The King of Vodka (22 page)

R
ussia came into the twentieth century resembling a tree in early autumn. All of its leaves were still intact and bountiful, some even quite beautiful. But they had begun to lose their vibrancy. A gradual weakening was taking place, brought on by the country's increasingly contentious political, economic, and social realities. Though few said so openly, there was a growing sense among certain sectors that it was only a matter of time before the nation, like the decaying leaves, fell to the ground exhausted. Tsarist Russia could only hang on for so long.

The emerging difficulties could be traced to a series of contradictory yet telling circumstances. Economically, Russia had made great strides throughout the 1890s. Production in industries such as coal, steel, iron, and oil had tripled. Railroad mileage had doubled, placing Russia second only to the United States. Foreign capital, led by money from France, Belgium, and Germany, had poured into as many as half of Russia's corporations. By 1900 few could credibly challenge the notion that Russia had taken
its place among the leading developing nations of the world. The historian Gregory Freeze wrote that Russia's rate of industrial growth through the 1890s would not recur until the 1930s and that industrial production, which increased an average of 8 percent per year, was higher than even that of the United States.
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The story was a powerful one, even though it had come at the expense of the majority of Russians. About 80 percent of the citizenry were tied in some way to agriculture, which contributed about half of the nation's income. The largesse from Witte's capitalistic drive toward modernization had not filtered down to them. Instead, most peasants grappled with high taxes and the inability to buy land offered to them after emancipation. In general, their standard of living, far from improving, was deteriorating, and they were not alone in their frustration. Members of the emerging working class, which flocked to the big cities in search of jobs, were voicing grievances of their own. Many endured brutal working conditions, long hours, paltry wages, and substandard living situations. These two seemingly disparate groups found common ground with other such disaffected circles as conservative intellectuals, who feared that Russia's tilt to the West would contaminate its beloved heritage, and an increasingly active socialist movement germinating on university campuses across the country.

The budding resentments, which were fomenting in almost every stratum of society, intensified even more as a worldwide financial downturn settled in. Unemployment spiked, factory production sank, wages dropped, and businesses went bankrupt. All this distress came at a time when the state's budget and spending had mushroomed out of control. “The country was seething with discontent and unrest,” wrote David Floyd.
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Inside the Smirnov's insulated household, the sentiment was much different. The deaths of Pyotr and Mariya, sad as they were, also had a liberating effect on a number of the Smirnov siblings. No longer did they need to keep their conduct in check.
No longer did they need Smirnov's approval for their choice of lovers or extravagant spending habits. No longer did they feel compelled to pretend to be something they either were not or resented. They were young, beautiful, wealthy—and now free. This emancipation, though, came at a price. Much like their homeland, the Smirnovs had begun to fracture. The common bonds of blood were thinning, strained as personal differences surfaced and financial interests began to collide. In this sense, the Smirnovs were not so different from their motherland. Both faced a polarizing uncertainty—one that would ultimately send them down a calamitous, destructive path.

 

L
ESS THAN TWO
months after Mariya's death, the seven remaining shareholders in Smirnov's vodka empire assembled at the house by the Cast Iron Bridge for their annual board meeting.
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They climbed to the second floor of the elegant mansion and settled into their seats. The room was exquisite; the ceiling resembled an artistic sculpture, full of elaborate floral motifs cast throughout the periphery of its surface. The windows were elongated with lovely rounded tops that captured the natural light as it filtered in. A heating oven enveloped by an opulent frame filled up an entire corner, though on this spring day it remained unlit and cool.

Most often, the board meeting was a routine affair, a yearly gathering held every April. Shareholders would conduct a detailed review of the state of the business and then make preparations for the coming year. But the April 28, 1899, assembly was anything but typical. The usual course of business needed to be suspended so a new order could be crafted. By this time Smirnov had been dead for five months, and his absence left a gaping, unpredictable hole in the proceedings. Thirty-one-year old Pyotr Petrovich now occupied his father's old chair, the obvious and unanimous choice to do so. His brothers, Nikolay,
now twenty-six, and Vladimir, twenty-four, took up two other places at the table while a guardian representing the interests of the two youngest brothers occupied another spot. The remaining seats were reserved for cousins Nikolay Venediktovich Smirnov and Dmitriy Venediktovich Smirnov, both of whom had been with the company for twenty-five years, and for Vasiliy Kouvaldin, a long-time employee who was close to the business and Smirnov's family. The three eldest Smirnov sons and their cousin Nikolay Venediktovich held the majority votes on the board, giving them ultimate control. The other attendees were nonvoting shareholders.

The exact agenda of the meeting is unknown. What
is
known, according to a financial report issued by the Ministry of Finance for 1899, is the substance of the most critical actions of the day. These details provide ample evidence as to the long-term intentions and aspirations of Smirnov's sons. At this time, the vodka firm was still thriving. The previous year had delivered the largest-ever profit for the enterprise, more than 1 million rubles.
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The bounty was due in part to Smirnov's keen foresight and business acumen, which had not only cushioned the company but had enabled it to prosper during treacherous market conditions. It was also the result of an unforeseen outgrowth of the state's vodka and temperance initiatives. According to published accounts, the closer the date came to implementing the monopoly in certain communities and cities, the more money consumers spent stocking up on their favorite, soon-to-be-vanishing brands of vodka. Sales of Smirnov's liquors, as well as Popov's, soared in 1898 when the monopoly came to larger population centers like St. Petersburg.
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The purchases fell into two categories: The vodka was either being preserved for personal use during future occasions or used as a means for turning an illegal profit later.

Smirnov's sons were smart enough to see that this spike in profits would be a temporary phenomenon. Consequently, they
did not hesitate to take full personal advantage of the good times. They had lavish lifestyles to support. Pyotr had purchased one of the most elaborate homes in all of Moscow. It was a second home, a showplace designed by the renowned architect Fyodor Shekhtel, and Pyotr used it most often for entertaining members of the Russian establishment. His primary residence was most likely his father's home by the Cast Iron Bridge. Vladimir's indulgences were also many, including underwriting theater performances, buying expensive gifts for women, and hosting his favored actors and actresses at grand after-performance parties. In the late 1890s, he had also purchased a 740-acre estate some fifty-four miles west of Moscow. It was a spectacular country hideaway complete with its own electric power source, boat dock, stables, and horse-racing track.
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As for Nikolay, he had resumed his drinking habit in the wake of Smirnov's death, spending money without restraint. Often seen buying precious jewels from Moscow's most exclusive retailers, he was also known in shady circles for lending significant amounts of money to people he barely knew in exchange for an informal, most often worthless IOU.

The Smirnov brothers, for the first time in the history of the company, proposed that board members be given yearly bonuses. Select employees would also be eligible for the additional payouts, though presumably at a rate much less than the directors. They voted to put aside a pot totaling 64,000 rubles (the equivalent of about $33,000 in 1899 and more than $851,000 in today's dollars) to split as the bonus for 1898.
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All three of the eldest Smirnov sons would receive checks despite Nikolay's recent appointment to the revision committee. The two youngest sons, since they were only shareholders, would not receive a cut. Pyotr headed off any objection his younger brothers or their guardian might have had by also proposing a dividend hike. Instead of garnering the previous year's 1,000 rubles per share, stockholders would now get 1,425 rubles. A total of 855,000
rubles ($441,341 then and more than $11 million now) would be paid out to the handful of shareholders. This dividend came on top of the 300,000 rubles in cash each son had already collected as part of the inheritance from Smirnov's estate.
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The escalation of these payouts continued unabated as the monopoly spread. The following year, bonuses jumped to almost 80,000 rubles. And in 1901, the year the monopoly was to be implemented in Moscow, the Smirnovs enjoyed an unprecedented windfall. Muscovites bought up barrels of Smirnov's vodka, helping push profits to a record 1.8 million rubles.
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Consequently, the brothers voted to split 226,000 rubles (about $117,000 then or more than $2.9 million today) in bonuses, triple the amount from the previous year.
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Aside from these financial machinations, the Smirnovs also took up the company's management structure and spearheaded a shakeup of the board's oversight committee. This maneuver was especially telling because, in addition to verifying financial reports, the committee also had a policing role. The panel had the authority to investigate any questionable or suspicious actions by management or the board. Smirnov's sons named their own wives to replace a cousin and a loyal accountant who had worked for Smirnov for many years. Having the Smirnov women in charge of an oversight function, even though by then Vladimir's and Nikolay's wives were their partners in name only, was an easy, efficient way to consolidate information and influence within the bounds of the family.

Smirnov himself would have been pleased to see all three of his eldest sons seated at the helm of his empire. It had been one of his greatest wishes. But it is highly unlikely that he would have condoned the blatant self-dealing—or the beginning signs of divisiveness that would soon transform brothers into warring factions.

 

T
HE BROTHERS DID
not begin in battle. Indeed, following Mariya's death, the dynamic among the brothers appeared to be harmonious and loving. Both Pyotr and Vladimir applied to the court to take over guardianship of their youngest brothers. Pyotr, who had a solid track record of charitable giving and religious activities, was appointed guardian over Sergey. Vladimir's application, however, was rejected. The court determined that his penchant for gambling and overall poor reputation would not be in ten-year-old Aleksey's best interests. “His sinful behavior was the reason why the court refused to allow him to be my younger brother Aleksey's guardian,” explained Sergey later, adding that his brother was “known all over Moscow for his passion for the [horse] races and for [betting on horses].”
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Konstantin Bakhrushin, Smirnov's portly son-in-law and chosen executor, was appointed Aleksey's guardian instead.

The rejection should not have come as a great surprise. Although Vladimir could appear the responsible, upstanding citizen when necessary, his natural disposition was much more whimsical. He liked nothing better than a good time—whether playing cards, betting on horses, partying at one of Moscow's nightclubs, or attending his own, frequently raucous fetes. “Vladimir enjoyed lively, cheerful company. Artists from the opera, operetta, theater, and farce often came to his home,” recalled Vladimir's third wife, Tatiana Smirnova-Maksheyeva.
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She wrote that among the frequent guests to Vladimir's home was Varya Panina, one of Russia's best-known gypsy singers. She had gotten her break singing at Yar, the wildly popular night spot in Moscow where years ago Vladimir had met his first love, Katya. Panina, known for her low, seductive voice and perpetually lit cigarettes, was a favorite of Chekhov, Tolstoy, as well as the tsar.

This was the company Vladimir liked best. Despite being married to Mariya Gavrilovna, he strutted around town like
a committed bachelor. Jovial, light-hearted, and handsome, Vladimir was often seen out with members of Moscow's theater community, cavorting with various women at Yar. This playfulness might have gone on for years had it not been for Aleksandra Nikitina.

Nikitina was classically beautiful. Everything about her, from her soft eyes to her elegant nose to her diminutive stature, was lovely and feminine. Her sister, Mariya Nikitina, was well regarded for her work in operettas and for performing with a well-known acting troop. Aleksandra Nikitina performed in the troop as well, which was how Vladimir, a fan, most likely met her.

The two fell in love. They carried on their affair openly, caring little about Vladimir's marital status or the scandal the relationship could spark. Soon, they were living together, with Vladimir continuing to support his wife in a luxurious manner. It had likely been a loveless marriage from the beginning, constructed out of practicality. Nikolay, who also carried on with other women while married, commented: “My brother Vladimir also spends money for a woman he lives with, Miss Nikitina—much more than I do. He bought her two houses at considerable expense. He doesn't feel embarrassed about giving gifts to her or other women.”
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Nor was he embarrassed when the two had a child together a year later. It was Vladimir's only child, a son named Vladimir, born to unwed parents. The two eventually married after Vladimir divorced his first wife.