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Russia: Financial Scandal Spreading

  • Tony Wesolowsky

The Kremlin has failed again this week to get rid of the man who is accusing President Boris Yeltsin of corruption. RFE/RL correspondent Tuck Wesolowsky takes a look at how the investigations into Russian money laundering have spread to the United States, Russia, Switzerland, and beyond.

Prague, 15 October 1999 (RFE/RL) -- Three times Russian President Boris Yeltsin has tried to fire his prosecutor general, who has been investigating allegations of corruption at the highest levels of the Kremlin. And three times the Russian leader has failed.

Yesterday, the upper house of parliament, the Federation Council, again refused to sack suspended General Prosecutor Yurii Skuratov. Under Russian law, only the Federation Council, made up of regional governors, has the authority to dismiss the prosecutor general.

Anatol Lieven, a Russian expert at the International Institute for Strategic Studies in London, told our correspondent the vote is a further sign of Yeltsin's slipping popularity.

"It is a sign that a majority of the regional bosses are now hostile to Yeltsin, and are anxious the Yeltsin regime should not be able to continue in some form after next year's presidential elections."

Back in April, Yeltsin suspended Skuratov, saying the prosecutor had abused his office. The suspension came after Russian television aired footage depicting a man resembling Skuratov frolicking in bed with two young women. Skuratov did not say whether he was the man in the footage, but he did say that the release of the footage is an attempt by officials to blackmail him and bring a halt to his investigation into corruption in high places.

Specifically, Skuratov was probing whether a Swiss-based construction company, Mabetex, had paid large sums to win a valuable contract to renovate the Kremlin. The charges would eventually envelop Yeltsin and his family. Russian officials vehemently denied the accusations.

The Mabetex case is just one of several in the latest round of corruption charges to hit Russia. American and Russian officials are now investigating charges that Russian mobsters may have laundered up to $7 billion through the Bank of New York.

There are also charges that loan money from the International Monetary Fund may be involved. Both the IMF and Russia deny that. Russia says this scandal is the work of U.S. officials opposed to the Clinton administration's foreign policy in Russia.

The Mabetex scandal gained new momentum last month, when Swiss investigators announced that up to $15 million had been made available to Yeltsin, his family, and senior government officials by the Swiss construction firm. It was the first time the Yeltsin family had been directly linked to the case, and the first time a precise figure had been mentioned.

Swiss investigators say they have evidence that President Yeltsin and his two daughters, Tatyana Dyachenko and Yelena Okulova, were given credit cards that were billed to Mabetex. A Swiss bank confirmed yesterday that it had given credit guarantees to back credit cards for the Yeltsin family at the request of Mabetex. According to Swiss officials, Mabetex records show that payments were also made to another Swiss bank, where Yeltsin and his daughters had accounts. Mabetex is also alleged to have transferred one million dollars to a Hungarian bank account for Yeltsin.

Swiss officials are also investigating Pavel Borodin, the Kremlin official who oversaw Mabetex's renovation contract. Swiss officials say Mabetex opened bank accounts for Borodin in two Swiss cities.

This week, Skuratov held a press conference in Moscow and said the allegations that Mabetex gave bank accounts to Yeltsin and his daughters are true.

An Italian newspaper, Corriere della Serra, reported last month that a furniture company linked to Mabetex had also laundered money for the Kremlin. The Italian paper alleges that Russian couriers delivered money to the company, which then channeled it into bank accounts that the Yeltsins could access. The furniture company denies those charges.

Lieven says the allegations resemble many dubious operations set up by Russians who live abroad.

"There have been many such firms, particularly in Switzerland, in recent years which have basically specialized in helping Russians to get their money out. In quite a number of cases, they were -- as in this case -- they were founded by Russian Jews who had themselves left Russia well in the 1970s, and then formed firms in the West. And then, basically, when the Soviet Union collapsed (they) created new links with Russia, which were used above all for money laundering."

Meanwhile, Swiss law enforcement officials have widened the scope of their Russian corruption probe. Switzerland confirmed this week that it has launched a probe into Lev Chernoi, Russia's aluminum magnate, following a request from the Russian authorities. The United States and Britain have reportedly opened their own probes into Chernoi.

Chernoi is officially described as a business partner of Trans-World Metals, a UK-based metals trading company with extensive business interests in the former Soviet Union. He and his two brothers control the associated Trans-World Group, which has dominated the Russian aluminum industry. A company spokesman has denied the allegations against Chernoi.

Swiss law enforcement officials have been kept busy by Russian officials probing dubious business dealings. Switzerland, known as a safe haven for ill-gotten gains, has been more than willing to publicize its cooperation in the probes.

Three months ago, Carla del Ponte, then Switzerland's attorney general, raided two companies with close ties to the controversial Russian business tycoon, Boris Berezovsky. Several bank accounts were blocked and files taken away.

Lieven says in the past the West was willing to turn a blind eye to reports of corruption within the Yeltsin government. For the West, Lieven explains, "our friend Boris" was the bulwark against a communist revival in Russia.

"Now after everything that has come out after the great disillusionment in the West with the Yeltsin regime and Russia and with the American election campaign approaching and, which this is a major issue, these considerations count for a great deal less. So I think that one could say that Western police forces have been given the green light to investigate things that formerly they would have been quite strongly discouraged from investigating."