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Russia: Moscow Prosecutors Investigate Former Privatization Head

Moscow, 2 October 1997 (RFE/RL) - Yesterday, October 1, marked the fifth anniversary of the start of Russia's first privatization scheme, known as "voucher privatization." On this very day, the Moscow prosecutor's office said it had launched a probe into actions by former Deputy Prime Minister and State Property Committee Chairman Alfred Kokh.

The city prosecutor said in a statement that it had "opened a criminal case into abuse of office." A spokeswoman, Tatyana Maslova, said that a preliminary investigation had revealed "an indication of abuse of power" by Kokh. The prosecutor's office said Kokh has not been charged, so far.

Earlier this year, Kokh, in line with the government's current anti-corruption drive, made public his income declaration. Kokh paid taxes on the royalty fee of $100,000 he had received from a Swiss company, Servina Trading, for the sale of the copyright of a planned book, "Privatization in Russia. Economics and Politics."

Deputy Moscow Prosecutor Yuri Syomin said that the royalty from Servina, a company that does not appear to have been involved in publishing in the past, "exceeds many times the possible returns" for a book yet to be published, and that is expected to attract mainly the interest of specialists. Syomin also said the preliminary investigation had revealed that the contract between Kokh and Servina had been concluded with help from the deputy chairman of Uneximbank, Dmitry Ushakov.

Uneximbank, one of Russia's largest and most powerful banks, is a key and controversial participant in the most recent Russian privatization auctions. The bank's Chairman, Vladimir Potanin, a former deputy prime minister, is a close friend of Kokh. Interfax news agency quoted Deputy Prosecutor Syomin as saying that "it is possible" that Ushakov's help came "as a result of the bank's effort to strengthen ties with Kokh, at the time Kokh was Deputy Prime Minster and Privatization Chief.

An Uneximbank spokeswoman, Larisa Zelkova, says the bank had "no connection" with the royalty fee paid to Kokh.

Uneximank this Summer won control of the world's largest nickel mine, Norilsk Nickel, under the controversial loan-for-shares scheme. An Uneximbank-led consortium was also the winner of a government sale of a 25 percent share in Russia's telecommunication monopoly, Svyazinvest.

Western economic analysts have hailed the Svyazinvest deal as one of Russia's fairest auctions to date, as is marked the start of a new, more transparent privatization scheme, under a new privatization law that came into effect August 2. But the victory provoked a firestorm of vitriolic criticism from loosing bidders, including media-and-financial tycoons Vladimir Gusinsky and Boris Berezovsky. They made clear, through media assets they control, that they believed the auctions were rigged.

This week, NTV TV, controlled by Gusinsky, provided heavy coverage of an article on the issue, published recently by the London "Financial Times." The article said that a Servina official responsible for the book deal, Siegfried Pasqual, later became a full-time employee of Uneximbank's Swiss subsidiary, Banque Unexim, and it questioned whether a book will really appear.

President Boris Yeltsin dismissed Kokh from office in August, apparently in a first attempt to defuse the scandal, and scolded him for favoring Uneximbank. In Yeltsin's words, the scandal appeared "to be connected to the fact that some bankers are closer to Kokh's heart."

Several State authorities that looked into the legality of the bids found no violations. However, following the scandal, the Communist-and-nationalist-dominated State Duma last month set up a committee to review the most controversial recent sales. The committee is due to announce its finding November 1. And, legal experts say a vague clause of the new privatization law allows sales to be overturned.

Russian politicians have reacted in different ways to the Prosecutor office's announcement. Aleksandr Shokhin, leader of the pro-government Our Home party told journalists he had never received such royalties for books he has published, but added that, if offered, he would had found such an amount "natural." According to Shokhin, "the problem is not the publication of the book, nor the royalty fee, but rather the fact that this money was paid by other services, or so we are told."

First Deputy prime Minister Anatoly Chubais, who is considered the architect of Russia's privatization and had been Kokh's direct superior, said in remarks broadcast by all Russian national TV channels that Kokh is "a man of integrity."

According to Chubais, the investigation of Kokh's activities is based on "well-paid lies" spread by media holdings controlled by rivals, jealous of Uneximbank's success. Interfax news agency quoted Chubais as saying also that financiers had threatened to stage such attacks before the auctions, when he had informed them that the era of 'sweet-heart' deals was over, and "they now would have to invest all the money they had" in order to win the next privatization deals.

In an interview with the daily "Kommersant" published before the prosecutor's office announced the formal inquiry, Kokh denied any wrongdoing. He said that he did not know that Servina's Pasqual was connected with Uneksimbank when the executive offered to publish his book. Kokh said the book will be published this year, after he has written a final chapter, requested by Servina, on the most recent privatization sales. In the interview, Kokh also confirmed he has close personal ties with Uneksimbank president, Potanin. He admitted taking his family on a vacation in France recently with Potanin and his family, but argued that there is "nothing shameful" in that.

Kokh also said he had not been surprised by the attacks of Potanin's business rivals, but concluded that he would "not play that game" and did "not want to defeat anyone."

But following the prosecutor's announcement, which comed as Yeltsin has pledged to crack down on "criminals in power," Kokh, willing or not, may soon be forced to produce convincing evidence of his innocence.