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Washington Journal: U.S. Congress Opens Hearings On Russian Corruption

Washington, 21 September 1999 (RFE/RL) -- A U.S. congressional committee begins its probe into Russian corruption today. But one of the more intriguing witnesses who had been expected to testify has decided not to appear.

A spokesman (Andrew Parmentier) for the U.S. House of Representatives Banking Committee says Mikhail Khodorkovsky notified the committee last week that he is not prepared to appear yet. Khodorkovsky is the director of the Russian industrial group Rosprom.

Khodorkovsky tells the Financial Times that he believes the money-laundering aspect of the Russian financial scandal is not as broad as the American press suggests.

The industrialist says in an interview with the British newspaper published Monday that he has learned that $6.3 billion worth of Russian currency passed through accounts at the Bank of New York during the past three-and-a-half years.

American newspaper accounts say between $10 billion and $15 billion may have passed through the bank since early 1998.

In Khodorkovsky's words: "I was very surprised by this enormous sum. But I do not think that all this sum concerns money laundering, or even capital flight."

Money laundering is the transfer of illegally earned money through many bank accounts until its source appears legitimate. But Khodorkovsky says that in the Bank of New York financial scandal, most of the money appears to come from legitimate Russian businesses that transferred their money abroad to evade Russian taxes.

He says Russian importers of consumer goods have been underreporting their earnings from the imports they sell. Then they have secretly transferred the difference through Benex Worldwide Limited, a company that U.S. news reports have linked to Russian organized crime.

The Western press also has linked the insolvent Russian bank Menatep and Yukos, Russia's second-largest petroleum company, to the alleged financial scandal. Menatep and Yukos are part of Khodorkovsky's Rosprom.

In the Financial Times interview, Khodorkovsky dismisses this connection. He says neither Menatep nor Yukos had substantial dealings with Benex.

The financial scandal is embarrassing to the government of Russian President Boris Yeltsin. This is especially so because he has twice vetoed legislation passed by the parliament that would create laws to fight the transfer of money abroad.

And Yeltsin himself is accused of accepting about one million from a Swiss construction company, Mabetex Project Engineering, in exchange for lucrative contracts to renovate Russian government buildings. Yeltsin and his supporters say the accusations were fabricated by his political opponents.

In the United States, the Russian financial scandal is nearly as embarrassing to Vice President Al Gore. Gore, who hopes to be elected president next year, has boasted of his work on the American-Russian Commission with former Russian Prime Minister Viktor Chernomyrdin. Yet as long ago as 1995, the New York Times reports, the CIA told Gore about suspected corruption by Chernomyrdin, and Gore rejected the agency's finding.

Now, Gore's opponents in Congress say he should have known more -- and done more -- about the suspected corruption. They dismiss Gore's explanation that he knew nothing about it.

The U.S. government's knowledge of the Russian financial scandal will be at the top of the agenda at today's hearing. The first witness will be U.S. Treasury Secretary Lawrence Summers.