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Corruption Watch: April 24, 2003

24 April 2003, Volume 3, Number 14
A plot to firebomb the Washington, D.C., Metrorail system was disclosed to Americans interrogating Khalid Shaykh Muhammad, the captured Al-Qaeda chief of operations, according to "The Washington Post" of 9 April. According to the paper, U.S. law-enforcement and intelligence officials "'have been unable to determine whether there is any credible threat to mass transit' on the basis of these interrogations.... He and other detainees may be providing false information to cause panic, misdirect intelligence agencies or curry favor with captors without actually giving up any secrets, they said."

One planned target was the Capitol Hill area, according to the paper. Since his capture, Muhammad has provided information that has been verified by other sources, the report added.

European law-enforcement agencies have uncovered a number of suspected Al-Qaeda terror plots against subway systems. Eight men were arrested last fall as part of an alleged plot to release poison gas on the London Underground, while French authorities this year discovered a vial with traces of the poison ricin at a Paris rail station. (See also "RFE/RL Organized Crime and Terrorism Watch," 27 February 2003.) RK

American businessman James H. Giffen was arrested in New York on 30 March and charged with two counts of violating the Foreign Corrupt Practices Act (FCPA). According to a U.S. Justice Department complaint, Giffen paid bribes to senior Kazakh officials to secure lucrative contracts for his small, New York-based merchant bank, Mercator Corporation. According to AP, he was freed on $10 million bail. Giffen's lawyer said his client is innocent.

Mercator served as an intermediary for the Kazakh government in the negotiation of deals to develop the country's large oil and gas reserves. "Eurasia View" of 3 April carried a piece by Alec Appelbaum that asserted: "The prosecutors' case focuses on transactions between Mercator and Mobil Oil Corp., which is now part of ExxonMobil. In May 1996, Mobil paid Mercator $41 million in fees, the complaint goes on to state that Mercator then, in a complex set of transactions, shifted $20.5 million of those fees into accounts under the control of a top Kazakhstani official, identified in the complaint only as 'KO-2.' Other transfers, according to the complaint, went to another official described as 'KO-1,' who signed a sale agreement with Mobil on Kazakhstan's behalf." In a press release issued by the U.S. Attorney's Office for the Southern District of New York, Giffen was indicted on charges of making more that $78 million in illicit payments to "two senior officials of the Republic of Kazakhstan in connection with six separate oil transactions." "Eurasia View" quoted "The New York Times" of 1 April, which reported that Swiss official documents claim that one of the accounts to which Mercator transferred money has Kazakh President Nursultan Nazarbaev listed as a beneficiary. Giffen had served as counselor to the Kazakh president.

In early April 2002, international press agencies reported that Kazakh Prime Minister Imangali Tasmagambetov told the Kazakh parliament that the government had secreted abroad some $ 1 billion in profits from the sale of 20 percent of the Tengiz oil field in 1996. On 16 April, President Nazarbaev told the "Financial Times" that he sees nothing wrong in the creation of the fund, adding that no money has disappeared.

The money had gone into a Swiss bank account (see "RFE/RL Business Watch," 30 April 2002) and allegedly had been deposited in the name of the president himself, although Kazakh authorities were quick to claim that neither the president nor his family benefited from it. Kazakhstan's central bank chairman, Grigorii Marchenko, defended Nazarbaev's decision: "As an economist and banker, I can only say this was the right decision from the economic point of view."

The central banker went on to say that $880 million from this fund was spent in 1997-98 to pay off huge pension arrears and to support the budget amid a sharp fall in revenues due to lower oil prices. He also stated that between the first of the year and 15 April, $213 million had been transferred to the country's national fund for oil income. No documentation was provided to confirm those statements.

Kazakhstan has long been suspected of being one of the most corrupt countries in the former Soviet Union. According to Transparency International, in 2000 it received 84 of a possible total of 99, suggesting that only Kyrgyzstan and Azerbaijan are worse in terms of corruption.

Writing in "Central Asia Analyst" of 19 July 2000, Louise Shelly, the director of the Center on Transnational Crime and Corruption at American University, made the point: "The [U.S.] Foreign Corrupt Practices Act has rarely been applied to American businesses. It must be presumed that similar relationships went on between American oil investors and corrupt Nigerian and Indonesian government officials but no criminal prosecutions resulted from these arrangements. Therefore, American investors had a sense of immunity in their dealings in Kazakhstan."

Pointing to the political complexity of the case, "Eurasianet" on 8 April quoted Reid Weingarten, a Washington attorney for Kazakhstan who said: "I am deeply concerned that foreign relations between the United States and the Republic of Kazakhstan -- an important ally in the war on terrorism with significant oil and gas reserves in an unstable geographical region -- will deteriorate if prosecutors maintain their pursuit of the documents in Kazakhstan and continue to aggressively investigate Kazakh government officials." RK

Sergei Yushenkov, the 52-year-old co-chairman of the Liberal Russia party and a member of the Russian Duma, was shot and killed near the entrance to his home in northwestern Moscow as he got out of his automobile in the early evening of 17 April. The killer fired three rounds from a Makarov pistol with a silencer attached. The pistol was found at the scene of the crime. Yushenkov died before reaching hospital.

AP reported on 18 April that Yushenkov's colleagues in the Duma suggested the killing was politically motivated. Chief Moscow Prosecutor Mikhail Avdyukhov said it was most likely connected to his "activities as a lawmaker."

A member of the Duma's Security Committee, Yushenkov had received death threats in the past, reportedly in connection with his opposition to the war in Chechnya.

Yushenkov was the ninth member of the State Duma to have been slain since 1994. Police have not apprehended any of the murderers in those cases.

According to "The Moscow Times" of 18 April, "Investigators also were trying to determine whether the killing could have been connected to the killing of another Liberal Russia co-chairman last year. Vladimir Golovlev, also an independent Duma deputy, was gunned down in Moscow in August, and his killing remains unsolved." RK

Amy Knight, writing about the Yushenkov killing in Canada's "Globe and Mail" of 23 April, said: "Don't even think about it -- that last week's murder of Sergei Yushenkov...was politically inspired. Because when you start considering motives, it leads you straight to President Vladimir Putin's security police." Referring to Yushenkov's investigation into the Moscow apartment bombings in 1999, which he suspected was the work of the Russian Federal Security Service (FSB), Knight wrote: "Imagine what a thorn in the FSB's side Liberal Russia could be during the election campaign, especially if its members continue to harp on the FSB's possible involvement in the 1999 bombings. What better way to intimidate Liberal Russia's supporters than to have one of their leaders knocked off?"

Knight recalled the November 1998 slaying of Liberal Party Deputy Galina Starovoitova: "The fact that Mr. Yushenkov is the third liberal lawmaker to be killed in less than five years suggests that politics in Russia can be a dangerous business, particularly if you are a critic of the Kremlin. The FSB is supposed to help solve these killings, along with a host of other apparent contract murders of politicians and journalists. But no one expects this to happen. Ironically, Vladimir Putin was head of the FSB when Duma deputy and human-rights activist Galina Starovoitova -- another harsh critic of the security services -- was gunned down outside her St. Petersburg apartment in November, 1998.

"Although Mr. Putin vowed to find the killers, and the FSB detained hundreds of suspects in the immediate aftermath, Ms. Starovoitova's murder has never been solved."

In the case of Yushenkov, Russian police moved quickly, and on 24 April announced that a suspect had been detained. According to Interfax, Artem Stefanov, 20, was arrested on suspicion of carrying out the killing. He was released from custody after providing a written pledge that he would not leave Moscow.

"We deemed Stefanov's further detention unwise and decided to ask him to give a written pledge not to leave Moscow and released him from custody," Russian Deputy Prosecutor-General Vladimir Kolesnikov told Interfax on 24 April. "The investigators intend to continue investigating this case."

"The Moscow Times" reported on 24 April that Stefanov is suspected of killing Yushenkov to avenge his father, who was jailed for six months in 1995 after sending a threatening letter to the lawmaker. Stefanov was quoted in the paper denying he had anything to do with the killing. RK

The trial of four suspected members of a major drug-trafficking ring began in a Moscow Oblast court on 17 April. According to "Izvestiya" of 14 April, the four defendants have been accused of engaging in the manufacture of synthetic drugs that they shipped to African countries, as well as of receiving cocaine from Colombia for shipment on to Great Britain. The leader of the group is reputed to be Vadym Petrov, who was arrested in Monaco in January 2001 and eventually deported to Russia to stand trial.

According to "Izvestiya" account of the group's history, the defendants first came to the attention of the counternarcotics section of the Russian Interior Ministry (MVD) in April 2000, when a sea shipment of cocaine destined for Russia from Colombia made a stopover in Miami, Florida. There, U.S. law-enforcement officials discovered that the declared cargo of industrial equipment contained 64 kilograms of cocaine hidden in the packing. The U.S. Drug Enforcement Agency informed Russian police of the cargo and, when it arrived on 13 May 2000, police placed it under surveillance. Within a few weeks, police had identified the men who eventually claimed the cargo from the customs broker and were preparing to ship it to England, presumably for street sale. The estimated street value of the shipment was $60 million. It was then that the arrests were made.

The investigation suggested that the group not only imported cocaine from Colombia, but also ran a laboratory for the manufacture of a synthetic drug called mandraks, which they sold in large quantities to distributors in African countries via Romania as a trans-shipment point. The laboratory equipment was imported from China, while the chemicals for the preparation of mandraks were bought in China in the mid-1990s and 12 tons of ingredients was brought into Russia hidden in shipments of talcum powder and house slippers. RK

The "San Francisco Chronicle" and Britain's "The Telegraph" on 6 April published information detailing close cooperation between the Russian Foreign Intelligence Service (SVR) and the Iraqi intelligence service prior to U.S.-led Operation Iraqi Freedom. The documents were discovered in Baghdad in the badly damaged building of the Iraq intelligence service, the Mukhabarat.

According to these reports, Russia provided President Saddam Hussein's regime with substantial assistance in the months leading up to the Iraq conflict, including intelligence on private conversations between British Prime Minister Tony Blair and Western leaders. How the Russians were able to obtain this information is not clear, but Western observers have repeatedly pointed out the increased level of activity of the SVR in the West.

According to "The Moscow Times" of 14 April: "Russia provided Iraq with lists of assassins available for 'hits' in the West and details of arms deals with countries near Iraq, the British paper said. The two countries also signed agreements to share intelligence, help each other to obtain visas for agents to go to other countries and to exchange information on the activities of Osama bin Laden.

"The [SVR]...declined to comment...on the report. Without mentioning 'The Telegraph,' SVR spokesman Boris Labusov said the agency does not comment on unsubstantiated reports in "boulevard publications," Interfax reported."

The" San Francisco Chronicle" reported that five Iraqi intelligence operatives graduated on 15 September 2002 from a two-week course in surveillance and eavesdropping techniques at the Special Training Center in Moscow.

One independent expert told "The Moscow Times" that he would not be surprised if members of the Mukhabarat had been trained in Russia: "I can't think of anybody in the Iraqi security service that hasn't been trained in Russia," said Ibrahim Marashi, a research fellow at the Center for Nonproliferation Studies at the Monterey Institute of International Studies. RK