Corruption Watch: December 19, 2002

NOTE TO READERS:
The next issue of "RFE/RL Crime and Corruption Watch" will appear on 9 January 2003.
By Roman Kupchinsky

On the morning of 25 November, the president of Turkmenistan, Saparmurat Niyazov, escaped unharmed after his motorcade came under machine-gun fire from four assailants. According to international press reports, his car accelerated en route to the Presidential Palace and Niyazov learned of the apparent assassination attempt only once he was inside the palace. An unidentified member of his convoy was injured in the attack. Later that day, Niyazov chaired an emergency session of the cabinet at which he accused former Foreign Minister Boris Shikhmuradov and former Agricultural Minister Imanberdy Ikymov of having plotted the act. AFP on 26 November quoted a presidential spokesman Serdar Durdyev as saying that 16 people had been arrested in connection with the assassination attempt, four of whom are citizens of Georgia. Durdyev then told a press conference in Ashgabat on 2 December that the attempt was aimed at overthrowing Turkmenistan's constitutional order and seizing power.

On 4 December, the Interfax news agency quoted Turkmen Prosecutor-General Kurbanbibi Atajanova claiming that three Russian citizens who are ethnic Chechens were involved in the assassination attempt, along with a U.S. citizen of Moldovan descent and a number of Turkmen citizens. She said that 23 persons had been detained so far.

Soon afterwards, U.S. State Department spokesman Philip Reeker criticized Turkmenistan's treatment of Leonid Komarovsky, a dual U.S.-Russian citizen who was detained as part of the investigation a day after the attack. Reeker said the United States was concerned that its embassy in Ashgabat did not receive immediate notification and was not allowed timely consular access to Komarovsky, who is described as a businessman. AP quoted Komarovsky's family as saying he had been staying with a Turkmen friend, Guvanch Dzhumaev, who has been identified by Turkmen authorities as a chief suspect in the assassination attempt.

On 17 December, the "Financial Times" reported that, according to Western diplomats and human rights groups in Ashgabat, up to 300 people have been arrested on suspicion of attempting to overthrow the Niyazov regime.

In a statement posted on http://www.gundogar.org on 27 November and signed by former Foreign Minister Shikhmuradov, the opposition Temporary Executive Council of the People's Democratic Movement of Turkmenistan condemned the reported attempt to assassinate Niyazov, asserting that violence cannot resolve political crises. The statement warned that Niyazov's unpredictable policies and extreme cruelty would inevitably trigger an outburst of popular anger.

According to former Deputy Prime Minister Khudaiberdy Orazov, an exiled Niyazov opponent, charged in a Russian newspaper that Niyazov staged the apparent attack himself (see "RFE/RL Newsline," 2 December 2002). According to that theory, by precipitating a crisis, the president could provide a pretext for a crackdown or purge of his enemies. Another opponent, former Deputy Agriculture Minister Saparmurat Iklymov, called the whole incident "a classic case of fabrication" and "an eerie reminder of events in Germany in 1933, when [Adolf] Hitler set fire to the Reichstag, setting the precedent for the murder of Jews," eurasianet.org reported on 26 November. Some analysts went so far as to question whether the attack ever even happened (see "RFE/RL Central Asia Report," 5 December 2002).

Vitalii Ponamarev, a Central Asian program director for the Moscow-based Memorial human rights organization, told RFE/RL's Zamira Eshanova on 4 December that, under Niyazov's new order, foreigners arriving in Turkmenistan must get a special registration that will cost a minimum of $20-30 in addition to a Turkmen visa, which costs an average of $70 and is virtually impossible to obtain. These new procedures, Ponamarev said, are aimed at putting the final seal on a country that was already almost completely isolated from the outside world. "Even without the [new rules for foreigners], entering Turkmenistan has become extremely difficult over last two years -- even with tourist visas. I think new procedures will simply create an unprecedented regime of isolation," Ponamarev said. Ponamarev added that these latest orders by Niyazov -- also known as Turkmenbashi, or "Father of all Turkmen" -- reflect the president's long-standing fear of dissent and his desire to suppress it at any cost: "I think all these things are connected with Turkmenbashi's belief that, in general, all dissent and all dangers to his regime may come, first of all, from outside."

Sharing a 744-kilometer border with Afghanistan, Turkmenistan has played a low-key role in the U.S.-led war on terrorism. U.S. Defense Secretary Donald Rumsfeld said during a press conference at Turkmenbashi Airport on 28 April: "As you know, Turkmenistan is a member of NATO's Partnership for Peace [PfP], and the United States has had a relationship with it for some time. As a neighbor of Afghanistan, needless to say, the United States has an interest in that relationship." But the chairman of the U.S. Commission on International Religious Freedom, Michael Young, said Ashgabat has a notorious human rights record and in fact has contributed little to the war on terrorism. Turkmenistan's president-for-life, Niyazov cited his country's neutrality in denying a German request to use Turkmen air bases for a peacekeeping operation in Afghanistan (see "RFE/RL Newsline," 8 January 2002).

Czech customs agents on 3 December raided a warehouse that occupies roughly 5 hectares in the Prague district of Malesice. The raid lasted 24 hours, according to Czech Radio as cited by CTK, during which agents confiscated 77,000 items of fake designer clothes worth an estimated 80 million crowns ($2.8 million). The clothes, presumably to be sold by street merchants in the capital, had been stored in some 150 containers.

Cases of police seizing fake designer clothes are not uncommon in Western Europe. On 10 November, police in Surrey, England, raided a father-and-son operation. Balbinder and Jarnail Singh allegedly were caught with piles of clothes bearing High Street labels including "Next" and "Miss Selfridge." A separate search later found fake "Gap," "Nike," and "Adidas" items in various stages of manufacture at a factory outlet in Leicester (see http://www.surreycc.gov.uk). All the garments seized by Surrey Trading Standards, and forfeited by the court, are being sent to overseas relief charity Mustard Seed Relief Missions, which was launched in the Balkans more than 10 years ago.

According to the BBC, John Anderson, executive secretary of the Anti-Counterfeiting Group (ACG) in the U.K., estimated that more than 10 percent of the trade in luxury goods is through counterfeiting. He also said he believes the global market in counterfeit goods is worth more than $250 billion, and could even be as high as $1,000 billion (see http://news.bbc.co.uk/1/hi/business/1577212.stm). The BBC quoted Peter Lowe, assistant director of the Counterfeiting Intelligence Bureau at the International Chamber of Commerce, who said, "Whole collections have been stolen in the U.K. and Australia. They are lifted before they get to the catwalk, and find their way to Hong Kong, where they are copied and manufactured."

The Far East, Thailand, and Vietnam are major centers where fake designer clothes and watches abound and where many such products are manufactured. One Vietnamese website even warns travelers: "Prices for Vietnamese foodstuffs, services and products are very low when compared with those in Western countries, although the quality of manufactured goods is sometimes poor. Fake goods abound -- beware of designer labels on clothes, sunglasses, watches, 'Zippo' lighters and so on. Virtually all CDs, DVDs and tapes are pirated copies. Although they are very cheap, they are usually of poor quality" (http://www.haivenu-vietnam.com/information.htm). RK

Federal prosecutors in the United States have accused Kazakh President Nursultan Nazarbaev of having accepted large bribes from U.S. oil companies in the 1990s in connection with rights to his country's considerable oil reserves. According to "The New York Times" of 11 December, Nazarbaev and his representatives have sought to stop the investigation by raising the issue with Vice President Dick Cheney and other U.S. officials. Those efforts have proven futile, and the investigation has continued, the paper reported.

A firm indictment of President Nazarbaev by a U.S. grand jury could have severe consequences for U.S. interests in Central Asia, above all in the energy sector and in the war on terrorism.

The nature of the U.S. investigation has been known for some time. According to the Justice Department, payments totaling $115 million were transferred from the accounts of numerous U.S.-based oil companies to a private account in New York held by a Swiss bank via several offshore locations. From this account, at least $60 million was transferred to Swiss accounts held by Nazarbaev, former Prime Minister Akezhan Kazhgeldin, and his successor, Nurlan Balgimbaev, who currently heads state-owned energy company Kazakhoil (see "Crime and Corruption Watch," 9 May 2002).

"The New York Times," based on court records and interviews with officials in both countries, suggests that tens of millions of dollars in payments to Kazakhstan by U.S. oil companies in the 1990s wound up in Swiss bank accounts that are thought to have benefited top Kazakh officials, including President Nazarbaev.

The companies -- including Mobil Corporation, now part of ExxonMobil; Amoco, now part of BP; and Phillips Petroleum, now part of ConocoPhillips -- have denied any wrongdoing and say all their payments were made directly to the Kazakh government. Both ExxonMobil and BP-Amoco are cooperating with the government, while Phillips reportedly has maintained silence. Phillips is allegedly the source of $21 million of the $60 million transferred to the Swiss accounts.

Not all the money that entered the account came from U.S. companies. On 11 June 2001, the "Los Angeles Times" reported that Choi Soon Young, a former chairman of Korea Life Insurance Company, told a Seoul appellate court that he ordered a subordinate to give $10 million in bribes to Nazarbaev in 1996 in order to promote business in that country. Choi's lawyer told the court that his client believed the bribe would help launch his businesses in Kazakhstan.

In April, Kazakh Prime Minister Imanghali Tasmaghambetov first announced the possible existence of secret Swiss accounts in the president's name. But he claimed that former Prime Minister Akezhan Kazhegeldin, now a leading opposition figure, was responsible for establishing the secret account. The president, Tasmaghambetov stressed, had no knowledge of the establishment of a possible slush fund (see "Eurasia View," 11 December 2002). Later in April, international news agencies reported that Tasmaghambetov told the Kazakh parliament that the government had secreted in a Swiss bank account 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 saw nothing wrong in the creation of this fund, adding that no money had disappeared.

The money in the bank account allegedly was held in the name of the president himself, though Kazakh authorities were quick to claim that neither the president nor his family benefited from the funds. Kazakhstan Central Bank Chairman Grigorii Marchenko defended Nazarbaev's decision, saying, "As an economist and banker, I can only say this was the right decision from an economic point of view" (see "RFE/RL Business Watch," 30 April 2002).

A U.S. grand jury has also been called to examine allegations against James H. Giffen, an American businessman who advised President Nazarbaev . Giffen has denied any wrongdoing. Meanwhile, "The New York Times" reported: "American and Swiss investigators have said Mr. Giffen and his company, the Mercator Corporation, are under investigation for possible violations of American laws, including a prohibition against bribing foreign officials."

A firm indictment of President Nazarbaev by a U.S. grand jury might have severe consequences for U.S. interests in Central Asia, above all in the energy sector and in the war on terrorism.

One expert was quoted by "Eurasia View" as saying that any possible response to such an indictment, even if it contains little specific information about the case itself, could provide clues to Bush administration policies toward Central Asia. "How they are going to respond is an important signal on the future of U.S. policy going forward in Kazakhstan and the Central Asian region," Pauline Jones Luong, a Central Asian expert and a political science professor at Yale University, said, according to "Eurasia View" on 25 November. "If the Bush administration delivers a harsh response to the letter it will indicate it's taking a strong stance on human rights and economic reform. But there are tradeoffs between security and reform, and security seems to be in the forefront right now." RK

It all began when a well-dressed, middle-aged man walked into the offices of the Russian Property Relations Ministry in early October with a bunch of official documents directing the creation of a new federal agency -- a "Transport and Sports Maritime Service for the Russian Federation" -- analogous to the U.S. Coast Guard. Ushered into a ministry office, the man, Nikolai Chemodanov, handed over the documents. They included a presidential decree purportedly signed by President Vladimir Putin and a government order that appeared to be signed by Prime Minister Mikhail Kasyanov. The documents set out that the agency should have a workforce of 15,000 and a budget of 500 million rubles ($15.5 million) for wages, he said. They also required that the Property Relations Ministry allocate a downtown building or buildings worth some $5 million for the agency, with a preference stated for Pyatnitskaya Ulitsa and Sadovaya-Kudrinskaya Ulitsa. Unfortunately for Chemodanov, the ministry had discovered by then that all the documents were false. The entire Russian "Coast Guard" was a massive con that was nearly pulled off by a single man.

This amazing story emerged on newsru.com and other Russian news agencies on 1 December (see "RFE/RL Newsline," 4 December 2002) and was written up in "The Moscow Times" of 6 December. That English-language newspaper's account was based on information provided by Filipp Zolotinskii, a spokesman for the Moscow Interior Ministry's economic-crimes division. Zolotinskii described the fraud this way, according to "The Moscow Times": "Chemodanov followed up his visit by ringing up and pretending to be various Russian and foreign officials. Once Chemodanov called and, speaking in fluent English, declared himself to be the assistant to United Nations Secretary-General Kofi Annan, [Zolotinskii] said. Another time, he spoke in fluent French, saying he was a high-ranking French official wishing to congratulate the Property [Relations] Ministry on the birth of the new federal agency."

Chemodanov was arrested and eventually confessed. If found guilty, he faces up to five years in prison.

"The Moscow Times" ended the story with a quote from Zolotinskii: "Russia has seen a number of frauds in recent years, but perhaps the only other case on such a grand scale was during World War II when a con artist convinced the Soviet Defense Ministry to fund a nonexistent army, giving him money and supplies. It was not until after the war that the fraud was discovered, and the con man [was] sentenced to 10 years in prison." RK

UKRAINIAN LAWMAKERS RELEASE CRIME AND CORRUPTION FINDINGS

By Roman Kupchinsky

On 2 December, the head of a parliamentary committee on combating organized crime and corruption, Volodymyr Stretovich, released a report on the state of criminality and corruption in Ukraine. The report was reprinted, with minor deletions, in the newspaper "Ukrayina moloda" on 5 December. The paper noted that, traditionally, this committee has been headed by a member of the opposition. Now, however, the pro-presidential majority in parliament has decided to change the committee leadership. As a result, Oleksander Bandurko of the Democratic Initiatives party is slated to become the new chairman.

The report notes that the committee in its present composition was able to work for less then six months. From the very start, the report states, most of the letters it received were from citizens asking that they be protected from state law-enforcement agencies. It is those agencies, in the view of the committee, that are among the most corrupt entities in Ukraine. They, along with the Department for Combating Organized Crime (UBOZ), are the root of the problem, the report concludes. Not one case of organized criminal activity initiated by the UBOZ in recent years has gone to court, it notes.

Citing fact-finding trips to different regions of Ukraine, the report found that criminal organizations were able to operate in the open in every region of the country. The reason for this, the report states, is that law-enforcement agencies do not hamper their activities -- and in fact are often in league with the criminals. The report cites a case in the city of Kryviy Rih, where a police investigator was forced to turn to the committee for help in trying to solve the murder of his son because police colleagues refused to work on the case. The report also mentions the case of Ihor Aleksandrov, a television journalist from Luhansk Oblast who was murdered after exposing widespread corruption within the local UBOZ. The killers of Aleksandrov still have not been found.

In the past year, not one organized criminal group with ties to local corrupt officials has been uncovered among 12 regions of Ukraine. In nine regions, fewer than three cases were discovered. The vast majority of "organized-crime" organizations uncovered by police consist of small groups of two to three people engaged in burglary and petty crime. Yet, the report continues, the statistics provided by the Ukrainian Interior Ministry distort the situation. For instance: "In the past year, 627 organized criminal groups were uncovered" is a meaningless piece of information without further explanation of their structures. Court statistics cited in the report show that, in the past six months, 253 individuals were sentenced for membership of organized-crime groupings, without a single individual who held a position above the raion level among them.

The report continues: "Formal indicators in the fight against organized crime do not convince the world of the sincerity of our efforts to liquidate the mafia and do not dispel the skepticism prevalent among the broader masses of our own population. Mail received by the committee, as well as numerous individual meetings by members of the committee with citizens, shows a total lack of confidence in the ability of law-enforcement agencies to protect the average person from criminal lawlessness acting in tandem with officialdom. But why talk about average citizens when even members of parliament can be dragged out of their cars and thrown onto the pavement? We all know, but most of us prefer to remain silent, about the superdemocratic methods used to create the majority in the parliament a half year ago. In the entire civilized world, of which we allegedly want to be part, the majority is created by voters. Here, it is created by an almighty "someone." It is sad and unfortunate that bribing and threatening an elected member of parliament does not surprise anyone in our country. Thus no one reacted to the official statement made by our colleague, Oleksander Turchynov, when he presented examples of attempts to bribe parliamentarians prior to voting for the new prime minister. During this shameful episode, I [Stretovich] was approached by three members who told me of attempts to buy their votes for between $300,000 and $500,000. But they refused my request to file formal complaints."

According to the report, corruption in the Ukrainian court system is widespread. Despite that reality, neither the Interior Ministry (MVD) nor the Ukrainian Security Service (SBU) reports mention this fact. Another factor is that court-ordered fines are rarely if ever paid. In Donetsk Oblast alone, more than 400 fines have not been acted upon -- for a total lost sum of 2 billion hryvnyas.

The report recommends that a special anticorruption unit be formed in Ukraine based on the Hong Kong Anticorruption Committee. Such a unit would have to be independent of the executive branch of government and its actions transparent, according to the report. Such a special unit is feasible, Stretovich states, adding that: "Even this would be not enough without broad openness and the inclusion of civic groups as well as objective media in a discussion of this problem. The committee believes that organized crime in the country has reached such proportions that it constitutes a real danger to the constitutional basis of government in Ukraine. The present efforts of law enforcement and other government agencies are ineffective and inadequate."