Khodorkovsky Initially Financed by KGB & Communist Party - Bobkov - Kondurov - MT - 16 May2005
Stefan Lemieszewski
http://www.moscowtimes.ru/stories/2005/05/16/001.html
Moscow Times
16 May 2005
Khodorkovsky's High Stakes Gamble
By Catherine Belton
[ . . . ]
"He set about his work like a maniac. The business was his life. Nothing was
left to chance, and he was constantly checking every detail. He has one
single passion: building an empire. People like this are unstoppable, or
stoppable only by a bullet," said Christian Michel, a founder of Valmet, a
Geneva-based global trust business, which agreed in early 1989 to advise
Khodorkovsky's group of young businessmen. Valmet later held the key to the
Group Menatep fortune, holding shares via nominee ownership schemes and
organizing the transfer of vast sums of money via its network.
[ . . . ]
As the leader of a Moscow Komsomol group, Khodorkovsky was chosen to head
one of the earliest forms of private business, the so-called Centers for
Scientific-Technical Creativity of Youth, or NTTMs. The centers were aimed
at stimulating scientific research at the nation's institutes, which had
been crimped by excessively controlled budgets. Under the new system,
researchers were to make a cash percentage for the first time from the sale
of their research.
[ . . . ]
The group's cash pile was rapidly mounting. By 1988, they had enough for
start-up capital for a bank. Initially named the Commercial Innovative Bank
for Scientific and Technical Progress, in December of that year Menatep
received one of the first licenses for private commercial banking and
hard-currency operations issued by the Soviet government. Soon, Khodorkovsky
and his team were being granted the right to manage government accounts.
How Khodorkovsky managed to get this role and how he was chosen to handle
and make so much cash is still something of a mystery. From the NTTMs to
computer imports to banking, all of these activities needed licenses and
approval from at least some sections of a regime that was rapidly falling
apart.
The Party and the KGB
According to Anton Surikov, an independent security expert who has known
Khodorkovsky for more than 10 years, the drive to create a new class of
private businessmen was partly a KGB operation from the start.
"It was impossible to work in the black market without KGB connections and
without protection from the KGB," he said. "Without them, no shadow business
was possible.
"There was a conscious creation of a black market," he said. "The creation
of the oligarchs was a revolution engineered by the KGB, but then they lost
control."
Behind the birth of this new breed of businessmen was an ideological clash
between the powerful Fifth Directorate of the KGB, headed by Filipp Bobkov,
and the Communist Party, Surikov said. The Fifth Directorate was in charge
of fighting so-called ideological diversions and national minorities and
thus was deeply immersed in these countercultures, he said.
"The KGB began to engage in ideology, too. Suddenly, there were two
competing ideological centers, when before the Communist Party held a
monopoly on ideology. This unavoidably led to a battle for power," he said.
"The Communist Party was heading into a dead end, and the people from the
Fifth Directorate saw that a new impetus was needed. This was how
perestroika was started."
Even though KGB officers working outside the country were in a better
position to see how Western economies differed, it was those inside the
country who "were leading the rebellion," he said. "It was the Fifth
Directorate and the Sixth Directorate ... to some extent that were leading
the way."
The Sixth Directorate was in charge of economic security, and the Soviet-era
mafia and the black marketeers were under its watch.
"The KGB really did help them, and at a certain stage, those who helped them
began to work for them," he said.
In Khodorkovsky's case, he said, the patrons were Bobkov and Alexei
Kondaurov, who also served as a general in the Fifth Directorate. Kondaurov
left the service immediately after the October 1993 revolt and began working
for Menatep as head of its analytical division, in charge of relations with
law enforcement structures.
Bobkov, meanwhile, went on to head the security division for Vladimir
Gusinsky, Khodorkovsky's fellow 1990s-era oligarch. Bobkov was unavailable
for an interview. Kondaurov said Khodorkovsky was never an agent of the KGB,
though he conceded that his future boss had made his way by doing a lot of
work for state officials as the Soviet Union was collapsing. "Leaders from
all levels of power, from the party nomenklatura to the red directors, were
looking for people who would help them deal with the new economic
realities," Kondaurov said. "Khodorkovsky and his group were these new young
wolves."
Khodorkovsky himself has been extremely circumspect about his early climb.
In an interview several months before his arrest, he was anxious to brush
over details of those days.
[ . . .]
=========================================================
http://infoukes.com/lists/politics/2000/09/0273.html
Role of KGB during the Transition from Communism to Democracy
=====================================================
http://policy.house.gov/russia/home.html
The Cox Report
Speaker's Advisory Group on Russia
Russia's Road To Corruption:
How The Clinton Administration Exported Government Instead
of Free Enterprise and Failed the Russian People
=====================================================
http://infoukes.com/lists/politics/2000/09/0191.html
Gusinsky & Bobkov & The Moscow Narco Group - NS - 27May96
====================================================
Stefan Lemieszewski
>
> http://www.moscowtimes.ru/stories/2005/05/16/001.html
> Moscow Times
> 16 May 2005
> Khodorkovsky's High Stakes Gamble
> By Catherine Belton
>
> [ . . . ]
> "He set about his work like a maniac. The business was his life. Nothing
was
> left to chance, and he was constantly checking every detail. He has one
> single passion: building an empire. People like this are unstoppable, or
> stoppable only by a bullet," said Christian Michel, a founder of Valmet, a
> Geneva-based global trust business, which agreed in early 1989 to advise
> Khodorkovsky's group of young businessmen. Valmet later held the key to
the
> Group Menatep fortune, holding shares via nominee ownership schemes and
> organizing the transfer of vast sums of money via its network.
> [ . . . ]
====================================================
Riggs Bank in Washington, DC was a key shareholder in Valmet.
Some of the money laundering operations of Riggs made it infamous
in the last several years and forced it into bankruptcy. Riggs did
some money laundering for Kissinger's dictator buddy from Chile,
Augosto Pinochet and oligarchs from African countries who were
recycling dirty bribe money from American oil firms--countries such
as Nigeria and Equatorial Guinea, oligarchs such as President
Teodoro Obiang Nguema Mbasago (who owns two houses in
Potomac valued at $1.3 million and $2.5 million, and whose son
Teodoro Nguema Obiang owns a $6.9 million house in Los Angeles),
and corporations such as Halliburton, Exxon Mobil, Amerada Hess,
Marathon Oil, ChevronTexaco, Devon Energy and CMS Energy.
Obiang's country of Equatorial Guinea was Rigg's largest depositor
with deposits of $700 million often hauled to Riggs' DuPont Circle
branch $1 million at a time in shrink-wrapped, 20-pound bundles,
while most of the country's 500,000 citizens barely survive on
about $1 a day and three of four residents suffer malnutrition.
Riggs Bank was noted for having many Embassy Row customers
and was known to have its bank employees go to their embassies
and pick up suitcases stuffed with $100 bills for deposits. Riggs
had banking relations with 95% of the Washington's 160-some
embassies and missions
(While Pinochet and family had 28 bank accounts at Riggs, they
had 68 bank acconts at Citibank).
Riggs Bank had been around for more than 160 years. It was known
as the "bank of presidents" served 21 first families over the years and
financed the purchase of Alaska. Since 1981 it was owned by the
Texan Joe L. Allbritton and his family. Allbritton is close to the Bush
family and has contributed (along with Riggs' client Saudi Prince
Bandar) over $100,000 to the Bush Presidential Library.
(And sshhhh! ; President George Bush's uncle, Jonathan Bush,
was the CEO of Riggs Bank's investment arm).
And according to the Wall Street Journal, Riggs had cose ties to the
CIA for decades going back at least to the Cuban Bay of Pigs affair
in the 1960s.
The outside law firm for Riggs Bank was Sullivan & Cromwell.
Before going belly up, pleading guilty to money laundering and being
bailed out, Riggs Bank used to run advertisements calling itself "the
most important bank in the most important city in the world."
While Pinochet gets lots of media coverage, money laundering by
Khodorkovsky, Riggs and the Valmet connection get very little.
Nevertheless, criminology professor and author Alan A. Block (with
co-author Constance A. Weaver) has a full chapter on Riggs and
Valmet in "All Is Clouded By Desire: Global Banking, Money
Laundering and International Organized Crime".
Stefan Lemieszewski
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http://www.itar-tass.com/eng/level2.html?NewsID=2029803&PageNum=0
13May2005
Khodorkovsky, Lebedev to be charged with money laundering
=================================================
http://www.dissentmagazine.org/
Dissent
Spring 2005
Profit Laundering and Tax Evasion
The Dirty Little Secret of Financial Globalization
by Lucy Komisar
[ . . . ]
An inquiry by Senator Carl Levin in 2004 revealed that Riggs Bank
in Washington, D.C., had helped ex-dictator Augusto Pinochet
hide $8 million from Chile's tax authorities. Until 1998, Riggs owned
a share of Valmet, an Isle of Man operation that set up shell
companies and accounts to hide and launder money for companies
controlled by the oil mogul Mikhail Khodorkovsky, now in a Russian
jail, and for Robert Brennan, the New Jersey penny stock fraudster
now in U.S. federal prison.
[ . . . ]
===========================================================
The Wall Street Journal
29Aug99
Russian banker and his deals are key to money-laundering case
By ANDREW HIGGINS
[ . . . ]
Kagalovsky seemed true to his word: Soon he was living in a suite
in a luxury hotel overlooking the Kremlin and, newly installed as
Menatep's first deputy chairman, was proclaiming bold ambitions for
the bank's future. Menatep, he told shareholders in early 1995, soon
would enjoy a global reach.
In a way, he might have been right. Menatep failed last year amid
Russia's financial crisis, but it lives on: Investigators say Menatep
and Kagalovsky increasingly are becoming a focus of the
investigation set off by the suspected laundering of Russian mob
money at Bank of New York Co.
[ . . . . ]
The scale of the operation, investigators now suspect, was even
more grand than imagined. Government officials are looking into
whether Menatep was used to move funds through accounts at Bank
of New York linked to Benex Worldwide Ltd., a Russian firm that
investigators already have said has ties to an alleged Russian
mobster.
Investigators have said about $6 billion zipped through the Benex
accounts just since authorities began monitoring the transactions last
fall, but one federal official says the Benex strand of the suspected
money-laundering operations appears to be the tip of the iceberg.
Investigators are checking accounts at a growing number of other
international banks, including UBS AG and Credit Suisse Group.
Moreover, investigators say they are looking into the role of Valmet,
a financial adviser based on the Isle of Man, a British-controlled
island in the Irish Sea. Valmet has affiliates in Cyprus, Gibraltar and
Zurich, Switzerland, among other places. Menatep acquired 20
percent of Valmet, some from Riggs Bank in Washington in 1994.
Russian regulators, meanwhile, have appealed to the U.S. Securities
and Exchange Commission for help in a separate investigation into
allegations that a $500 million loan Kagalovsky helped negotiate in
1997 from Goldman, Sachs & Co., Merrill Lynch & Co. and Credit
Lyonnais might have violated Russian law. The SEC declined to
comment.
[ . . . ]
Kagalovsky is deputy chairman of AO Yukos, a Russian oil company
bought by Menatep in 1996 in a loans-for-shares privatization deal. A
Yukos spokesman says the oil company had nothing to do with the
money-laundering case and denies any role in the illicit transfer of
money or assets abroad.
[ . . . ]
===================================================
All Is Clouded By Desire: Global Banking, Money
Laundering, and International Organized Crime
By Alan A. Block and Constance A. Weaver
(2004; ISBN 0-275-98339-7; pp117+)
CHAPTER 7
Moving Hot Money: Riggs National Bank and Valmet S.A.
INTRODUCTION: FROM BANK MENATEP TO RIGGS VALMET
The March/April 1994 issue of Foreign Affairs, a publication of the Council
on Foreign Relations, featured an article entitled "The Russian Mafia,"
which held that "Organized crime is the most explosive force to emerge from
the wreckage of Soviet communism." The article went on to state that the
Russian government estimates "$25 billion had been transferred ... to
western banks by organized crime structures in 1993." Approximately eight
months later, a Washington Times story, purportedly based upon a CIA
analysis, said the Russian Bank Menatep "is controlled by one of the most
powerful crime clans in Moscow."
[ . . . ]
Although much has been written about Menatep Bank, which failed in the
crisis years of 1998-99 (except for a small branch in St. Petersburg), as
did so many other Russian banks and businesses, the Menatep organization's
grand success has only recently come to light. Oligarch Mikhail B.
Khodorkovsky, who founded Menatep Bank, finally admitted that he controlled
36 percent of Yukos Oil, which was worth around $7.2 billion. Moreover, the
Menatep Group owns all of Yukos Universal Ltd., which in turn has more than
60 percent of the Yukos shares. Khodorkovsky also is the chief of most of
the Menatep Group, with 59.5 percent of the shares. It appears that $7.2
billion may be on the light side of all that he owns when it comes to Yukos,
whose current market capitalization is in the $20 billion neighborhood.5
Interlocking Worlds: Valmet, Riggs, and Menatep
Whatever Bank Menatep did with The Bank of New York and BNY-IMB, it first
worked its magic through an extraordinary Swiss-based firm, Valmet, which
was majority owned (51%) in 1989 by the Riggs Bank of Washington, D.C. That
was also the year Bank Menatep created its first Swiss affiliate, Menatep
S.A., in December. A little over one year later, Menatep formed another
Swiss company, Menatep Finance. As the Swiss noted, Menatep Finance
benefitted from the infrastructure and personnel of Riggs Valmet S.A. Both
of the Menatep creations were managed by Riggs Valmet from the start.6
[ . . . ]
With the coming of Riggs, the composition of the Valmet Board of Directors
was changed at the end of March 1989. The new administration was composed of
Bruce Rappaport's close associate, attorney Jean-Paul Aeschimann; Robert J.
Woodbridge, an executive vice president of Riggs National Bank in charge of
supervising private banking in Europe and the managing director of Riggs AP
Bank in London; and Lanse Offen III, who was hired away from the Bank of
Boston in 1988. Often soon took over Woodbridge's post as head of Riggs'
foreign operations.13 Under Offen's direction, more international private
banks and bankers were added, and Riggs itself "opened an offshore trust
company in The Bahamas."14 Approximately one month later, Christian Michel
and Michel Saba were nominated as directors general of the new institution,
Riggs Valmet.15 The auditor was the Arthur Anderson firm, notable for its
criminal accounting methods.
Valmet's attractiveness came from its "$130 million in assets under
management," and its disinclination to handle any accounts under $500,000.
It had also established offices in Portugal and Spain to complement the ones
already noted in Britain, Gibraltar, and Switzerland.16 Riggs Valmet
continued to expand quickly. Of particular significance was the development
of Riggs Valmet on the Isle of Man, notorious for its propensity to assist
in money laundering. The managing director was Peter M. Bond,17 who would
play an extraordinary role in the farrago of Russian money laundering
through The Bank of New York.
[ . . . ]
Christian Michel and Alton Keel, Jr.
The Riggs-Valmet marriage was consummated, according to Michel Saba, because
Valmet needed an infusion of capital and Riggs wanted to do business in
Eastern Europe and Russia. The key players were Christian Michel and Alton
G. Keel, Jr., who had joined Riggs National Bank of Washington as a senior
executive vice president in November 1989, right after he stepped down as
the U.S. ambassador to NATO.19 When we interviewed Saba, he characterized
them both as active members of the Libertarian movement and said that their
philosophical affinity is what really brought them--and thus Riggs and
Valmet--together.
[ . . . ]
The Bank of New York and Riggs
During the time Riggs was floating in its sea of troubles, it worked with
The Bank of New York on a number of projects. One involved a common effort
by both banks to establish correspondent banking arrangements with
Turkmenistan, the fourth-largest former Soviet Republic, which borders
Uzbekistan, Kazakhstan, the Caspian Sea, Iran, and Afghanistan. The
correspondent arrangements were made and completed in 1993 with
Vnesh-econombank, the Turkmenistan government's primary fiscal agent.37 The
following year, The Bank of New York also became the clearing agent for
Riggs common stock traded over the counter.38
[ . . .]
THE FINAL GO-ROUND WITH VALMET
[ . . . ]
Also in 1994, the Rossiyskiy Kredit Bank (RKB), Moscow, formed a Swiss
affiliate, Roskredit Finance S.A., which was housed under the directorship
of Valmet S.A. in Geneva. The RKB was established in 1990, and grew into the
third-largest private bank in Russia by late winter 1998. It was put
together by more than thirty-five of the largest Russian companies, state
enterprises, insurance companies, and banks. The bank handled transactions
for the Russian Ministry of Finance, the Taxation Service, the Customs
Service, and the Committee for Precious Metals, among other government
agencies. It also created a network of more than 120 affiliates and branches
within Russia, and worked with approximately five hundred foreign
correspondent banks. Moreover, around thirty major international banks
provided the RKB with credit lines, including The Bank of New York,
Citibank, Chase Manhattan, Credit Suisse, Banca Nazionale del Lavoro,
several German banks including Deutsche Bank, and Austrian ones such as
Raiffeissen Zentralbank, and others as well.73
There were other Valmet changes, though they were not easy to find. For
instance, in the December 1995 Annual Report of Intelect Communication
Systems Ltd., Bermuda, it turned out that two of its officers were also
officers of Valmet. Peter G. Leighton, the president of Intelect was a
director of Valmet Group Limited housed in Bermuda, as was Rhianon M. Pedro,
Intelect's chief financial officer and a member of its audit committee.
Bermuda would play an ever-more-important role in the Valmet saga.
Runicom and Russian Oil
Runicom S.A. was another Valmet spawn that soon became an arm of the Russian
oil giant Sibneft (the Siberian Oil Company). It was dominated by two
oligarchs--Roman Abramovich and Boris Berezovsky. Shortly before that
happened, Abramovich, who was twenty-eight years old when Runicom was
registered in Geneva on December 6, 1994, was just an oil trader supervising
a network of companies operating out of Switzerland.74 The following year,
Abramovich was given the title of director of Runicom's Moscow
representative office. He was also a partner with Leonid Dyachenko,
President Yeltsin's son-in-law. Runicom was technically owned by two Riggs
Valmet companies: 50 percent was registered by Riggs Valmet Nominees on the
Isle of Man--Peter Bond's roost--and the other half by Riggs Valmet
Finsbury Nominees in Gibraltar. The true beneficial owners of both firms
were not disclosed. Runicom's officers were Eugene Markovich Shvidler from
New York, who would later become the president of Sibneft, and Otto
Deggeller, Nicolas Jaquet, and Christian Michel. Arthur Anderson S.A.
handled the new firm's accounting.75 Shvidler served as Runicom's vice
president from 1994 through 1996.76
[ . . . ]
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