Publication: Monitor Volume: 6 Issue: 81

A Russian newspaper wrote today that the arrival of the U.S. congressional delegation headed by Congressman Jim Leach is a sign that Leach, who, in the paper’s view, tried to use the Bank of New York (BONY) money laundering scandal to discredit Russia, is now backing off. The paper played down the charges which have been brought against the two major players in the scandal–Lucy Edwards, a former BONY vice president, and her husband Peter Berlin–in New York. According to the paper, the couple is now being charged only with failure to pay US$1.8 million in taxes (Kommersant, April 25).

This interpretation, however, would seem to be a deliberate and misleading attempt to play down the implications of the BONY scandal. In February, Edwards and Berlin pleaded guilty in a U.S. federal court to various charges, including operating an illegal money-transmitting business, laundering money through international funds transfers intended to promote criminal activity and tax evasion. Their admissions were part of a plea-bargain agreement, in which they promised to cooperate with U.S. authorities. The couple admitted that they arranged more than 160,000 illegal transactions amounting to more than US$7 billion, and named two Russian banks, Depositarno-Kliringovy Bank (DKB) and Flamingo Bank, as having been involved. According to Western and Russian media reports citing court documents and Russian law enforcement officials, two other banks, MDM and Sobinbank, were involved. MDM and Sobinbank were the principal owners of DKB and helped raise capital for Flamingo (Moscow Times, February 18, April 25; Vremya MN, February 24). Last October, NTV television alleged that the Kremlin administration was the “krysha” (roof, meaning protection) for a scheme to illegally launder money abroad which involved MDM, among others (see the Monitor, October 11, 1999). Aleksandr Mamut, who has been identified as a member of former President Boris Yeltsin’s Kremlin “family,” or inner circle, held top posts in both MDM and Sobinbank, and is currently chairman of MDM’s coordination council (Moscow Times, April 25).

Meanwhile, the weekly newspaper Versiya claimed in its latest issue that there is a video-tape, made in 1998, of a top BONY official–an American–in bed with prostitutes at Moscow’s Kempinski hotel. The paper, which named the official, promised to detail this latest scandal, along with what it called BONY’s highly-lucrative “schemes” in Russia–which, the paper hinted, involved tax evasion–in the very near future (Versiya, April 25).

Versiya, whose editor-in-chief and publisher, Artem Borovik, died in a plane crash earlier this year, is seen by many as a scandal sheet. Nonetheless, it has been at the forefront in investigating various high-level corruption cases. Last year, Versiya alleged that Aleksandr Mamut conspired with Mikhail Kasyanov, then Russian finance minister who today is also a first deputy prime minister, to manipulate debt obligations to Russia for profit. Versiya claimed that Kasyanov received a commission from such operations, thus earning the nickname “Misha 2-Percent” (see the Monitor, October 5, 1999). Kasyanov is seen as the front runner to head President-elect Vladimir Putin’s new cabinet.