Publication: Fortnight in Review Volume: 6 Issue: 18

Perhaps it was a sign that the summer was truly over and the fall political season in full swing. Whatever the case, the din of corruption charges and mutual recriminations between the government and its critics dominated the fortnight in Russian politics. Perhaps emboldened by the fact that the Kremlin had, earlier in the month, been focusing its efforts on trying to pry a 49-percent stake in Russian Public Television (ORT) away from the controversial tycoon Boris Berezovsky, outlets belonging to rival tycoon Vladimir Gusinsky’s Media-Most once again began running items on high-level governmental corruption. There were just the kind of stories that had been annoying the powers-that-be for more than a year and, many observers believe, were a key factor in Gusinsky’s arrest and brief stint in jail last June.

Segodnya, Media-Most’s daily newspaper, ran an item alleging that back in March, Prime Minister Mikhail Kasyanov, who was then a first deputy prime minister and finance minister, had signed an agreement giving an obscure Cyprus-based company the right to collect the Railway Ministry’s debt to the Finance Ministry and earn US$13 million on the deal–courtesy of the Russian taxpayer. According to Segodnya, the deal was not authorized by the Russian Central Bank, as was required, and the US$38.9 million in Railways Ministry debt was transferred through MDM-Bank–where the influential banker and reputed Kasyanov associate Aleksandr Mamut once worked–to an account in Business Mediterranean Bank Ltd., which is located on the Pacific Island of Nauru. This was not the kind of publicity Kasyanov was seeking, given that he was already known in some circles as “Misha 2-Percent”–a reference to the commissions he allegedly earned from foreign debt manipulation schemes (reportedly in cahoots with Mamut and Sibneft chief Roman Abramovich). What is more, Kasyanov was rumored to be on the verge of becoming one of Russia’s many ex-premiers, and such attention clearly was not helpful in this regard.

The Kasyanov expose, however, was just the beginning, and Segodnya delivered the encore when it published a letter that Swiss magistrate Daniel Devaud sent to Vladimir Ustinov, Russia’s Prosecutor General, last July, asking for help in prosecuting 14 people whom the Swiss authorities have charged with money laundering. The letter was connected to the so-called Mabetex case, named after a Swiss engineering-construction firm that allegedly paid multi-million-dollar kickbacks to Kremlin officials. Among those named in the letter were Viktor Stolpovskikh, the head of Mercata Trading and Engineering, a Mabetex affiliate, and Pavel Borodin, the former Kremlin property manager who was the target of an international arrest warrant issued by the Swiss authorities earlier this year. The letter provided fascinating details on how high-level money laundering works, replete with obscure shell companies and foundations, and banks located on exotic offshore banking centers like Panama, the Isle of Man and the Bahamas. Perhaps more importantly, the leak was undoubtedly seen in the Kremlin as an attempt to embarrass President Vladimir Putin, given that Borodin was once his boss and that Putin earlier this year recommended Borodin for the post of Russia-Belarus Union State Secretary, an international bureaucratic post which comes with immunity from criminal prosecution.