SWISS FIRM REPORTEDLY PROVIDED FIRST FAMILY WITH GENEROUS “POCKET MONEY.”

Just on the heels of reports that U.S. and British law enforcement are investigating the alleged laundering of billions of dollars from Russia through the Bank of New York, a new wrinkle has emerged in another Russian corruption scandal. The Italian newspaper “Corriere della Sera” reported yesterday that Bahgjet Pacolli, the head of the Swiss construction company Mabetex, which won contracts worth hundreds of millions of dollars to refurbish Russian government buildings, told Swiss prosecutors that he gave more than US$1 million to President Boris Yeltsin, his two daughters and former presidential security chief Aleksandr Korzhakov as “pocket money” for a 1994 trip to Budapest, Hungary. The newspaper, which cited unnamed sources close to outgoing Swiss chief prosecutor Carla del Ponte, claimed that during the Budapest visit Yeltsin’s youngest daughter, Tatyana Dyachenko, who is now one of his advisers, spent thousands of dollars in a single day. A Mabetex spokesman quoted Pacolli as calling the “Corriere della Sera” report an “excellent fiction” (Moscow Times, August 26).

Swiss authorities joined the investigation into Mabetex earlier this year at the request of then Russian Prosecutor General Yuri Skuratov, whom President Boris Yeltsin subsequently suspended. In March of this year, Russian prosecutors seized documents from the offices of Pavel Borodin, the head of the Kremlin property management department, which had concluded contracts with Mabetex to refurbish various government buildings. Mabetex was paid US$12,000 per square meter for refurbishing the Kremlin building, which includes Yeltsin’s office–an astronomical fee which has led some observers to suspect a kickback was involved. In 1997, “The Independent,” a British newspaper, reported that Mabetex had brokered the purchase of two boats for Yeltsin in Britain, costing more than US$490,000.

Last month, Swiss prosecutors investigating Mabetex froze the bank accounts of more than twenty Russians–among them, reportedly, top Russian government officials. Swiss media specifically named Borodin, along with his wife, as being among the account holders. According to the Italian account, Mabetex chief Pacolli told Swiss prosecutors that Borodin’s Swiss accounts provided the pocket money for the Yeltsins’ Budapest visit (Moscow Times, August 26).

Borodin’s Kremlin department is a veritable empire, made up of property formerly belonging to the Soviet Communist Party and nationalized by the Yeltsin administration following the Soviet collapse in 1991. It includes 5,254 buildings totaling more than 3 million square meters, 23 sanatoriums, 114 publishing houses, as well as hotels, ships, an airline company servicing government officials, and various property abroad (Delovoi vtornik, No. 29, August 1999). Borodin himself once valued the property under his department’s management at US$600 billion.

OFFICIAL RUSSIAN RESPONSE TO BANK OF NEW YORK SCANDAL: NOT OUR PROBLEM.