And Just When Everybody Is Trying to Get Along

0 Comments | Insight on the News, August 13, 2001 | by Jamie Dettmer

With the Bush administration trying to cozy up to Moscow -- all part of the diplomatic effort to coax the Russians to assent to the missile-defense proposal -- the last thing the White House wants to hear about is further allegations concerning money laundering of International Monetary Fund (IMF) loans via the Bank of New York (BONY).

During the second presidential debate last fall, then-candidate George W. Bush sought to embarrass Vice President Al Gore by raising the issue and accusing former Russian prime minister Viktor Chernomyrdin, among others, of pocketing the IMF cash. The Russian threatened to sue. On the campaign trail, Bush pledged his administration would be far more cautious in backing international aid for Russia.

All that appears now to be forgotten, but the money-laundering scandal just won't go away. In mid-July, the Russian biweekly newspaper Novaya Gazeta published an article claiming that Anatoly Chubais -- currently head of United Energy Systems, Russia's electric utility, and a leader of the Union of Right-Wing Forces, a party allied to Russian President Vladimir Putin -- was involved in the laundering of IMF money.

Chubais was an early Putin mentor, being partly responsible for securing Putin's transfer from his job in St. Petersburg to the Kremlin when Boris Yeltsin was president.

According to documents obtained by Novaya Gazeta, in January 1996 a Chubais aide, Alfred Kokh, traveled to Barbados with Natasha Gurfinkel-Kagalovsky, a BONY senior vice president in charge of the bank's Eastern European division, and her husband, Konstantin Kagalovsky, Russia's representative to the IMF.

At the time of the trip, Kokh was first deputy chief of the Kremlin's State Property Committee, which was controlled by Chubais, who was then a first deputy prime minister. FBI sources say that Kokh went to Barbados on behalf of Chubais, who needed a "mechanism" to send billions of dollars received from the sell-off of state companies overseas and to launder a portion for Yeltsin's re-election campaign.

The sources cited by the newspaper say that Chubais did not want to be spotted meeting with Gurfinkel-Kagalovsky, although earlier he had met in the United States secretly with some key figures in the BONY scandal. No charges in connection with the BONY case have been brought against Gurfinkel-Kagalovsky, who was suspended by the bank and later resigned. Last year she filed an action against the bank, denying any connection to the money laundering and seeking compensation for the damage to her reputation.

The newspaper also claims that between 1993 and 1995 Chubais "organized the sale of unique Russian [military] technology to the West" and that most of the proceeds also went missing, along with $2 billion in money from the West to assist in the development of privatization in Russia. Some of that money, it is alleged, ended up in BONY accounts along with diverted IMF loans.