Those Funny Money Matters in Moscow

0 Comments | Insight on the News, Sept 27, 1999 | by Jamie Dettmer, | Paul M. Rodriguez

Independent counsel Kenneth Starr should count himself lucky -- at least he was able to investigate various and sundry allegations of presidential wrongdoing without being sacked. His counterparts in Russia, who against great odds have been trying to get to the bottom of Kremlin corruption, have not been so fortunate.

The latest money-laundering scandal to rock Moscow, with Swiss bank accounts here, there and everywhere and hundreds of millions of dollars of apparently misappropriated foreign aid ending up coursing through the Bank of New York, has led President Boris Yeltsin to unleash a purge against prosecutors. The senior investigator, Georgy Chuglazov, and two of his colleagues in the prosecutor general's office were in the process of being removed from their jobs as news alert! went to press.

Chuglazov was fired as he was about to set off for Switzerland in connection with his ongoing probe into alleged kickbacks to the Kremlin by the Swiss construction firm Mabetex. Shortly before he was "neutralized" he declared, "We possess material on the existence of accounts of high-level government officials and their relatives in foreign banks."

The country's prosecutor general, Yuri Skuratov, who was suspended by Yeltsin in the winter, continues to maintain that the Russian president's "closest entourage" will do anything to block probes, especially into the laundering of $10 billion through the Bank of New York. Skuratov claims more than 800 top Russian officials also illegally have speculated in short-term treasury bills. The Kremlin insists that neither Yeltsin nor his family have any foreign bank accounts.

Political fallout from the corruption scandal isn't only impacting American politics (see cover story, p. 10). Other Western governments are being challenged to explain what they know about Kremlin graft and when they suspected diversions of foreign-aid cash. According to France's Journal du Dimanche, French authorities "have known for at least three years, from their secret services, about machinations with International Monetary Fund loans." And Le Figaro has claimed that former Russian prime minister Viktor Chernomyrdin diverted $1.5 million in government funds to "highly dubious" research institutes.

With the hue and cry increasing internationally, U.S. Treasury Secretary Larry Summers said the Clinton administration will not back payment of new support by the International Monetary Fund, or IMF, to Russia due at the end of this month "without adequate safeguards that any funds disbursed are used properly and without adequate accounting for the previous use of funds." Later, his own department tried to pull back a bit from the secretary's initial comments, arguing that the United States was not seeking to delay further IMF funding of Russia. The second tranche of a $4.5 billion IMF credit agreed in July will be discussed in late September by the IMF board.