Tainted Transactions

National Interest, The, Spring, 2000 by Janine R. Wedel

The donors' flagship organization was the Russian Privatization Center, which had close ties to Harvard University. Its founding documents state that Harvard University is both a "founder" and "Full Member of the [Russian Privatization] Center." [13] The center received funds from all major and some minor Western donors and lenders: the United States, the IMF, the World Bank, the European Bank for Reconstruction and Development, the European Union, Germany and Japan. [14] The center's chief executive officer, a Russian from the Chubais Clan, has written that while head of the center he managed some $4 billion in Western funds. [15] The Chamber of Accounts, Russia's rough equivalent of the U.S. General Accounting Office, investigated how that money was spent. An auditor from the Chamber concluded that the "money was not spent as designated. Donors paid ... for something you can't determine." [16] When I interviewed aid-paid consultants working at the center, I was told that the funds were routinely used for p olitical purposes.

The center was an archetypal flex organization, one that switched its identity and status situationally. Formally and legally, it was nonprofit and non-governmental. But it was established by Russian presidential decree and received aid because it was run by the Chubais transactors, who also played key roles in the Russian government. In practice, the center played the role of government agency. It negotiated with and received loans from international financial institutions--which typically lend to governments, not private entities--and did so on behalf of the Russian state.

According to documents from Russia's Chamber of Accounts, the center wielded more control over certain privatization documents and directives than did the Russian government agency formally responsible for privatization. [17] Two center officials, its CEO from the Chubais Clan and Harvard's Moscow representative, Hay, were in fact authorized to sign privatization decisions on Russia's behalf. Thus did a Russian and an American, both of them affiliated with a private entity, end up acting as representatives of the Russian Federation.

* "Transidentity"

It was not only organizations that could change guises. The flex organization had its individual equivalent in the phenomenon of "transidentity", which refers to the ability of a transactor to change his identity at will, regardless of which side originally designated him as its representative. [18] Key Harvard-Chubais transactors were quintessential chameleons. To suit the transactors' purposes, the same individual could represent the United States in one meeting and Russia in the next--and perhaps himself at a third--regardless of national origin.

Jonathan Hay, who alternatively acted as an American and a Russian, provides a telling example of this phenomenon. In addition to being Harvard's chief representative in Russia, with formal management authority over many other U.S. contractors, Hay was appointed by members of the Chubais Clan to be a Russian. As such, he was empowered to approve or veto high-level privatization decisions of the Russian government. According to a U.S. official investigating Harvard's activities, Hay "played more Russian than American." The financial arena yields many such examples of transidentity, in which Chubais transactors appointed Americans to act as Russians. [19]