[Apologies for the poor formatting. Articles like this appear everyday on JRL] --SP. Johnson's Russia List #3456 22 August 1999 [EMAIL PROTECTED] ******* #4 New York Times August 22, 1999 [for personal use only] Russian Money-Laundering Investigation Finds Familiar Swiss Banker in the By TIMOTHY L. O'BRIEN with RAYMOND BONNER At the intersection of illicit Russian money and the Bank of New York is Bruce Rappaport, a Swiss banker who has had brushes with governmental investigators in the past and who has long had an important connection to the bank. Together with the Bank of New York, Rappaport owns a bank in Switzerland that helped provide the American bank with important business contacts in Russia, according to Western bankers familiar with the operation. And millions of dollars that were channeled through the Swiss bank, known as Bank of New York-Inter Maritime, are linked to what Federal investigators describe as possibly one of the biggest money-laundering schemes in the United States, according to a person close to the investigation. The Bank of New York, which for years aggressively sought business in Russia, is currently engulfed in a Federal money-laundering investigation that led to the suspension last week of two senior officers who oversaw the bank's Russian business. Federal investigators are also looking into the activities of their husbands, both of whom are involved in businesses that have ties to either Rappaport or his Swiss bank. The money moving through the Bank of New York-Inter Maritime raises the question of why the Bank of New York, a conservative institution that is one of the nation's oldest banks, worked closely with a man who has frequently drawn the attention of government regulators and law-enforcement officials worldwide. Most recently, Rappaport's bank was sued by the Justice Department in 1997, to recover proceeds that the Government asserted were from drug sales that had been deposited in the Bank of New York-Inter Maritime on the Caribbean island of Antigua by a known money-launderer. A Federal judge dismissed the case last year, though, citing lack of jurisdiction. The Government is appealing the decision. A Boston lawyer representing Bank of New York-Inter Maritime, William Shaw McDermott, did not respond to requests to interview Rappaport or talk about the Justice Department suit. Efforts to contact Rappaport were unsuccessful. The Bank of New York, which is cooperating with the Federal money-laundering investigation, declined to comment about Rappaport. The interest of investigators is heightened, one official said, because Rappaport, who is 76 years old and lives in Switzerland, was recently appointed Antigua's Ambassador to Russia. Antigua, this official noted, has been a major center of Russian money-laundering for many years. Rappaport has long had close business, banking and political ties to Antigua, where the Government once granted him a near-monopoly on the fuel-oil market. Money-laundering is a legal catch-phrase that refers to the criminal practice of taking ill-gotten gains and moving them through a sequence of bank accounts so that they ultimately look like legitimate profits from legal businesses. The money is then withdrawn and used for further criminal activity. Rappaport, who has never been convicted of any wrongdoing, is well known in Russian banking circles. He helped solicit business during the boom times in Moscow. In fact, for a brief time, Bank of New York Inter-Maritime was used in 1994 by the Bank of New York to conduct business in Russia. The world of international banking is often built on personal relationships. In that world, an ability to deal easily across borders and within business, political and financial circles is highly valuable to big banks. To gain access to certain foreign markets, the Bank of New York has relied on people like Rappaport. Born in Haifa, now Israel, Rappaport has used his base in Geneva to pursue investments and business in a wide range of places, including Oman, Liberia, Nigeria, Haiti, Thailand, Indonesia, Belgium and the United States. Rappaport opened Inter-Maritime in Geneva in 1966. By the 1980's, he was one of the Bank of New York's largest individual shareholders, controlling millions of dollars in stock amounting to a nearly 8 percent stake in the company. Although virtually all of that stock has been sold, back in the 80's, Rappaport's hefty stake gave him entre to the bank's senior management, including the chief executive at that time, Carter Bacot. Bacot, whom the Bank of New York declined to make available for comment, is said by a former Bank of New York senior executive to have approved the bank's decision to buy a large stake in Rappaport's bank known then as Inter Maritime. By 1992, the Bank of New York reportedly owned about 28 percent of what became known as Bank of New York-Inter Maritime. In the Federal money-laundering investigation of the bank that surfaced last week, one of the accounts authorities are looking at is Benex, which moved funds through the Bank of New York as well as the Bank of New York-Inter Maritime. The sole director of Benex Worldwide, a British affiliate, according to corporate records in London, is Peter Berlin. He is the Russian-born husband of one of the senior officers at the Bank of New York, Lucy Edwards, who was suspended last week by the bank. Ms. Edwards, 41, oversaw Russian accounts in the Bank of New York's London office. Berlin is believed by American investigators to have had authority over the Benex account at the Bank of New York. An initial round of Federal subpoenas issued to the Bank of New York produced 3,500 pages of transactions for one account in Benex's name, investigators said. Ms. Edwards reported to Natasha Gurfinkel Kagalovsky, who is based in New York and supervised all of the bank's Eastern European business. Ms. Kagalovsky, 44, was also suspended because of the money-laundering investigation, and her office, like Ms. Edwards's, was searched and sealed by law-enforcement officials last week. The Bank of New York has repeatedly declined to make either of the women, who have not been accused of any wrongdoing, available for comment. Ms. Kagalovsky's husband, Konstantin Kagalovsky, is a former senior executive at Bank Menatep, one of Russia's largest banks. And Menatep, according to Western law-enforcement officials, has also had dealings with Rappaport. Menatep, now virtually insolvent, is part of an industrial empire overseen by Mikhail Khodorkovsky, one of Russia's prominent financiers, or so-called "oligarchs." Bank of New York had an active relationship with Menatep and helped the bank list its stock for trading in the United States. Federal investigators are trying to determine whether some of the money that may have been laundered through the Bank of New York came from Menatep. Menatep, and related companies in Russia, are suspected by Western investors and Russian regulatory authorities of having looted money from the country, assertions that Khodorkovsky and his representatives have firmly denied. In 1994, Khodorkovsky briefly served as a director of the European Union Bank, an Internet bank based in Antigua. Khodorkovsky has said that he served as a director of the on-line bank for only one week and had no further involvement with it. The bank later collapsed amid accusations from various regulators that it was a scam. ******* #5 The Guardian (UK) 22 August 1999 [for personal use only] Russian mafia target the City Fury in Britain as US leak blows investigation into money-laundering link with world's most wanted man By Tony Thompson and Paul Farrelly Three days after the murders the German film crew turned up at the fortified Budapest home of Semion Mogilevich, the man they call 'the most dangerous mobster in the world', hoping for an interview. The bodies of four East European prostitutes, a brothel owner and his wife had been found in a stuccoed villa on the edge of Frankfurt's business district. The women were naked, hands tied behind their backs, and were forced to lie face down before being strangled. The brothel owner, who disturbed the murderer, was garrotted. Russian police believe Mogilevich is a senior figure in the Solntsevo, Russia's biggest organised crime gang, run by Sergei Mikhailov. Mogilevich runs prostitution on a massive scale through out Eastern and Western Europe, was said to have arranged the murders to deter rival operators from moving in on his patch. The interview lasted approximately eight seconds - a group of large men in suits with machine-guns ordered the crew to get out of town or be killed on the spot. Last week Mogilevich, who is also said to be involved in the traffic of nuclear materials, drugs, precious gems and stolen art as well as contract killings, was linked to an investigation by officers from the National Crime Squad at the London office of the Bank of New York after it emerged that between $4.2 billion and $10 billion of dirty money had been laundered through a single account. Two members of the bank's staff - one in London, the other in New York - have been suspended pending completion of the investigation. Author Jeffrey Robinson - whose latest book, The Merger, was published by Simon and Schuster last week - says that organised criminals such as Mogilevich are enjoying massive success using Harvard Business School techniques. 'Mogilevich typifies the new global criminal,' says Robinson. 'These men don't rob banks, they buy them. They take full advantage of globalisation, ill-equipped law enforcement and lax money-laundering laws - especially in Britain - using the City of London as their onshore gateway to the offshore world. 'This case is the tip of the iceberg. The City is an absolute cesspool and it will remain a cesspool because the people in charge don't care. Mogilevich is not the only one, the Bank of New York is not the only place. London is the best place to launder money in the world. Since the money-laundering regulations were introduced in this country four years ago, there have been thousands of reports but only one successful prosecution.' Intelligence sources in Moscow believe that the British and US investigations have uncovered a major conduit of dirty money out of Russia that involved the connivance of Russian organised crime overseas and senior figures in the establishment. Konstantin Grigoryevich Kagalovsky, the husband of Natasha Kagalovsky, the senior Bank of New York executive suspended in the US, headed Russia's debt negotiations with the West. A measure of Kagalovsky's importance in the power nexus is that he was expected to head next year's presidential campaign by former Russian Prime Minister Victor Chernomyrdin. His mentor, Anatoly Chubais, who later became Boris Yeltsin's chief of staff in the Kremlin, is now head of the pro-Yeltsin political bloc which, along with Chernomyrdin's party, is expected to back new Prime Minister Vladimir Putin's run for the presidency next year. Mogilevich came to the attention of Britain's National Criminal Intelligence Service through the money-laundering activities of Arbat International and an associated Channel Islands company, Arigon. The investigation, code-named Operation Sword, led to the arrest of three people, including two City solicitors, in 1995. Soon after Mogilevich made a call to the London offices of the National Criminal Intelligence Service. The officer he wanted to speak to was not there but he left a message asking why he was being chased by the British police when he was a legitimate businessman. The call was not returned but Mogilevich was banned from entering the UK. This has done little to stop his wealth and influence growing rapidly. According to Robinson, transnational crime of this kind no longer requires criminals to be in any particular place. 'Mogilevich can sit in Budapest and play the Toronto stock exchange to make himself $635 million or launder $4.3bn through the Bank of New York in London.' In fact, Mogilevich has rarely stepped outside his front door since the day in May 1995 when he travelled to Prague to attend a birthday party at the Uhaluba Club. Just before he arrived, he was tipped off that some time during the evening he would be murdered. He immediately turned around, went home and hired additional security guards. He now conducts almost all his business by phone, e-mail and fax. During 1996, according to Russian intelligence sources, the NCIS also went to Moscow to identify the extent of Mogilevich's activities and connections in the Russian underworld. Subsequent co-operation with the US authorities led to FBI raids a year ago on a US-based firm, YBM Magnex International, which bought Arigon and was a major conduit for money-laundering. YBM, a magnets company with activities in the UK, has since been closed down. Operation Sword led directly to the British investigation into Mogilevich's connections with the London branch of the Bank of New York. An undercover investigation, said to involve agents from MI6 and the FBI, was continuing until news of the case broke in the New York Times last week. The National Crime Squad is furious at the leak - suspected to be from a high-level US source - which prompted a hasty raid on the central London apartment of Lucy Edwards, the Russian-born London employee of Bank of New York also suspended last week, and her Russian husband Peter Berlin. The British authorities, which have been co-operating with the FBI and the US Attorney's office, are particularly incensed at the leaking to the New York Times of a confidential report on the capabilities of the National Crime Squad, which had a limited circulation. Berlin and Edwards were present during the raid last Wednesday evening as documents, a computer hard drive and disks were taken away in large plastic bags. No arrests were made and the whereabouts of the two are now unknown. They were not answering their phone this weekend. British inquiries have looked at the use of accounts at Bank of New York by Benex Worldwide, a UK company of which Berlin is sole director and which investigators have linked to Mogilevich's YBM. Benex is understood to have made applications for US visas for associates of Mogilevich, which were turned down. Among other companies, the police are also examining another UK firm, International Investment Finance Company, of which Berlin is a director along with three Russians. One senior source at the National Crime Squad expressed pessimism about successful prosecutions. He told The Observer: 'The briefing to the New York Times has jeopardised operations that are still ongoing on both sides of the Atlantic. Now all the people we have been looking at will simply vanish.' ******
