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bd10264_.gif (185 bytes)  BREAKING NEWS from AP
bd10264_.gif (185 bytes)  BUSINESS
bd10264_.gif (185 bytes)   LAW
clipred.gif (185 bytes) KEY ISSUES
bd10264_.gif (185 bytes)   RUBLE-$ INDICES
bd10264_.gif (185 bytes)   MONEY LAUNDERING
bd10264_.gif (185 bytes)   CORRUPTION
bd10264_.gif (185 bytes)   MEDIA
bd10264_.gif (185 bytes)   WEATHER
bd10264_.gif (185 bytes)   RESOURCES
bd10264_.gif (185 bytes) COUNTRY PROFILE: RUSSIA












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the boss of Inkombank


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More on Russian money Laundering scandal

An act of God or the bank heist of the century?

On March 31, 1999, House of Representatives Majority Leader Dick Armey (R-Texas) and Representative Jim Saxton (R-NJ), Chairman of Joint Economic Committee forwarded a letter to the US Treasury Secretary, Robert Rubin, urging the Clinton Administration to take a closer look at new IMF loans to Russia. Congressmen expressed their concern that "a substantial portion of the American taxpayer money to the IMF may now be financing the lavish lifestyles of Russian oligarchs". Total amount extend by the IMF to Russia from 1992 to 1996 is $20 billion. Has US taxpayer money financed lavish lifestyles of Russian nouveau riches? Was the "Russian Financial Crisis" a planned event? What did American bankers and public officials know about it and when did they know? Has any part of the $20 billion gone into private pockets in the US? Is there a cover-up going on now?


by:   Anna Tokmakoff

Book Preview

August 10, 1999, New York. Anna Tokmakoff, a Russian-American journalist and writer, has investigated and covered the incredible rise and fall of the Russian private banking empires since 1994. Her nearly completed documentary "The Russian Bank - a Crash of the True Values" (will be published later this year) presents a chilling, eye-opening account ofunthinkable corruption in the Russian banking sector and even more unthinkable role, played by the Western bankers and public officials in what is now demurely called "Russian financial crisis". "The Russian Bank" is the first true endeavor to shed light upon the Russian bankers’ encounters in the US and other Western countries -- lifting a curtain, behind which looms the picture of the crime of the century. Anna has obtained plentitude of unique documents, records of judicial proceedings and various investigations by the Russian and Western law enforcement agencies, charts and audiotapes thoroughly evidencing her presentation. Those on both continents who wish to suppress this material have been able to delay the publishing of the book several times and Anna has been a target of threats and harassment.

"Robbery is going on, that's the only way to describe it."

Corruption in the Russian banking sector has been widely vented by the Russian and international media. Charles Blitzer, research director of Donaldson, Lufkin & Janrett, in an interview with the Financial Times said: "Robbery is going on, that's the only way to describe it." Andrew Ipkendanz, Head of Credit Suisse First Boston global emerging markets said: "Russian elites have plundered the country's capital and funnelled most of the proceeds offshore". Benjamin A. Gilman, Chairman of the House Committee on International Relations most correctly pointed out to "disturbing reports that corrupt or criminal individuals have 'entre' at high levels in official Moscow and that the tremendous amounts of money being spirited out of Russia by their activities may ultimately serve nefarious enterprises in the United States..." (Hearings on US and Russia held on July 16, 1998) U.S. Rep. Christopher Smith, Republican of New Jersey, said during the same Congressional Hearings that "it is an unfortunate fact that much of Russia's ruling class has created a kleptocracy masquerading as a democracy."

However, only recently, questions are beginning to be asked as regards the role of Western bankers and public officials. A New York Times editorial titled "For Russia and Its U.S. Bankers, Match Wasn't Made in Heaven" (October 18, 1998) questions how the investment banking firm, Goldman Sachs & Co. was able to escape the Russian economic bloodbath, in which most other western investors drowned. The editorial points out that the US bankers in pursuit of profits "glossed over some warning signs about Russia", such as corruption, failure to pay loans on time, gross accounting irregularities and tax evasion -- hooking Russia on easy money and flattering the country's oligarchs with generous loans. (Prior, September 26, 1998 NY Times editorial described oligarchs as "a voracious clique of Russian businessmen").

A November 18, 1998 editorial by Moscow News titled "The Gag Order of Judge Duffy" appears to be the first serious attempt to get to the roots of what the Western press commonly refers to as a "Russian financial crisis." The MN report refers to investigation by the Criminal Investigations Bureau of the New York State Banking Department of an illegal activity of now defunct Russian bank Inkombank, once the second largest privately owned bank in Russia. MN editorial raises for the first time much broader issue, that of Americans’ role in Inkombank's crash and perhaps in the entire "Russian crisis" and boldly asks: is this really a "crisis" or a gigantic theft, the bank heist of the century, camouflaged as a "crisis".

The scandalous collapse of Inkombank, once one of the largest privately owned Russian banks became one of the most notable casualties of the Russian financial crisis. As was widely reported by Russian and Western press, in mid-summer of 1998, Inkombank declared itself insolvent, having defaulted on over $1 billion debt to the Western creditors and public institutions (such as IMF and EBRD). By Order dated October 29, 1998, the Central Bank of Russia ("CBR") revoked Inkombank's license for "failure ... to comply with the Federal laws and administrative rules of the Bank of Russia, regulating conduct of banking business and [for] failure to honor its financial obligations to creditors ... and considering numerous [prior] disciplinary actions taken [as regards Inkombank]" 


Western creditors and analysts are in accord that the humongous losses and "insolvency" of Inkombank and several Russian banks connected with it are due largely to massive theft by corrupt management. Several days before revocation of Inkombank's license Chairman of Inkombank's supervisory council, Vladimir Groshev, publicly admitted that the bank's former management "had been placing assets outside of bank's control" (i.e., stealing.) Mr. Ralph-Dieter Montag-Girmes, Director of ARQ, which was retained to assess Inkombank's financial position, said in an interview with Kommersant-Money that Inkombank's former president, Vladimir Vinogradov, and other senior managers had stolen approximately $1,5 billion and should be arrested and prosecuted. Mr. Girmes added "If they flee the country to pursue a "quite life" abroad they would probably be arrested [in the West] even faster than here." Even though Vinogradov and his ex-second in command, Alexei Kouznetsov, often travel to the US and own property here, contrary to Mr. Girmes’ prediction no arrest warrants have been issued... Why?


In June of 1998 Judge Duffy issued an order prohibiting the parties from discussing this with the press anywhere in the world, commonly referred to as a "gag order". In the US, where the First Amendment of the Constitution guarantees freedom of the press, such prohibitions are not very common in civil cases. Also, such orders are usually issued at the request of one of the parties upon showing of potential harm or prejudice resulting from media coverage. In this case no party asked for the gag order. Another peculiar detail: Judge Duffy explains that the gag order was necessitated by "breaches of the court's confidentiality order" and some unspecified "leaks". However, the record of the proceedings show that no confidentiality order exists or ever existed in this case. In fact in November of 1996, Christy & Viener advised the Court that Inkombank is not interested in a confidentiality order. This necessarily begs the question, to what "breaches" judge Duffy refers to in order justify his gag order when there was never an order which could be breached. In the absence of the confidentiality order, all proceedings in American courts are public. How does one "leak" that which is public record? Yet another strange "coincidence": the judge's hush decree was issued just 30 days prior to the IMF's decision to grant Russia $4.8 billion in aid. As was widely reported, the money promptly disappeared.


Shortly after issuing its gag order, amidst Inkombank's insolvency, the Court released to Inkombank approximately $2.5 million which, since the beginning of the action, had remained frozen in the Bank of New York. The ownership of these funds was vigorously disputed by Inkombank's opponents. Incredibly, the Judge’s order stated as the reason for releasing these funds that Inkombank's request (to release) was "unopposed" by plaintiffs. The court's docket reflects that plaintiffs filed their formal opposition as early as April of 1996.

The record of the four year old case reflects that the plaintiffs-shareholders attempted from the outset to bring to the Court's attention that Inkombank and its codefendants, attorneys of Christy & Viener, deliberately thwarted and delayed the proceedings in order to permit Inkombank's bosses to bleed Inkombank into insolvency. Inexplicably, Judge Duffy has completely ignored plaintiffs' pleas, focusing instead on constant scolding of the plaintiffs and threatening to throw them all in jail. This accorded Inkombank and its lawyers ample time to loot and secret the bank's assets before declaring the bank insolvent.


On July 1, 1998, a well-known Russian-American newscaster, Maria Berdnikova, forwarded a letter to the Chief Judge of the US District Court for the Southern District of New York, the Honorable Thomas Griesa, which we quote here in its entirety:

"Honorable Sir:

I write to bring to your Honor's attention an alarming aspect of this litigation which involves a controversial Russian bank, Inkombank. On June 13, 1998, the mother of one of the lawyers opposing Inkombank (Anna Reid, Esq,) died of a massive heart attack -- following threats and harassment by the "Russian bank's representatives." Ten days prior to that, judge Duffy ordered Fordham University to release Ms. Reid's records containing information leading to her mother's residence, ignoring Ms. Reid's pleas for a protective order. Ms. Reid, since 1996, desperately has been trying to persuade his Honor that "releasing private and confidential information may jeopardize physical safety" of her family. In a surprise move, judge Duffy in the very same order, dated June 3, 1998, on his own initiative, issued a gag order prohibiting parties from giving any information to members of the press.

Inkombank, a principal defendant in this case, has been attracting media attention for some time. Numerous reports link Inkombank to multi-million dollar financial frauds, money laundering, financing of Russian-Georgian narco-dealers and contract killings. In November of 1994, one of the plaintiffs (Michael Shik) traveled to Moscow for 11th hour settlement discussions with Inkombank's bosses -- found two weeks later in the Moscow River shot in the back of his head. In March of last year, TASS implicated Inkombank in the murder of a Russian plant manager (Vera Kompasova) who resisted the takeover of her plant by Inkombank's subsidiary, Inkomcapital (also a defendant in this case.) A few months later a senior auditor of the Central Bank of Russia (Lubov Tarasova) was murdered shortly after plaintiffs requested that she testify in this case.

Judge Duffy, throughout this almost four year old litigation, was apprized of the above mentioned as well as other numerous incidents of intimidation and muscling of parties and witnesses. in these proceedings. As early as September 27, 1995, Senior Vice President of Smith Barney Shearson, Wm. Donald Redfern, testified about threats of Inkombank's bosses that Mr. Redfern's "throat be cut", and his associate be killed for being "a nuisance". However when plaintiffs requested a protective order at that time, judge Duffy (similarly to the later request of Ms. Reid) denied it upon the grounds that his Honor had not read the deposition of Mr. Redfern and had "no idea who [Redfern] identified as suggesting that his throat be cut." His Honor's sarcasm as regards Mr. Redfern's throat being cut appeared uncalled for and couldn't but urge a comparison with the like skepticism of judge Duckman who denied protection to my countrywoman, Galina Komar, upon the grounds that he did not yet see broken bones.

Even more bewildering was that judge Duffy ridiculed the very notion of Russian organized crime and its control over Russian banks as "nonsense" and even stated for the record that his Honor, in general, was "not impressed with all this stuff about the Russian Mafia and this and that and the other thing." Spoken by a senior Federal Judge, this statement obviously sounds odd to the undersigned Russian-American reporter, who works with Western media on reports covering the Russian mafia's global expansion and has lost many colleagues and friends to Russian mob hits. However, the stuff about Russian organized crime's proliferation in all spheres of the Russian economy (and particularly in the Russian banking sector) and its expansion to the West through mob-controlled banks is not confined to my expertise. Along with me, hundreds of my American network colleagues reported the grim testimony of FBI Director Louis Freeh, at the Congressional Hearings on international organized crime (October 1, 1997), warning that Russian organized crime presents the "greatest long-term threat to the security of the United States" and quoting Russian president Yeltsine as admitting that "the majority of the Russian banks are controlled by organized crime". Yet, judge Duffy is not impressed. After covering the WTC bombing trial it was hard for me to accept that a man of his Honor's erudition was uninformed of the existence or morbid influence of Russian organized crime (especially considering that judge Duffy's daughter-in-law works in the Russian Organized Crime section of the FBI.) The explanation came from Inkombank itself. Its bosses make no secret that his Honor's views expressed on the record are formed off-record by the defendants and their lead lawyer and codefendant Arthur Christy, judge Duffy's former boss and friend for 40 years. In fact the Russian bankers proudly explained to this reporter that the Judge is irate with plaintiffs for naming Mr. Christy a defendant for aiding and abetting Inkombank's management's frauds and money laundering. His Honor's displeasure all but drowned the record in antagonistic, insulting and threatening remarks uttered at parties, lawyers and even witnesses who dared to oppose Inkombank and Mr. Christy. It suffices to glance through judge Duffy's latest Memorandum and Order (issuing the gag order and releasing Ms. Reid's records), in which he refers to lawyers opposing Inkombank as "Derman", "Zeltser", "Fishkin", "Reid" while addressing defendant-lawyers of Christy & Viener as "Arthur H. Christy, Esq.", "John F. Cambria, Esq.", etc. -- it appears almost as if his Honor makes a point to emphasize his partiality.

What is the real reason for the gag order? Aren't proceedings in American courts meant to be public? Doesn't the public have a right to know of the Russian banks' maneuvering in the US courts? The record does not reflect any party asking for it. In fact, by letter dated November 25, 1996, Christy & Viener informed all attorneys and Magistrate Judge Grubin that defendants withdrew their request for confidentiality. Inexplicably, judge Duffy ordered parties "not to discuss this case with the media in this country or abroad." Why would the court seek to prevent the press from reporting on this case in Europe or in Russia? Can judge Duffy be concerned about contaminating a jury pool from Gorky Park? Even before "officially" silencing the parties, the Chambers sought to curtail the coverage of this matter. In mid-December of last year, judge Duffy's clerk telephoned me and in an odious and threatening manner demanded that I immediately reveal my sources in these proceedings -- in a conspicuous bid to "spook me off." Why such ardent effort to keep the press away from this litigation?

In the past two years Inkombank attempted to rehabilitate its image tarnished by reports exposing its bosses' escapades in Russia and in the West, by blaming the "international Zionist conspiracy" against the Russian economy, which conspiracy included commencement by plaintiffs of these proceedings. (All plaintiffs and their attorneys are Jewish.) Judge Duffy's statements of bias have been meticulously compiled in a press-release titled "We Let the Judge Speak for Us" which is aggressively distributed to Russian and Western media (our bureau received at least half a dozen copies.) Accompanied by psychedelic commentaries fostering judge Duffy's unconditional advocacy of Inkombank, this document reads like a parody of American judicial process. Judge Duffy was first informed of this press-release in 1996.

I wanted to be on record as having informed your Honor that the sarcastic statements regarding stuff about the Russian mafia and Mr. Redfern's throat, combined with judge Duffy's manifest partisanship in favor of Inkombank and Mr. Christy are perceived by some in Moscow as the Court's tacit encouragement of their mob "litigation tactics" and foster an environment in which these incidents will repeat and propagate. In fact they have. Since Ms. Reid applied for the protective order two years ago, the car controls of another plaintiff-attorney opposing Inkombank and Mr. Christy (Emanuel Zeltser, Esq.) have been tampered with at least twice. Shortly after my telephone conversation with judge Duffy's clerk, Mr. Zeltser narrowly escaped grievous injury in a car crash. Before more people turn up dead perhaps someone ought to examine the record and determine whether his Honor's resentment of those opposing Inkombank and Mr. Christy has spilled beyond routine eccentricity, more importantly - who is really being protected by the Court's restricting the public awareness of these proceedings and why.

Requesting the kindness of your Honor's reply, I remain, Most respectfully,

Maria Berdnikova"

Maria never received "the kindness" of his Honor's reply and her questions remain unanswered to this day. Why did Judge Duffy release Ms. Reid's private information to the Russian "bankers", permitting them to harass her elderly mother into heart attack and death? Why did he ignore reports about Inkombank's bosses' theft, money laundering and ties with international drug dealers? Why did he never address numerous reports respecting Inkombank's tampering with and coercing witnesses by threats and physical reprisals? Why did he pay no attention to allegations of Inkombank's involvement in the murders of a party and a prospective witness? Why did Judge Duffy refer to the Russian Mafia as "nonsense"? Why a gag order which no party ever requested? Can Inkombank's explanation suggesting, essentially, a conspiracy between the Russian mob-linked bank and an American senior Federal Judge to "fix the case" be true? Why would a clerk of a Federal judge try to intimidate a journalist so as to prevent her from reporting on this case? Maria is right: the real question is who Judge Duffy is trying to protect by barring public awareness of these proceedings and why.

There are other odd details relating to judge Duffy's gag order. In the very same document the Judge ordered all parties to appear for conference on June 15, 1998, at which time his Honour would finally give plaintiffs the chance to present evidence as regards Inkombank's management's methods of dealing with "unfriendly witnesses". At the conference, however, judge Duffy apparently had a change of heart. He cut it short before the plaintiffs were able to present evidence of Inkombank's strong arm tactics. It is fairly apparent that judge Duffy is not interested in having such evidence presented in a way that it becomes a part of the official court record. Why not?


In his letter, requesting judge Duffy to step aside, FIPM's director, Vlad Portnoy, wrote:

"Our adversaries don't even refute that such a hearing, regardless of the outcome, would produce enough evidence of their crimes to soil the record upon which they desperately rely to fence off numerous investigations by the US, Russian and other law enforcement authorities. Despite multi-million dollar bribes and exorbitant fees paid to well connected law firms, the probes into Inkombank's management's money laundering, world-wide financial frauds and corrupting of public officials continue and widen. Our opponents know that all that have rescued them from full-blown prosecution in Russia thus far are this United States District Court's exculpatory decrees and iterated commentaries condoning Inkombank and condemning all exposing its wrongs. In the US Inkombank uses this record to foil the investigations by banking and securities authorities into Inkombank's fraudulent filings and illegal "rep-office" operations by Janna Boulakh and Alexei Kouznetsov (including a "collection" of a 10% per month $80 thousand loan brutalizing a female debtor)".

In other words, Mr. Portnoy suggests that judge Duffy is aspiring, not only to ensure that Inkombank wins this case (this is easy when you are the judge), but also to keep the record of the proceedings "clean" of any ill-omened evidence which may be obtained by authorities, investigating Inkombank's misdeeds (this is more difficult but possible). Can this be?

Mr. Portnoy in his letter reminded Judge Duffy about prior reports of his off the record interaction with Inkombank and Christy & Viener and offered to provide "detailed affidavits and additional evidence in this regard, if the Court 'deems it necessary" Judge Duffy neither expressed an interest in reviewing any additional evidence, nor addressed the plaintiffs' request for his disqualification.

In December of 1998, plaintiffs' attorneys attempted to remind the Court of its duty to rule on the plaintiffs' request for recusal and suggested that plaintiffs are prepared to file a more formal motion for disqualification. Plaintiffs also informed the judge of Inkombank's insolvency and requested that the proceedings be expedited so as to enable the plaintiffs to attach some of the remaining Inkombank assets. Judge Duffy has never responded and on February 10, 1999, suddenly, without consultations with any party, issued an order to place the case on the "suspense docket", simply put, moved it into the archives. This sealed the fate of Inkombank's investors as well as their hope to ever recover even a fraction of their investment.

The utter protectiveness by the US Federal Judge of the defunct Russian bank may appear bewildering, especially, given the fact that its former management's embezzlement (in hundreds of millions of dollars), money laundering and other crimes have been publicly exposed.


Evidence obtained by the Criminal Investigations Bureau of the New York State Banking Department contains an affidavit of Inkombank's former employee, Oxana Berkounova. Berkounova, a summa cum laude graduate of Russia's # 1 law school, MGIMO, and a recent LLM graduate of the London School of Economics. Oxana was subpoenaed by the New York State Banking Department and appeared before the investigators in October of 1998. Her affidavit states:

"Inkombank's bosses ... proudly declare that American and Western European officials are on their payroll. Are they boasting? Of course, to an extent. However, as was told during one of my conversations with the Department investigators, I heard the name Jerome Walker referred to as "our man in Government" at least three years ago from Doudkin, Vinogradov and also when I translated the tapes of telephone conversations between Christy & Viener and Inkombank's officers. Was this just boasting? I learned from Mr. Caiola that Mr. Walker, a former OCC official, is a current Christy & Viener partner. Can this be a coincidence? Messrs. Doudkin and Kouznetsov openly discussed that, at Mr. Christy's request, the Federal Judge custom-tailors his decisions and commentaries in such a way as to cast aspersions upon Inkombank's opponents, so that they may be used to thwart investigations which are based upon evidence provided by these opponents. Was this trivial bragging? During my discussions with the Department Investigators it was indicated that Christy & Viener keeps on responding to the charges against it and Inkombank by feeding the Department portions of the record in the abovementioned proceedings containing the judge's biased statements regarding of Inkombank's opponents."

The premise is understandable. The eminence of the US District Judge is formidable and his comments, even if not directly related to the matter at hand, can certainly influence the investigators. Simply speaking, if judge Duffy makes a pejorative, or merely sarcastic remark respecting someone who provides evidence to the Banking Department, the latter will treat such evidence with much diminished regard. Likewise, his statements favoring Inkombank would have a great exculpatory effect. The question of course is why? Why would an American Federal Judge "custom-tailor" his decisions and commentaries" to help a Russian bank to hush an investigation?

Another witness subpoenaed by the Banking Department, a New York computer programmer, Mr. Ted Krechmer, testified at Inkombank's management retained him to design a computer program to manage transfers of hundreds of millions of dollars through a complex network of offshore companies and multiple bank accounts in Switzerland, Liechtenstein, Cyprus and the United States. Krechmer, however, soon realized that he was hired to create an elaborate money laundering system and declined the assignment. Krechmer provided the investigators charts showing bogus multi-million dollar "loans" to shell companies controlled by Inkombank's bosses and Inkombank's "special offshore accounts" which were used to bribe public officials "to hush investigations into Inkombank's unlawful activity in the United States and elsewhere." Krechmer also testified that Inkombank's bosses have openly boasted to him and others "that, and I quote, 'the banking people in Washington are in our pockets and so is the presiding judge in our New York lawsuit.'"

On August 5, 1999,   Inkombank's shareholders filed a motion seeking disqualification of Judge Duffy from further presiding over the shareholders' suit against Inkombank and its management
(clipred.gif (185 bytes)Click here) The shareholders assert that Judge Duffy may not fairly preside in this lawsuit because of his personal bias and animus against all parties opposing defendants Inkombank and Christy & Viener. Plaintiffs also asserted that Judge Duffy's bias stems from improper extra-judicial relationship between Judge Duffy and the defendants. The application is presently before Judge Duffy who must now decide whether he should recuse himself.



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