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A Money Trail To The Kremlin? (Int'l Edition)


International -- European Business: Investigations

A Money Trail to the Kremlin? (int'l edition)

Swiss prosecutors are after a man who may know lots of secrets

In his book-lined office in the Palais de Justice in Geneva's old town, Swiss Prosecutor General Bernard Bertossa is pacing the floor with excitement. The 58-year-old prosecutor thinks he's closing in on one of his highest-profile cases ever--an alleged money-laundering scheme that could reach to the highest levels of the Kremlin. On Jan. 17 , acting on a Swiss warrant, authorities at New York's John F. Kennedy International Airport detained Russian official Pavel Borodin, 54, as he entered the U.S. Now, Bertossa is pressing for Borodin's extradition. "We have never had problems with the U.S. authorities on enforcing extradition treaties before," Bertossa says. "We have collected enough evidence to press charges."

If Bertossa manages to win Borodin's extradition, it could be quite a coup. The balding, chain-smoking lawyer is on something of a crusade to clean up Switzerland's image as a haven for dirty money--especially since 1998 laws requiring Swiss banks to report suspicious transactions were introduced. He and his team of 15 magistrates convicted former Ukrainian Prime Minister Pavlo Lazarenko and former Pakistani Prime Minister Benazir Bhutto on money-laundering charges last year.

Bertossa's investigation of Borodin could turn out to be much more sweeping. That's because Borodin, who strenuously denies any wrongdoing and is asking for release on bail in New York, is closely linked to both Russian President Vladimir V. Putin and his predecessor, Boris N. Yeltsin. Borodin ran the Kremlin's property empire for most of Yeltsin's presidency. That department was set up in 1993 to manage former Soviet Communist Party assets, including hotels, official dacha complexes, and the Kremlin itself. Borodin has claimed the empire was worth over $650 billion.PUTIN PAL. Borodin also gave Putin his first job in the Kremlin as his deputy in 1996, summoning the former KGB agent from St. Petersburg when he was unemployed. Now, Borodin works for Putin, in a ceremonial role as State Secretary of the Union of Russia & Belarus, a largely powerless organization.

Bertossa won't disclose how high he thinks the money trail leads. But at a minimum, he alleges, Borodin abused his government office to collect more than $25 million in kickbacks for himself and his family in return for awarding $492 million in contracts for renovating the Kremlin to two Swiss companies--Mabetex and Mercata Trading. Both companies have denied wrongdoing. Swiss prosecutors say they have evidence that $65 million of these state funds were siphoned off through an offshore company in the Isle of Man in 1997, then into offshore accounts of Russian officials and company executives involved in the deal. Although Switzerland does not have the authority to prosecute crimes committed in Russia, Bertossa says that under Swiss law Borodin's actions qualify as money-laundering. "I would like this individual to explain what he did with his money," he says.

In an indirect way, Bertossa's investigation has already touched the Yeltsin family. When it was disclosed in early 1999, the Russian and Western press kicked up a political storm by citing unnamed sources in the Swiss prosecutors' office, who claimed that Yeltsin's daughters received credit cards from Mabetex. The Yeltsin family denied the charge. In addition, Bertossa now denies that prosecutors want to indict Yeltsin's daughters. "Using somebody else's credit card is not a crime. Our case has nothing to do with Yeltsin's daughters," he notes. But he wants to question Borodin to learn what other officials may be implicated in money-laundering. "Who knows where the story will end?" he says.SILENCE. Bertossa acknowledges that he has "no evidence connecting Putin" to the Mabetex affair. Rus-sian law-enforcement officials have not cooperated, and they dropped their own investigation last year, citing lack of evidence. In Moscow, Putin has declined to comment on Borodin's arrest--although Russia's Foreign Ministry demanded Borodin's release in the U.S. and protested to Swiss authorities. Still, Putin's critics are calling on him to comment. "Putin knows a great deal about Borodin's activities. His silence goes against his stated intention to launch an anti-corruption drive that targets everyone equally," says Yevgeny Volk, a political analyst at the Moscow office of the Heritage Foundation.

If Borodin is extradited to Switzerland, his questioning could lead to other revelations. Known for his idealism, Bertossa is hoping for more than just a few convictions. "My hope is that the people in government in Moscow start acting in the interests of the community and not in their own interests," he says. It will take a much bigger crusade in Russia for that to happen.By Catherine Belton in Geneva


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