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RFE/RL December 22 1998
by Julie A. Corwin


The rise of former Inkombank President Vladimir Vinogradov to the top of Russia's financial and political circles was rapid, but his fall was even quicker. In a little over two months, Vinogradov went from being one of Russia's handful of "oligarchs," a small elite of powerful businessmen and financiers who reportedly rule the nation, to the disgraced former head of a financial institution on the brink of receivership.

Come 28 January, when a Moscow arbitration court hears a bankruptcy case filed by private creditors against Inkombank, the bank's actual status will be clearer. However, few analysts believe that much remains of Inkombank that is worth preserving. Those individuals and institutions who once expressed an interest in saving the bank--National Reserve Bank Chairman Aleksandr Lebedev, Gazprom Deputy Chairman Sergei Dubinin, and Union of Industrialists and Entrepeneurs head Arkadii Volskii--say that Inkombank is beyond saving. Its liabilities exceed its assets, Lebedev announced on 23 November. Volskii was more blunt, saying top managers at Inkombank "had been playing dishonest games" and were "transferring Inkombank assets to other firms."

Ten years ago, Inkombank started in the kitchen of Vladimir Vinogradov's communal apartment. Vinogradov was working in a state bank at a "low-paying" job that was "boring." So, according to him, he and two friends started a commercial bank. Later, they moved their "headquarters" to the top room of a bar on the outskirts of Moscow, where they managed to attract nine shareholders including the economics think-tank, the Plekhanov Institute; the association of aircraft manufacturers, Sokol; and the oil and gas pipeline operator, Transneft. They then approached Central Bank for a credit of 10 million rubles. They got it, although the official who okayed the loan was let go soon after, according to Vinogradov.

In September 1998, Inkombank got its last break from the Central Bank--a $100 million loan--from another outgoing official, its chairman, Sergei Dubinin. The loan was just one of many parting gifts to troubled commercial banks from Dubinin, who knew he was leaving, a source at an international financial institution told RFE/RL. When Viktor Gerashchenko replaced Dubinin, Inkombank's last hope was to be designated one of Russia's "socially important" banks. These banks, though basically insolvent, were still considered worth saving with a massive influx of government cash.

As Russia's second-largest bank in terms of private deposits and third-largest in terms of assets, Inkombank might have seemed a good candidate. It also serviced 10 percent of Russia's total foreign trade and 4-5 percent of the country's bank accounts, according to "Kommersant-Daily." But if Inkombank's example is any indication, then the emphasis in the phrase "socially important" should perhaps be on the first word, socially. Gerashchenko and Vinogradov do not like each other, according to a variety of sources. Vinogradov had earned Gerashchenko's hostility during Gerashchenko's last reign at the Central Bank through his frequent criticisms of Gerashchenko's policy as a vocal member of the Association of Russian Banks.

In an official statement after it pulled Inkombank's license on 29 October, the Central Bank explained that Inkombank "had taken excessive risks ahead of the 17 August [ruble] devaluation and its obligations dwarfed its assets." It is true that Inkombank persisted in writing forward currency contracts much longer than its counterparts. According to Fitch IBCA estimates, Inkombank had concluded between $12-14 billion in forward currency contracts by mid August. It is not clear, however, that Inkombank acted that much more imprudently than Menatep, Most Bank, and SBS-Agro, all of which have been granted a second life.

It is also not yet clear whether Vinogradov's tale is one of rags to riches back to rags again. In addition to Volskii's charge, the head of Moscow's Tax Police accused Inkombank management of diverting funds intended for tax payment. And analysts cited by the "Moscow Times" on 15 December noted that Inkombank's ownership in food-processing, metals, and aerospace enterprises had been carefully structured to allow for easy asset-stripping, since most of the holdings are not owned directly by Inkombank but by "affiliated persons" possibly leading back to Vinogradov. Among the bank's holdings were a 26 percent interest in the giant Magnitogorsk steelworks, of which only 3 percent is owned directly by the bank. The bank also owned an extensive collection of Russian avant-garde painting, including Kazimir Malevich's "Black Square," according to "Argumenty i Fakty."

In the meantime, at least some of Inkombank's depositors are anxious about the fate of their savings. Three years ago, Galina Oleinikova, a university professor in St. Petersburg, put her entire life savings, as well those of her mother, which she had inherited, into an Inkombank interest-bearing U.S. dollar account. On 5 September 1998, she sent a registered express letter, asking that her account be transferred to a U.S. bank in California, where she is now living. She got no response, and although she was worried, she didn't panic because she believed "President Yeltsin and other Russian leaders who said that bank accounts of individuals would be protected."

Now she is panicking. A friend in St. Petersburg acting on her behalf told her that she still has the option of transferring her money to Sberbank, but she will have no access to it for two years and will be reimbursed in rubles, not dollars. In the meantime, her daughter, a high school senior, is heading off to college, but since she is not yet a U.S. citizen, will not qualify for a scholarship, despite her excellent grade point average. Her American husband, who is recuperating from two surgeries, cannot provide any financial assistance. Perhaps the Central Bank can spare her a few dollars short of $100 million, but she is likely not considered "socially important" enough.










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Compiled, translated and codified by the staff of American Russian Law Institute: Emanuel E. Zeltser, Esq., Anna Reid, LL.M., LL.D., and Alexander Fishkin, LL.D. , together with the Academy of Jurisprudence of the Ministry of Justice of Russia, and professors of the Law School of the University of Pittsburgh


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Statement of Emanuel Zeltser, Director and General Counsel of ARLI September 29, 1999, Hearing of the House Committee on Banking and Financial Services on the Bank of New York Russian Organized Crime and Money Laundering Matters