MYTHS AND REALITY
ABOUT THE IMF THEFT
November 1999
Much has been said about the possibility that the funds
provided to Russia by the International Monetary Fund were stolen and laundered through
the US banks to the offshore coffers of the perpetrators. In a letter addressed to then
Secretary of the Treasury Rubin on October 31, 1998, House Majority Leader Dick Armey and
Representative Jim Saxton, warned that the billions of the IMF dollars July 15, 1998
provided to Russia last year was lost in "illegal arrangements" and further that
"a substantial amount of the American taxpayer money to the IMF may now be financing
the lavish lifestyles of Russian oligarchs". Few weeks before the Russian banks
officially announced themselves insolvent, Pat Buchanan said "The Russian economy is
a corpse. That $15 billion, which comes on top of the $9 billion the IMF has already
committed and on top of the scores of billions from Europe and the United States, will
never be seen again."
The IMF took the position that it loans directly to the
Russian federal government and has no way of knowing or monitoring how the funds are
allocated or used thereafter. Recent report in the Wall Street Journal states that
"an independent review" of the CBR by PricewaterhouseCoopers made at the behest
of the IMF concluded that although the CBR misled the IMF as regards the use of its
foreign subsidiaries the review turned out no evidence that the IMF funds were stolen and
the auditors found "nothing criminal" in the operations of the CBR foreign
subsidiaries. Everybody appears to be relieved - the IMF and the Central Bank of Russia
are "in the clear" (after all, CBR has only "misled" the grantor of
the tens of billions of dollars - "nothing criminal" about that.)
Perhaps Mr. Camdessus resigned too hastily?
Regrettably, the IMF review by PricewaterhouseCoopers has
not been made public. However, the published reports about the IMF audit of the CBR do
little in assuaging concerns expressed by Buchanan and Armey. Between the years of 1992 to
1996 the IMF loaned Russia $22 billion dollars (give or take). If the money was not
stolen, where is it? There is no dispute that it wasn’t paid back. Likewise, few
would seriously argue that these billions never accomplished the intended purpose, i.e.,
to stabilize Russian economy -- indeed the Russian economy is worse off than it was before
the IMF monies were provided. This sorrowful fact notwithstanding, the Russian
oligarches’ personal financial picture is much improved (perhaps by $22 billion, give
or take?)
Another peculiar fact: the report mentions that no
evidence of criminalities turned up as regards the CBR subsidiaries in France, Germany,
Britain, Luxembourg and Austria, but is silent with respect to CBR’s most
controversial offshore "subsidiary" FIMACO, an obscure Channel Islands outfit,
controlled by the CBR official. In February of 1999 Russia admitted that from 1993 to
1998, the Russian Central Bank had hidden $50 billion of, which included the IMF monies in
this shell company.<1>
Also, it is not exactly clear why would the Russian
Central Bank need to move the nation’s monetary funds through the foreign
subsidiaries in the first place and mislead the IMF as to their use. "It's though the
U.S. Federal Reserve secretly ran money through the Cayman Islands" correctly compare
Bill Powell and Yevgenia Albats in their March 1999 Newsweek article "The latest
Kremlin scandal involves billions of dollars moving offshore...". <2> Newsweek
asserts that the IMF was aware at the time that the Central Bank was placing monies at its
European subsidiaries. Responding to the allegations of illegal machinations with the IMF
funds, former chairman of the Central Bank of Russia, Sergey Dubinin insisted that the
central bank had kept the IMF informed. "It was not news for the IMF", said
Dubinin in a television interview. IMF spokeswoman confirmed that the IMF knew the Russian
central bank was managing much of its international reserves through European
subsidiaries, but denied the knowledge about FIMACO.
Admissions of the Russian
Officials
In September of last year, Russia's chief state
auditor, Venyamin Sokolov, admitted on the BBC's Money Programme: "We have
checked a fair proportion of the <IMF> loans and I'm ashamed to say that several
billion dollars has not been used for its intended purpose and some of it was simply
stolen." Sokolov, was quoted as urging the West not to give more money unless
better supervisory measures were in place.<4>
The admissions of Russia’s Chief Auditor were
cautiously corroborated by then Minister of Internal Security, Sergei Stepashin and
the Prosecutor General of Russia, Yuri Skuratov. In December of 1998, Stepashin
said that security forces were conducting a detailed investigation into the allegations
that billions of dollars, which included the proceeds of the IMF loans were spirited away
from the central bank. CBR officials conceded that there was a $9 billion flight of
capital abroad soon after the August crisis erupted -- money that has simply
disappeared.<5> A few weeks later Skuratov publicly acknowledged that Russian
government officials may have illegally used a $4.8 billion IMF loan given to Russia in
July of 1998, admitting that "there was a series of suspicious operations
involving the money from the (IMF) tranche" <6> The $4.8 billion IMF loan
given to Russia in July of 1998, evaporated two weeks prior to August 1998, when Russia
simultaneously devalued the rouble and defaulted on its debt. <7>
Also, in September of this year, the independent member
of the Russian Parliament, Duma, Nicolay Gonchar explained: "The system was
created in the Russian Federation whereby the highest financial elite of the nation gets
personal income, while dragging the country deeper into debt." According to
Gonchar, billions of dollars, including the IMF funds given to the CBR were transferred to
FIMACO, and used for improper purposes, including market manipulations and paying huge
interest on Russia’s own currency reserves, with the profits possibly ending up in
private pockets. <8>
The chairman of the Duma Committee on Security, V.
Ilyukhin, wrote to Skuratov that the IMF loans did not make it to Russia but were
"distributed" to the secret foreign accounts controlled by the highest Russian
officials as follows: $2.35 billion to the Bank of Sydney, and $2.115 billion to the
National Westminster Bank (London) $780 million to Credit Suisse, $270 million to the
Lausanne branch of Creditanschtalt-Bankferein (Switzerland) and $1.4 billion to the Bank
of New York. Ilyukhin said he had traced part of the IMF credit to an Australian company
in which Yeltsin's daughter, Tatyana Dyachenko, allegedly has a large stake. "We
believe", wrote Ilyukhin, "that the above named operations were executed with
the participation of the former Central Bank of RF Chairman, Sergey Dubinin."
<9>
Why have the IMF’s auditors, after examining the
books of the sovereign come to the conclusion which is so dramatically at odds with the
admissions of the top officials of the sovereign itself? Could it be because another
exposee-report would bring further scrutiny upon the IMF failed Russian policies? Another
Newsweek article in March of this year states: "No matter how much the IMF wants
everyone to believe that they are in Moscow to play hardball ... this is not exactly the
stuff of white-knuckle suspense. Even after watching Moscow devalue its currency, default
on its ruble debt and allow its horribly managed banks to stiff their creditors and steal
their depositors' money, the world is once again likely to come to Russia's
aid."<10>
One may wonder what would the IMF, funded to a large
extent by the US taxpayers but entirely self regulated, consider "evidence" that
the money it gave to Russia was indeed stolen. A dollar bill stamped "STOLEN FROM THE
IMF" with Yeltsyn’s signature across?
