U.S. Officials Say Bank of New York Transfers Involved Money in Russian Tax Cases
The New York Times
9/15/00

By BENJAMIN WEISER and LOWELL BERGMAN

Page 16, Column 3
c. 2000 New York Times Company

After about two years of investigating the movement of billions of dollars through the Bank of New York, federal law-enforcement officials now say much of the money involved tax evasion by Russian businesses, and the investigators are prepared to help Moscow if Russia wishes to pursue its own cases.

In what began as one of the biggest money-laundering investigations in United States history, law-enforcement officials have determined that much of the wrongdoing -- tax fraud and kidnapping -- appears to have occurred in Russia. The inquiry has also shown that the system for moving funds through the Bank of New York was used to transfer money to individuals connected with organized crime in Russia.

Newly released federal court documents said the Federal Bureau of Investigation found evidence that a small amount of the money, some $300,000, moved through the Bank of New York for the purpose of paying a kidnapping ransom and that a leading Russian bank was involved in transferring the payments to gain the release of a businessman. For its services, the Russian bank received a commission, federal prosecutors in Manhattan said in the court documents.

The documents, which were released last week over the strenuous objections of the Russian bank, Sobinbank , also said that federal investigators seized $15 million last year from a Sobinbank account in the Bank of New York and that the F.B.I. now believed that Sobinbank -controlled accounts at the American bank were responsible for moving ''the vast majority'' of $7 billion channeled out of Russia from 1996 to 1999.

The accounts of that bank and a smaller Russian bank, the government said, ''were, in short, the pipeline for this illegal scheme,'' the prosecutors said.

The documents describe in some detail how money moved out of Russia through the Bank of New York and for what purposes.

The Bank of New York has not been accused of wrongdoing. It has said it is fully cooperating with government investigators. Sobinbank has also not been charged. The bank said yesterday that it ''had no knowledge of any criminal activities connected with funds passing through'' the Bank of New York account.

Sobinbank , founded in Moscow in 1990, became one of the most politically connected financial institutions in the country. It was put together by a collection of larger powerful banks, some of which had ties to President Boris N. Yelstin's inner circle, including Boris A. Berezovsky , Russia's leading financier and media mogul. Sobinbank was raided last year, and if Russian authorities decide to pursue a case against the bank, that could mean taking on some of the most influential people in the country.

The release of the Sobinbank court documents occurs as Louis J. Freeh, director of the Federal Bureau of Investigation, is in Moscow this week for meetings with Russian prosecutors and other officials. A senior American law-enforcement official said Mr. Freeh might meet the Russian president, Vladimir V. Putin, and discuss some findings of the investigation, with an offer to help the Russians.

''Louie was briefed by the F.B.I. in New York and the U.S. attorney for the Southern District about the case and about what we can do for the Russians,'' the official said. ''If Putin wants to know where all that money went, we can help him.''

Mr. Freeh, in a news conference yesterday in Moscow after meeting Interior Minister Vladimir B. Rushailo, made no mention of the Bank of New York inquiry. But an American official said Mr. Freeh planned to raise ''a range of issues'' with Russian officials at later meetings.

The deputy chairman of Sobinbank , Andrei Serebrennikov, said in a statement the government's seizure of $15 million on deposit at the Bank of New York was ''not based on any substantiated wrongdoing by Sobinbank '' but rather on ''the unproven theory that the seized funds'' and bank account ''were associated with illegal money-laundering activities by persons other than Sobinbank .''

''The bank is affirmatively saying that it hasn't done anything wrong, and the government hasn't produced any evidence to the contrary,'' said Michael Lesch, a lawyer in Manhattan for the bank.

The bank made similar arguments in court when it unsuccessfully tried to regain control of the money.

The newly released documents show that prosecutors told a federal judge in Manhattan, Richard C. Casey, that the evidence supported ''an inference of the complicity'' of Sobinbank in the illegal activity in the Bank of New York accounts.

Judge Casey, in refusing to overturn the seizure order and also unsealing the proceedings, wrote, ''The court cannot fathom how billions of Sobinbank 's dollars could have been transferred out of its constantly replenished B.O.N.Y. account, to accounts in the United States, without Sobinbank 's knowledge or willful blindness to the scheme.''

The documents show that the government obtained a court order on Aug. 20, 1999, to seize the $15 million from the Sobinbank account and a much smaller sum, about $11,000, from an account controlled by a bank called DKB.

The office of United States Attorney Mary Jo White in Manhattan said in the court papers that ''the degree to which Sobinbank was a participant in the illegal activity in its correspondent account'' would be investigated further. Her office had no additional comment yesterday.

J. Freeh, left, F.B.I. director, and Russia's interior minister, Vladimir B. Rushailo, going to a news conference yesterday in Moscow. (Associated Press)