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In Portuguese Arrests, Suspicions Of Dirty Russian Money And European Soccer

By Carl Schreck
May 08, 2016
The heavies arrived at the pop-up marketplace on a frigid morning packing pistols, knives, and steel pipes. One strapping young man reportedly brandished a submachine gun. A day earlier, a group of thugs had pummeled a beefy ex-boxer nicknamed Broiler in a dispute over two leather coats sold by a merchant paying him protection money. Now, Broiler was back with a dozen of his allies in tow, staring at his assailants and the muscle they’d mobilized for the meeting.
 The confrontation near the Devyatkino train station on Leningrad’s northern outskirts escalated quickly. In the ensuing scrum, Broiler stabbed a martial arts coach nicknamed Fedya Crimea, who died at the hospital later that day -- December 18, 1988. The deadly brawl led to a schism between the two sides that clashed that day: the notorious Tambov and Malyshev crime syndicates, whose alleged links to allies of President Vladimir Putin are detailed in documents related to a Spanish warrant issued this week for the arrest of Russians including current and former officials.
Over the next decade, these groups would establish ties to the upper political echelon in the city where Putin grew up and began his political career. While they came to wield pervasive influence in St. Petersburg, with control over key industries and key officials in their pocket, their power base was initially on the streets, manned by members of a fearsome fraternity at the center of Russia’s turbulent transition to capitalism: gangster athletes.

“In St. Petersburg, from 1992 to 1995, the power at the middle and lower levels of society was completely in the hands of gangster athletes. Completely,” says Yevgeny Vyshenkov, a prominent Russian crime journalist and a former St. Petersburg police investigator.

They had nicknames like Sledgehammer and Flatiron, and they had come of age pounding heavy bags and pumping iron during the zenith of the Soviet sports machine. But as a capitalist free-for-all supplanted communist ideology amid Mikhail Gorbachev’s perestroika reforms -- and as the state’s lavish spending on sports began to dry up -- legions of these athletes ditched their dreams of sporting glory and became ruthless mob enforcers.
 With brute strength and a blase attitude toward life and death, these jocks served as foot soldiers in the protection rackets that helped define the era of gangster capitalism in Russia. It was a profession that the Soviet state had unwittingly trained them for in its relentless push for supremacy in the sports world.
 “A combination of qualities, such as competitiveness and team spirit, physical aptitude and willpower, readiness to use force and to sustain injury, leadership and discipline, make [an athlete] particularly fit for violent entrepreneurship,” Vadim Volkov notes in his 2002 book Violent Entrepreneurs: The Use of Force in the Making of Russian Capitalism.
The Soviet government incorporated sports into its official ideology while still in its infancy following the 1917 October Revolution. But it was after World War II that it made a serious push to deploy sporting excellence as evidence of the communist state’s superiority over the capitalist West, establishing thousands of sports schools and clubs to identify and train future champions.

It was during this postwar push for sporting preeminence that Soviet athletes made their first serious contacts with the criminal underworld, says Vyshenkov, the author of a 2011 oral history of protection rackets in St. Petersburg and a former volleyball standout with deep contacts among gangster athletes in the city.
 Boxing coaches in the city would toughen up their proteges by sending them out to the park to test their skills on street hoodlums who were armed with pocket knives and ambivalence toward the rules of the sweet science, he says.
 Pickpockets, burglars, and black marketeers observing these dust-ups concluded that putting a pair of fists on the payroll could be a wise investment, Vyshenkov says. “A pickpocket works in the bus. These days if someone steals your wallet, the victim might just get angry. Back then you could get thrashed for it. And a thief needed a boxer to protect him.”
 As they grew closer to the leaders of Leningrad’s underworld, the athletes glimpsed a life of illicit luxury that was far removed from the Soviet hoi polloi’s humdrum existence.
 “They invited them to restaurants and showed the boxers that there’s such a thing as the good life,” Vyshenkov said. “Pretty watches, pretty jackets, jazz. The boxers had never seen that. They’d seen poverty and labor. They didn’t know anything else. And gradually the boxers started to become their friends -- and to protect them.”
Gangster athletes were easily identifiable by their appearance: track suits, short haircuts, gold chains, and bulging muscles that earned them the nickname "kachki" --from the Russian word to pump up one's muscles.
 As the criminal underworld began to grow in the 1970s and early 1980s under the shortage-plagued reign of Leonid Brezhnev, Soviet mafiosi began stationing athletes in bars and restaurants to effectively work as bouncers while black-market dealings were conducted. This job was a rite of passage for many gangster athletes both before and after the Soviet Union collapsed in 1991.

“I calmed down people who were acting up. In general, I just made sure everything ran smoothly,” Andrei, a 50-something former karate enthusiast and a veteran of one of the city’s protection rackets, told RFE/RL on condition that he only be identified by a pseudonym.
Eventually this hired muscle bonded into a kind of informal union capable of mobilizing instantly if their intimidating presence was needed.
 “Everyone who worked in those bars got along well. We had our own sort of corporate solidarity,” reputed Tambov gang leader Vladimir Kumarin, whose influence among St. Petersburg officials earned him the moniker Night Governor, told crime journalist Andrei Konstantinov in Banditsky Peterburg (Bandit Petersburg), a seminal account of organized crime in Russia’s northern capital during that era.
 They were also eyeing opportunities for career advancement in this underground economy, Vyshenkov says, starting with a promotion to bartender, which paid better than the bouncer gig.
 "Not only do we want to wear jeans, we want to drive Volgas. We don’t just want red caviar, we want black caviar, too," Vyshenkov says. “And gradually they become bartenders, they gradually start to infiltrate and seize the business. They have little knowledge, but a lot of confidence."
 Violent ‘Pioneers’
 It was Gorbachev’s rise in 1985 and his subsequent reforms that ultimately propelled gangster athletes to the front lines of a brutal battle for wealth nationwide. Thirty years ago this November, his government passed a law on individual enterprise that would help trigger the proliferation of “cooperatives” -- small businesses that would form the bedrock of the Soviet Union’s nascent market economy as the government’s grip over citizens began to wane. Soviet athletes didn’t miss their chance.

“As the state weakens to the point that it can no longer effectively contain violence, sports, especially fighting sports and the martial arts, can supply everything needed to create a racketeering gang: fighting skills, willpower, discipline, and team spirit,” Volkov writes in Violent Entrepreneurs.
 Their business model could essentially be boiled down into the mob cliche: “Nice place you got here. Be a shame if something happened to it.” But they also provided a valuable service, Volkov and Vyshenkov argue: Because the communist superpower had few effective mechanisms to regulate business disputes, the country’s emerging entrepreneurs needed some way of enforcing contracts and protecting their assets.
 "A market is born, and it has to be regulated," Vyshenkov says. "What does it mean to regulate? ‘You’re right, you’re wrong. Give it to him.’ Who is going to do that? Suddenly athletes see a niche. They enter this market and say: ‘We’ll decide who’s right and who’s wrong. But we’re going to collect taxes in exchange.’"
 City markets and other forums “for the free economic exchange of privately produced goods,” Volkov writes, “began to attract those who were able and willing to display and use force.”
 “Former [athletes] were the pioneers of this movement -- gyms and sports clubs were the initial breeding grounds for the fresh wave of organized crime,” he adds.
 Andrei, the St. Petersburg racketeering gang veteran who spoke to RFE/RL, recalled the case of a businessman whose bank collapsed.
 “He was left with a pile of debt, and they started tearing him apart like a terrier does a badger. The good thing for all sides was that we caught him first,” Andrei said. “We even had to live with him, 24 hours a day over the course of two weeks without letting him out of our sight. And of course he ended up paying.... We ate and drank off that money.”
 In the beginning, gangster athletes’ chief weapon was brute strength. But by 1988, the same year that Gorbachev fully legalized cooperatives, a Soviet Interior Ministry organized crime specialist named Aleksandr Gurov told a Moscow newspaper: “There are a lot of athletes among these warriors. Unfortunately, it’s no problem for them to get their hands on a gun.”

Global Reach
At the time of Gurov’s interview, the Soviet Union boasted that 250,000 of its citizens had achieved the Master of Sport qualification. Some 12,000 were deemed masters of an international caliber, while more than 3,000 had earned the country’s most exclusive athletic title: Decorated Master of Sport.
 Most of the Soviet and, later, Russian athletes who moved into protection rackets specialized in combat sports -- martial arts, boxing, wrestling -- or weightlifting and bodybuilding. They ranged from amateur gym rats to international stars like Yury Sokolov, a world and European judo champion from Leningrad. He reportedly oversaw a gang of boxers before being killed in murky circumstances in 1990 at the age of 28.
“Most of the people who came into organized crime in this way, they were muscle rather than mind. They weren’t really the gang leaders and the planners,” says Mark Galeotti, an expert on Russian organized crime and a professor at New York University.
 There were purported exceptions, such as Sergei Timofeyev, a karate expert nicknamed Sylvester who led the Moscow-based Orekhovskaya crime group and was killed in 1994 car-bomb attack in the Russian capital. The Solntsevtsaya organized crime group, based in Moscow but with an international reach, has long been said to be headed by businessman Sergei Mikhailov, a Soviet master of sport in wrestling. Authorities in Russia, the United States, and Europe have alleged that Mikhailov as a leading player in Russia's criminal underworld, though he has never been convicted on organized crime charges. Known by the nickname Mikhas, Mikhailov boasted in 2014 that Putin had honored him with a watch as a gift, a claim the Kremlin denied. Mikhailov rejects allegations that he is tied to the mob.
 The rise of gangster athletes did not go unnoticed in Washington. A 1991 report by the CIA on Soviet organized crime noted that “gangs often recruit former top athletes because they have access to modern weapons and cars, unlimited funds, and good connections abroad.”

“Athletes, in turn, may join gangs to continue living the ‘good life’ they lose when their government stipends end. Organized crime allows some athletes to translate their physical strength and prowess into quick money,” the reportadds.
 Moscow and Leningrad weren’t the only stomping grounds of gangster athletes: They operated in major cities across the country’s 11 time zones.
 They even extended their reach into the Russian-speaking enclave of Brighton Beach in New York City. It was under the elevated subway tracks there one night in January 1994 that a gunman shot a reputed mob enforcer named Oleg Korotayev once in the head at point-blank range, killing him instantly, and fled. Korotayev was a three-time Soviet boxing champion who in1974 defeated future undisputed world heavyweight boxing champion Leon Spinks of the United States at a tournament in Havana.
 Legend has it that Fidel Castro personally presented Korotayev with a machete after the light-heavyweight impressed the Cuban leader at a tournament in Havana four years earlier.
 By the time Korotayev’s brains were blown out in Brighton Beach, a massive bloodletting among gangster athletes was already under way back in the motherland as well. The Soviet collapse had further empowered organized crime groups in Russia as money from protection rackets and all manner of official malfeasance sloshed around chaotically.
 “We always had money in our pockets. Always,” says Andrei, the former St. Petersburg gangster. “We were well fed. Of course, now I only regret that I didn’t buy any damn apartments with that money. We snorted and drank away so many apartments.”
 The competition among rival gangs for these riches became increasingly bloody, sparking turf wars in which mob bosses, businessmen, and politicians expired seemingly daily in a barrage of bullets or the blast of a deftly placed car bomb.

“From 1990 to 2000, around 6,000 people died in such conflicts,” Konstantinovtold RFE/RL’s Russian Service recently. “By comparison, in the same amount of time we had 14,000 people die in the [Soviet] war in Afghanistan. And that was just in St. Petersburg.”
 That gangster athletes were frequent victims of this carnage is unsurprising. Volkov estimated in his 2000 book that “three out of five middle- and upper-ranking members of groups specializing in private enforcement have athletic backgrounds.”
 "The Romans forgot how they stood side-by-side in the cohorts and fended off the enemy’s onslaught," said Vyshenkov. "They forgot how they died for one another. It ceased to matter. It was every man for himself."
 Andrei recalled his work becoming increasingly perilous, particularly at meetings -- called “strelki” -- of rival racketeering gangs to resolve business disputes between their respective clients. “People started showing up at strelki all jumpy and didn’t know what to expect,” he said.
 Like many of the toughs that populated the protection rackets in that era, several of Andrei’s colleagues didn’t survive the decade. Some were killed or simply disappeared. Another was shot dead and chopped up into pieces “like in an American movie.”
 “How did I stay alive? Well, thank God I didn’t end up owing anyone anything, and thank God I didn’t really know anything that was worth killing me over. I just gradually got out of the business,” said Andrei, who in recent years worked as a middle-manager in the construction industry.
 As the decade came to a close and Putin’s ascent began, Russian law enforcement officers began supplanting the gangs in the protection business, Andrei says. “Nobody wanted to fight with them anymore because there would be only one ending: jail,” he said.
 The more fortunate veterans of the racketeering game became “shareholders in something, had homes,” he added. “They were the New Russians, the new millionaires, the new oligarchs. The rest were either already dead, smashed up or rotting away in jail somewhere. They were of no use to anyone.”

 Those gangster athletes who did survive included several senior members of the Tambov and Malyshev gangs, to which Spanish prosecutors have tied several current and former Russian officials, including some close to Putin.
 The man for whom the Malyshev gang is named -- a former wrestler named Aleksandr Malyshev -- fled back to Russia last year after skipping bail in Spain following his arrest in 2008. Soviet master of sport Mikhail Glushchenko, a former high-ranking Tambov gang member and a quick-fisted boxer who relied on precision rather than power, is currently imprisoned after being convicted of extortion and organizing the 1998 murder of Galina Starovoitova, a widely respected lawmaker from St. Petersburg. Glushchenko, who was reportedly involved in the 1988 brawl between the Tambov and Malyshev gang members at the Leningrad marketplace, served as a deputy in Russia’s lower house of parliament in the mid-1990s.
 Glushchenko has since fingered Kumarin, the reputed Tambov leader once known as the Night Governor of St. Petersburg, as the mastermind behind Starovoitova’s slaying. Kumarin, who now goes by the last name Barsukov and is currently serving a 14-year prison sentence on gang-related charges, denies his involvement in the murder.
 As for Broiler, the Malyshev gang member who stabbed Fedya Crimea to death at the 1988 brawl at the Devyatkino train station: He served time for the crime and then, after his release, as president of a charity organization led by Putin’s political mentor Anatoly Sobchak, the mayor of St. Petersburg from 1991-96. A former city boxing champ in Minsk, Broiler survived an apparent assassination attempt in 1997, when his car was riddled with bullets by unidentified assailants. Four years later, he finished his dissertation, titled Strategy For Ensuring Production Effectiveness In A Market Economy.
 According to Vyshenkov’s oral history of protection rackets in St. Petersburg, published in 2011, Broiler -- whose real name is Sergei Miskaryov -- is a “millionaire.”

How Europe Became a Russian Gangster Playground

In early May, the moves came thick and fast. In Portugal, police swooped on a Russian criminal network that bought control of struggling lower-league football clubs and used them to launder millions of euros.
Meanwhile, in London, hedge fund boss turned campaigner Bill Browder presented evidence to British members of parliament that $30 million stolen in one of Russia’s most high profile frauds had passed through the country’s banks. The money was from a tax scam uncovered by Russian accountant Sergei Magnitsky, who was imprisoned and died in jail in 2009. It was spent, Browder said, on private jets, elite school fees, lavish houses and designer dresses in Britain.
As Browder laid out his story, it was revealed that a Spanish judge had issued arrest orders for 12 Russians, including several current and former government officials. The warrant was part of Europe’s biggest probe into Russian organized crime. Investigators say Gennady Petrov, a gangster from St. Petersburg, plowed money into Spanish real estate that came from contract killings, arms and drug trafficking, extortion and kidnapping. They claim Petrov was the center of a money-laundering cabal that reached the top levels of Russian officialdom.
The events revealed the extent to which Russian organized crime has penetrated Europe. They also suggest that European authorities might be mobilizing against it.
Gennady Petrov fled Russia two decades ago. A heavyset bruiser who had climbed to the top of the criminal ladder in St. Petersburg while Vladimir Putin was a deputy mayor, he moved to Spain after losing ground to a rival gang.
He was not alone. Spain in the 1990s and early 2000s was “a kind of playground for organized crime figures … nice climate, and weak law enforcement,” says Mark Galeotti, an expert in Russian organized crime and security services.
Crime figures also spread to Israel, Cyprus and Germany. In the French Riviera, Russian criminals laundered suitcases full of cash through the property sector while bribing local politicians and judges to look the other way. By the 2000s, Europe’s police agency, Europol, was calling the Baltic States the “northeast criminal hub.”
London attracted a different crowd. These were the businessmen and political figures whose wealth could withstand at least a cursory probing of its sources. Euan Grant, an expert on transnational crime, calls these people “politically-protected looters.”
Organized crime had blossomed in Russia in the 1990s as state authority broke down. Under Putin, who became president at the end of the decade, the melding of the state and criminal networks was institutionalized, says Galeotti. No state employee lives off their salary alone. Instead, a culture of cronyism developed where personal connections were used to dole out favors and no one is truly clean.
Even Defense Minster Sergei Shoigu, a career official regarded as one of the less corrupt members of the government, was found by anti-corruption activists last year to have a lavish, pagoda-style mansion near Moscow allegedly worth $18 million.
When Russian businessmen and gangsters moved overseas, they took their personal connections with them. The Spanish investigation into Gennady Petrov appears to provide a snapshot into the system’s workings.
In the 1990s, St. Petersburg was practically run by criminals, and Petrov was a big figure. “Everyone knew him,” says Roman Shleinov, a Russian investigative journalist. He had cash to invest and could pull strings in different spheres of government and business. Petrov’s connections extended to Putin’s closest associates. In the late 1990s, Petrov was a shareholder in Bank Rossiya, later described by U.S. officials as the “personal bank for senior [Russian] officials.”
But Spanish prosecutors were on to him. They launched an investigation called “Operation Troika” in the late 2000s. Prosecutors tapped hundreds of telephone conversations and examined bank transfers and property transactions. Their report, issued last year, revealed connections between Petrov’s crime group and a wide circle of Russian officials and politicians. Among the senior figures mentioned were former Defense Minister Anatoly Serdyukov, former Prime Minister Viktor Zubkov and current Deputy Prime Minister Dmitry Kozak. Even Putin got a mention in one of the tapped conversations discussing his reported ownership of a house in Spain.
The 12 names on the Spanish arrest warrant revealed this month are only slightly less senior. They include Vladislav Reznik, a senior member of parliament, Igor Sobolevsky, a former deputy head of the Investigative Committee, Russia’s equivalent to the FBI, and General Nikolai Aulov, deputy head of the narcotics police. Among the accusations, prosecutors say Reznik helped Petrov get clients appointed to key posts in Russia in exchange for assets in Spain. Aulov, they said, was used to intimidate potential threats to Petrov’s group.
The accused have dismissed the claims. Aulov branded them “political.” Kremlin spokesman Dmitry Peskov said the allegations against Putin were “beyond the realm of reason.”
But the investigation’s chief prosecutor, Jose Grinda, was convinced he had uncovered the true nature of Russian crime syndicates. According to a U.S. diplomatic cable leaked to WikiLeaks, Grinda told U.S. officials in 2010 that Russian criminal groups operated “hand-in-hand” with the state, whose tactic was to use “organized crime groups to do whatever the government of Russia cannot acceptably do.” These tasks included running guns to clients such as Kurdish militia, he said. In return, the Russian state gives criminal groups support and protection.
Russian cash has certainly padded many pockets. Flows of illicit money are difficult to measure. They are also various in nature, ranging from direct proceeds of drug and people trafficking to kickbacks and sweetheart deals. But analysts say tens or even hundreds of billions of dollars have left Russia over the last two decades in criminal schemes. Deutsche Bank last year said $1.5 billion enters Britain each month without being recorded by official statistics. Half of that cash comes from Russia.
Russian money has been a boon for real estate agents, lawyers and purveyors of luxury services. But it has also cultivated an extensive network of former government officials and intelligence figures now working at private advisory firms. One such was Conservative Friends of Russia, a lobby group founded in London in 2012 and chaired by Sir Malcolm Rifkind, a former foreign minister. Rifkind was later filmed by Britain’s Channel 4 television boasting he could provide access to “every British ambassador in the world” and offering to use his political connections on behalf of a fake Chinese company for £5,000 a day.
 “No one wants to kill the golden goose,” says Browder.
That is a key reason for lackluster policing. Another is that much of the money looks superficially clean. It has been smuggled through multiple countries and often comes with the stamp of a clever corporate lawyer. Western law enforcement isn’t set up to deal with this, says Grant. “It’s looking for the smoking gun” — something Russian fraudsters are too clever to provide.
Spanish prosecutors say Vladislav Reznik, a senior member of the Russian Duma, helped Gennady Petrov appoint allies to senior positions in the Russian bureaucracy in return for assets in Spain.
•           Crackdown
Attitudes may now be changing. Following Moscow’s annexation of Crimea in 2014 and support for Ukrainian separatists, many Western capitals now see Russia as a security threat. More people are worried at the effect of Russian money on Western politics.
Grant warns that the penetration of organized crime in the Baltic countries could be catastrophic in a potential national security crisis provoked by Russia. He says Russians connected to state-sanctioned organized crime form a massive quasi-intelligence agency for Russia. They are “political trojan horses,” he says. By spreading their money, they can “undermine morale, compromise officials and weaken Western resolve.”
Scandals around the Spanish investigation into Petrov and the poisoning of Alexander Litvinenko in London in 2006 have also shifted public opinion. An enquiry in Litvinenko’s death published this year said the former Russian secret policeman had given evidence to Spanish prosecutors investigating Russian organized crime. Shortly afterward, he was fed radioactive polonium in an apparently state-sanctioned murder. Outrage over the Panama Papers leaks this year is also forcing governments to consider tighter measures against offshore companies and financial crime.
Shifting attitudes to Russia could help investigators access extra resources, says Galeotti. More significantly, it means that Western security services are now refocusing on Russia. These play a major role in monitoring and action on organized crime.
Few think that a full fledged attack on Russian money is feasible. More likely is “a partial and creeping lockdown,” says Browder. As in Spain and Portugal, individual prosecutors in different countries will investigate and seize Russian property, he says. “The more they do, the more empowered some of the timid ones will get, and this will become a much more wide ranging problem for the Putin regime.”
The process will be difficult and slow, says Grant. Russian organized crime networks have had time to deeply embed. Meanwhile, Moscow does not extradite its citizens. And its law enforcement agencies often refuse to aid foreign investigations. Petrov, now 68 and living in St. Petersburg, is unlikely to ever again appear before a Spanish court.
That doesn’t mean there are no consequences. Spain has seized property worth tens of millions of euros. Those on Spain’s arrest warrant cannot travel to Spain or any country with which Spain has an extradition treaty.
 “What this does is bit by bit begins to lock down the outside world to this criminal elite,” says Galeotti. This sort of action goes to the heart of the Putin regime. “This elite regarded globalization as a buffet — that they can enjoy all the opportunities of being Europeans while at the same time maintaining their capacity to steal with impunity back within Russia,” he says. “Now they are finding that this is becoming harder and harder.”
When Spanish police raided his properties in 2008, Petrov was living in a 20-million-euro villa in Calvia, a village on the Mediterranean island of Majorca. He had a painting by Salvador Dalí on the wall. Among his neighbors was the sister of King Juan Carlos.
A crackdown on criminal groups also raises questions. The omnipresence of crime in Russia means it is often difficult to differentiate between legitimate and illegitimate business. Meanwhile, the entanglement of crime and state also means that every clampdown on a “businessman” or their cash is an attack on the foundations of Russia’s political system, which risks provoking Moscow.
However, the drip feed of actions against Russian organized crime continues. In early May, the European Central Bank said it would phase out 500-euro bills, a favorite of gangsters. A week after the Portuguese raids and Spanish arrest warrants, police in London said they had seized $22 million and arrested two men suspected of laundering money for a Russian gang.
To be truly effective, however, action has to be coordinated, with tighter regulation and information shared across jurisdictions. If not, it will amount to “squeezing the balloon,” says Galeotti — where pressure in Spain and Portugal merely moves the money to France and Greece. Despite encouraging signs, such continent wide measures seem a long way off.

Contact the author at p.hobson@imedia.ru. Follow the author on Twitter at @peterhobson15

London Police Seize $22 Million Transferred by Russian Gang

London police seized $22 million allegedly transferred into the country by a Russian organized crime gang running Ponzi schemes and laundering money through the futures market.
The move came six weeks after a 43-year-old Russian broker was arrested on suspicion of fraud, abuse of position and money laundering and released on bail. A British national was also interviewed under caution and released. Neither person was identified by police.
Detectives took possession of four checks from a clearing firm in the Square Mile, London’s financial district, after the firm closed the suspect’s five trading accounts. The operation came two weeks after authorities seized bankers’ drafts worth 30 million pounds ($43 million) in South Wales and arrested a 58-year-old man on suspicion of money laundering in the largest monetary seizure by a U.K. police force.
A Russian oil firm, a Swiss investment company, an investment firm in the British Virgin Islands and another Russian company were a front for the Russian gang, according to police. None of the businesses were identified.
The arrest was the result of an investigation into suspicious trading on the futures market by the police’s Money Laundering Unit and the Intercontinental Exchange Inc., which monitors markets to identify suspicious trading activity.
"ICE monitors trading activity around the clock using sophisticated market surveillance tools and technology to detect market abuse," Kelly Loeffler, a spokeswoman for ICE, said in an e-mailed statement. "We notified the authorities immediately upon detecting suspicious trading activity and continue to support the City of London Police in their operation."

Russian Mob Lawyer Tied to Whistleblower’s Death

Russian attorney Andrei Pavlov has been named as  a “candidate for the killing” of Alexander Perepilichnyy, a Russian national who became a Swiss informant on corruption allegation and then died under mysterious circumstances in Surrey, England, in November 2012.
Pavlov is considered to be the lawyer for the “Klyuev Group,” an alleged organized crime syndicate responsible, say U.S. officials, for perpetrating a $230 million Russian tax fraud in 2007 and then covering its tracks by framing and murdering the whistleblower who exposed the crime, Russian tax attorney Sergei Magnitsky. In 2012, U.S. Congress passed a law named for Magnitsky that aims to freeze any American assets, and ban from entering the United States, Russian officials implicated in the affair.
The Daily Beast has reported extensively on Pavlov in the last few months. Leaked emails and attachments revealed that he retained the legal services of the London branch of Debevoise & Plimpton, a white-shoe U.S. law firm, for the purpose of keeping his name off of European sanctions on Russia and rebutting the accusations made against him, primarily by William Browder, the CEO of the Hermitage Fund, which Magnitsky represented and whose corporate documents were allegedly used in the $230 million fraud. Pavlov’s lead counsel at Debevoise, Weiss reported, is none other than former British Attorney General Lord Peter Goldsmith. Also, acting on Pavlov’s behalf, Debevoise subcontracted the services of private investigation firm GPW & Co., whose chairman is Andrew Fulton, formerly British foreign intelligence agency MI6’s station chief in Washington, D.C.
—Michael Weiss


Report: NSA Tapped Phone Of Russian Crime Boss To Probe For Putin Ties

By Carl Schreck
May 17, 2016
Documents leaked by former U.S. National Security Agency (NSA) contractor Edward Snowden suggest that the spy agency eavesdropped on a Russian mob kingpin in an effort to determine his possible ties to President Vladimir Putin.
According to an internal NSA newsletter published by the website The Intercept, the NSA in 2002 or 2003 successfully tapped the phone of Vladimir Kumarin, the reputed head of the notorious Tambov crime syndicate whose influence in St. Petersburg in the 1990s earned him the moniker "Night Governor."
The newsletter, published by The Intercept on May 16 states, says the State Department submitted a request to the NSA for intelligence on Kumarin "to learn whether there were any links" between the Tambov syndicate and Putin, who served as deputy mayor in St. Petersburg in the 1990s.
The website was co-founded by Glenn Greenwald, one of two American journalists who received secret NSA documents from Snowden. The document referencing Kumarin was among the first batch of internal NSA newsletters spanning a nine-year period that The Intercept plans to publish.
Putin has long been alleged to have maintained ties to organized-crime groups that flourished in St. Petersburg, where he grew up and began his political career, following the collapse of the Soviet Union. The Kremlin has repeatedly dismissed these claims.
Kumarin, who now goes by the last name Barsukov, is currently serving a 14-year prison sentence after being convicted on gang-related charges in 2009.

According to the NSA newsletter published by The Intercept, analysts from the NSA’s Signals Intelligence Directorate "had their work cut out for them" with the State Department’s 2002 request because the agency "had neither Mr. Kumarin's phone number nor a sample of his voice."
The document, dated May 5, 2003, states that the NSA ultimately achieved "success" in the operation thanks to "many months of target development" and was able to issue intelligence reports based "on the intercept of Kumarin’s telephone."
The contents of those reports remain unclear.
A State Department official, when questioned by RFE/RL on May 17 about The Intercept report, said: "As a matter of policy the Department of State does not comment on specific intelligence allegations."
As experts on Russian organized crime have noted, the Tambov syndicate and other gangs were so entrenched in economic and political life in St. Petersburg in the 1990s that it was virtually impossible to conduct public affairs without dealing with them.
A Spanish judge this month issued international arrest warrants for several current and former Russian government officials and other political figures closely linked to Putin in connection with crimes committed in Spain, including murder, weapons and drug trafficking, extortion, and money laundering.

The Spanish documents target alleged members of the Tambov syndicate and another well-known crime group in St. Petersburg, the Malyshev gang. Both groups emerged as racketeering gangs comprised largely of former athletes during the twilight of the Soviet Union in the late 1980s.

The Panama Papers and Putin

Vladimir Putin's regime has increasingly subjected its opponents to systematic harassment and detention.
OPINION: The Panama Papers scandal, among other things, reinforces growing concerns about high-level fraud and corruption within President Vladimir Putin's government and raises troubling questions about Moscow's conflict with neighbouring Ukraine.
While Putin is not personally named in the massive leak of financial documents known as the Panama Papers, close associates of the Russian president nevertheless feature prominently in them.
The list of names identified by the Panama Papers includes Russian regional governors, members of the Russian parliament, Kremlin spokesperson Dmitry Peskov, and Putin's close friend and cellist, Sergey Roldugin.
While there is nothing inherently illegal in using offshore tax havens, it is estimated by the Tax Justice Network that $1.3 trillion of assets from Russia are currently sitting offshore at a time when many Russians are experiencing tremendous economic hardship.
These revelations follow a number of reports and books in recent years from whistleblowers, journalists, scholars, and foreign government agencies, which document a massive concentration of secret wealth and power by the Putin regime.
According to Karen Dawisha's book, Putin's Kleptocracy, Putin has established a regime in which the leader, his inner political circle and friendly oligarchs have hugely enriched themselves in a criminal and corrupt fashion. Politicians loyal to Putin have become wealthy and oligarchs close to Putin's cabal have become billionaires.
At the same time, the Putin regime has increasingly subjected its opponents to systematic harassment and detention, curbed unauthorised political demonstrations, and pursued an extensive crackdown on independent media organisations and journalists.
But Putin's kleptocratic rule is not just been a Russian problem. For many years, neighbouring Ukraine has played a key role in facilitating this system.
Given that the Russian economy is heavily reliant on oil and gas exports and about 50 per cent of these exports went until recently to the EU market via the Ukraine, the country holds enormous strategic significance for Russian oligarchs and their associates in Putin's political entourage.
In particular, there have been indications of co-operation between the Putin regime and Russian organised crime in the Ukraine with respect to the vitally important energy sector.
Apparently, some groups of Russian mafia have coordinated directly with state organisations in organising the supply of energy, especially natural gas, to Ukraine from Russia and central Asia.
But Ukraine's place in the triangle of crime, politics and business in Russia came under serious threat in 2013 when the then pro-Russian Ukrainian President Viktor Yanukovych agreed in principle to sign a trade association deal with the EU.The Putin regime felt it had no choice but to use all means at its disposal to protect its vital interests in the Ukraine.
It used economic pressure on the Ukraine to block the proposed trade association agreement with the EU, and when angry anti-government protests toppled the Yanukovych leadership in Kiev in February 2014, Moscow reacted with force.
After annexing Crimea in March 2014 and then actively supporting armed separatists in eastern Ukraine, Putin's Russia was targeted by several rounds of international sanctions from the US and EU. The Putin government retaliated with sanctions of its own against a number of Western countries, including Germany.
The conflict between Russia and the Ukraine over the last two years has generated the worst crisis in relations between Moscow and the West in the post-Cold War era.
Altogether, over 9,000 people have been killed and about 20,000 wounded since the conflict in eastern Ukraine began in April 2014.
And Russia has paid a huge economic price for backing the separatist rebels in the Ukraine. The value of the rouble has plummeted, inflation has spiraled, and Russia is facing economic recession and zero growth in 2016.
The Putin regime claims the US had engineered the Ukraine crisis in order to extend its global dominance through NATO enlargement.
But the problem for Putin and Western observers who share this view is that the major impetus for NATO enlargement in Eastern and Central Europe has come from the countries of the region – which have historical memories of Russian interference in their internal affairs - rather than Washington.
And membership of NATO was not on the agenda for the Ukraine when the crisis began.
So why did the Putin regime feel so threatened by the prospect of a trade association agreement between the Ukraine and the EU in 2013? After all, Russia itself was a major trade partner of the EU.
An examination of the terms of the agreement is instructive. Article 20 pledged to "prevent and combat money laundering", organized crime, and corruption in the Ukraine. To this end, the Ukraine and the EU agreed to implement this provision to international standards, including those already adopted by the EU.
From the standpoint of the Putin regime, Article 20 could undermine Russia's power base in the Ukraine by seeking to extend the rule of law and attacking networks of organised crime and corruption. Moreover, it was feared such a development would have political 'spillover' effects into Moscow and threaten the legitimacy of Putin's kleptocracy in which the favoured few massively enriched themselves at the expense of the majority of Russian citizens.
Thus, Putin's political concerns about the fall-out from the 2013 EU-Ukraine association agreement significantly contributed to Russia's subsequent intervention in the Ukraine.
It is ironic the scuppered EU-Ukraine association agreement was finally signed in June 2014, and that the agreement contains strengthened anti-money laundering and financial transparency regulations.
This agreement and now the Panama Papers open up new political pressures on Putin's kleptocracy. But it is clear that Putin has every intention of fighting hard to preserve his leadership system. This may ultimately be a losing battle, but in the meantime the largely Putin-controlled Russian parliament recently passed new secrecy laws that hamper international attempts at prosecuting cases of corruption that have links to Russia.
Putin will face his day of reckoning, but it will probably not come soon enough for the well-being of his country.

Robert G. Patman is Professor of International Relations at the University of Otago, New Zealand.

US$ 10 Billion Transferred Out of Russia Illegally in 2015, Moldova Remains Hub

Officials from the Russian Ministry of Internal Affairs said more than 700 billion rubles (US$ 10.5 billion) were transferred illegally from Russia into offshore accounts in 2015, TASS News Agency reported.
 (Photo: Images of Money, Flickr)Andrei Kurnosenko, head of the Department for Economic Security, along with the deputy chief of the General Directorate of Economic Security and Anti-Corruption, Police Colonel Yevgeny Lukin, held a press conference revealing some of the ministry’s findings from the past year.
The Ministry of Internal Affairs found that 75,000 economic crimes had been committed in 2015 with damages amounting to more than 87 billion rubles, more than a third involving “large and very large” sums, according to a ministry news release on the year’s results. The ministry also said that the first quarter of 2016 saw a more than 60 percent of economic crimes committed by an organized group or criminal community.
Kurnosenko said 20 offshore companies and 10 banks had been involved in facilitating the transfers. “We identified almost 23,000 crimes linked to the transfer of money abroad,” Kurnosenko told the TASS news agency. “In particular, we found evidence of the transfer of more than 700 billion rubles (US$ 10.5 billion) abroad, linked to the transfer of money from Russia to Moldova, which continued onward to offshore companies.”
Moldova has been identified as a hub for money laundering with criminal cash making its way through the country before landing in offshore havens. Between 2010 and 2014, US$ 20 billion, originating in Russia, was laundered through Moldova according to theRussian Laundromat investigation by the Organized Crime and Corruption Reporting Project (OCCRP) and its partners.
Later, in November 2014, US$ 1 billion vanished from three Moldovan banks after the banks gave loans to companies owned by people whose identities remain hidden in a maze of offshore corporations. The borrowers took the money and ran. The collapse of these loans was a serious blow to a Moldovan banking sector that already faced a number of corruption scandals.
The Moldovan case referred to by Kurnosenko is only one of several cases that were part of the US$ 10.5 billion transfer, according to Ion Preasca, editor of RISE Moldova. RISE Moldova took part in the Russian Laundromat investigation.
Moldovan authorities have sought to make money laundering through the country more difficult since 2014 through legislative changes and sanctions, he said.
“Several judicial cases have been launched against judges, bailiffs and bankers,” Preasca said. “Moreover, in 2015 the National Bank started special monitoring of three of the biggest banks in Moldova, about 70 percent of the banking sector, in order to track bank operations and transactions."
However, despite the these advances, Moldova still faces significant risks, according to a 2016 report by the International Monetary Fund (IMF). "In some cases, very large deposits are placed cross-border in obscure transactions, which may combine fictitious creation of ‘liquid’ assets, tax evasion, and money laundering," the report said.

Although the report hailed the moves made by the Parliament to enhance anti-money laundering legislation in the country, it highlighted that the anti-money laundering and counter-terrorism finance unit at the National Bank of Moldova seems to be "understaffed" and that difficulties identifying the ultimate beneficial owners of companies, among other problems, called into question the effectiveness of money laundering prevention in Moldova. 

Navalny: Russia Run by 'Mafia' System

FILE - Russian opposition activist Alexei Navalny leaves a detention center in Moscow, Russia, Friday, March 6, 2015.
Danila Galperovich
June 03, 2016 4:04 PM
Alexei Navalny, the leading Russian opposition activist who heads the Anti-Corruption Foundation (FBK) and the unregistered Party of Progress, was interrogated by police this week, after which his office and home were searched. The police action was connected to a libel case against him brought by former Russian Interior Ministry investigator Pavel Karpov.
Karpov is among a group of people on whom the U.S. government imposed sanctions for their alleged involvement in the death of Sergei Magnitsky, the Hermitage Capital lawyer who died in a Moscow prison in 2009. The Kremlin's own human rights council said Magnitsky, who was arrested accusing Russian officials of involvement in a $230 million tax fraud scheme, was probably beaten to death.
Karpov filed suit against Navalny on May 19, accusing the anti-corruption activist of slandering him by posting a video that asked how an Interior Ministry officer with a modest official salary could have come into possession of expensive cars and apartments without engaging in corrupt practices.
Navalny has been the target of various criminal investigations and has been repeatedly interrogated. On May 17, Navalny and about 30 FBK members were attacked by a group of men wearing Cossack hats and uniforms at an airport in southern Russia. Navalny accused Russian Prosecutor General Yury Chaika and his son Artem of being behind the attack. Back in December, the FBK published a report linking Artem Chaika to organized crime.
In an interview with VOA's Russian service, Navalny discussed his latest problems with Russian law enforcement agencies.
 FILE - In this frame from video provided by Anapa Today, opposition leader Alexei Navally, center, tries to get up after being attacked at the Anapa airport, southern Russia, May 17, 2016.
Q: What happened in the latest incident, and why are Russian law enforcement structures once again putting pressure on you?
A: On the morning of June 1, I was called in for questioning. The interrogation was rather formal. And then, after the interrogation, people entered the office and said, "Hello, we are [from] the criminal investigation department. We are going to search you personally." They patted down my back, lifted up my trouser legs, forced me to take off my shoes, checked to see if I had some terrible secrets in my shoes, and then declared that they were going to search my home.
This was, on the one hand, absurd, of course. Because it's ridiculous: What kind of search can you do in a libel case? The criminal case was launched the same day the libel case was filed: There is no indication of why it was [a] slander [case], what information the policeman Pavel Karpov does not like. ... In general, it's all absurd.
But, on the other hand, there is definitely logic in these actions. The logic is that, on the basis of this ridiculous and trumped up case, it is necessary to take away all the equipment, phones, confiscate all of the memory cards; to rummage through them and find something else. Because the task of the authorities is not even connected to this criminal case, or to defend Pavel Karpov of the Magnitsky List, but to fabricate a criminal case against me and guarantee my non-participation in the [September 2016 Russian parliamentary] elections, against the backdrop of the European Court of Human Rights having overturned earlier fabricated cases, one after another.
[In February 2016, the European Court of Human Rights ruled that Russia's conviction of Navalny on embezzlement charges in 2013 was "prejudicial," and that he had been denied a fair trial — ED.]

FILE - A tombstone on the grave of lawyer Sergei Magnitsky who died in jail, at a cemetery in Moscow, Nov. 16, 2012.
Q: Pavel Karpov is indeed on the "Magnitsky List" — actually, on two of them, the European one and the American one. Why do you think the Russian state is so seriously protecting those accused of involvement in Magnitsky's death?
A: There has been no reasonable answer to this question. … It had seemed to me it was protecting them because, first of all, America is giving them a hard time, because some foreign senators adopted an act against Russia, so that means [they] have to protect them no matter what, even if they are notorious crooks. This is what I thought before the [Panama Papers] documents were published, which prove that the offshore accounts of the cellist [Sergei] Roldugin, who is an obvious "corrupt coffers" for Vladimir Putin, also received money under this scheme [i.e., the one uncovered by Magnitsky — ED]. These same firms and persons were involved.
[In late April, the Organized Crime and Corruption Reporting Project, which was involved in bringing the Panama Papers to light, reported that Roldugin, a friend of Putin's since the 1970s, "received money from an offshore company at about the same time it was being used to steal money from the Russian government in the notorious Sergei Magnitsky case."  — ED.]
I'm certainly not trying to say that the murder of Magnitsky was carried out so that Putin could receive more money — he doesn't need it. It's just that there is a unified money-laundering infrastructure, or that [they] overlap. So, it turns out that the people who stole 5 billion rubles from the budget [which Magnitsky uncovered — ED], also replenished — fully or partially, we do not yet know — the Putin coffers. Therefore, the mechanisms that protect Vladimir Putin personally are involved here.
Q: What do you call a system that is part of the state — in fact, it wears epaulettes — while, at the same time, according to [Hermitage Capital CEO] William Browder, it is involved in a rather interesting way of making money?
A: There is an excellent word, known to everyone — "mafia." This "mafia" system is a merger of bandits and the state. It is a system that is built in part on family ties. Their children are already inter-married. Loyalty is based on the fact that these people grew up together since childhood, the same way it happens in the real mafia. So you have these people who grew up together, the way Roldugin grew up with Putin, [and who are] loyal [to each other]. This perfectly describes the system as a mafia. It is honed mainly to receive benefits for making money, but if, as a collateral effect, it is necessary to kill someone, it kills people.
Q: Was the latest criminal case against you launched because the authorities sense the previous ones failed, or simply because the system will never leave you alone?
A: In as much as this is being done very deliberately and very crudely, it is, of course, a signal to a certain circle of people that, look, nothing distracts us and we won't let up. But more generally, of course, it is the practical implementation of a political decision that I should not be allowed to participate in the elections. And, in general, that no independents should be allowed to run, and that to prevent us from participating in the elections, they will bring criminal cases against us. This concerns not only me. A lot of people — my colleagues from both the Party of Progress and the Anti-Corruption Foundation — can't run for office because they were put on probation, and several are in jail or political exile. A decision was made, and I'm trying to derail this decision from a formal point of view by having it overturned by the European Court of Human Rights, where I win. But they're simply inventing new cases.

Bulgaria withdraws extradition request for alleged leader of Russian gang – e

•           One of Gagiyev gang’s leaders sentenced to 19 years in prison
•           Criminal case against one of alleged Gagiyev gang’s leaders reaches court
•           Alleged leader of Russian gang released on bail by Austrian court - report

MOSCOW, June 7 (RAPSI) – Bulgaria has withdrawn a request for extradition of Aslan Gagiyev, an alleged leader of Russia's organized-crime syndicate charged with organization of multiple murders, from Austria, Kommersant newspaper reported on Tuesday.
Therefore, the case on extradition of Gagiyev to Bulgaria has been closed, Christina Salzborn, a representative for the Regional Criminal Court of Vienna, told the newspaper.  Earlier, Gagiyev was charged by Bulgarian authorities with documents’ forgery in absentia.
Austria is yet to review Russian extradition request for the second time. In the summer of 2015 extradition request was granted by the Austrian court, but later it was appealed by Gagiyev.
Russian investigators claim that Georgian-born Aslan Gagiyev’s gang has been operating since 2004 and includes over 50 members.
According to Kommersant, members of the gang committed more than 60 counts of murder in Moscow and North Ossetia.
Eighteen members of the gang have already received long prison terms; two of them have been sentenced to life. Currently, 14 members are in detention, 8 members are on the international wanted list.
Gagiyev who was arrested in Austria in January 2015 faces life sentence in Russia. On March 3, the Austrian court released him on bail of EUR 100 because hearing of extradition cases against him ran over time.

German Federal Police warn of Russian mafia spreading in Germany

The Russian mafia has reportedly gained a major foothold in Germany. The head of Germany's Federal Criminal Police Office (BKA) says that the crime gangs have "potential to cause enormous damage."
"We are experiencing Russian-Eurasian organized crime as very dynamic," BKA President Holger Münch told the Sunday edition of the daily "Die Welt" newspaper.
"It is currently expanding into the West," Münch added.
Organized gangs originating from Soviet era
Münch said the Russian mafia was also active in fields of crimes where it is normally not suspected to be involved - such as mass burglary and shop thefts.
"They have therefore enormous potential to create losses," Muench said, explaining that many of the crime gangs had originated in prisons and gulags in Joseph Stalin's Soviet Russia, and had extended the use of penitentiaries as recruitment centers to their network in Germany.
Münch said that up to 10 percent of inmates in German prisons were Russian speakers, marking a "great potential for recruitment" there.
The BKA approximates that at least 20,000 to 40,000 individuals living in Germany may likely have ties with the Russian mafia, adding that the number may be higher as some of the crimes committed are never reported.

With a high proportion of the Russian criminals coming to Germany as asylum seekers, there has also been an increased level of cooperation between the BKA and Germany's Federal Office for Migration and Refugees (BAMF). Münch had warned earlier, however, that refugees and asylum seekers were also more likely to suffer violence and attacks.

Dodo co-founder Igor Gilenko wanted in Ukraine over bank fraud

 Igor Gilenko, who helped to found the innovative Dodo internet service provider, is under investigation in Ukraine for bank fraud.
•           The Australian
•           MARK SCHLIEBS

He was a star in Melbourne — a dashing silver-haired businessman who had MPs and business veterans fighting in his corner.
There was a place for him on a BRW Young Rich List, thanks to his co-founding of innovative cut-price internet provider Dodo, and his lavish lifestyle and penchant for deep-sea diving saw him travel the world.
His charm and intelligence were Igor Gilenko’s biggest assets.
But now Gilenko, 50, has vanished, an international fugitive linked to powerful Russian mobsters — including the biggest of them all.
He is believed to be hiding somewhere in Moscow and refusing to return to Ukraine, which is investigating massive bank fraud it alleges was carried out by him and billionaire gas oligarch Dmytro Firtash, whom the US Federal ¬Bureau of Investigation is pursuing.
And one of Gilenko’s obscure Melbourne companies was ¬repeatedly named by the FBI in the 2003 indictment of Russian mobster Semion Mogilevich.
Gilenko’s flight to the country of his birth as an inter¬national fugitive has shocked friends and supporters back in Melbourne.
“I don’t know his business dealings,” says fellow Dodo co-founder Larry Kestelman. “He seemed like a very legitimate businessman, and that’s what I still believe of him. I don’t know what his other dealings were.
“He was very smart and I thought he was a good businessman. He was very smart and well-educated.”
Another Australian who knew him through family connections says Gilenko is a clever and amiable businessman. “He is charming, yes. And very, very motivated and driven,” he says.
“I don’t believe any of those ¬allegations are true … Ukraine is a very complicated country.”
At his peak, Gilenko rubbed shoulders with Ukrainian presidents and the financial elite. He was named on the BRW Young Rich List in Australia at the same time as he was being described as a “financial whiz-kid” in Kiev — his home away from Melbourne.
In Australia, he was best known for Dodo, which eventually sold for $203 million in 2013 after he gave up his stake three years ear¬lier. In Ukraine, he was the popular chairman and chief executive of a major bank.
But Gilenko was not involved in the day-to-day running of Dodo and rarely met his fellow co-founders. Kestelman says he has not spoken or dealt with Gilenko for many years.
Greg Hywood, chief executive of Fairfax Media, once wrote an opinion piece calling for an overhaul of Australia’s immigration rules after the government refused to give Gilenko citizenship. At the time, Gilenko had been a permanent resident here for seven years and Hywood was a senior bureaucrat in the Victorian government.
“He has poured $2.5 million into the company (Dodo) but is ¬denied citizenship because the international travel associated with his work keeps him out of the country much of the time,” -Hywood wrote in The Age in February 2005. “The minister could make an exception, but won’t.”
Melbourne Labor MP Michael Danby also lobbied then-¬immigration minister Amanda Vanstone to grant Mr Gilenko citizenship. In a letter to the minister, Danby criticised the Immigration Department’s grounds for refusal — that “evidence provided by Mr Gilenko does not demonstrate that his business ventures offshore bring any significant benefit to Australia”.
“This ruling is somewhat like arguing that Frank Lowy adds ‘nothing’ to Australia because a large part of Westfield’s holdings are in the USA,” Danby wrote, ¬according to Hywood’s piece.
Danby tells The Australian that Gilenko was eligible for citizenship at the time.
“Our records show that in 2004 Igor Gilenko fulfilled the legal requirements of Australian citizenship and was a senior executive with Dodo, the reputable and still very active local telco service,” Danby says. “We have no idea of Igor Gilenko’s ¬activities since that time and more than a decade later.”
Hywood tells The Australian: “An elected federal representative asked me to consider the case of one of his constituents and also the broader implications of the way Australia attracts and retains skilled immigrants. The broader discussion of attracting skilled ¬immigrants is as relevant today as it was in 2005. Given the particular case is a matter of legal interest it would be inappropriate of me to comment further.”
It was shortly before the collapse of the Soviet Union that ¬Gilenko first started doing business in Australia. He was born and raised in Moscow, graduating from that city’s Institute of Electrical Technology in 1988. His initial connection with Australia is still a mystery. It is suggested he knew people who had migrated from eastern Europe to Melbourne.
It was in 1991 while he was still in Moscow that Gilenko, using his skills with electronics, became a director of an Australian company distributing computers and software. Investments in clothing and property development followed.
In 1993, he set up an obscure shelf company in Melbourne called Australian Finance Structure Pty Ltd and became its biggest shareholder.
It was this Gilenko company that was named in a 2003 criminal ¬indictment issued by a US grand jury — in connection to the most powerful eastern European criminal in the world.
Even now, few outside law ¬enforcement know that a Latvian bank account in that company’s name allegedly received $US1.8m as part of large-scale stock fraud carried out in the US and Canada, allegedly under the direction of Semion Mogilevich.
So notorious is Mogilevich, formerly of Budapest but now in Russia, that the FBI last year -removed him from their top 10 most wanted list, conceding it was unlikely to help bring him to justice.
The former Russian spy Alexander Litvinenko, who infamously was killed from polonium poisoning in London 10 years ago, once claimed Russian President Vladimir Putin “is hiding Mogilevich”.
On March 27, 1998, two alleged accomplices of Mogilevich — Jacob Bogatin in Philadelphia and Igor Fisherman in Hungary — communicated via telephone. FBI agents listened in.
“[The men were] discussing Russia and Ukraine licensing ¬arrangements and the use of a company named ‘Australian ¬Finance Structure’ to facilitate the transfer of money,” the 2003 ¬indictment states.
The FBI was investigating share fraud.
Several weeks later, the two men again discussed the company over the phone, “in which Bogatin advises the Australian company is an obvious ‘sham’.” But the company name was not fake. It was registered in Melbourne five years earlier. Its dominant shareholder was listed as Igor Gilenko.
Eventually, on June 30, 1998, about $US1.8m (the equivalent of $3.6m today) was transferred “for the Russian licensing agreement” to the Latvian bank account of “Australian Finance Structure Pty Ltd”, according to the Mogilevich indictment.
Mogilevich was never brought to trial over these matters. The FBI and the US Justice Department both refuse to provide any further details of the telephone conversation, the funds transfer or the company. “As this is still an open case, we’re unable to provide those details, in any format,” an FBI spokeswoman says.
At the time of the transaction, Gilenko was a director and the biggest shareholder of the company.
In Melbourne, Gilenko lived in plush suburbs before moving into a flash St Kilda Road apartment in the city with his Russian wife Elena Zavelov and her two sons from a previous relationship — one of whom became a founding director of Dodo.
But his struggle to secure an Australian citizenship and his ¬expansion of Bank Nadra — of which he was chairman and chief executive since 1997 — prompted him to spend more time in Ukraine.
“Igor was only in Australia several times,” one associate in Melbourne says. “It’s not like he spent a lot of time here.”
In Kiev, Gilenko rubbed shoulders with Ukrainian and eastern European elite and was hailed as a financial “wonderkid” for his management of the bank. But the global financial crisis in 2008 forced the bank to seek bailouts from Ukraine’s central bank — before billionaire Ukrainian gas oligarch Dmytro Firtash swooped in to take control of Nadra.
The National Bank of Ukraine repeatedly bailed out Nadra over six years, to the tune of $560m. But much of the bailout money given to Nadra by the National Bank vanished and an arrest warrant was issued for ¬Gilenko in 2009.
One person who remained in contact with Gilenko after the ¬arrest warrant was issued says he believed the allegations were politically driven and were baseless.
A senior Ukrainian government source tells The Australian that Firtash and Gilenko are both under investigation in a case ¬involving ¬alleged defrauding of the country’s central bank.
“Nadra collapsed at autumn 2009 when Gilenko was the chief executive. The investigation -period includes 2008-2014,” the source says. “Mr Igor Gilenko is wanted now by national police.”
Ukrainian investigators says officials from the Trasta Komercbanka bank in Latvia — the country where the account for Australian Finance Structure ¬allegedly received money from Mogilevich’s alleged share fraud — were also suspects in the Nadra fraud investigation.
Asked if he was surprised that Gilenko set up a company that was named in the indictment of -Mogilevich, the Ukrainian government source said: “No, because (the) connection between Firtash and Mogilevich is a common known fact.”
This statement appears to be based on a 2008 diplomatic cable, released by WikiLeaks, sent by then US ambassador to Kiev ¬William Taylor, in which he says Firtash had admitted links to -Mogilevich.
“Firtash acknowledged that he needed, and received, permission from Mogilevich when he established various businesses, but he denied any close relationship to him,” Taylor says in the December 2008 diplomatic cable.
Firtash has strenuously denied that such a conversation took place and says he had no direct or indirect business dealings with Mogilevich.
According to other cables, Firtash was seen as controlling the bank since late 2008. He claims to only have taken over the bank in 2011, paying $400m to secure a 89 per cent stake, according to a statement released at the time.
Firtash is widely seen as using his massive business interests to influence Ukrainian politics, candidly expressing support for pro-Moscow candidates. He made his fortune as a co-owner, with Gazprom, of gas middleman Ros¬UkrEnergo.
“As co-owner of gas intermediary RosUkrEnergo, Firtash is widely believed to be serving as a front man for far broader interests,” a November 2008 cable from the US embassy in Kiev said.
“In the case of Nadra, Firtash is sufficiently cash-rich to finance the purchase on his own, but the suspicion remains that in his major business dealings he ¬remains at least politically ¬indebted to the ¬forces that helped him rise so quickly.”
He was arrested in Austria on a US extradition warrant — issued over foreign bribery charges laid in 2013, which he says are untrue — just four days after the culmination of 2014’s Maidan revolution in Ukraine.
A Vienna judge refused last year to extradite him and ruled the FBI’s bid was politically motivated and tied to the unrest in Ukraine.
As for Gilenko, his high profile life abruptly came to a halt.
Reports in Ukraine stated that Gilenko flew to Melbourne when investigators began sniffing around Nadra but there is no confirmation that this ever happened.
One Melbourne man says it is several years since Gilenko set foot in Australia, and he believes he remains in Russia.
He has split up with the woman he helped bring to Australia, who is believed to be in Melbourne with one of her sons. They both have Australian citizenship.
The last news about him comes from 2010.

As Gilenko deleted his social media profiles, Russian authorities reportedly located him outside of Moscow. But they refused to ¬detain Gilenko. He was a Russian citizen and thus could not be -extradited.