BoNY - ABN-Amro - State of Delaware Facilitates the Russian Mafia - Primeway - Simpson - WSJ - 30Sep2004
Stefan Lemieszewski Sep 30 2004, 8:44 am show options
Newsgroups: soc.culture.russian,soc.culture.ukrainian,soc.culture.usa,soc.culture.baltics
From: "Stefan Lemieszewski" <stef...@direct.ca> - Find messages by this author
Date: Thu, 30 Sep 2004 08:44:51 -0700
Local: Thurs, Sep 30 2004 8:44 am
Subject: BoNY - ABN-Amro - State of Delaware Facilitates the Russian Mafia - Primeway - Simpson - WSJ - 30Sep2004
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The American Bank of New York isn't the only international bank
involved in facilitating flight capital and money laundering for the
Russian Mafia. The Solntsevo crime syndicate's mafia boss and
FBI's "Most Wanted" criminal Semion "Brainy Don" Mogilevich
et. al. may have given it the most unwanted publicity by prompting
federal investigations into the Russian mob's $7-10 billion money
laundering schemes, but there are others.
Another one mentioned is the Dutch ABN-Amro bank. For example,
reporter Mark Ames in the eXile alleged that oligarch Alexander
Smolensky embezzled $25 million from the Stolichny Bank to the
Vienna branch of ABN-Amro when he wrote the following:
--------------
exile.ru
the eXile
Issue #25/50, Oct22-Nov05, 1998
Russia's Purse Snatcher Barons
Semantic Smokescreen That Made Suckers Out Of All Of Us
[ . . . ]
Let's start with the slimiest of them all, Alexander Smolensky, who heads
the largest private bank in Russia, SBS-Agro. Smolensky's higher education
consisted of furtively purchasing a diploma from an obscure institute in the
town of Dzhambul. After a stint in the Red Army, he found work in printing,
and worked his way up to the position of foreman for a publisher affiliiated
with the Economic Administration of the USSR's Ministry for the Construction
Materials Industry. Confidential reports from his superiors characterized
Smolensky as "having a tendency towards swindling."
Right they were. In 1981, the future oligarch was sentenced by the Sokolniki
District Court in Moscow to two years in prison for embezzling. Immediately
after getting out of jail, he went to work in another construction firm, and
in 1989, with the help of then-Moscow Mayor Gavriil Popov, Smolensky founded
his Stolichny Savings Bank. How did he get there from jail? If we knew the
answer to that, we could tell you how Michael Bass went from Lompoc to
hosting a Hollywood party for Ronald Reagan and Ryan White...
The first few years were pretty dicey financially for Stolichny, and
Smolensky's reputation was tarnished by repeated investigations into
embezzlement charges. The investigations were quashed after Smolensky
extended a loan to the Interior Ministry. In 1993, the Finance Ministry
opened an investigation into the disappearance of $25 million from a
Stolichny account, which had allegedly been transferred to the Vienna branch
of ABN-AMRO. Austrian police joined in the investigation, but it was
mysteriously hushed.
At that time, the Austrian press began to loudly accuse Smolensky, who lived
part-time in Vienna, of being connected to a Russian Mafia kingpin, one
Lenni Makintosh. Smolensky was enjoying the mafia High Life, cruising
Vienna's imperial roads in a Rolls Royce, living in Tony Montana-like
mansions, marking himself as the trailblazer in nigga-esque New Russian
chic. Austrian authorities began a public campaign to prosecute and possibly
deport Smolensky but, after intervention from the heads of the Russian
Foreign Ministry and Interior Ministry, the case was dropped.
[ . . . ]
-------------------------------------------
Marshall I. Goldman made the similar reference to Smolensky and
Vienna (but without naming ABN-Amro's Viennese branch) in his
book: "The Piratization of Russia: Russian reform goes awry" (p. 126):
[ . . . ]
"As an oligarch Mr. Smolensky was applauded for his charitable contribution
of 116 pounds of gold for the cupolas of Mayor Yuri Luzhkov's Cathedral of
Christ the Savior, as well as for his business savvy. Nonetheless,
allegations about his past continued to haunt him. The newspaper Rossiiskaia
Gazeta ran an investigative article on March 14, 1995, which charged that he
participated in a forgery scheme to smuggle $25 million in cash out of
Russia to Austria, the home of his grandfather, where Mr. Smolensky is also
a citizen and his wife has a home and office. The Wall Street Journal on
October 4, 2000 ran a follow-up piece detailing Smolensky's sale just before
the August 1998 crash of $500 million in bonds that were not legally his to
sell.6 "
6 The Wall Street Journal, January 16, 1997, p. 6; The Washington Post, May
21. 2001.
[ . . . ]
-----------------------------------------
In today's Wall Street Journal, staff reporter (and author of
the 1996 book titled: "Dirty Little Secrets: The Persistence of
Corruption in American Politics"), Glenn R. Simpson writes
how the State of Delaware's corporate secrecy laws are making
it a haven for the Russian Mafia. He also mentions international
banks such as the Bank of New York, ABN Amro, and Bankers
Trust (now part of Deutsche Bank), and a Ukrainian tax-fraud
case involving Primeway and the mafia.
Stefan Lemieszewski
===============================================
Wall Street Journal
30Sep2004
Laundering queries focus on Delaware
By Glenn R. Simpson
WILMINGTON, Del. -- Delaware's corporate-secrecy laws may
be making it a haven for foreign criminal groups, prompting
prosecutors in Eastern Europe and Russia to flood the Justice
Department with requests for help in probes of Delaware shell
companies.
In the past four years, law-enforcement agencies in Russia,
Hungary and a dozen other nations have made more than 100
formal requests to the Justice Department to go before the U.S.
District Court in Delaware to obtain subpoenas to learn more
about the companies. In many cases, foreign prosecutors say
in their requests that they believe the companies are controlled
by or connected to Eastern European criminals who use them
to move money into and out of the U.S.
The cases also have connections to U.S. and foreign banks,
and are generating concern among top U.S. regulators and law-
enforcement officials that crime groups were able to penetrate
the U.S. economy despite warning signs such as a $7-billion
money-laundering probe at the Bank of New York in 1999.
The Delaware cases involve a handful of banks that have catered
to the region including the Bank of New York, ABN Amro Holding
NV, and Bankers Trust, all of which kept correspondent accounts
in New York for small Eastern European banks. Correspondent
accounts allow foreign banks to conduct dollar-denominated
transactions and move funds into the U.S. without setting up a
U.S. branch, simply by paying fees to a host bank that has a
U.S. banking license. These accounts allow banks to move money
around the world without having branches everywhere.
Both the Bank of New York and ABN Amro, of the Netherlands,
are the subjects of law-enforcement inquiries related to their ties
to companies suspected of fraud and money-laundering in Eastern
Europe.
In addition, ABN Amro is the subject of a previously undisclosed
fraud suit in New York State Supreme Court over its ties to a bank
in Cyprus that the Treasury Department has blacklisted for money-
laundering.
That case appears to have played a role in generating a Justice
Department money-laundering investigation concerning ABN Amro,
documents related to the case show. In February of this year, one
letter states, a lawyer with the influential Washington firm Patton
Boggs met with the deputy chief of the Justice Department's money-
laundering section on behalf of a group of Hong Kong investors
claiming they had been defrauded by ABN Amro and provided the
prosecutor with numerous documents. A Justice Department
spokesman couldn't be reached last night."We are aware of a legal
matter to which you refer...and we have filed a motion to dismiss
the matter," an ABN Amro spokesman said.
A spokeswoman for the Bank of New York couldn't be reached.
Delaware law allows for creation of limited-liability corporations
and other entities without identifying beneficial owners or directors --
one of many company-friendly laws that make the state a favored
corporate-headquarters venue. These laws have led to a thriving
industry that helps fuel Delaware's economy by bringing business
to the state, even though the process now often is done over the
Internet.
When the Soviet Union collapsed, officials say organized-crime
groups that emerged gravitated to Delaware, prompting warnings
from watchdogs such as the U.S. Government Accountability Office
that Russian firms could use the state for money-laundering. A vast
archive of correspondence from prosecutors in Eastern Europe in
U.S. District Court here now indicates criminal groups, corrupt
politicians and money-laundering banks in newly liberated Eastern
Europe in fact may have become some of the state's best customers.
The GAO, the investigative arm of Congress and then called the
General Accounting Office, warned of potential problems in Delaware
in an October 2000 report, "Suspicious Banking Activities: Possible
Money Laundering by U.S. Corporations Formed by Russian Entities,"
which found that thousands of companies had been set up in Delaware
on behalf of company brokers in Russia. "It is relatively easy for
foreign individuals or entities to hide their identities while forming shell
corporations that can be used for the purpose of laundering money,"
the report warned.
Delaware officials say the problem isn't their fault and there is little
they can do about it. "The reality is they are using U.S. entities for
this purpose, [but] there's nothing particularly unique about Delaware
as related to these small privately held shell companies," said
Delaware Assistant Secretary of State Rick Geisenberger. Many
other states have the same laws, he said. "They're choosing to
incorporate in Delaware for the cachet of the fact that Coca-Cola
and McDonalds and lots of large multinationals incorporate here.
So in many ways, we are sort of victims of our own renown."
The emergence of Delaware as a nexus for money-laundering, tax
evasion and financial fraud is a potentially huge embarrassment to the
U.S. in the war against transnational financial crime. While launching
stinging rhetorical and legal attacks on foreign jurisdictions, U.S.
officials long have overlooked Delaware, which also caters to American
companies that use the state to reduce state taxes.
Four of the Delaware fraud cases involve Bankers Trust, a unit of
Deutsche Bank since June 1999. Last month, a federal judge in
Wilmington approved a request by the Justice Department to issue
subpoenas to Bankers Trust on behalf of Ukrainian prosecutors
seeking to investigate a tax-fraud case. In a nine-page letter, the
Ukrainian tax police in Kiev described a complex mechanism to
evade value-added taxes on aluminum exports. The deal involved
a firm in Rehoboth Beach, Del., called Primeway LLC, which
allegedly was a client of Bankers Trust, and a Latvian institution
called Parex Bank that is the target of numerous fraud probes in
Eastern Europe.
A spokeswoman for Deutsche Bank declined to comment.
Delaware corporate records show Primeway was registered as a
Delaware business called Consumer Corporate Agents Corp.
Primeway never disclosed any of its officers and directors in state
filings, and no longer is registered after failing to pay incorporation
taxes for three years. Prosecutors say that shortly before it went
out of business, Primeway signed millions of dollars in fictitious
contracts with a firm in Ukraine, allowing that company to claim
millions of dollars in tax rebates from the Ukrainian government,
in a classic organized-crime operation.
ABN Amro is the subject of a lawsuit in New York state court filed
June 7 claiming it abetted a $16-million fraud against a group of Hong
Kong investors called International Strategies Group Ltd. The architect
of the fraud was allegedly First Merchant Bank OSH, based in the
rump Turkish Republic of Northern Cyprus, a lawless region that lacks
diplomatic relations with the U.S. and almost the rest of the world.
The suit contends ABN Amro's office in New York was warned in
writing by various banks, regulatory authorities and its own head
office in Amsterdam about possible money-laundering by First
Merchant in 1999 but failed to cut its ties to the bank immediately.
myturl.com
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