A reputed gangster who calls himself “a simple Jew from Kiev” has emerged as the central suspect in an international bank-fraud probe that investigators term the biggest money-laundering case in history.
The case involves an apparent scheme by Russian mobsters to launder billions of dollars in criminal proceeds through one of America’s oldest and most respected banks, the Bank of New York. The FBI’s yearlong investigation into the scheme was disclosed by the New York Times in a series of articles in late August.
Beyond the Times’ disclosures lies a far more complex story, reported piecemeal in a variety of publications here and abroad. Together they tell a hair-raising tale of international crime and intrigue by reputed crime boss Semyon Mogilevich and his so-called “Red Mafia.”
Mogilevich’s mob is said to be the largest and most dangerous criminal organization to emerge from the breakup of the Soviet Union; it’s engaged in arms dealing, drug smuggling, prostitution, contract murders and international art theft.
The gang has been described as resembling traditional Italian mafia groups in its hierarchy, brutality and reliance on family and ethnic ties. Most of its members are Jewish.
The money-laundering and related allegations, though, lift Mogilevich to a level of sophistication and influence rare in organized crime. They also hint at the magnitude of threat posed by Russian organized crime, both to Russia and the world at large.
Britain, in particular, has been investigating Mogilevich’s group for more than four years, seeking to unravel a worldwide network of shell companies implicated in money-laundering, contraband sales, stock manipulation and investor fraud. It was Britain’s National Criminal Intelligence Service that tipped off the FBI last year to Mogilevich’s apparent relationship with the Bank of New York.
Switzerland is also investigating the gang, on suspicion that it helped launder millions of dollars through Swiss banks for Russian government officials. Those cash movements began just before the August 1998 ruble devaluation that led to Russian financial chaos. Some say Kremlin officials traded on their inside knowledge of policy plans, bleeding the country.
Part of the laundered money — at least $200 million, by some accounts — may have come from International Monetary Fund aid. The IMF is now facing criticism in Washington for sloppy oversight. That, in turn, could hurt the presidential hopes of Vice President Al Gore, a key architect of the IMF’s Russia policies. The GOP-led House Banking Committee is holding hearings on the allegations later this month.
Others whose names have surfaced in the mushrooming probe include several so-called “oligarchs,” the business tycoons, many of them Jewish, who control much of post-communist Russia’s privatized industry. Those mentioned include Mikhail Khodorkovsky, a leading banker and oil executive; Boris Berezovsky, formerly a ranking Yeltsin aide; and Vladimir Goussinsky, president of the Russian Jewish Congress. All three headed Russian banks that have been implicated in the Mogilevich investigations.
Another “oligarch” implicated is Konstantin Kagalovsky, a close ally of Khodorkovsky. His wife, Natasha Gurfinkel, headed Bank of New York’s East Europe operations until she was suspended last month.
Nobody has formally been accused of any wrongdoing.
Russian Jewry experts fear the allegations may help fuel Russia’s already rampant anti-Semitism, by seeming to confirm extremist myths about Jewish “rape” of Mother Russia. All told, Mogilevich’s mob may have looted as much as $15 billion from the Russian economy in the last few years. “It can’t help but have an impact,” said Isabella Ginor, a leading Israeli analyst of post-Soviet affairs.
Semyon Yukovich Mogilevich, 53, was born in Kiev and graduated from the University of Lvov with a degree in economics. An Israeli citizen since the early 1990s, he currently operates from Hungary, where he is married to a local woman.
He has been known to law enforcement authorities for decades, and is a familiar figure in the Russian media. In the West, though, he was virtually unknown until May 1998, when he was profiled in a lengthy article in the Village Voice by investigative reporter Robert Friedman.
Friedman went into hiding shortly afterward, at the urging of the FBI, which told him Mogilevich had taken out a $100,000 contract on his life. He is currently writing a book about Russian organized crime.
As described by Friedman, Mogilevich first became involved in petty crime in Moscow in the 1970s. He made millions in the 1980s by bilking Jews leaving for Israel, promising to sell their valuables for them after they left, then pocketing the proceeds.
He spent the 1990s allegedly building his Red Mafia from his new base in Budapest, sending lieutenants to acquire legitimate companies in England, Canada, Australia, the United States, the Caribbean and elsewhere, then using them as covers for his illegal activities.
Activities cited by Friedman include a sale of $20 million in stolen East Bloc weaponry to Iran, the theft and resale of Torah scrolls, a scheme to dump American toxic waste in Chernobyl — in cooperation with the Genovese crime family — and a phony antique restoration shop that took in Russian art treasures and sent fakes back to the owners, while the originals were secretly sold at Sotheby’s in London.
Britain appears to have been a favorite base for Mogilevich’s financial schemes. In 1995, British authorities shut down a firm he had created there to launder funds from his worldwide criminal activities. In 1997, authorities began investigating a far more complex scheme, in which he acquired a Hungarian magnet factory, incorporated it in Philadelphia, then took it public on the Toronto Stock Exchange in 1994. Hundreds of millions of dollars worth of stock was sold, yet few magnets were produced. Federal authorities, tipped by Britain, shut the firm down for securities fraud last spring.
The magnet probe led British investigators to Benex, a London-based firm allegedly controlled by Mogilevich. It was set up in March 1998 for the sole apparent purpose of transferring funds out of Russia.
Benex’s only officer, reputed Mogilevich lieutenant Peter Berlin, is married to Lucy Edwards, the Bank of New York officer who was fired last week for her apparent role in the money-laundering scheme.
Edwards, born Ludmilla Pritzker in Leningrad, has declined to comment so far. Berlin has disappeared, and knowledgeable observers suggest he may turn up floating in the Thames.
As for Mogilevich, he granted an interview to a Moscow newspaper this week and insisted that the only money he ever laundered was $5 left in a shirt on wash day. The whole affair, he claimed, is “the raving of the FBI.”
J.J. Goldberg writes a weekly column for The Jewish Journal.