By Albert Samaha
By Steve Weinstein
By Devon Maloney
By Tessa Stuart
By Alison Flowers
By Albert Samaha
By Jesse Jarnow
By Eric Tsetsi
After it was revealed in August that $7 billion to $15 billion had been siphoned out of Russia through the Bank of New York, the nation's influentials were shocked, shocked. America's most sophisticated financiers were vulnerable to tawdry Russian fraudsters? The press gasped at the scale, congressional committees mobilized, and the Clinton administration trumpeted an anti-money-laundering strategy.
But the scandal was no surprise to federal immigration agent Thomas D. O'Connell. Nor was it the first time a New York bank had been soiled by money believed stolen
by Russian con men. Though it has not been reported until now, the Bank of New York and other New York banksincluding Chemical, Chase Manhattan, and Citibank were and most likely still are conduits for the proceeds of a still-to-be-tallied series of crimes, with at least a thousand shell company bank accounts laundering dirty cash. Indeed, O'Connell suspects that hundreds of millions of tainted dollars have passed through the New York banks into offshore havens.
O'Connell described one scam in detail after this reporter discovered the court record last year. O'Connell was then heading an inter-agency federal investigation of money laundering and other international crimes. The FBI, IRS, Customs, and O'Connell's agency, the Immigration and Naturalization Service, had monitored two Russians with unusual banking habits. In 1993 and '94, the pair used Chemical and Chase (now merged), Citibank, and the Bank of New York to launder almost $2 million embezzled from a St. Petersburg TV station. That case was among the many that calls into question the melodramatically proclaimed surprise of Bank of New York CEO Thomas Renyi, who told the House Banking Committee in September "how dismayed I have been by the suggestions in the press that the Bank of New York has been involved in, or been used as a vehicle for, money laundering or other illicit activities."
Another big New York bank also moved funds on a grand scale. O'Connell said investigations into the activities of one of the men in the St. Petersburg swindle revealed roughly a thousand bank accounts used by Russian crooks. "Most [of the accounts] were out of the Chemical Bank in Dag Hammarskjold Plaza in New York City. The first four or five bank statements I saw had hundreds of thousands of dollars going through them," he said. "The money would be wired in from Russia and then go out [offshore] to the Cayman Islands or the Isle of Man or Switzerland in two or three days. There's at least a thousand of them, and in each one there's money being wired into the U.S., hundreds of thousands of dollars." He said the total of the money moving through all the accounts investigators examined ran into "hundreds of millions."
This story underscores dangerous failures in U.S. bank practices and federal and state policies. Banks routinely establish accounts for phony companies without doing effective "due diligence" to check out their customers. Law enforcement agents are hamstrung by state corporation recording procedures that make it hard to ferret out bogus companies set up by crooks. Once money moves through offshore secrecy havens such as the Cayman Islands, it's generally impossible to locate or recover, because those jurisdictions won't open bank records to law enforcers.
O'Connell believes dozens of the owners of the targeted accounts were linked to Russian organized crime. He says one customer was Vyacheslav Kirillovich Ivankov, at the time the most powerful Russian organized crime leader in the United States. Ivankov was convicted of extortion in Brooklyn in 1996 and sentenced to 10 years in federal prison at Raybrook, New York.
The bank accounts were discovered because investigators were tapping the fax of a Russian immigrant, Alexandr Yegmenov, who'd provoked the attention of law enforcement authorities from almost the moment he set foot in this country. The St. Petersburg fraud that brought Yegmenov down offers a fascinating glimpse into the money-laundering process. The details were obtained from court records and interviews with government investigators.
All the banks discussed in this piece were given several opportunities over the past several weeks to respond. A Bank of New York spokesperson declined to comment on any of the cases. PR officials at Citibank and the now-merged Chase and Chemical banks promised to look into the issues. Follow-up queries brought the reply that they were still looking.
Alexandr Yegmenov arrived in the U.S. more than 10 years ago, when he was in his early thirties. Thomas O'Connell arrested him in 1990 as an "overstay" when he was living at a fraternity house at Rensselaer Polytechnic Institute in Troy. Seeking to block deportation, in 1990 Yegmenov filed a political asylum application. He claimed he had been an economist in the dissident organization Sintez and had been detained in a psychiatric facility for a month. Actually, the court records said, he had been convicted in Russia in 1984 on weapons and unlawful sale of goods charges and had served three years. That wasn't known by Immigration then, and Yegmenov got asylum.
A good capitalist, Yegmenov went into the corporate services business, setting up shell companiespaper corporations that don't actually operate, but are often covers to evade taxes or disguise transactions. He established New York companies through his All American Corporate Service, Inc., in Albany and filed for Delaware corporations with help from Delaware Business Incorporators in Wilmington.