I had been vindicated, and I had been granted asylum. Finally it appeared that our lives could return to normalcy. Unfortunately, the INS wasn’t done yet. Having suffered sufficient humiliation in court and from the media, the INS decided to strike back.
On September 21, 1999, J.P. Szymkowicz left a message on my answering machine: “Today Congress heard two testimonies dedicated to you entirely. A bunch of fantasies – I’ll email you the transcripts. And answering the question I know you are going to ask me upon reading the transcripts: no, we cannot sue them for libel. Statements to Congress are ‘privileged,’ and cannot serve as grounds for a libel suit.”
I found J.P.’s email and quickly skimmed the testimony to the House’s Banking and Financial Services Committee, which had been holding an inquiry into Russian money laundering and organized crime. Remarkably, it was from Major Shvets, the very man who had helped secure my release. As I scrolled down the screen, the phrases “Konanykhin knowingly participated in the crime” and “the grant of asylum to Konanykhin was a mistake” immediately jumped out at me.
I suspected I knew why Shvets had changed his story. It was pretty obvious that he had been given the “lead or silver” choice, just like Val Kulkov and Nikolai Mentchoukov. Revocation of his asylum, for instance, would be tantamount to a death sentence for the Major.
I could see, though, that the information Shvets was providing was very poor. He was making allegations without even bothering to state his sources, and in many instances he contradicted himself.
I took a deep breath and started to read the transcript.
From 1980 to 1990 I worked with the KGB foreign intelligence service. In September of 1990, I resigned from the agency on political grounds. It was clear to me that the leadership of the KGB and the Soviet communist party were ruining the country.
Starting from 1988, the KGB intelligence service focused primarily on following domestic developments in the Soviet Union. Also, it was "preparing" for future market reforms in the country. Number one priority of any KGB officer was to work on establishing new businesses or penetrating existing businesses, including the banks. I was a senior analyst, and my responsibility included analyzing the information provided by the field officers and composing reports to the top leadership of the country.
In this report I would like to focus specifically on just one KGB business operation. I believe it will by example give the distinguished members of this committee a better understanding of how Russia has been looted. This issue is widely discussed today, but the looting in Russia started before the Soviet Union collapsed.
In September 1990, KGB active duty officer Major Chukhlantsev together with a young free-wheeler Alexander Konanykhin established a private company named Rosinformbank.
That’s very misleading, I thought. Chukhlantsev was not a partner – just one of my employees. Why was Shvets suggesting otherwise? He had no first-hand knowledge, as he had testified in court, and the documents submitted by Volevodz were, as he himself concluded, “classic KGB disinformation.” Annoyed but intrigued, I read on:
Prior to that, 24-year-old Konanykhin had been involved in an unremarkable construction co-operative. He did not graduate from any college, was energetic and apparently liked publicity. According to the KGB standards, he was a good candidate for a role of a KGB front.
What nonsense, I mused. I didn’t like publicity – I shunned it. Prior to my kidnapping, there was practically no mention whatsoever of my name in the media. I kept reading Shvets’ testimony.
It should be noted that active-duty KGB officers were authorized to engage in business activities under one condition only: when their activities in private business are carried out on behalf of and under directions of the KGB. In other words, Rosinformbank was a joint venture between Konanykhin and the KGB.
That’s why Shvets implied that Chukhlantsev was a partner, I realized.
Later, Rosinformbank gave birth to a number of other businesses and then vanished without a trace. Even the Russian Military Prosecutor’s office was unable, or unwilling, to find a single document pertaining to the establishment of Rosinformbank.
Very clever! Knowing that his statements were totally unsupported, Shvets turned the admission of the lack of foundation for his claims into purported evidence! Surely the Congressmen would be smart enough to recognize that he was simply saying: “I am making it up. There’s nothing I base it on – it all ‘vanished without a trace.’”
It is noteworthy, because from an intelligence viewpoint, it is essential that the first front organization to be established cover all traces of its successor organizations or its exposure can have a domino effect on the rest of the front businesses.
Interesting, I thought. Why bother to create that “front organization” just to have it “vanish without a trace”? And if it vanished with no trace, how did he “learn” that Chukhlantsev was a partner there? And if it was a front designed to conceal the KGB’s involvement, would the KGB be present there as a partner? None of it made sense, but I continued reading.
In December 1990, Konanykhin and his wife established a company named Fininvestservice. In January 1991, Rosinformbank (KGB) together with Fininvestservice established a company named the All-Russia Exchange Center (AREC). In doing so, Rosinformbank provided 100 percent of the initial capitalization of AREC, but gave away 80 percent of the shares to Fininvestservice (Konanykhin). This may not make sense from a business point of view, but it makes good sense from the KGB perspective: It made Konanykhin a front for AREC. The fact that this also turned Konanykhin into an official stockowner of AREC entitled to 80 percent of the profits did not matter. The KGB had a large arsenal of tools and methods to solve these minor technical issues much to their advantage.
The KGB Major Chukhlantsev was appointed “technical director” of AREC. He also controlled AREC’s finances. Other KGB officers – Boldyrev, Chukhlantsev and Sumskoy – were appointed to the board of directors of AREC. Konanykhin officially served as the chairman of the board and unofficially – as a front for the KGB-run AREC.
Later, the All-Russia Exchange Center established the All-Russia Real Estate Exchange, the Secondary Resources Exchange and finally created the All-Russia Exchange Bank (AREB). The KGB controlled all those businesses through its officers placed on key positions. Usually, they would take the top positions, or positions of deputy boss, and always filled in positions that controlled company’s finances … In other words, the KGB had full control over all those businesses from the very start.
It still seemed strange to me that Shvets would give a false story to Congress, offer no evidence to support it and, in fact, admit that there was none. While I did employ scores of KGB officers, I did so only because I needed well-trained officers for my security and a few administrative positions; none of them were my partners. As the KGB was losing its prestige and power, thousands of its officers were looking for employment in major banks and commercial institutions, and many banks were hiring them for the same reasons I did.
Could it be that Shvets was making an honest mistake? After all, he had retired before that mass exodus from the KGB. During his time there, the KGB indeed controlled everything its officers did — apart from Major Shvets defection, of course.
Konanykhin fronted the KGB in the All-Russia Exchange Bank as its president...
What nonsense! Anybody could see that, contrary to Shvets’ earlier suggestion, a young college drop-out was NOT “a good candidate for the role of a KGB front” to run the largest commercial bank in the country. In fact, I looked so totally out of place as a banker that I always used my own front men – the bank’s personable chief operating officer and Arkady Maslennikov, my spokesman.
Among the Bank’s employees there were about 200 KGB officers, including several generals. Shortly after the aborted coup d’etat of August 1991, Konanykhin employed General Leonid Shebarshin, former KGB Chairman and the right-hand-man of Vladimir Kryutchkov, leader of the aborted coup d’etat. Konanykhin would later claim that he hired the KGB men for protection.
With respect at least to General Shebarshin this explanation is deceptive. After the failed coup d’etat, the top leadership in the KGB turned into pariahs in Russia. Kryutchkov was thrown into jail, and his men feared for their lives. They were afraid that the events in Russia might become similar to what had happened in 1956 in Hungary, where a number of state security officers had been lynched by mobs in the streets. After the failed coup d’etat in Moscow, the mob tore down a monument of the founder of the KGB and was ready to storm the KGB headquarters.
Faced with unprecedented public outrage against the KGB, most Russian government institutions, which traditionally had served as the KGB covers, declared after the aborted coup d’etat that they would close the KGB positions. The KGB top leadership was not a protection any more. They were huge liability. In that situation for a private business to employ a former KGB Chairman was next to insanity, unless Konanykhin could not refuse the KGB demand. It was not General Shebarshin who was protecting Konanykhin; it was rather Konanykhin who was protecting the former KGB Chairman.
I could find no logic in Shvets simultaneously claiming that I was the KGB’s puppet and that I was also powerful enough to save the KGB Chairman from “unprecedented public outrage.” Was it possible that Shvets, being forced to testify against me, deliberately prepared his testimony in such an obviously senseless and contradictory way? I returned to the Congressional transcript:
There are strong indications that the All-Russia Exchange Bank was a ‘reliable cover’ for the KGB, where the front man would clearly understand that he was entirely dependent on the KGB and had to comply with all the KGB instructions irrespective of the consequences. In most cases, the front man of a reliable cover company was a KGB human asset. The KGB had a file on him with as much of compromising materials as possible. A standard material was a document signed by the front man, in which he pledges to faithfully co-operate with the KGB. Given the importance of the All-Russia Exchange Bank for the KGB, I believe the strictest standards were applied to Konanykhin.
Now my blood was boiling over Shvets’ false suggestions. The idea of me working for the KGB was deeply offensive. The Russian saying, “A whore always believes all other women are whores,” jumped into my mind, but I forced myself to get a hold of my frustration. After all, if it wasn’t for Shvets’ honest testimony before the federal court, I would still be in jail — either Russian or American. He was now being pressured into saying this obvious nonsense, but could I really expect him to risk his life for me again?
After the aborted coup d’etat of August 1991, the KGB was ostracized and soon officially disbanded. It was reborn under the different names. The KGB men, who had penetrated businesses and banks, continued to operate there. To avoid confusion, I will keep calling them here ‘the KGB.’
On 21 October 1991, the All-Russia Exchange Bank received a license from the Central Bank of the Russian Federation that authorized the All-Russia Exchange Bank to execute transactions with hard currency. The license actually granted the All-Russian Exchange Bank a monopoly on banking transactions between Russian businesses and organizations and foreign institutions. Also, it authorized the bank to buy and sell hard currency. The ruble was in a free-fall. Trading it was a bonanza.
Two whole paragraphs with no misrepresentations, I noted. Then I remembered Major Shvets explaining to the federal judge that true facts were needed to make disinformation believable. I opened his testimony in the federal court and read:
“[Disinformation is] an operation designed to influence public opinion, the influence of top government officials of foreign countries in a way favorable for the KGB. There were plenty of ways to do that: publication of articles, based on true facts, partial truth, semi-lies and lies.”
Disinformation was exactly what the Major was doing to the U.S. Congress – misleading it with “true facts, partial truth, semi-lies and lies” for the purpose of “influence of top government officials of foreign countries in a way favorable for the KGB.” I shook my head in disbelief and read further:
According to the Russian political tradition, the decision for granting the license could not be made without the involvement of the top government and security officials. The motives of the decision have never been made public. It’s remarkable, however, that the monopoly for hard-currency transactions was given to a group of people that had absolutely no experience in running a bank, not to mention working with foreign financial institutions.
This was a brazen misrepresentation on Shvets’ part, considering how easy it was to prove false. After all, it was a matter of public record that all key operating positions in my bank were held by professional bankers, with doctorate degrees in banking or finance, many with international experience. On top of that, one of the bank’s directors had been in charge of the whole Soviet economy as Gorbachev’s first vice prime minister, and another, also a former first vice prime minister, had been in charge of international economic co-operation for the Soviet Bloc.
In normal circumstances, their chances for obtaining the license were nil. They were sure, however, they would get the license well before it was actually granted. It was not surprising – the KGB traditionally had very strong positions in the Central Bank.
How remarkable it was for Major Shvets to suggest KGB control over the Central Bank, right after describing that the KGB bosses had turned into “pariahs,” “feared for their lives,” and even their Chairman needed my protection!
The All-Russia Exchange Bank did not offer, or engage in, or provide, traditional banking services. Its main function was to serve as a pipeline in channeling large amounts of money out of Russia, and it operated in this capacity approximately from November of 1991 to May of 1992.
The misrepresentations were mounting and still no proof was offered. Why did he stop there? He could have added all kinds of juicy embellishments, like “financing the drug trade, terrorism, and civil wars against democracy” to make his fantasies even more sensational. But as J.P. had reminded me, I could not sue for statements made to Congress anyway.
The first corresponding account of the All-Russia Exchange Bank was opened at the Central-European International Bank, Budapest, Hungary. The Russian government and law-enforcement agencies have never officially disclosed the amount of money channeled by the All-Russia Exchange Bank out of Russia. However, in February 1997, the Russian Interior Minister Anatoly Kulikov, speaking in a closed-door session of the Russian Parliament, said that as a result of Konanykhin’s activities as a financier $300,000,000 had vanished from Russia. Last week, Russian Acting Prosecutor General Yuri Skuratov in personal conversation confirmed to me that his office suspects Konanykhin of participating in a scheme, which resulted in illegally taking out of Russia at least $300,000,000.
What chutzpah! He had testified in federal court that the documents submitted by these sources were “classic KGB disinformation.” Now he was feeding that very form of disinformation to the United States Congress!
It should be noted that when the first democratic government of Russia chaired by Yegor Gaydar was formed, it discovered that Russian hard-currency reserves were depleted. Rubles were not freely convertible, and there was an acute shortage of hard currency to import the most essential goods – food and medicine. In this situation, the government appealed to the West to provide humanitarian aid to Russia. The aid, paid by the Western taxpayers, started to flow in. At the very same time, hundreds of millions of U.S. dollars were secretly channeled from Russia to the West by the bank run by the old KGB guard and Konanykhin.
It was very professional propaganda, I had to admit. Shvets’ depiction made me a worst offender in the ‘crimes against humanity’ category.
I walked to my mini-bar, poured myself a shot of Cognac and drank it, trying to settle down.Remember, this person saved your life before. He must have been subjected to a lot of pressure by the U.S. government to tell such obvious lies to Congress, I said to myself before reading on.
In his recent appearance on CBS’ 60 Minutes, on 19 September 1999, Konanykhin acknowledged that $1 billion was stolen from Russia through the All-Russia Exchange Bank.
What nerve! The Major was implying that I had confessed to the crime – whereas on60 Minutes I was actually estimating how much the KGB had stolen through my bank after hijacking it from me.
Konanykhin was not a mastermind of the crime. However, given the information available to me at this point I strongly believe that he was an accomplice, who knowingly participated in the crime.
Once a turncoat, always a turncoat, I thought, throwing the remaining transcript into the trash can. Why had nobody from Congress called me or my attorney to offer the right of reply?
Later that night I felt rotten for being so angry at the Major. I realized how much pressure he was subjected to. I recalled him telling the federal judge during my case,
“I seriously have concerns about my, my security, because I can not doubt that the KGB is visibly present in this case, on the other side across the ocean. I have concern about my close relatives out there. This is serious case, and I know that KGB is … desperately wants to win this case, and everybody who won’t step to their side would face problems.”
Yuri Shvets had enough personal courage to take the stand and testify truthfully in 1997. I figured they must have gotten to his relatives by now. So many good people suffered because of the KGB and the INS, simply for getting involved in my case — and I was powerless to help them.
The second shot in the devastating INS cover-up salvo was the testimony of one of my stalkers. Many people who are presumed to be rich are targeted by stalkers. I was unfortunate enough to have two very dedicated stalkers.
One of them described herself as “unpaid voluntary asset of the CIA.” Her name was Karen von Gerhke-Thompson.
In early 1993, I had met with a partner from one of Washington’s immigration law firms for a consultation on how Elena and I could obtain travel documents to replace our Russian passports, which required us to have visas for almost every country we chose to visit. The lawyer told me that there was no way to expedite obtaining American or Canadian passports – the process invariably took years -- but some countries would issue travel passports to permanent residents who were not citizens. He said many countries would grant foreign investors permanent residence. In the USA, the minimum investment was $500,000; in Canada, $150,000; but in other countries, the amount could be $75,000 or less.
I mentioned that some of MENATEP Bank’s wealthy clients, who also experienced difficulties traveling on their Russian passports, might be interested in investing in such a program in order to qualify for better travel documents. That piqued the lawyer’s interest, but since his firm specialized only in U.S. immigration, he promised to put us in touch with a consulting company that could provide us with assistance in this matter.
The next day, Helen, my company’s managing director, came into my office. “The president of that consulting firm just called,” she informed me. “In fact, she is still on the line, but I have a bad feeling about it. She keeps insisting that she can sell us a thousand passports.”
“She is trying to sell passports?” I asked incredulously. “She does understand that we are not buying or selling passports, right?”
“I am not sure she is a lawyer. I don’t really think she is. She is not very coherent.”
“Well, then, tell her to fax her offer for my review. I owe that much to the attorney who recommended her.”
We received the fax the next day, and it was worded more carefully than her ranting phone conversation with Helen. In it Ms. von Gerhke-Thompson offered to set up a meeting with top government officials in the Bahamas who were interested in having us promote their immigration programs to Russian investors. It seemed like a chance to land a very important client — the government of the Bahamas — so I included the Caribbean island nation on my next trip’s itinerary.
The meeting turned out to be a total disappointment. The official I met with had not even been briefed on the subject I was there to discuss. Instead, he had been led to believe that I was representing a big Russian bank interested in making a large low-interest long-term investment in the new harbor they were constructing. With the exception of Elena and me getting the chance to do some wonderful sightseeing and feed sharks from a restaurant built over the sea, the trip was a waste of time.
Upon my return, Helen told me, “The crazy lady called again.”
“I don’t ever want to hear from her again,” I responded.
But the “crazy lady” continued to call periodically for a whole year, despite explicit responses that we were not interested in her services. She also sent faxes full of idiotic offers, which we trashed on arrival.
“I found the best way to get rid of her,” my managing director told me one day. “I have that big world map on the wall right by my desk, so whenever she calls, I look at the map, pick a country at random, and tell her that you are in that country for the next three weeks. You are in Turkey now. You were in Russia all of last month.”
“Thanks for letting me know,” I said with a chuckle. “But why don’t you just tell her to get lost?”
“I don’t want to be rude to her – she used to be an assistant to the U.S. Attorney General. Short of being rude, I have tried all forms of discouragement. In any case, she is not much of a bother, now that you are traveling around the world so much,” she said, smiling.
I thought I’d heard the last of the “crazy lady.” No such luck. She resurfaced in 1996, calling every journalist who had reported my story to tell them that she was conducting a dangerous secret operation on behalf of the CIA. Her “operation” was supposed to uncover the illegal movement of billions of dollars from Russia and the resettling of hundreds of high-ranking Russian officials, all handled by — who else? – lucky me.
To my further amusement, she blamed the failure of her covert operation on the CIA itself – and even tried to sue the CIA! She claimed that in 1994, the famous CIA mole Aldrich Ames had met with me in Turkey to brief me about her secret mission. Fact is, I’ve never even been to Turkey.
Fortunately, most of the reporters recognized her as a lunatic and disregarded her delusions. But somehow, she did manage to get her account published in a big article in a major Italian newspaper and later, in 2004, her allegations were mentioned inThe Washington Post andThe New York Times.
My amusement had turned to frustration as I read the transcript of her statement to the Senate Finance Committee.
Ms. von Gerhke-Thompson used the list of fictitious trips my managing director had invented (to brush her off) as key evidence that I was shuttling between Washington, Moscow, and Turkey, where she said I had been meeting with the CIA mole and the KGB.
Unlike my second stalker, however, Ms. von Gerhke-Thompson never tried to extort any money. In fact, I have never even met her. It seems that her primary motivation was to live an exciting “cloak and dagger” fantasy life rather than the uneventful existence of a retired administrative assistant.
But what stunned me the most was that she got to share her insane fantasies with Congress in a lengthy public testimony. And nobody from Congress, other government branches, or the media even contacted me regarding her testimony.
The second stalker was an attorney whose name was surprisingly similar to mine. Mr. Konan happened to be present in the courtroom when Judge Newman was entering the judgment in my favor in the libel case against Izvestia. As soon as Attorney Konan realized that I was the co-founder and CEO of a hot Internet company, and that I had won a case against a major publication, he saw the chance for some easy money. He approached one of the dismissed defendants on the Izvestia case, a reporter named Vladimir Nadein, and together they prepared a frivolous lawsuit alleging that I had arranged the character-assassination campaign against myself to later become rich by filing libel suits.
With these papers in hand, Mr. Konan barged into the hearing that specified the amount of damages and announced that he was there to prevent a huge injustice. The judge ordered Mr. Konan to keep quiet, for neither he nor his client had any standing in that case, sent the jury to start the deliberations, and scolded Mr. Konan for trying to influence the jury inappropriately.
As soon as the jury returned the $33.5 million verdict in my favor, Mr. Konan served me with a copy of his lawsuit. I read it twice, unable to take seriously what was there: absurd allegations with absolutely no proof.
Mr. Konan approached J.P. Szymkowicz a few minutes later and stated that he would dismiss his suit in exchange for $750,000. I’ve read about the legal racket where attorneys target wealthy individuals or corporations with bogus suits, hoping that the target will decide that it’s easier to pay the money than to spend a lot of time and resources fighting the nuisance lawsuit, but this was the first time I was the target of such a scam.
We rejected the offer and J.P. wrote a terse letter to Mr. Konan stating that his suit violated a number of legal provisions and that we would request sanctions against him unless he immediately dismissed it. But Mr. Konan did not dismiss his suit, so we asked for sanctions, and the judge granted our motion. He found Konan’s suit so ridiculous that he fined him $1,000 and dismissed the suit.
J.P. and I figured that was the end of that, but remarkably, even this wasn’t enough to discourage Mr. Konan. He re-filed his suit, asking for a reduced pay-off of $475,000. When, instead of giving in to his racket, we submitted a discovery request, Mr. Konan failed to comply – and was hit with a $1,050 fine.
A few days later, his lawsuit was dismissed by the court. This time he was fined $5,000. The judge remarked that it is very rare for attorneys to be sanctioned for filing lawsuits, but Mr. Konan’s case was so inane that the sanctions were required.
When Mr. Konan’s client advised the court that Konan was representing him without his knowledge or consent, we thought that we had seen the last of Mr. Konan, but his persistence amazed and astonished us. He filed a slightly modified lawsuit for the third time.
This time the fine imposed on him was considerably higher: $22,680.
“He’s destined for the Guinness Book of World Records as the attorney who was fined the most,” J.P. remarked.
Mr. Konan refused to pay, was found in contempt of court, and was fined $2,000 more.
Only when the judge ordered the sheriff to put Mr. Konan in jail until he paid the sanctions did he send the check to my attorneys.
He then attempted to overturn the judge’s decisions by misrepresenting the facts to the Appeals Court. His fraud was revealed, he was found in contempt of court, and he was disbarred. The Supreme Court of Virginia prohibited him from practicing law for the rest of his life.