PART 2: RED MAFIYA: HOW THE RUSSIAN MOB HAS INVADED AMERICA...THE LITTLE DON& BRIGHTON BEACH GOODFELLA'S

RED MAFIYA: HOW THE RUSSIAN MOB HAS INVADED AMERICA

BY ROBERT I FRIEDMAN

2 

THE LITTLE DON 

The man who deprived Monya Elson of his warm spot, seemed, at first glance, too unprepossessing a figure to become Brighton Beach’s first don. A short, grandfatherly man, Evsei Agron attracted little attention as he passed through Immigration at Kennedy Airport on October 8, 1975. He was one of the 5,200 Soviet Jewish emigres to enter the United States that year, many of them gangsters sent from Russia by the KGB. He had listed his occupation as “jeweler,” and perhaps he had even once been one. But he had also served seven years for murder in a Soviet prison camp, from which he emerged as a vor. After leaving Russia in 1971, he ran a large prostitution and gambling ring in Hamburg, West Germany. And even though he had supposedly been cast out of the vor brotherhood for welshing on a gambling debt, the order’s ferocious reputation gave him sufficient cachet to quickly seize power when he arrived in Brighton Beach. Little else is known about Agron’s early years. His records from the Soviet Union were sealed, and few of his victims from the Old Country who are still alive are willing to share their reminiscences. 

From a modest office at the El Caribe Country Club, a catering hall and restaurant, the Leningrad born Agron ran a vicious extortion ring that terrorized the Russian emigre community. “They were scared shit less of him,” FBI agent William Moschella has recalled. By 1980, his gang was bringing in tens of thousands of dollars a week. Agron’s victims ran the gamut from Russian doctors and lawyers to shopkeepers and grocery store owners on Brighton Beach Avenue. “What if they refused to pay?” chuckled a gang member in mock amusement. “We’d beat them in their store right in front of everybody. But they paid. They knew what was coming if they didn’t pay. They knew they’d get murdered, if they don’t pay.” 

Agron once threatened to kill a Russian emigre's daughter on her wedding day if he didn’t pay $15,000. Going to the police would have simply guaranteed a late-night visit from one of Agron’s henchmen, like the Nayfeld brothers, or the forty-five-year-old Technicolor killer Emile Puzyretsky. “Puzyretsky had a great contempt for life. He killed his enemies with force, fury, and no mercy,” a Russian Militia colonel recalled. 

One of the most terrifying sounds in Brighton Beach was Puzyretsky’s voice on the other end of the phone. “You have to pay!” Puzyretsky screamed at a recalcitrant shakedown victim in one tape recorded conversation. “Otherwise you’re not going to live! And if you survive, you’re not going to be able to work anymore!” 

“Willy, please don’t terrorize me anymore,” pleaded the distraught Russian émigré, who was being ordered to hand over $50,000. “We aren’t livin’ in a jungle. We live in U.S.A.” 

“You fuckin’ rat… I’ll make you a heart attack. This is the last time you’ll be able to see. If you don’t give the money… just wait and see what’s goin’ to happen to you.” 

Puzyretsky was paid—with interest. 

The Nayfeld brothers were just as savage. The steroid-enhanced thugs emigrated from Gomel, Russia, in the early 1970's. The black-bearded Benjamin, a former member of the Soviet Olympic weightlifting team, was a bear of a man with a twenty-two-inch neck. He once killed a Jewish youth in a Brighton Beach parking lot in front of dozens of witnesses by picking him up like a rag doll with one hand and plunging a knife into his heart with the other. The teenager had allegedly insulted Benjamin’s girlfriend and reached for a weapon. After the murder, eighteen witnesses vouched for Benjamin’s version of events, insisting the stabbing was a justifiable homicide, and the case was dropped. 

By all accounts, Boris Nayfeld was even more fearsome than his brother. To this day, superstitious Russian emigres insist that his eyes are sheer white orbs, a sign that he has no soul and is possessed by the devil. 

Olga, the owner of two hair salons in Manhattan’s Greenwich Village, recalls the day in the mid 1980's when Boris and Agron swaggered into her brother’s Brooklyn restaurant and ordered him to sell his one-third stake at a rock-bottom price. “The restaurant was not doing well,” she says. “He wanted to sell, but at a fair price.” When he refused, “Boris clubbed my brother over the head with his gun.” 

Olga and her family lived in the same Brighton Beach apartment complex as Nayfeld and his non-Jewish wife. “Boris’s kids were always playing with my kids in my house,” said Olga, still enraged over the decade-old incident. One night, she tailed Boris’s Mercedes. At an intersection, she hit her brights, and flew out of the car to pick a fight: “How dare you, you shit! To do this in the house where you live, you bastard!” 

“We’re only trying to help your brother,” replied an unfazed Nayfeld, who with Agron stole the restaurant anyway. 

Resistance like Olga’s was rare. For the most part, the community endured the horrible violence inflicted on them by a large and growing criminal class. They had left a brutal society where the state and the government were as crooked as the crooks. Their blatant distrust of authority carried over to the United States. The American government, which had generously given them refuge and financial assistance, was still the enemy. There was a great tolerance for white-collar crime. The new emigres routinely cheated on their taxes, stole food stamps and welfare benefits, and shopped in sable coats while their late-model Mercedes were parked in the mall. Medicare, Medicaid, and other forms of insurance scams were ubiquitous. Stealing from the government was as much a part of their culture as was paying off the mob. Their own xenophobia was one of their greatest enemies. It allowed the mobsters in their midst to act with impunity. 

However viciously cruel his subordinates, it was Agron who was despised above all in Brighton Beach. His own brand of cruelty involved carrying around an electric cattle prod, with which he enjoyed personally torturing his victims. Unlike some Russian vors, Agron held fear above honor. “If Agron had been an honorable godfather, he wouldn’t have had to use brute force to extort shopkeepers,” says Ivan, a former resident of Brighton Beach and a Gulag vet. “Instead, he would have been showered with gifts, both as a sign of homage and as payment for protection from ruthless street predators like Monya Elson. The owners of the stores would have said, ‘Oh, please take from me.’” 

The widespread antipathy toward Agron finally found its release one night in 1980. While strolling down the Coney Island boardwalk, Agron was shot in the stomach and lost part of his lower intestine. 

“We hired a retired cop to stand guard over him at Coney Island Hospital,” recalled a Genovese wiseguy who had begun a close alliance with Agron. “I have a friend in police intelligence. He went to talk to Evsei, who had tubes in his nose and arms.” 

“Do you know who shot you?” asked the detective. 

“Yes,” Agron nodded. 

The detective reached into his suit and took out a ballpoint pen and pad. “Who? We’ll take care of it,” he said soothingly. 

Wagging his finger, Agron rasped, “I’ll take care of it myself.” 

There was no shortage of theories about who shot Agron: Perhaps it was connected to Agron’s local gambling debts, said the smart money on the Brighton Beach boardwalk. Perhaps the hit was contracted by someone Agron had chiseled in Germany, the Genovese source surmised. Perhaps a member of his own gang thought it was time to replace the imperious don, shopkeepers along Brighton Beach Avenue prayed. 

Agron shrugged off the attempt on his life. He remained supremely self-confident. His boys were making major scores in everything from truck hijackings to Medicare fraud. He even purchased a Russian-language newspaper in Brighton Beach so the burgeoning emigre community could read all the news that was fit to print according to the little don. 

The paper was torched. 

Still, Agron retained an iron grip over the most powerful Russian crime group in Brighton Beach, with outposts in at least a half dozen North American cities. Agron’s criminal authority was bolstered by two highly potent allies: the Genovese crime family and Ronald Greenwald, a politically savvy, well-connected Orthodox Jewish rabbi. These connections, Agron concluded, made him invincible. More than that, without Greenwald’s careful nurturing of Agron’s criminal career, and the Italian Mafia’s muscle, the Russian mob in America might never have been anything more than a minor annoyance, a two-bit gang of emigre hoodlums. 

The nexus between the Russian mob and the Italians was a man named Murray Wilson, whose consummate money laundering skills had earned him a reputation at the FBI as a modern-day Meyer Lansky. Wilson, a Genovese associate, engineered some of the Russian mob’s first big criminal scores, and eventually he would help a second generation of Russian racketeers become a financially sophisticated global peril. 

Wilson was raised in a bare-knuckles neighborhood in the Bronx, where Jewish gangs like Murder Inc. once roamed. He preferred hanging out with street corner wiseguys to pursuing a “legit” career, like his able cousin, Marvin Josephson, the founder of International Creative Management, the largest theatrical and literary talent agency in the world. Barely managing to eke out a diploma from Taft High School, Wilson nonetheless effortlessly mastered the intricacies of offshore accounts, letters of credit, and complicated international stock market transactions. In the process, Wilson, who has an import-export firm and is a restaurateur, became the focus of at least eight criminal probes. 

Wilson’s patron in the Genovese family was underboss Venero “Benny Eggs” Mangano. Benny Eggs began his career as a soldier with Lucky Luciano and rose to oversee the Genovese family’s multibillion-dollar-a-year racketeering enterprise. He once boasted over an FBI wire that he surrounded himself with Jewish associates as fronts to help generate and hide illicit funds because they were shrewder at such financial dealings than the Italians. According to Benny Eggs, when a Jew had an annual income of two or three million dollars he would declare a healthy $300,000 of it on his taxes, enough to avoid raising any suspicions with federal authorities. An Italian wiseguy, on the other hand, might declare only ten grand. It was the IRS, he warned, that had nailed Al Capone. 

Fortunately for La Cosa Nostra, Wilson, a pugnacious, right-wing Jewish militant who was active in resettling Russian Jewish emigres in Brooklyn, quickly deduced that many of the new arrivals were not long-suffering, downtrodden Jewish dissidents, but professional thieves and hit men—a potential bonanza for the Genovese crime family. The Italians were not only getting the services of highly skilled Russian crews, but were extending their control to a new neighborhood. They already had affiliations, for example, with the Greek mob in Queens and the coke-pushing Dominican gangs in Washington Heights. 

Wilson introduced Agron to the Genovese chieftains, forming the nucleus of the dark alliance. “A day didn’t go by when a truck hijacking or a jewelry heist didn’t go down,” a Genovese goodfella who committed many street crimes with the Russians admitted. “It was a time of high adrenaline.” Although Agron was very much the junior partner, enamored of the Italians for their well-entrenched national power base, their vast army of soldiers and political connections, the Genovese bosses valued Agron’s crew for its tireless work ethic, ruthlessness, and most especially, its global connections. 

Nevertheless, there were major cultural differences between the ethnic crime groups that sometimes caused friction: with a few exceptions, the Italian gangsters lived quiet lives in modest houses, trying not to call attention to themselves. On the other hand, “the Russians have a tremendous zest for life and like to live large,” says James DiPietro, a criminal attorney in Brooklyn who has represented both Russian and Italian underworld figures. “They keep saying we are Russians and we are proud of being Russians. Russians are the best! One Halloween at Rasputin”—a Russian mob haunt in Brooklyn—“they came in Ronald Reagan masks, in limos; they love to flaunt their affluence.” 

And unlike the Russians, the Italian mobsters more or less adhere to established rules of conduct. “The Italians don’t kill civilians—not even the family members of rats. The Russians have no such codes,” says DiPietro. 

Rabbi Ronald Greenwald did as much for Agron’s career as did the Italian gangsters, and then helped groom a new generation of Russian wiseguys to enter corrupt Third World countries and loot their natural resources, a charge the rabbi denies. But well-placed sources say that some of the little don’s biggest scams were hatched in the rabbi’s downtown Manhattan commodities firm. Greenwald says he first met Agron in West Berlin while he was innocently sitting in a hotel lobby wearing a yarmulke. The rabbi says Agron started a conversation with him about Judaism. He claims he didn’t know that Agron was a vicious extortionist who tortured victims with a cattle prod and ran an infamous prostitution and gambling empire. Greenwald allegedly helped Agron get a U.S. visa, according to several former business associates of both men. The rabbi denies that he helped Agron enter the United States, but admits that the mobster would sometimes visit his Manhattan office. In fact his office was a magnet for a host of Russian and Italian gangsters, as well as a powerful U.S. congressman and a convicted KGB spy. 

Greenwald was born on the Lower East Side in 1934. “I was the only kid in school who played hardball without a glove,” Greenwald told me. “That’s how tough I am!” He went to Jewish day schools and then to rabbinical college in Cleveland. Though he is an ordained Orthodox rabbi, he never took the pulpit. “I felt I should be out in the work world.” 

At one time or another Greenwald has been a bank director, president of a small business college, gas station owner, chaplain for the New York state police, a liaison between a segment of New York’s Orthodox Jewish community and the state Republican party—and a high-risk entrepreneur with ties to the Genovese crime family and the Russian mob. 

But it was as a political operative for Richard Nixon that Greenwald first made a name for himself. The then-president had received 17 percent of the Jewish vote in 1968, and he wanted to double it in 1972. New York, with its huge Jewish population, was a crucial state. And Greenwald, as one 1971 New York Times story put it, was “key to Nixon’s New York effort.” 

Greenwald was recruited by CREEP—the Committee to Reelect the President—to mine for Orthodox Jewish votes. He toured synagogues, warning that McGovern would betray Israel and wipe away Jewish gains by giving away too much to blacks. His efforts paid off: Nixon received nearly 36 percent of the Jewish vote in 1972. 

The rabbi was repeatedly in the throes of some political scandal or other. After Nixon was reelected, for example, he was rewarded with a plum post at the Department of Health, Education, and Welfare as a consultant on Jewish poverty programs, including a job-training program for Brooklyn’s Hasidic community. Greenwald was soon being investigated by a young federal prosecutor named Rudolph Giuliani for allegedly placing jobs program trainees in a garage in Williamsburg of which he was part-owner, as well as for creating no-show jobs. (The investigation was dropped, and Greenwald has denied wrongdoing.) 

A few years later, he was in front of Giuliani again, this time pleading for Marc Rich and Pinky Green—the billionaire fugitive financiers and commodities brokers who fled the United States in 1983 one step ahead of a sixty-five-count federal indictment for fraud and income tax evasion. Greenwald, who was their business representative in the United States, tried to cut a deal that would bring them home to face civil, but not criminal, charges. Hasidic community leader Rabbi Bernard Weinberger, who along with a group of Orthodox rabbis sat in on the meetings, said that Greenwald told Giuliani that the fugitives were great humanitarians because they gave vast sums of money to Jewish charities. Giuliani was unmoved. 

Thanks to his friendships with Greenwald and the Italians, Agron was soon participating in schemes that dwarfed the type of street crime that had been the Russians’ mainstay. In 1983, federal agents investigating a Mafia skim of the casino at the Dunes Hotel in Las Vegas stumbled onto a multi million-dollar fraud perpetuated jointly by Agron and Wilson and planned with Greenwald in Greenwald’s office. (“Ridiculous,” Greenwald says.) The Dunes was owned by Morris Shenker, Jimmy Hoffa’s attorney and a longtime target of FBI probes. During the 1950's and 1960's, Shenker, himself a Russian-born Jew, had invested hundreds of millions of dollars of the Teamsters union Central States Pension Fund, which he and Hoffa controlled, into the Dunes and other famous Las Vegas hotels, giving the Mafia a hidden share of the gambling Mecca. According to the FBI, some of that money was being siphoned off in the scam set up by Wilson and the others. He arranged for Agron and a dozen members of his crew to fly into Las Vegas on all-expense-paid junkets. The gangsters were each given lines of credit of up to $50,000, but instead of gambling the money, they simply turned their chips over to Wilson. The chips were later cashed in; the markers never repaid. In this way, over a period of several months, the Russians helped defraud the Dunes of more than $1 million. The government believed that Shenker had masterminded the scheme. He eventually plundered the Dunes into Chapter 11. Indicted for personal bankruptcy fraud in 1989, Shenker died before the government could mount its case. When Russian-speaking FBI agents traveled to Brighton Beach to question the erstwhile junketeers, “the Russians wouldn’t talk to us,” said the agent who ran the investigation. “They said, ‘What can you do to us after the KGB and the Gulag?’ The only thing they were afraid of is that we would deport them, and we won’t do that.”

By the mid-1980's not only had Agron achieved a certain measure of criminal notoriety and power, but he was also beginning to add more sophisticated schemes to his criminal repertoire, a development that did not go unnoticed among the Italian Mafia’s bosses. The Italians were particularly impressed with the Russians’ growing adeptness at bilking financial markets, which was aided by members of a younger generation of Russians who were now returning from graduate schools with MBAs and getting jobs on Wall Street. Gambino crime family head Paul Castellano, for instance, was overheard on an FBI wire praising a Russian fraud that involved manipulating the stock in Bojangles, a fast food chain. 

But as potent a force as Agron had become, he was still prey to the cutthroat struggles for dominance that continued among the lawless Russian gangs, and on a cold evening in January 1984, as he walked up a gentle slope from the garage in the basement of his home on 100 Ocean Parkway in Brooklyn, Agron was shot again—this time, twice in the face and neck at point-blank range. The don was rushed for a second time to Coney Island Hospital. Though Dr. Larissa Blinkin was unable to remove the slugs, she did save his life, but not without leaving the mobster’s face paralyzed on one side, twisted in a permanent sneer. Once again, when the police asked him if he knew the assailant, he said he’d take care of it himself. 

As he had during the earlier attack, Agron believed he knew who had authorized the hit. He had recently been feuding with an upstart Russian gang led by Boris Goldberg, an Israeli army veteran from the U.S.S.R., and Ukrainian-born David “Napoleon” Shuster, a criminal mastermind who was reputedly the best pickpocket in Brighton Beach. The Goldberg gang maintained a formidable arsenal in a safe house on West 23rd Street in Manhattan’s Chelsea neighborhood. The armory included an assortment of pistols and silencers, and cartons of hand grenades and plastic explosives, as well as numerous remote control detonators. 

Goldberg owned a kiddy-ride company off Kings Highway in Brooklyn called Rainbow Amusements. As a cover to score narcotics, “he used to do a lot of travel to the Far East to look at new rides,” says Joel Campanella, a former New York City cop who is now a U.S. Customs official. The gang sold coke out of its Chelsea stronghold to mid-level street dealers, and, according to police statements made by a gang member, to film stars and the managers of rock bands. 

It was also the scene of nonstop drug and sex orgies. Goldberg, a bland-looking man with black framed, coke-bottle glasses, had a growing cocaine dependency that made him so paranoid that once, after hearing a siren, he flushed two kilos of coke down the toilet, then pulled a sweaty wad of cash from his pocket and ordered an underling to run out and procure two more kilos so he could continue his sybaritic party. 

When Goldberg wasn’t holed up in his hideout, he was often cuddling with his girlfriend Tonia Biggs, the daughter of Penthouse publisher Bob Guccione. Biggs was an editor of Forum, an adult magazine also published by her father. “She lived in Beverly Hills and was about thirty years old, blond, big chest, but a little sagging,” Goldberg gang member Charlie Rivera, a razor-thin man who is half Sicilian on his mother’s side, told law enforcement agents. “She also had a penthouse in New York, and he sold coke out of both places. Boris would bring coke out from New York and he would sell some out there.” Biggs later conceded that she let Goldberg use her home for coke parties, but she denied helping him peddle it. 

Meanwhile, the Goldberg gang, hopped up on drugs, insanely violent and indiscriminate, was responsible for a staggering string of robberies, shootings, insurance frauds, auto thefts, and narcotics sales. They hurled grenades at the storefronts of recalcitrant extortion victims in California, and performed contract murders as far away as Texas. They assassinated competing drug dealers, the wife of a gang member suspected of cheating on him, and an elderly man, who was chased across a busy boulevard in Queens and shot twice in the head for refusing to vacate his rent-stabilized apartment. On another occasion, gang members were paid to kill two teenagers who had robbed and beaten a man with a hammer known on Brooklyn streets as Jacmo. Jacmo, who owned an antique Mercedes Benz dealership, was also a major drug dealer with a long rap sheet. Jacmo dispensed the contract at Coney Island Hospital. A day later, one of the teens was lured from his apartment to meet a “friend” who was supposedly waiting downstairs in a parked car. When he peered inside the window, he was shot in the face with a. 38 caliber revolver loaded with copper-jacketed bullets. 

It was inevitable that, given their shared interests in the spoils of Brighton Beach, Goldberg and Agron would run afoul of each other. One issue that proved to be a constant source of friction was the collection of extortion money from Brighton Beach businesses. Sit-downs to discuss their turf disputes had never been able to resolve the problems. Once, the Nayfeld brothers even broke Shuster’s nose. Goldberg finally became so frustrated that he put out a standing $25,000 contract on Agron’s head. 

In May 1984, Agron commanded Goldberg to attend a meeting at the El Caribe Country Club. Goldberg, his lieutenant Rivera, and several other gang members showed up to find fifty taciturn, heavily armed Russians waiting for them around a large oak table. Agron demanded to know if Goldberg was responsible for having had him shot. In the dim room, Agron’s face seemed to dissolve into the shadows, but there was enough light to see that he was cradling a shotgun as he sat in a white wicker chair across from Rivera. The diminutive don leaned forward and spat, “Why you shoot me in the fucking face?” 

Goldberg and Rivera were silent, each waiting for the other to respond. “We didn’t do it,” Rivera said finally, although he was, in fact, the one who had disfigured Agron in the botched hit ordered by Goldberg. 

Although Agron had not seen the shooter’s face, he had caught a glimpse of the man’s boots as he lay crumpled on the ground. 

“Let me see your fuckin’ boots,” Agron growled. 

“I don’t own a pair,” Rivera replied, his eyes darting to his feet. 

Eyeing him suspiciously, Agron looked around the room and then demanded that Goldberg’s crew all put their feet up on the table. He intended to inspect each of their footwear. 

When nobody moved, he shouted, “What’s da matter? You don’t want to?” 

One by one, Goldberg’s men raised their feet onto the table. The don was enraged: he didn’t recognize anyone’s shoes. 

Goldberg settled back in his chair uneasily. Speaking in Russian, he swore he was innocent. But if Agron wanted trouble, he warned, he had brought sufficient firepower. Agron sent a scout outside, who returned and reported that the parking lot was swarming with gunmen. It was a Mexican standoff. 

Goldberg convinced Agron that he was not involved in the attempt on his life, and the meeting ended without bloodshed. But if Goldberg was the most likely suspect in the attempt on Agron’s life, he was hardly the only rival who wanted the don dead. 

On May 4, 1985, Agron’s brawny chauffeur Boris Nayfeld was sitting outside his boss’s apartment building in a black Lincoln Town Car, waiting to make the weekly drive across the East River into Manhattan. Every Saturday morning, Agron went to the Russian and Turkish Baths on Manhattan’s old Lower East Side. The ornate nineteenth-century bathhouse had been a favorite hangout of Meyer Lansky, Bugsy Siegel, and Lucky Luciano during Prohibition, when the establishment kept a special cubbyhole behind the towel counter where the gangsters could deposit their tommy guns. It was a perfect place for Agron to have sit-downs with his pals, all of them sweating in the heat of the 200-degree steam room while burly attendants struck their backs with bundles of oak branches. 

On that morning, the fifty-three-year-old Agron was still upstairs in his sixth-floor apartment, shaving in his lavish bathroom. Its imported marble and gold-leaf fixtures—a recently completed renovation that had cost $150,000— were elegant even by Russian mob standards. Agron patted his disfigured face with expensive cologne, slipped on his baggy, blue pin-striped suit, and grabbed his brown fedora. While most Russian mobsters swaggered around in sharkskin suits and enough gold jewelry to stand out like lighthouses on a moonless night, Agron’s associates joked that he dressed more like a longtime resident of a senior citizens’ home. Just before he left, he told his common-law wife, a striking blond cabaret singer, that he would meet her for dinner that night at a Brighton Beach restaurant. 

At exactly 8:35 A.M. Agron pressed the elevator button outside his apartment door. Suddenly, a man wearing a jogging suit and sunglasses stepped from behind a corner in the hallway and shot him at point-blank range, hitting him twice in the right temple. He fell to the floor, blood pooling around him on the black and white marble tiles.

3 

BRIGHTON BEACH GOODFELLAS
 

A few days after Agron was found in a pool of his own blood, his driver, Boris Nayfeld, strolled into what had been Agron’s modest office at the El Caribe Country Club in Brighton Beach. He was there to begin his new job as the driver and bodyguard of the man who benefited the most from the execution of Evsei Agron: Marat Balagula, the new godfather of the Russian mob. 

Virtually everyone in law enforcement who has had anything to do with investigating the Russian mob believes Balagula ordered the hit, but he has always denied it. “Evsei used to come to the Odessa [restaurant] and pick fights,” Balagula claims. “Sometimes ten or twenty people would get into a brawl. Maybe Evsei was killed by someone he fought with before.” 

Balagula had been serving as Agron’s consigliere for several years, and while he was always careful to pay Agron the respect due a “great man,” he had his own ideas. All along, he had been forging a rival criminal syndicate of his own, and as Balagula’s star began to rise, explains a former insider, Agron “wanted a piece of the action. Because of his status, Agron expected something.” What Agron got, of course, was two bullets in the head. 

Within a few months of seizing power, Balagula demonstrated that he was the very model of a modern don. Unlike Agron, who had been a thuggish neighborhood extortionist, Balagula was a brilliant, coldly efficient crime boss who was soon not only conspicuously enjoying the lushest version of the American dream but bestowing his largess on members of the small Russian emigre community. 

“Marat was the king of Brighton Beach,” recalled a former employee. “He had a Robin Hood complex. People would come over from Russia and he’d give them jobs. He liked professional men. Guys came over and couldn’t practice medicine or use their engineering degrees. He sought them out. He was fascinated with intellectuals. He co-opted them. He put them into the gasoline business, he put them into car washes or taxi companies. He’d reinvest his own money in their business if they were having trouble. He had a heart.” Such generosity was, of course, also good for building loyalty. It seemed that everyone in Brighton Beach owed him a favor, and he wasn’t hesitant about collecting on them. 

Though Brighton Beach residents had good reason to be tight-lipped about Balagula, tales of his enormous wealth began circulating in cafes and over dinner tables: he tried to purchase an island off the coast of South Africa to set up a bank for money laundering; he circled Manhattan on luxury yachts, holding all-night drug and sex orgies; he rode in a custom stretch limo, white and immaculate, with a black-liveried chauffeur and stocked with ice-cold bottles of vodka. “Marat throws around diamonds the way we throw around dollar bills,” Joe Galizia, a soldier in the Genovese family, enviously told an associate in a conversation taped by police.

 “Everybody in Brighton Beach talked about Balagula in hushed tones,” says Ray Jermyn, former chief of the Rackets Bureau for the Suffolk County DA in New York. “These were people who knew him from the Old Country. They were really, genuinely scared of this guy.” 

Marat Balagula was born in 1943 in Orenburg, a small Russian town, at the height of World War II. His mother, Zinaida, fled with the children from their home in Odessa as the German Wehrmacht swept across the Russian steppes. Marat’s father, Jakov, was a lieutenant in the Red Army; Balagula claims that he was with one of the armored corps that stormed Berlin during the last desperate hours of the war. 

In the harshness of the Stalin era, the Balagulas led a comfortable, middle-class life. Jakov worked in a factory manufacturing locks, as did his wife. Young Marat, an average high school student, was drafted into the Soviet army at the age of nineteen and served as a bursar for three years, after which the party assigned him to manage a small food co-op in Odessa. Determined to get ahead, Marat attended night school, receiving a diploma as a teacher of mathematics and then a business degree in economics and mathematics. Like many ambitious Russians with a capitalist predilection, he promptly plunged into the country’s flourishing black market. He quickly learned to attend to the demanding appetites of the apparatchiks, making certain the choicest meats and produce was diverted to them. 

He was only twenty-two years old when he was rewarded with a prestigious job as a bursar on the Ivan Frankel, a Soviet cruise ship that catered to foreign tourists. According to American law enforcement sources and Brighton Beach colleagues, party bosses slipped Balagula currency, gold, valuable Russian artifacts, and stolen artwork to sell to the tourists or to fence in Europe. “It was a good job,” Balagula recalls. “I got good money. My salary was in dollars and rubles. I traveled to Australia, France, England, and Italy. The KGB gave me visas, no problem. I brought back lots of stuff: stereos, cameras. I was not middle-class. I was upper-middle-class. I had a nice apartment in Odessa, a dacha on the Black Sea.” 

He met his wife, Alexandra, at a friend’s wedding party in 1965 and married her the following year. Because she didn’t like his traveling, in 1971, after five years at sea, he got himself appointed manager of the largest food co-op in the Ukraine, a huge promotion that allowed him to rise to even greater heights as a black marketeer. On his thirtieth birthday, the flourishing Balagula threw himself a gala party at his dacha in the sunny Crimea. Many of the region’s elite were in attendance—including Mikhail Gorbachev, then a young regional party boss, who posed for a photo with Marat and his wife. Balagula later bragged to his Brighton Beach mob associates that Gorbachev was on his pad, a claim that seems doubtful: even then, Gorbachev was a stern reformer. It would have been impossible, however, for a Soviet party boss to avoid dealing with black marketeers in some way, since they played such an integral role in the economic life of the country.

The fact that Balagula was Jewish apparently never hindered his career, even though government sponsored antisemitism surged after Israel’s victory over five Arab armies in the June 1967 Six Day War. “I never felt antisemitism,” Balagula says, though he admits he was only nominally a Jew: he never attended Odessa’s lone synagogue and was ignorant of Jewish history and religion. “Jews had some of the best positions in the country. They were the big artists, musicians—they had big money.” 

When he decided to journey to America, therefore, it was not because he suffered as a Jew, though he concedes, “I used that as an excuse when I applied for my visa.” Although he was leading the charmed life of a high-flying black marketeer, he decided to leave it behind when “I saw with my own eyes how people lived in the West,” says Balagula. “This pushed me to move.” A business associate explains: “Marat said he read about capitalism and knew he could do well over here.” 

On January 13, 1977, Balagula, his wife, and their two young daughters, together with his elderly parents and younger brother, Leon, moved to Washington Heights in upper Manhattan, where a small enclave of German Jews who had fled from Hitler lived precariously among drug dealers and boombox din. Balagula attended English classes arranged by a Manhattan-based organization that settles Soviet Jews, which then found him a job in the garment district. He worked for six months as a textile cutter for $3.50 an hour, claims Alexandra, his wife. “It was hard for us, with no language, no money,” she says. 

Balagula’s fortunes improved markedly when he relocated his family to Brighton Beach and he started to work for the infamous vor Evsei Agron. “Everybody knew his name,” Alexandra cheerfully recalled. “He was so much in the Russian newspapers.” 

Agron, it turned out, was no match for the ambitious Balagula. While Agron’s technical expertise didn’t go beyond seeking sadistic new uses for his electric cattle prod, Balagula wanted to lead the Organizatsiya into the upscale world of white-collar crime, and with the experience he had gained in the Soviet Union, he developed a business acumen that put him in a class by himself. Surrounded by a cadre of Russian economists and math prodigies at the Odessa restaurant, he acquired a knowledge of global markets that enabled him to make millions in the arcane world of commodities trading. He also energetically cultivated the Italian mobsters he met as Agron’s consigliere. After Agron was executed, Balagula organized his followers in a hierarchy, much like the Italian Mafia, and before long, he succeeded in transforming the Organizatsiya into a multi billion-dollar-a-year criminal enterprise that stretched across the tatters of communist Eastern Europe, Africa, and Southeast Asia. Ultimately, however, it was Balagula’s spectacular success in the gasoline bootlegging business—a scheme that would reportedly earn him hundreds of millions of dollars and an honored position with the Italian Mafia—that would usher in the first Golden Age of Russian organized crime in America. 

Balagula’s bootlegging career began modestly enough. Within just a year after arriving in New York, he managed to gain control over fourteen gas stations. He then formed two fuel dealerships, and bought gas from a corporation owned by the Nayfeld brothers. This transaction was the foundation for an ingenious way to avoid paying billions of dollars of gasoline taxes. 

Gasoline bootleggers, mostly Turkish and Greek immigrants, had been operating in New York since the early 1960's. They simply collected taxes at the pump and instead of turning the money over to the government, pocketed the cash and disappeared before the IRS caught on. “They’d make their $600,000 and go back and buy an island and you’d never hear from them again,” says Sam Racer, a Russian-born attorney who has represented Balagula. “It was a nice scam until it got into the hands of the Russians. They bought Rolls and Ferrari's and walked around Atlantic City with stacks of hundred-dollar bills, and suddenly the IRS realized they were getting fucked for hundreds of millions of dollars.” 

What the Russians had discovered was a way to expand the scam into the biggest tax heist in U.S. history. Prior to 1982, thousands of individual gas stations in New York State were responsible for collecting state and federal taxes—amounting to as much as 28 cents a gallon—and then passing them on to the relevant authorities. Because of rampant cheating, however, state lawmakers decided that year to shift the responsibility to New York’s four hundred gasoline distributors, who had to assess the fuel before it was moved to the stations. But clever Russians like Balagula found in fact that the new tax law presented opportunities for even larger scores. They would first set up a welter of phony distributorships. One of these companies would then purchase a large shipment of gasoline and, on paper at least, move it to another distributor through a so-called daisy chain. The transactions were carried out quickly and generated a blizzard of paper. One of the dummy enterprises was designated as the “burn company,” the one that was required to pay the taxes to the IRS. Instead, the burn company sold the gas at cut-rate prices to independent retailers with a phony invoice stamped “All taxes paid.” The bootleggers pocketed the money, and the burn company—no more than a post office box and a corporate principal, usually a Russian émigré living in a rooming house on Brighton Beach Avenue—disappeared. By the time the IRS came looking for the taxes due, the revenue agents were buried under an intricate paper trail that led nowhere. 

Balagula proved a master at this scheme, and he, along with many other Russian groups, began amassing enormous sums from it. Through their control of gasoline distributorships in the New York metropolitan area and elsewhere, the Russian mobsters evaded as much as $8 billion a year in state and federal taxes by 1985. 

Balagula’s fraudulent fuel syndicate received a major boost from the involvement of Power Test, a midsize, $160-million-a-year gasoline company on Long Island that was itself being driven into bankruptcy by independent stations selling cheap or bootleg gas. (Indeed, by 1980 half of all unbranded gas sold on Long Island was bootlegged, destroying the livelihood of many honest businessmen who couldn’t afford to compete against cut-rate prices.) Rather than see his company fail, Power Test CEO Leo Liebowitz decided to join the bootleggers. According to court testimony and interviews, he instructed two Power Test executives, John Byrne, a district sales manager and former New York City police sergeant, and Robert Eisenberg, the company’s in-house counsel, to buy bootleg gas. Byrne and Eisenberg then set up bootlegging companies with Balagula that would sell “cheap” gas exclusively to Power Test. 

The plan worked—so successfully, in fact, that Power Test soon had enough cash to begin negotiating with Texaco to purchase Getty Oil, one of the fabled Seven Sisters. (Because of antitrust problems, Texaco was being forced to sell the East Coast marketing operation of Getty, which it had acquired in 1984.) According to a Power Test insider, Liebowitz had joined the bootleggers not merely to save his company but also because of his aspirations to become a major player in the oil business. “Leo started talking to Texaco in the winter of 1983,” recalls the insider. “If he was going into receivership, he couldn’t talk to Texaco. He had to keep the company solvent. So he did deals with gasoline bootleggers. He did lots of those deals.” 

In 1985, Power Test concluded the deal for Getty, and Liebowitz—triumphant atop the $1.3 billion company that adopted the lustrous Getty name—was lauded in Forbes as one of the most brilliant businessmen in America. “The sky’s the limit,” Liebowitz told Newsday. “We are the largest independent in the United States and we are just getting started!” 

Six years later Getty became the first major oil corporation in recent history to be convicted of gasoline bootlegging. John Byrne and Robert Eisenberg escaped prosecution by becoming government witnesses. Two senior company executives were convicted and sentenced to jail terms, and Getty was fined $400,000. Liebowitz, to the surprise of many, was never indicted. Getty’s role in the scheme was uncovered by the Long Island Motor Fuel Task Force, a group of federal, state, and local prosecutors and investigators formed to combat gasoline bootlegging. “Gasoline excise tax evasion is no longer a local problem. It’s a national problem,” said James Rodio, a tax attorney with the U.S. Justice Department and a member of the task force. “Cheating of this magnitude has to stop,” U.S. District Court Judge Leonard Wexler chided during sentencing. 

By this time, however, the money from bootlegging had spread far beyond the gasoline industry. It was being used, New York and federal officials feared, to corrupt politicians, labor unions, and law enforcement itself. Consider the revelations of Lawrence Iorizzo, a six-foot, 450-pound, self confessed bigamist who became a government informant after he was indicted for stealing $1.1 million in gas taxes in 1984. A New York gasoline company executive who is credited with inventing the daisy chain, Iorizzo ran an enormously successful bootlegging empire in the early to mid-1980's with the help of Michael Franzese, the vicious “Yuppie Don” of the Colombo crime family and a consortium of Russian and Eastern European gangsters. In sworn testimony before the oversight subcommittee of the House Ways and Means Committee, Iorizzo charged that one of his former partners, Martin Carey, had skimmed millions of dollars of tax money from his Long Island gas stations and illegally channeled it into the campaign treasury of his older brother, Hugh, then the governor of New York. Martin Carey escaped prosecution because he had been granted immunity by testifying in another case. [Iorizzo's name has come up in the Savings and Loan book that  I am currently republishing here DC]

Incredibly, Iorizzo’s charges of political corruption were never investigated. In 1987, when Jeremiah McKenna, the counsel to New York’s Crime and Correction Committee, called for a hearing to probe Iorizzo’s allegations, he was forced to resign by New York governor Mario Cuomo, who had been Carey’s running mate as lieutenant governor in 1978. Cuomo complained that McKenna, a respected Republican investigator, was spreading false and malicious stories. Iorizzo had previously testified to Congress that he had made political contributions to Governor Cuomo’s 1984 campaign from some of these bootleg funds, asserting that he had done so at the “directions of people above me.”  

Though Iorizzo’s allegations about political corruption were ignored by prosecutors, his court testimony did help break up the powerful Russian-Italian bootlegging combine led by Franzese, which paved the way for Balagula to gain uncontested control of the operation. By 1985, Balagula was well on his way to becoming the undisputed king of American bootleggers: his domain was a selfcontained, vertically integrated behemoth that included oceangoing tankers, seven terminals, a fleet of gasoline trucks, truck stops (including even their greasy spoon diners), and more than one hundred gas stations, all operated by fiercely loyal Soviet Jewish émigrés. Balagula even negotiated to take over oil-refining terminals in Eastern bloc countries, which would process fuel waste products known as derivatives, then sell shiploads of the toxic by-products in North America. Balagula’s headquarters in New Rochelle, New York—which ironically stood next to an FBI building — looked like a scene in a Stanley Kubrick black comedy. Russian secretaries wearing identical zebra-print dresses and fur hats worked at computer terminals while video cameras scanned the office. “The obsession with security,” says one of Balagula’s associates, “came from the paranoid Russian personality that one develops growing up in a police state.” 

Flush with cash, Balagula began to run his empire like a profligate oil sheik. Joe Ezra, a former attorney for Balagula, once accompanied the Russian godfather and his retinue on an epicurean “business trip” to Europe, to broker oil deals with Marc Rich, the billionaire fugitive commodities trader. The group paid visits to Cartier shops in every airport along the way, spending thousands of dollars on “shit like little leather-bound address books that cost $300 each,” Ezra remembered. Often, they would stop in a city and take over entire whorehouses and go on food binges. “They’d go to meals in Germany with ten people, and when they finished, somebody would say, ‘I’m still hungry,’ and Marat would order a second meal for everybody.” Most of the food would be thrown away. “If a bill was $1,500, the tip would be $1,500. If a guy would come over and sing a song, Marat would give him a hundred-dollar bill. I remember saying to myself, “These people need intensive psychiatric help.’” 

Balagula was also a compulsive gambler, and the joke in Brighton Beach was that you would know how he did at the craps tables over the weekend by the price of gas at the pump on Monday. “Marat says he’s got a photographic memory, but he don’t,” grumbled a powerful Genovese crime family figure who went to Atlantic City with Balagula after the Russian boasted that he could count cards. “We lost $20,000. I told Marat, ‘How the fuck do you remember anything?’” 

Befitting his new status, Balagula bought a $1.2 million home on Long Island, to which he relocated his family from Brighton Beach. His reputation as Little Odessa’s godfather, however, was met with consternation by his new neighbors and caused his younger daughter a bit of grief in school. “I love my dad very much. My father’s my world to me,” Aksana, a sullen, curly haired, nineteen year-old optometry student told me in a 1992 interview. “There was a lot of harassment, a lot of fights,” she recalled. Once, after a classmate called her father a gangster, “I just got very upset and I threw a book at his head. They [the school] made me see a psychologist.” 

As Balagula’s wealth grew, so did the violence in Brighton Beach. At least fifteen unsolved homicides were attributed to his turf wars with rival Russian mobsters. “Marat ordered many murders. I know!” insisted an Italian mob boss. Many of the gangland-style slayings were brazen, broad-daylight shootings carried out in Brighton Beach restaurants in front of numerous witnesses. “These guys are worse than the Italian wiseguys,” says Ray Jermyn. “They have no hesitation at all to whack somebody. They are cowboys.” 

Balagula may have employed enough wild, Uzi-wielding Russians to reign supreme in Brighton Beach, but he didn’t dare fight with the Italians. When a Mafia associate told John Gotti in 1986 about the Russian-dominated gasoline bootlegging scam, the “Dapper Don” was heard to reply over a government bug, “I gotta do it right now! Right now I gotta do it!” He wasn’t alone in coveting a share of this business: heads of four of the five New York Italian Mafia families imposed a 2-cents-per gallon “family tax” on the Russian bootleggers, and the levy became their second largest source of revenue after drugs, worth an estimated $100 million a year. Genovese soldiers guarded the family’s take at Balagula’s terminals in Westchester, while Christopher “Christie Tick” Furnari, then the sixty eight-year-old under boss of the Lucchese crime family and one of the most powerful mobsters in the country, got Brooklyn, Queens, and Staten Island. 

Balagula’s closest aides had argued to keep the Italians out of the bootlegging operation. Marat had “capable guys,” said a key associate. “They weren’t afraid of fights.” But Balagula believed he could never win a war with the Italians, so he invited them in, confident he could outsmart them into accepting less than they had agreed upon. Marat “didn’t realize how insidious they were,” says the associate. “He fell for their charm. He had watched too many American movies." 

“The LCN didn’t want to know the ins and outs of the gas business,” but simply wanted their cut, the source asserts. “The LCN reminded Balagula of the apparatchiks in the Soviet Union. He thought as long as he gave them something they’d be valuable allies” with their political connections and muscle. “Then all of a sudden he was at risk of being killed if he couldn’t pay to the penny.” 

Whatever it cost him in lost revenue, Marat was grateful to have the Italians on his side. According to a mob source, their new relationship enabled him to forge a protective alliance with the Genovese and Lucchese families against the Colombo family’s Yuppie Don, Michael Franzese. One of Franzese’s crew, Frankie “the Bug” Sciortino, had been going around with a Gotti soldier “shaking down a bunch of Russian bootleggers,” says Jermyn. “They would just go into places in Brooklyn and make them pay $25,000 a clip for protection, or else they’d use a ball peen hammer on them. The Russians are scared to death of the Italians. They scored over half a million dollars by shaking these guys down.” 

At around the same time, Franzese himself “tried to hustle Marat,” says a well-placed Genovese underworld figure. “I showed up at a restaurant, and two of Franzese’s guys was sitting with Marat. I said, ‘Who are these guys?’” 

“They are not with me,” Balagula said. 

“The next time I saw Michael Franzese and mentioned Marat, his face went white,” the Genovese gangster says with a laugh. “Christie Tick had put out the word that Marat was under his protection.” 

When in 1986 the Brooklyn office of Balagula’s company Platenum Energy was riddled with Uzi sub-machine gunfire, killing one of Balagula’s bodyguards with eight shots in the chest and two in the head, it was the Italians who came to Balagula’s aid. According to law enforcement sources, the shooters were two Russians, Michael Vax and Vladimir Reznikov, who were disgruntled because Balagula had sold them invalid state gasoline distributorship licenses. (Balagula told me the shooting was an attempted robbery.) 

A short time after the Platenum Energy incident, Reznikov, an infamous Brighton Beach hit man, stuck a gun in Balagula’s face outside the Odessa restaurant and demanded $600,000 and a partnership in his bootlegging empire. Balagula was so frightened by the assault that he suffered a heart attack but refused to go to the hospital. Instead, he persuaded his doctors to set up a makeshift intensive care unit in the bedroom of his fortress like mansion, whose sandstone spires bristled with gunmen. “When we went to Marat’s house, I remember seeing Marat in bed hooked up to all kinds of machines,” Anthony “Gas Pipe” Casso, a Lucchese mob boss turncoat, recalled.  

On June 13, 1986, Reznikov was lured to the Odessa to parley with Balagula, who was actually in California convalescing. When Balagula didn’t appear, Reznikov strolled back across Brighton Beach Avenue and climbed into his new brown Nissan. Suddenly, Lucchese soldier Joe Testa emerged from behind a car and pumped six bullets from a .380 automatic handgun into Reznikov’s arm, leg, and hip. As the grievously wounded Russian grabbed for his own weapon, Testa fired a fatal shot to his head. “After that,” Casso said, “Marat did not have any more problems from any other Russians.” 

However greatly the Russians may have feared the Italian Mafia, they had little regard for American law enforcement, manipulating the FBI as easily as they had the apparats in the Soviet Union. “As soon as they knew they were in trouble and law enforcement was breathing down their necks,” says Ray Jermyn, “they ran to the counterintelligence guys [the FBI and CIA] and tried to sell what they considered to be secrets and stuff.” In the years before glasnost, the strategy often worked, for the FBI routinely placed advertisements in New York’s Russian-language newspapers, offering cash rewards for information about KGB spies. When a Russian gangster became an intelligence asset, the feds would often shelve pending investigations targeting him. “We never stopped doing stuff because we were requested to,” Jermyn says. “But a lot of times the agents would change their focus and slow down…. You put it on the back burner, and then it kind of goes away.” 

Jermyn pleaded with the FBI to lend him Russian-speaking agents to monitor the voluminous, court-authorized wiretaps of Russian bootleggers. “We were always asking for agents to give us assistance to do translations,” he recalls. “They wouldn’t help. They said they were too busy, they are working at the [Soviet] embassy” in New York. 

“Then I got a phone call from a woman who said she was a deputy counsel in the CIA. I thought somebody was pulling my leg. She gave a callback number, and, sure enough, she worked for the Central Intelligence Agency. She was trying to bring to our attention that there was this guy who was a driver for Marat who had been a Russian submarine captain. She said that he had performed many valuable services for the agency and that he was still cooperating. And that’s when the bureau really first started to make inquiries about our investigation.” When the court-authorized wiretaps revealed that Balagula and his comrades were major players in the bootlegging business, the bureau suddenly “gave us an agent full-time who had a Russian background and who had counterintelligence training,” Jermyn explained. 

The intelligence community’s interest in Balagula was undoubtedly heightened by his many friendships with KGB spies, corrupt Third World despots, and international terrorists. Exploiting his connections within the Russian criminal diaspora, Balagula had begun forming criminal networks with outposts in Russia, Europe, and Asia. In a typical transaction that exploited this international reach, his henchmen would buy automatic weapons in Florida, move them up the East Coast to New York, and ship them to the U.S.S.R., where firearms of this sort were extremely difficult to come by. 

But these were relatively small ventures for Balagula. From Brighton Beach, he and his cronies virtually ran the small, diamond-rich West African nation of Sierra Leone, whose president, Joseph Momoh, allowed the Russian mobsters to set up a global smuggling and money laundering operation there. Diamonds smuggled out of Sierra Leone were transported to Thailand, where they were swapped for heroin, which was then distributed in Europe by Balagula’s close friend Efim Laskin, who had been deported by the United States as an undesirable in 1986, and who had been arrested for illegally importing weapons and explosives to the Red Brigades in Milan.  The Russians even brought Genovese crime family members to Sierra Leone, where, among other activities, they plundered diamond mines with the help of corrupt tribal chieftains. The Italian gangsters, who helped bankroll Momoh’s 1985 presidential campaign, became so prevalent in Freetown that when he was sworn in, a contingent of Genovese goodfellas stood proudly on the dais next to Balagula under a fierce tropical sun. 

Balagula’s main contact in Sierra Leone was Shabtai Kalmanovitch, a charming, tanned Russian-Israeli entrepreneur. The two hatched numerous deals together, including one to import gasoline to Sierra Leone, which was brokered through the Spanish office of Marc Rich by Rabbi Ronald Greenwald, and another to import whiskey; the pair even had a contract to print Sierra Leone’s paper currency at a plant in Great Britain. Kalmanovitch also handled President Momoh’s personal security. In 1986, his Israeli-trained palace guard crushed an attempted coup; according to one account, Kalmanovitch pulled Momoh out of his bed just before rebels sprayed it with machine gunfire. As a reward, Kalmanovitch was granted major fishing and mining concessions and was allowed to run the nation’s largest bus company. He was also an operative for Mossad, Israel’s intelligence agency. Kalmanovitch’s Freetown office was a prized listening post in a city with a large, prosperous AfroLebanese Shi’ite Muslim community in close contact with Lebanon’s then warring Shi’ite militias. It was only later that Mossad discovered that Kalmanovitch was not as valuable an asset as it had supposed: in 1988 he was arrested in Tel Aviv and charged with being a KGB spy. Yitzhak Rabin, then defense minister, said he was “almost certain” that the Soviets had passed on information obtained from Kalmanovitch to Syria and other Arab countries hostile to Israel. Wolf Blitzer, at the time a correspondent for the Jerusalem Post, reported speculation that sensitive material stolen by Israeli spy Jonathan Pollard was passed on to the KGB by Kalmanovitch.  

It was the peripatetic Rabbi Greenwald who introduced Kalmanovitch and Balagula to moneymaking opportunities in Africa. In May 1980, the rabbi had been asked by Lucas Mangope, the president of Bophuthatswana, one of the so-called independent black homelands inside South Africa during apartheid, to be its economic adviser with the rank of ambassador in New York and Washington. 

“But because there is a strong black opinion here and a strong liberal opinion that the black homelands are just an extension of apartheid,” Greenwald said, “I told Mangope that there was only so much I could do for him in the U.S. and he would be more successful dealing with Israel. Israel is closer, Israel doesn’t have political restrictions with South Africa like America has. I suggested they hire Shabtai,” who was a close friend and business associate. 

Within several years after being introduced to Mangope, Kalmanovitch was a millionaire. Through a newly formed company called Liat, he landed lucrative contracts to build a soccer stadium, and imported Israeli specialists to train the Bantustan’s police and security service. In February 1987, when rebel armies revolted and placed Mangope in the soccer stadium Kalmanovitch had built, the Russian took his considerable wealth and relocated to Sierra Leone, using Greenwald’s contacts in the government. 

Eventually, the Russian and Italian gangsters were to lose more than $3 million in deals with Kalmanovitch. The Russian mobsters became so furious with Kalmanovitch that they threatened to kill him, said the Genovese source, who mediated peace talks between Kalmanovitch and Balagula. “The Russian mobsters wanted their money,” he said. “Marat said, ‘Don’t kill him, you can attract more flies with honey than vinegar.” 

In order to pay back his business losses, Kalmanovitch entered into an intricate scheme with Russian and Italian gangsters to defraud Merrill Lynch, according to several of the participants. These sources say that the Russian mobsters bribed a Merrill Lynch employee to steal unused company checks worth more than $27 million by illegally accessing the company’s computer. The employee also stole valid signature stamps. The checks and stamps were then sent by courier to Kalmanovitch. 

According to Interpol reports and sources involved in the scheme, on April 27, 1987, Kalmanovitch, Greenwald, and an associate left Kalmanovitch’s lavish home in Cannes and drove to Monte Carlo where the associate opened up a business account at Republic National Bank for a paper company called Clouns International. He then deposited a number of fraudulently endorsed checks worth some $2.7 million. When the checks cleared three days later, Greenwald and the associate returned to the bank, where Greenwald was given $400,000 in cash from the Merrill Lynch funds. Greenwald carried the money in a large black bag via Germany to Switzerland, where he allegedly turned the cash over to Balagula’s representatives in a Zurich hotel men’s room. According to the scheme’s participants, Greenwald was paid $50,000, an allegation the rabbi flatly denies. 

On May 22 of that year, Scotland Yard arrested Kalmanovitch at the Sheraton Park Tower Hotel in London at 3:00 A.M. It found three rubber stamps used to endorse the checks in Kalmanovitch’s room. Earlier that day, Kalmanovitch had had lunch with Uri Lubrani, the head of Israeli intelligence in south Lebanon, according to a source who attended the meeting. 

While Kalmanovitch was being led away in handcuffs, Greenwald, who was also staying at the Sheraton, threw his bags together and, without paying his bill, caught a Concorde flight back to America, according to the FBI and an associate of Greenwald. Greenwald returned home just in time for the Friday night Sabbath meal.

Kalmanovitch was extradited to America to stand trial on fraud charges. (The FBI questioned Greenwald three times, but didn’t arrest him.) Greenwald rounded up a select group of prominent Americans and Israelis to provide character references, including New York Republican congressman Benjamin Gilman, who wrote that “Mr. Kalmanovitch enjoys a wide reputation for his integrity and business acumen.” He obtained bail and flew to Israel, where he was immediately arrested for being a Soviet spy.

In 1986, at the height of his power, Marat made a reckless error. Robert Fasano, a small-time hood who traveled around Brooklyn in an ostentatious white Excalibur, phoned Balagula with an interesting proposition. Fasano had obtained the numbers of two dozen Merrill Lynch credit cards with six-figure authorization codes. Fasano also had sheets of white plastic and a machine that could emboss the stolen numbers on dummy cards. All he needed to use the material was some cooperative merchants who would agree to accept the phony cards to charge merchandise. The merchants would get a cut, though the goods, of course, would never leave the stores. At a meeting with Fasano, Balagula agreed to introduce him to Russian merchants in New York and Philadelphia. He then instructed two of his henchmen to accompany Fasano to the stores. 

The scam worked as planned, and the men took in more than $750,000, stopping only long enough in their shopping spree to feast at Russian restaurants. But Fasano was arrested by the Secret Service not long afterward, and agreed to wear a wire in meetings with Balagula. In those discussions Balagula not only implicated himself in the “white plastic” fraud, but also commiserated with Fasano about their sexual problems; both men, it seems, had trouble achieving erections. Fasano had found a doctor in New York who prescribed a plastic hand pump for genital stimulation, and recommended it to Balagula. The prosecution later played the tape at Balagula’s trial in Philadelphia to prove the men had more than a casual relationship.

“Go out and get a ten-pound bag of shit and try to put it in a five-pound bag and that’s Fasano,” said Joe Ezra, one of the five defense attorneys Balagula brought to Philadelphia at a cost of nearly $1 million. Lead attorney Barry Slot-nick, renowned for his successful defense of Bernhard Goetz, was dismissed on the first day of the trial by the judge because of a conflict of interest: his firm already represented one of Balagula’s co-defendants, Benjamin Nayfeld. Slotnick, who received a $125,000 fee, camped out at the Hershey Hotel, where he debriefed Balagula’s lawyers at the end of each session and advised them on their strategy for the following day
 

Nevertheless, Balagula was convicted of credit card fraud, and there is even now a great deal of rancor among Balagula’s defense team. Some charge that Slotnick’s backseat lawyering hurt the case; others claim that one defense lawyer received a large bribe to fix the trial. Marat himself believed that the money was being used to grease the system. After his conviction, Balagula was taken by Rabbi Greenwald to attorney Alan Dershowitz to discuss an appeal. Instead, Balagula asked the esteemed lawyer to bribe the appeals judge. An indignant Dershowitz refused. Just three days before his November 1986 sentencing, the mobster fled to Antwerp with his mistress, former model Natalia Shevchencko. 

Secret Service agent Harold Bibb admits he feared that Balagula “would turn rabbit” after the government rejected the crime boss’s offer to ferret out Soviet spies in Brighton Beach in return for setting aside his conviction. In addition to protecting the president and foreign dignitaries, the Secret Service investigates credit card fraud and counterfeiting. Ironically, Bibb, a born-again Christian from Tennessee, had once been assigned to the security detail protecting Israeli cabinet minister Moshe Dayan during U.S. fundraising trips on behalf of Soviet Jews in the early 1970's. He had now been given the task of hunting down the most dangerous of those Soviet Jews, the godfather of the Russian mob. 

In February 1987, four months after Balagula left the country, Bibb tracked him down in Johannesburg, where he was living with his mistress and her daughter, who had enrolled at a local university. “You have to understand how to chase a fugitive,” Bibb explained in his spartan Secret Service office in Memphis. “You either find the hole that they’re living in, you find the people that they are talking to, or you find out how they are getting funded.” In this case, Bibb found Balagula by tracing his girlfriend’s credit card receipts. He also discovered that Balagula was receiving monthly deliveries of $50,000 in cash from his New York underlings. The money, stuffed in a worn black leather bag, was hand-delivered to Balagula’s Johannesburg apartment by Balagula’s driver, the ex-submarine commander. 

Bibb had intended to tail the driver to Balagula’s hideout. But the Secret Service was too cheap to pay for his plane ticket, the agent said. So he contacted the security officer at the American embassy in Pretoria, who in turn alerted the police, supplying them with photos of the driver and Balagula. However, Bibb suspects that the constable who was dispatched to make the arrest let Balagula go free when the Russian handed him the monthly payment. Again with his mistress in tow, Balagula next fled to Sierra Leone, where he bought Sierra Leonean and Paraguayan diplomatic passports for $20,000. 

Over the next three years of Balagula’s exile, he jetted to thirty-six separate countries, including Switzerland, Paraguay, and Hong Kong, where he worked “in the jewelry business,” according to the Genovese family figure close to him. Bibb even heard that he was once spotted playing craps in Atlantic City. Finally, on February 27, 1989, an especially alert border guard at the Frankfurt airport recognized the Russian godfather from his picture on the “Red Notice,” the wanted poster distributed by Interpol. After being apprehended, Balagula claimed, “It’s very difficult to be a fugitive. I can’t see my family. In the last year I started to work in the open. I wanted to get caught.” 

Balagula’s close association with Efim Laskin earned him detention in a maximum security “terrorist jail” in Germany. (One of his cell mates was Mohammed Ali Hamadei, the Lebanese who hijacked TWA Flight 847, during which a Navy SEAL was brutally murdered.) The New York Times reported that, during his extradition hearing, rumors circulated about a large bribe that was to be paid to free the Brighton Beach mobster. The Times also noted that, according to informants cited in U.S. intelligence reports, Balagula may have had connections to Soviet intelligence—a charge Balagula denied in a sworn statement to the FBI. 

Meanwhile, in New York, Barry Slotnick met with U.S. Attorney Charles Rose, hoping to broker a deal that would keep Balagula out of an American jail. Balagula proposed setting up a company in Europe to entrap traders in stolen American technology. “Marat also tried to present himself as a secret agent to help track down KGB spies in Little Odessa and Eastern Europe,” says one of Balagula’s attorneys Sam Racer. “He claimed Little Odessa was teeming with KGB and that they were using the gas stations as a front.” 

In return for his cooperation, said Charles Rose, Balagula “obviously wanted the authority to travel, which was important to him. We had FBI agents who were familiar with foreign counterintelligence stuff talk to him. It was all very cloak-and-daggerish. The theory was that he would be so valuable to us that we would not want him to be in jail…. We never really paid much attention, and said we wanted to prosecute the guy.” 

In December 1989, federal marshals wearing flak jackets escorted Balagula aboard a C-5A military transport bound for New York, where he was placed in the tomb like Metropolitan Correctional Center to await sentencing for his four-year-old conviction on credit card fraud. “He called me from M.C.C crying, ‘Why am I in solitary?’” recalls Sam Racer. According to Racer, a contact in the Bureau of Prisons told Slotnick that “a group of terrorists from Europe was in New York to break Balagula out.” 

His rescuers never appeared, however, and Balagula received an eight-year sentence for the credit card fraud. In November 1992, he was sentenced to an additional ten years for evading federal taxes on the sale of four million gallons of gasoline. “This was supposed to be a haven for you,” declared U.S. District Court Judge Leonard Wexler. “It turned out to be a hell for us.” 

Balagula was domiciled in Lewisburg federal penitentiary, situated on one thousand acres of rolling Pennsylvania farmland. The shady, tree-lined blacktop leading to the prison from the highway looks like the entrance to an elite country club. The maximum security prison, however, is a vast stone fortress, with thirty-foot-high walls and eight gun turrets bristling with automatic weapons. Balagula shared a dormitory room with thirty-six dope dealers, rapists, and murderers. He was one of only a handful of inmates at Lewisburg convicted of a white-collar crime, and he was also the only mob boss allegedly running “family” business from the facility. 

I had always heard Balagula described as a man of King Kong–like proportions. But when prison guards ushered him into a smoky ground-floor visiting room, dressed in an orange jumpsuit and bound in manacles and chains, he looked haggard. He sat down heavily, a thick chain wrapped snugly around his soft paunch, and lit a Marlboro with yellow-stained fingers. 

It was his twenty-fifth wedding anniversary, and Alexandra, his tall, elegant blond wife, was in another waiting room. She was in a foul mood. Prison authorities had just told her that Balagula had been receiving visits from his mistress, Natalia Shevchencko. “It was hell” when his wife found out, Balagula hissed. 

Balagula was spending his days working as a prison janitor, practicing his English, reading Russian detective novels and academic books on economics. “They claim I made $25 million dollars per day bootlegging. It’s crazy! I got nothing. What have I got? The government took my apartment in Manhattan, my house on Long Island, $300,000 in cash. They said, ‘If you don’t cooperate you’ll go to jail for twenty years.’ The prosecutors wrote a letter to the judge that I’m a Mafia big shot so they put me here.

 “They want me to tell them about the Mafia, about gasoline, bootlegging, about hits,” Balagula told me, glowering. “Forget it. All these charges are bullshit! All my life I like to help people. Just because a lot of people come to me for advice, everybody thinks I’m a boss. I came to America to find work, support myself, and create a future for my children.” 

Balagula, who is eligible for parole in March 2003, has not only refused to give the authorities any information about the Russian mob’s activities in America, but denies that he ever heard of such an enterprise. “There is no such thing as the Russian Mafiya. Two or three friends hang out together. That’s a Mafiya?"

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