DEFIANCE
Or How to Succeed in Business Despite
Being Hounded by the FBI, the KGB,
the INS, the Department of Homeland Security, the Department of Justice, Interpol and Mafia Hit Men
A TRUE STORY
by Alex Konanykhin
Chapter Three
Empire Stolen
Our Exile Begins
Though totally exhausted, I didn’t sleep a wink during the flight
to New York. I kept thinking about the security blunder in Hungary
which had cost me so dearly, trying to figure out if I had committed
other mistakes which might bring about future disasters.
I was also regretting not calling Colonel Ivanov, the head of my
security detail, and other key people in my companies, from the
Bratislava airport.
Then again, getting to a safe country had been our top priority. I
simply couldn’t have risked being traced through my phone calls to
Moscow. Instead, I decided to call from New York, where we’d finally
be out of the KGB’s reach.
It was still early in the day when Elena and I checked into the
Dumont Plaza Hotel on East 34th Street. We took showers, climbed
into bed, and slept for fourteen hours straight, more than twice as
long as I normally sleep.
We had brought nothing with us, not even a toothbrush, so when
we woke up the next morning, we went out to buy toiletries. Half an
hour later, we returned to our room, brushed our teeth, and went
downstairs for breakfast.
It was 10:00 AM in New York and 6:00 PM in Moscow when
I finally started making calls. My chief operating officer and his Defiance
deputies had already left their offices, which was unusual. Still, I got
to talk to Val, my assistant and old high school friend.
The news Val delivered was devastating: the kidnappers had
already taken over my companies!
Val went on to explain that, the day after my escape, Captains
Sumskoi and Boldyrev showed up at my bank with Vadim Avdeev.
They announced that I had reinstated them in their positions and
appointed Vadim as executor in my absence. Everyone there sensed
something was wrong, but no one really understood what was
happening, and they knew better than to mess with the KGB.
“But you can still take the bank back, right?” asked Elena after
I hung up with Val. “Surely you can call Yeltsin or the Minister of
Security.”
“I can, dear,” I replied, “but it won’t make a difference. A bank
is little more than its assets and debts. The hijackers have surely
emptied all bank accounts. The assets are gone; all that’s left are
debts. Everything I’ve worked so hard for: sayonara.”
“It’s all right, honey,” said Elena, kissing me. “We still have some
money left, and you’re smart and young. You’ll launch something
that will be even more successful. And this time in a country where
no one will steal it.”
“You’re right,” I said, pondering how close to death I had been in
Hungary. “It could have been much, much worse.”
A few more calls confirmed that all my banks and companies
had fallen under KGB control. I shouldn’t have been surprised. The
Russian Exchange Bank was de facto headquarters for my corporate
empire. Once they got control of that, it wasn’t difficult to swipe everything else.
I kept trying to reach Colonel Ivanov, but couldn’t get through.
Later, I learned that his phone had been disconnected by the KGB.
After staying up all night, I finally went to sleep at eight the next
morning. I was still jet lagged, but was also numb from the realization
that, within a matter of days, I had gone from being on top of the
world to being lucky to be alive.
Seeking Justice
“So what now?” asked Elena after I filled her in on the details.
“Will you call the President and the police?”
“I have to. But you know something? The story is so bizarre, it’s
difficult to explain. It will take a long time to tell it to everyone, and
the authorities will need a written report, anyway. So I think it would
be better to write the report, send it out by fax, then follow up with
phone calls.”
We roamed the streets until we found a computer store. There I
bought a laptop and printer.
The sun had set by the time I managed to install Cyrillic fonts on
the computer but, by noon of the next day, my letters to President
Yeltsin, the Minister of Security, and the Secretary of the Security
Council were printed out.
In the letters, I described what had happened to me and
demanded an immediate investigation. One of my loyal assistants
in Moscow found the fax numbers and street addresses of all the
recipients. Reports were also faxed to police officials, the Minister of Finance, the Mayor of Moscow, and the Hungarian police.
Finally, I wrote to the Chairman of Russia’s Central Bank,
asking him to take my bank under government control to protect
its clients.
As a backup measure, hard copies of my letters were also sent to
the recipients by express mail.
Then, after everything had been sent out, I was finally able
to reach Colonel Ivanov. I told him all that had happened and he
promised to see that my letters received proper attention.
Trek South
I continued to sleep unusually long hours every day, but the
fatigue lingered.
Eventually, I realized what was happening: Eight years of
constant work had taken their toll. A major chapter of my life, which
had spanned my defining years, had just been slammed shut. The
accumulated stress and exhaustion was flattening me like a low grade
virus.
Bustling New York wasn’t the best place for someone who needed
rest, so after searching through travel books, I decided to head to
Hilton Head Island in South Carolina. A few days by the ocean,
soaking in the Jacuzzi, finally relaxed me.
From Hilton Head, we flew to Washington, where the pace of life
was less hectic than New York. Elena and I rented a suite in a cozy
hotel near Georgetown.
The KGB had masterfully seized practically all my business and personal assets. Avdeev surely made good use of me foolishly telling
him about the codes and the telex: the hijackers swiftly blocked the
money I controlled in Swiss banks. We now only had access to a
little over a million dollars of our money. Even that only happened
because the codes for those accounts were not in my office safe. It
was a fraction of one per cent of what I used to be worth, but at least
we did not have to go hungry or live on the streets.
Though we could order food or book a hotel room, our English
wasn’t by any means sufficient to conduct a meaningful conversation.
We decided that our next priority was to become proficient in English.
We took Berlitz courses, listened to tapes, watched TV, rented videos,
and read American books with a dictionary handy.
The other priority was figuring out what the hell we were going
to do with the rest of our lives.
Colonel Ivanov Railroaded
While Elena and I adapted to life in America, we anxiously
awaited news from Moscow. To my astonishment, nothing much was
happening there, despite my calls and letters. Finally, Colonel Ivanov
filled me in with a grim report on the so-called investigation.
“The police came to the bank,” he told me. “Two colonels. The
KGB guards made them wait in the lobby for more than an hour.
Eventually, they left, totally humiliated, without seeing anybody.
I spoke to them afterwards. They said that they weren’t going to
interfere because they can’t investigate the KGB. They told us to call
the Ministry of Security.”
I asked if there was any word from the Ministry of Security.
“I’m going there tomorrow.”
But the Colonel never made it. He was arrested that very same
day, on a monstrously improbable charge: stealing my car! The
charge was made even more bizarre by the fact that the Colonel had
been carrying my notarized authorization to use it.
Reporters from Kommersant, the primary Russian business
publication, just “happened” to be present at the arrest scene. “Colonel
of Presidential Guards Steals Car,” was their headline. Kommersant
went on to feature the story in two more issues. Thoroughly defamed,
Colonel Ivanov was forced to resign.
This act of character assassination was a dazzling demonstration
of the power the KGB had regained in Russia. They had cooked up
an absurd, implausible charge to show that they could arrest anyone
at any time — even the Colonel of the Presidential Guards.
The worst part was that it worked. Even senior government
officials, when I called for support, said: “What do you want from
me? You had tons of money and access to the President. They attacked
you, then they squashed the Colonel of the Presidential Guards like
he was a fly. Just imagine what they could do to me!”
It was a difficult point to argue. Why should someone sacrifice his life or career to help a deposed tycoon?
I had all but given up hope for justice, when one day my fax machine spit out a news report that claimed the conspirators who had hijacked my business empire had been arrested.
“It seems that what they did was too much, even for a country as corrupt as Russia,” I exclaimed, passing the report to Elena. “That’s really saying something."
“We’ll see about that,” she replied with sensible skepticism.
Sure enough, the conspirators were soon scot-free. A source in Yeltsin’s government later told me that a $3 million bribe had secured their release.
Unfortunately, KGB and Mafia takeovers were becoming ordinary facts of Russian life. Most of the country’s banks were falling under criminal control, and my story was quickly becoming yesterday’s news.
In 1994, the Directors of both the FBI and CIA reported to Congress that 80 percent of Russian banks were under the control of organized crime. “Russia has become the superpower of crime,” ruefully admitted President Yeltsin.
Kommersant around this time ran a full-page interview with my former kidnapper, Vadim Avdeev. “I wouldn’t bet even a single dollar on the life of Konanykhin,” boasted Vadim on the pages of the most influential business publication in Russia.
The KGB was, by now, looking for me everywhere. Elena and I were still at risk, even in the United States.
While I realized it would have been prudent to shut up and admit defeat, I continued to seek justice and write about the danger the KGB posed to Russia’s fledgling democracy.
The one person I was trying to contact most urgently had already proven he wasn’t afraid to take on the KGB, even when standing defenseless before their tanks: Boris Yeltsin. But reaching the Russian President from a Washington hotel turned out to be infinitely trickier than when I had a direct line to him at my Moscow desk. Forced to keep talking to the gatekeepers, I made little progress. This was where I learned just how vast the gulf between “tycoon” and “former tycoon” really was.
I finally reached Mr. Yeltsin in the spring of 1993, half a year after my escape from Hungary. He promptly ordered an investigation.
Soon thereafter, I was contacted by Major Volevodz of the Russian Military Procuracy, formerly known as the Investigative Department of the KGB. He asked me a few questions and assured me that he’d do everything possible to restore justice.
I was skeptical. The kidnappers had proven extremely effective at intimidating all previous investigators, or buying them off with the cash they stole from me. There was little reason to think things were suddenly going to turn around now.
“This is Colonel Alexeev,” the caller said. “I’m with the Russian Ministry of Security. Our Minister read your letter and ordered an investigation, which has confirmed the facts you described. I’m leading the investigation. I’m charged with the task of returning your property and finalizing the criminal case against the perpetrators.”
It sounded too good to be true. I asked, “So what’s your plan of action?”
“Let’s meet to discuss it in person. How soon can you get to Moscow?”
To me, this smelled like crude entrapment. “As soon as the perpetrators are arrested,” I replied. “Until that happens, it might be a little dangerous.”
“The Minister guarantees your security.”
“Thanks. But after my own security people kidnapped me, I don’t want to try my luck with the KGB again.”
“We’re called the Ministry of Security now,” pointed out the Colonel.
Big fucking difference, I thought.
“I’m just concerned, Colonel,” I explained, “that there might be rogue officers in your organization. Why don’t we meet here in Washington and save the Ministry the trouble of my security?”
“Impossible. Our department doesn’t do business in the States. That’s the prerogative of Foreign Intelligence. I don’t want to step on their toes.”
“Then I’m sorry.”
A week later, the Colonel phoned back. “Let’s meet in Berlin,” he suggested. “We still have military bases there, and our planes aren’t subject to German border controls. My deputy and I won’t need a visa.”
By that time, I had done a background check on the Colonel and was reasonably sure he wasn’t working for the kidnappers. I agreed to the meeting.
Elena and I arrived in Berlin a day early. It was our first trip to the city. We marveled over still-standing stretches of the Berlin Wall, then visited the Reichstag and other historical sights.
“I’m so happy we no longer live in a country that seizes people who want to leave,” remarked Elena at the Checkpoint Charlie Museum, dedicated to those who tried to escape over the Wall to freedom. “Nothing like that could possibly happen in America.”
Nine years later, I would bitterly recall her words when the American government ambushed us at the Peace Bridge.
The Colonel and I sat down in the living room, and his Deputy served us espresso. The Colonel was ruddy and portly, while the Deputy was tall and thin. They reminded me of a middle-aged Laurel and Hardy.
“We have a nice surprise for you,” offered the Deputy.
The Deputy left the room to fetch the surprise while the Colonel got up to turn off the remote-less Soviet-made TV. When his back was turned, I quickly switched cups.
“What a wonderful aroma!” I exclaimed, sipping from the Colonel’s cup.
Two minutes later, I was pleased to observe that the Colonel, who had just taken the final slurp of espresso from the cup intended for me, was still conscious.
Just then, the Deputy sauntered in with two large suitcases. He said, “Recognize them?”
I sure did. They were the ones Elena and I had left behind in the Budapest hotel after fleeing our kidnappers.
“Few people get anything back from the KGB’s Lubyanka storage,” the Colonel went on to explain. “Academician Sakharov was the last. By order of President Gorbachev, you know.”
“Of course,” added the Deputy, “some of the jewelry might be missing. Expensive things sometimes get lost in our storage.”
Great, I thought. The KGB can’t even stop looting in its own headquarters.
After a little more small-talk, we got down to business. The Colonel said, “The Minister wants to know, Mr. Konanykhin, if you’d be interested in establishing a Foundation of National Security and serve as its president.”
He went on to explain that the Ministry, formerly known as the KGB, would return whatever property of mine could be salvaged, and that I’d donate 50 percent of it to the Foundation. They, in turn, would provide me with security and connections.
“In no time at all, you’ll be much wealthier than before the kidnapping,” the Colonel added.
“Tell me more about the Foundation,” I asked him. Other businessmen, too, might decide to “voluntarily donate” to the Foundation, especially when the Ministry “helped” them, the KGB representative went on explaining. Thus, the Foundation would undoubtedly have very substantial resources.
“And what will these resources be used for?” I asked, thinking that I knew the answer already.
“National Security. At the discretion of the Foundation’s chairman.”
“In other words, the Minister.”
“Correct.”
Elegant little plan! I thought. Currently, the Minister was limited on how his agency’s funds could be allocated. His power would increase enormously if he could distribute billions of rubles any way he wanted. With KGB officers collecting hefty “donations” from businessmen in exchange for protection, this could easily become the greatest shakedown racket in world history.
I asked, “What do you need me for?”
“You are in a unique position, Mr. Konanykhin. You’ve demonstrated that you can be spectacularly successful in business. Yet, unlike other successful entrepreneurs, you’re not currently preoccupied with running your own business.”
“Your downfall was caused by a security mistake,” broke in the Deputy. “And security is something we will take care of.”
“Can I have a day or two to think it over?”
“What can there possibly be to think about?” the Deputy exclaimed. “It’s the opportunity of a lifetime!”
“It’s all right to think before making such a big commitment,” offered the Colonel. “Let’s resume tomorrow at the same time. Agreed?”
Though I had no intention whatsoever of cooperating with this nefarious enterprise, I agreed to see them the following day. I needed time to consider whether there was some better reply than telling them to fuck off.
It was then that the Colonel said the Ministry had a little favor they wanted to ask of me.
Another one? I thought.
“We would like, Mr. Konanykhin, for you to buy the Museum of German Capitulation.”
Sure, I thought. That’s exactly what I was thinking of doing today: buying a museum.
But the Colonel wasn’t joking. The museum in question was located in the mansion where the Germans had signed the Act of Unconditional Capitulation upon surrendering to the Allies in 1945. The Colonel explained that, because Germany was re-uniting and Russian troops were leaving, the German authorities were going to shut down this reminder of their national defeat. But if it became private property, the owner could then do whatever he wanted with it. Like keep it open.
“They respect private property here,” broke in the Deputy, his tone expressing bewilderment over the concept. “Needless to say we will secretly provide you with the necessary funds – and with an appropriate commission.”
Great! Now they want me to launder KGB money in Germany!
After parting company with the Colonel and his sidekick, I drove erratically for a few miles, making sharp turns and constantly checking my rear-view mirror. No vehicles tailed me.
I pulled over to the side of the road to inspect my car and the suitcases the KGB had returned. I found no bugs or tracking devices. Relieved, I drove back to the hotel.
“How did the meeting go?” asked Elena when I walked in.
“We wasted our time coming here.”
After outlining the Colonels’ various proposals, I said, “I’m not getting into bed with the KGB. Sleep with dogs and you’ll catch fleas.”
Elena said, “So this means they’re not going to punish the kidnappers, right?”
“Punish one of their own for my sake? No way.”
“Well at least you got our suitcases back.”
Later, after rummaging through our cases, Elena said, “Everything’s here except for our camcorder and the diamond earrings my grandpa gave me for my sixteenth birthday.”
“Well, the wife of some KGB bigwig is undoubtedly wearing them now.”
“Quite a gamble,” I told Elena. “But that explains why the Minister wanted to set up his Foundation. He knew the coup was coming and, with his agency running the country, the opportunities for plunder would have been overwhelming.”
Elena and I stayed glued to the TV until, later that day, all three coup leaders surrendered and were taken to the KGB prison on Lubyanka Square. So much for the Minister’s shakedown racket!
Shortly afterwards, the phone rang. It was Colonel Alexeev. He was calling to say that our meeting would have to be postponed until “some later time.” Evidently, he had been watching the coup on CNN, too.
Of course, the attempt by a lawfully elected Parliament to impeach the President hardly fit the definition of a coup d’etat. And Yeltsin’s use of the Army to shell Parliament in response to his impeachment clearly was no triumph of democracy.
Still, history is written by the victors. Shelling Parliament was spun into saving democracy. Western governments gobbled up the story and endorsed Yeltsin’s interpretation of events, because they considered him more acceptable than a pro-communist Parliament. More importantly, his victory was a fait accompli.
Another common misperception is that Yeltsin kept and consolidated power. The under reported truth is that, though he kept the title of President, Yeltsin was forced to give up much of his authority to the KGB to secure their support. Yeltsin had won, but at the price of losing most of his muscle. His “victory” left him largely a ceremonial head of state, a paper tiger.
Russia was now neither a democracy nor an empire. It was a Mafiocracy. The KGB and Mafia alliance firmly controlled key government ministries, including law enforcement.
The corrupt Alexei Ilyushenko became Attorney General, the Russian equivalent of the U.S. Attorney General. He promptly terminated all investigations that had been launched in response to my requests. Not stopping there, he also ordered prosecution against me.
I didn’t see us settling in Washington or New York, for I had found the summer heat and humidity in these cities unbearable. Born north of Moscow, I occasionally found even Moscow summer days oppressively hot. I recalled walking around Washington in my business suit on a hot June afternoon and thinking that I was going to pass out from heat stroke. Canada seemed more suitable.
While we waited for our landing visas, I tried to keep busy. I didn’t know the American market well enough to start my own business yet, so I decided to start by representing a few leading Russian companies. That would give me time to fathom the American business landscape.
Soon thereafter, I dropped by the Greatis office, unannounced. There I discovered a dank, dark, dingy basement where three young guys, including President Nikolai Menchoukov, were going over storyboards. Nikolai had straight brown hair, a powerful upper body that inclined at times to puffiness, and powder-blue eyes.
Though the place was a dump, it took only a short conversation for me to see that these guys were bursting with ideas. I hired them immediately and they quickly turned my companies into household names.
Greatis didn’t stay in their basement for long. I moved them to a nice building I had acquired for a bargain price on my real-estate exchange. Nikolai gave me stock in his company and a place on the board, as a sign of his appreciation. That gesture would later cost him his business, his country, and nearly his life.
Three days after the kidnapping, I contacted Nikolai and explained what had happened to my business empire.
Since my companies were the primary clients of Greatis, the news was devastating for his agency. But Nikolai took the blow stoically.
“The important thing is that you’re all right,” he said. “The papers are full of stories of businessmen much less fortunate.”
We talked some more and decided that I’d market Greatis’s services to U.S. clients. We were going to become the first agency to advertise Russian companies and products in the United States.
Jones Day, America’s second largest legal firm, incorporated Greatis USA. Nikolai became chairman and I took on the president’s role. I rented a spacious office in the historic Willard building, right next to the Treasury and the White House, and hired an assistant.
Back in business!
Another person I called shortly after arriving in the States was
my banking rival, Michael Khodorkovsky.
Michael was, at that time, the founder and CEO of MENATEP, the main competitor of my Russian Exchange Bank. Through superb networking skills and organizational brilliance, Michael had developed one of the great business empires in Russia. His bank had introduced numerous innovations, and I was quick to imitate him. And vice-versa. Michael and I hit it off from our first meeting back in Moscow, largely, I think, because we were of the same age and similar backgrounds, with much in common.
After listening to my account of the KGB’s hijacking of my companies, he said he’d rather continue the conversation in person.
“I’ve been thinking a lot about what happened to you,” said Michael when we met in Washington a few weeks later. “As you know, our businesses are very similar, so I’m facing similar risks. Frankly, what happened to you made me think that maybe it would be better to quit the game while I’m ahead.”
“You are leaving Russian business?”
“I’ve decided to stay. I’ll just have to avoid making the mistake you made.”
“Mine was a dumb mistake,” I admitted. “But the KGB is inventive, Michael, and there is more than one way to skin a cat. They are coming back to power and I think this trend is irreversible. Do you really think you can cover yourself from all angles?”
“I’ll try.”
For the next twelve years, I would marvel over not only Michael’s survival skills, but also how he became one of the world’s richest men while skillfully dodging endless hazards.
We talked some more, and Michael made me the offer I had been hoping for. “Alex,” he said, “with you no longer in the game, MENATEP is now the most successful private bank in Russia. My goal is to build an international financial group with a strong presence in every key market. The problem is that neither I nor my staff really understands foreign markets.”
“I know,” I replied. “Back in Russia, I had the same objective but didn’t have time to study international markets.”
“So, seeing how you’re free now, why don’t we join forces to make MENATEP truly international? We’ll be partners. I’ll pay all expenses and you’ll get half the profits on international operations you develop.”
It was a generous offer and I accepted without bargaining. We shook hands and, shortly thereafter, Michael returned to Russia.
I researched U.S. banking laws and asked the Jones Day attorneys to draw up the paperwork. Then, a few days later, one of them called with discouraging news.
“We talked with the Board of Governors of the Federal Reserve,” the attorney reported. “The Fed people said they wouldn’t permit Russian banks to open subsidiaries in the U.S. They think many Russian banks are Mob-controlled.”
“But not MENATEP!” I replied indignantly. It was painful to think that my whole nation was now blacklisted.
On one hand, the world was hailing the nascent Russian democracy and trailblazing Russian businesses. On the other, the Fed wouldn’t even consider issuing a license to a Russian bank. How much sense did that make?
But then, as I simmered down, I realized my indignation was misplaced. My own story was the best evidence: there was simply no guarantee that any Russian bank wouldn’t be taken over by hoodlums.
If the United States was off-limits for Russian banks, then I had to develop an alternative strategy. I researched the regulations and policies of many other countries, and then prepared a plan for the international development for MENATEP.
Stage One of the plan called for opening branches in three jurisdictions.
Austria was one location I selected. Traditionally, it had served as a cultural bridge between East and West. It seemed like an ideal place for a MENATEP subsidiary. My Austrian attorney said there’d be no political barriers for us, but that the licensing procedure normally took upwards of two years.
Uruguay was another country I suggested. It was the banking capital of MERCOSUR, the economic union of Uruguay, Argentina, Brazil, and Paraguay. Located on a continent notorious for volatile politics and military coups, Uruguay was known as the “Switzerland of South America” because of its relative political stability.
For decades, Uruguay and Argentina had been supplying meat and leather to Eastern Bloc countries in exchange for automobiles and industrial equipment. That arrangement came to a sudden halt when the Soviet Union and its only foreign trade bank collapsed. Nobody had yet rebuilt a financial bridge between the two trading blocs, and I saw this as a fantastic opportunity for MENATEP.
With Khodorkovsky’s approval, I spoke to Uruguayan officials, who invited me to visit.
Our timing was perfect. Because it was an election year, politicians knew that resuming trade with Russia promised to improve the lives of the nation’s farmers and thus secure their votes. Interest in restoring trade with Russia was so high that Elena and I were treated as VIPs by the Uruguayan ministers. We were even issued Uruguayan passports for visa-free entry to their country.
I also recommended that Michael incorporate an offshore bank in the Caribbean. Practically all the major financial groups had offshore subsidiaries, and for a good reason: legal tax shelters.
As soon as Khodorkovsky approved my proposal, I retained Coopers & Lybrand, one of the Big Six accounting firms, and set things in motion. As a 50 percent partner in three international banks, I was certain I’d soon develop a higher net worth than before the kidnapping.
Though I was bitter, I certainly wasn’t surprised. After the KGB railroaded Colonel Ivanov for “stealing” my car, I figured it was only a matter of time before similarly absurd charges were leveled against me. Stealing from myself was apparently the most imaginative crime my nemesis could devise.
Unfortunately, absurd as the charges were, it was not a laughing matter, as the major acted on orders from the new Russian Attorney General, an official so crooked that he would later be jailed for corruption.
A week after Coopers & Lybrand sent me the banking license for East European International Bank they had registered for us in Antigua, Khodorkovsky phoned with alarming news.
Michael said, “Volevodz and another colonel just stopped by to ask if I was doing business with you.”
“And?”
“I told them it was none of their business. Damned if I’m going to let two KGB clowns push me around.”
By this time, Michael had become one of the most powerful men in Russia, one of the so-called “Oligarchs” who later pulled off the almost-impossible task of getting an unpopular President Yeltsin reelected. Unfortunately, Michael had underestimated the enemy, and the KGB made him pay dearly for it.
A “classified government report” was cooked up and leaked to the international media. It falsely stated that MENATEP was the Russian Mafia’s Number One bank. The shocking news made headlines all over the world.
The damage was colossal. Apart from ruining our reputations, the KGB also scuttled our joint banking venture. No one was going to do business now with a bank that reputedly served the Russian Mob.
I could no longer appeal to Boris Yeltsin. By 1994, Yeltsin had known as well as anyone that the Russian Mafia was taking over the Russian economy, with the KGB as its brain center. A skillful politician whose only concern was staying in power, he chose to ride, rather than fight, this trend.
No prosecutions of major crimes would ever be launched under Yeltsin’s rule. The country would be allowed to remain, as Yeltsin himself worded it, “a superpower of crime.” By the end of his second term, Yeltsin and his inner circle would come to be known as “the Family.”
“I’m worried about Michael,” confided Elena after the meeting. “He’s a prime target for the Russian mob and the KGB. The popular mood in Russia has always been ‘all businessmen are exploiters and enemies of the people.’ Doesn’t he see the danger?”
“I told him all that. I also said the worst part of it is that, to stay in business, he will have to play by the new rules of the game, and they really stink. The time when it was possible to run an honest business in Russia is over.”
“Well, I’m glad we live here now,” replied Elena.
“Me, too.”
But I certainly didn’t want to have the demise of Greatis on my conscience, so I told him to cool it. I said I’d limit operations of Greatis USA to the domestic market, to minimize his direct involvement with me.
My business plans were shattered. The KGB had successfully derailed two ventures which could have netted me hundreds of millions. In KGB jargon, the operation against me was called “cutting off the oxygen”: deprive the target of income and supporters, and he becomes easy prey.
Meanwhile, Elena and I were making little progress in securing permanent residence in Canada. On the application form, I had to reveal that I had first visited Canada as part of President Yeltsin’s delegation, and this drew the scrutiny of the Canadian Security and Intelligence Service.
They interviewed me on four separate occasions, but my story made no sense to them. Canadian officials simply couldn’t believe that my business empire could have been stolen without a government investigation. And they couldn’t fathom how someone in his early twenties came to employ a former KGB Chairman and a host of other former top government officials.
I really couldn’t blame them. I realized that, for people who lived in a civilized country like Canada, the things that had happened to me must have sounded fantastic.
By the time I was called in for the fifth interview in Buffalo, we had already received approval of our green card application, and had decided to stay in the U.S.
Because of its security, Elena and I chose to live in the Watergate. We bought a spacious apartment, withdrew our Canadian application, and prepared to settle down.
He asked my advice on a winning strategy for his new venture and I recommended making the bank the first to be internationally accessible via computer. He loved the idea and asked me to stay on as Vice President, with the task of making this dream a reality
I still owned almost half of the bank’s stock and wanted to make sure the bank succeeded. I accepted the offer, and in October of 1994 Elena and I moved into a beautiful house in a tropical paradise. By early 1995, we were in business.
Offshore banking historically had been a perk of large corporations, financial institutions, and those wealthy enough to afford expensive tax consultants. My goal was to revolutionize the offshore financial industry by making the same information, services, and benefits available, via the nascent Internet, to the middle class.
One American bank beat us to our goal of becoming the first bank to offer Internet access, but we did manage to become the world’s first offshore bank accessible through the Net.
I proudly felt that we were revolutionizing the industry.
After the disastrous 1992 and 1994 setbacks courtesy of the KGB, things were again looking good for me. I was the co-owner of a bank poised to take a share of the enormous offshore financial market. And Elena and I were reveling in our sun-soaked Caribbean lifestyle.
Back in Russia, however, things continued to deteriorate. Russian citizens had grown weary of democratic “reforms”, and seemed to crave a strong hand that would restore order. A complete takeover of Russia by the KGB was inevitable.
I was done fighting the KGB. But, as I would soon find out, the KGB wasn’t done fighting me.
“Hi, Alex,” said my Washington attorney, Donald Bucklin. Donald was a partner at Squire, Sanders & Dempsey, one of the country’s biggest firms. “Are you okay?”
“Yes,” I replied, alarmed by his anxious tone. “Why do you ask?”
“The FBI visited me today. They’ve just learned that the U.S. branch of the Russian Mafia has taken out a contract on you.”
“Jesus. Did the FBI say anything else?”
“Yes. They advise you not to reveal your whereabouts to anyone on the Russian side. They also confirmed your account of the kidnapping in Hungary. I’m faxing you a letter that details everything.”
“Thanks,” I replied, suddenly feeling very tired. “I’ll call you tomorrow.”
“Wait, there’s more. The FBI gave me a copy of Russian government documents you need to see. They show that the KGB is looking for you everywhere. They even tracked your phone number in Uruguay.”
Donald added that the Americans had only found out about this because of the Russian government’s request to extradite me. As soon as the Department of Justice determined that it had been made by a corrupt prosecutor on behalf of the Mafia, the extradition was denied. More than that, the Department of Justice even sent the Russian files to my attorney.
I hung up, dazed. Elena and I sat on the terrace, gazing out to the harbor. We wondered when the KGB’s persecution would end, and to which remote corner of the world we’d have to trek to be free of them.
“We can’t let them make our lives miserable,” I told Elena finally. “If that happens, then they’ve won.”
“I agree.”
Suddenly, Antigua was no longer safe. From here, I had made calls to Khodorkovsky, and those could easily have been intercepted and traced.
Antigua was too small to hide in, and the police on this laid-back resort island could provide no real protection against Mafia assassins. We had to move back to the States, where I felt law enforcement agencies could protect us. But first, I needed to create a diversion.
To throw the KGB off our trail, Elena and I flew to Austria. Knowing that news of my sudden appearance would quickly be passed along to their new bosses, I visited the offices of RosFinConsult, a company I had co-founded with a former Austrian Vice-Chancellor and Finance Minister. After the KGB took over my bank, he had resigned as chairman, but some of the original employees stayed on.
I stopped by unannounced, chatting with the staff about politics and other matters. I also casually mentioned I was very happy in my new, secluded home in the Austrian Alps.
Hoping that the KGB’s manhunt would now be centered in Austria, Elena and I returned to Washington.
I was extremely grateful that the FBI – and the Department of Justice – had gone out of their way to save our lives. What I didn’t yet know was that the FBI had since sold us out to the Russians.
There was a knock on the door, and I got up to answer it. Through the peephole, I saw the familiar face of Charlie, the maintenance man. I opened the door.
“Immigration Service,” someone bellowed as four men in suits rushed past Charlie into our apartment. They were followed by four more suits, who stepped out of the hallway elevator. Two headed straight to our office and ordered Elena to stay put.
to be continued...s78
It was a difficult point to argue. Why should someone sacrifice his life or career to help a deposed tycoon?
I had all but given up hope for justice, when one day my fax machine spit out a news report that claimed the conspirators who had hijacked my business empire had been arrested.
“It seems that what they did was too much, even for a country as corrupt as Russia,” I exclaimed, passing the report to Elena. “That’s really saying something."
“We’ll see about that,” she replied with sensible skepticism.
Sure enough, the conspirators were soon scot-free. A source in Yeltsin’s government later told me that a $3 million bribe had secured their release.
Lost Cause?
My efforts to go public with the crimes committed against me
were producing depressing results. I wrote countless articles for
major publications, warning of the dangers of the impending KGB
takeover of the nation. But only a few newspapers would publish
them. Unfortunately, KGB and Mafia takeovers were becoming ordinary facts of Russian life. Most of the country’s banks were falling under criminal control, and my story was quickly becoming yesterday’s news.
In 1994, the Directors of both the FBI and CIA reported to Congress that 80 percent of Russian banks were under the control of organized crime. “Russia has become the superpower of crime,” ruefully admitted President Yeltsin.
Kommersant around this time ran a full-page interview with my former kidnapper, Vadim Avdeev. “I wouldn’t bet even a single dollar on the life of Konanykhin,” boasted Vadim on the pages of the most influential business publication in Russia.
The KGB was, by now, looking for me everywhere. Elena and I were still at risk, even in the United States.
While I realized it would have been prudent to shut up and admit defeat, I continued to seek justice and write about the danger the KGB posed to Russia’s fledgling democracy.
The one person I was trying to contact most urgently had already proven he wasn’t afraid to take on the KGB, even when standing defenseless before their tanks: Boris Yeltsin. But reaching the Russian President from a Washington hotel turned out to be infinitely trickier than when I had a direct line to him at my Moscow desk. Forced to keep talking to the gatekeepers, I made little progress. This was where I learned just how vast the gulf between “tycoon” and “former tycoon” really was.
I finally reached Mr. Yeltsin in the spring of 1993, half a year after my escape from Hungary. He promptly ordered an investigation.
Soon thereafter, I was contacted by Major Volevodz of the Russian Military Procuracy, formerly known as the Investigative Department of the KGB. He asked me a few questions and assured me that he’d do everything possible to restore justice.
I was skeptical. The kidnappers had proven extremely effective at intimidating all previous investigators, or buying them off with the cash they stole from me. There was little reason to think things were suddenly going to turn around now.
Contacted by the KGB
Late September of 1993, a year after the kidnapping, I received a
peculiar phone call. “This is Colonel Alexeev,” the caller said. “I’m with the Russian Ministry of Security. Our Minister read your letter and ordered an investigation, which has confirmed the facts you described. I’m leading the investigation. I’m charged with the task of returning your property and finalizing the criminal case against the perpetrators.”
It sounded too good to be true. I asked, “So what’s your plan of action?”
“Let’s meet to discuss it in person. How soon can you get to Moscow?”
To me, this smelled like crude entrapment. “As soon as the perpetrators are arrested,” I replied. “Until that happens, it might be a little dangerous.”
“The Minister guarantees your security.”
“Thanks. But after my own security people kidnapped me, I don’t want to try my luck with the KGB again.”
“We’re called the Ministry of Security now,” pointed out the Colonel.
Big fucking difference, I thought.
“I’m just concerned, Colonel,” I explained, “that there might be rogue officers in your organization. Why don’t we meet here in Washington and save the Ministry the trouble of my security?”
“Impossible. Our department doesn’t do business in the States. That’s the prerogative of Foreign Intelligence. I don’t want to step on their toes.”
“Then I’m sorry.”
A week later, the Colonel phoned back. “Let’s meet in Berlin,” he suggested. “We still have military bases there, and our planes aren’t subject to German border controls. My deputy and I won’t need a visa.”
By that time, I had done a background check on the Colonel and was reasonably sure he wasn’t working for the kidnappers. I agreed to the meeting.
Elena and I arrived in Berlin a day early. It was our first trip to the city. We marveled over still-standing stretches of the Berlin Wall, then visited the Reichstag and other historical sights.
“I’m so happy we no longer live in a country that seizes people who want to leave,” remarked Elena at the Checkpoint Charlie Museum, dedicated to those who tried to escape over the Wall to freedom. “Nothing like that could possibly happen in America.”
Nine years later, I would bitterly recall her words when the American government ambushed us at the Peace Bridge.
Devil’s Proposition
My meeting with Colonel Alexeev took place the next day in a
house that used to house the KGB Chairman on his trips to Berlin.
Sequestered in a pleasant residential section of what used to be East
Berlin, it was identical in style to the housing built for top government
officials in Russia. The Colonel and I sat down in the living room, and his Deputy served us espresso. The Colonel was ruddy and portly, while the Deputy was tall and thin. They reminded me of a middle-aged Laurel and Hardy.
“We have a nice surprise for you,” offered the Deputy.
The Deputy left the room to fetch the surprise while the Colonel got up to turn off the remote-less Soviet-made TV. When his back was turned, I quickly switched cups.
“What a wonderful aroma!” I exclaimed, sipping from the Colonel’s cup.
Two minutes later, I was pleased to observe that the Colonel, who had just taken the final slurp of espresso from the cup intended for me, was still conscious.
Just then, the Deputy sauntered in with two large suitcases. He said, “Recognize them?”
I sure did. They were the ones Elena and I had left behind in the Budapest hotel after fleeing our kidnappers.
“Few people get anything back from the KGB’s Lubyanka storage,” the Colonel went on to explain. “Academician Sakharov was the last. By order of President Gorbachev, you know.”
“Of course,” added the Deputy, “some of the jewelry might be missing. Expensive things sometimes get lost in our storage.”
Great, I thought. The KGB can’t even stop looting in its own headquarters.
After a little more small-talk, we got down to business. The Colonel said, “The Minister wants to know, Mr. Konanykhin, if you’d be interested in establishing a Foundation of National Security and serve as its president.”
He went on to explain that the Ministry, formerly known as the KGB, would return whatever property of mine could be salvaged, and that I’d donate 50 percent of it to the Foundation. They, in turn, would provide me with security and connections.
“In no time at all, you’ll be much wealthier than before the kidnapping,” the Colonel added.
“Tell me more about the Foundation,” I asked him. Other businessmen, too, might decide to “voluntarily donate” to the Foundation, especially when the Ministry “helped” them, the KGB representative went on explaining. Thus, the Foundation would undoubtedly have very substantial resources.
“And what will these resources be used for?” I asked, thinking that I knew the answer already.
“National Security. At the discretion of the Foundation’s chairman.”
“In other words, the Minister.”
“Correct.”
Elegant little plan! I thought. Currently, the Minister was limited on how his agency’s funds could be allocated. His power would increase enormously if he could distribute billions of rubles any way he wanted. With KGB officers collecting hefty “donations” from businessmen in exchange for protection, this could easily become the greatest shakedown racket in world history.
I asked, “What do you need me for?”
“You are in a unique position, Mr. Konanykhin. You’ve demonstrated that you can be spectacularly successful in business. Yet, unlike other successful entrepreneurs, you’re not currently preoccupied with running your own business.”
“Your downfall was caused by a security mistake,” broke in the Deputy. “And security is something we will take care of.”
“Can I have a day or two to think it over?”
“What can there possibly be to think about?” the Deputy exclaimed. “It’s the opportunity of a lifetime!”
“It’s all right to think before making such a big commitment,” offered the Colonel. “Let’s resume tomorrow at the same time. Agreed?”
Though I had no intention whatsoever of cooperating with this nefarious enterprise, I agreed to see them the following day. I needed time to consider whether there was some better reply than telling them to fuck off.
It was then that the Colonel said the Ministry had a little favor they wanted to ask of me.
Another one? I thought.
“We would like, Mr. Konanykhin, for you to buy the Museum of German Capitulation.”
Sure, I thought. That’s exactly what I was thinking of doing today: buying a museum.
But the Colonel wasn’t joking. The museum in question was located in the mansion where the Germans had signed the Act of Unconditional Capitulation upon surrendering to the Allies in 1945. The Colonel explained that, because Germany was re-uniting and Russian troops were leaving, the German authorities were going to shut down this reminder of their national defeat. But if it became private property, the owner could then do whatever he wanted with it. Like keep it open.
“They respect private property here,” broke in the Deputy, his tone expressing bewilderment over the concept. “Needless to say we will secretly provide you with the necessary funds – and with an appropriate commission.”
Great! Now they want me to launder KGB money in Germany!
After parting company with the Colonel and his sidekick, I drove erratically for a few miles, making sharp turns and constantly checking my rear-view mirror. No vehicles tailed me.
I pulled over to the side of the road to inspect my car and the suitcases the KGB had returned. I found no bugs or tracking devices. Relieved, I drove back to the hotel.
“How did the meeting go?” asked Elena when I walked in.
“We wasted our time coming here.”
After outlining the Colonels’ various proposals, I said, “I’m not getting into bed with the KGB. Sleep with dogs and you’ll catch fleas.”
Elena said, “So this means they’re not going to punish the kidnappers, right?”
“Punish one of their own for my sake? No way.”
“Well at least you got our suitcases back.”
Later, after rummaging through our cases, Elena said, “Everything’s here except for our camcorder and the diamond earrings my grandpa gave me for my sixteenth birthday.”
“Well, the wife of some KGB bigwig is undoubtedly wearing them now.”
Reforms Abandoned
The following morning, CNN broadcast live footage of tanks
shelling the Russian Supreme Soviet. Inside, the Chairman, the Vice
President, and the Minister of Security were holed up. Their effort to
take over the country from Yeltsin had backfired. “Quite a gamble,” I told Elena. “But that explains why the Minister wanted to set up his Foundation. He knew the coup was coming and, with his agency running the country, the opportunities for plunder would have been overwhelming.”
Elena and I stayed glued to the TV until, later that day, all three coup leaders surrendered and were taken to the KGB prison on Lubyanka Square. So much for the Minister’s shakedown racket!
Shortly afterwards, the phone rang. It was Colonel Alexeev. He was calling to say that our meeting would have to be postponed until “some later time.” Evidently, he had been watching the coup on CNN, too.
Of course, the attempt by a lawfully elected Parliament to impeach the President hardly fit the definition of a coup d’etat. And Yeltsin’s use of the Army to shell Parliament in response to his impeachment clearly was no triumph of democracy.
Still, history is written by the victors. Shelling Parliament was spun into saving democracy. Western governments gobbled up the story and endorsed Yeltsin’s interpretation of events, because they considered him more acceptable than a pro-communist Parliament. More importantly, his victory was a fait accompli.
Another common misperception is that Yeltsin kept and consolidated power. The under reported truth is that, though he kept the title of President, Yeltsin was forced to give up much of his authority to the KGB to secure their support. Yeltsin had won, but at the price of losing most of his muscle. His “victory” left him largely a ceremonial head of state, a paper tiger.
Russia was now neither a democracy nor an empire. It was a Mafiocracy. The KGB and Mafia alliance firmly controlled key government ministries, including law enforcement.
The corrupt Alexei Ilyushenko became Attorney General, the Russian equivalent of the U.S. Attorney General. He promptly terminated all investigations that had been launched in response to my requests. Not stopping there, he also ordered prosecution against me.
Chapter Four
American Businessman
Trying to Settle In
Shortly after arriving in the States, Elena and I applied for
permanent Canadian residence. I didn’t see us settling in Washington or New York, for I had found the summer heat and humidity in these cities unbearable. Born north of Moscow, I occasionally found even Moscow summer days oppressively hot. I recalled walking around Washington in my business suit on a hot June afternoon and thinking that I was going to pass out from heat stroke. Canada seemed more suitable.
While we waited for our landing visas, I tried to keep busy. I didn’t know the American market well enough to start my own business yet, so I decided to start by representing a few leading Russian companies. That would give me time to fathom the American business landscape.
Greatis USA
In 1990, two years prior to my unplanned immigration, an
innovative advertising campaign for one of my prime competitors
grabbed my attention. It was the first major branding campaign
in Russia done by Western standards. Massive TV advertising with
quality commercials was coordinated with consistent supporting
ads in print media. My assistant quickly found that the campaign was handled by an advertising agency called Greatis. Why are these
obviously talented people working not for me but for my competitors, I
wondered. Soon thereafter, I dropped by the Greatis office, unannounced. There I discovered a dank, dark, dingy basement where three young guys, including President Nikolai Menchoukov, were going over storyboards. Nikolai had straight brown hair, a powerful upper body that inclined at times to puffiness, and powder-blue eyes.
Though the place was a dump, it took only a short conversation for me to see that these guys were bursting with ideas. I hired them immediately and they quickly turned my companies into household names.
Greatis didn’t stay in their basement for long. I moved them to a nice building I had acquired for a bargain price on my real-estate exchange. Nikolai gave me stock in his company and a place on the board, as a sign of his appreciation. That gesture would later cost him his business, his country, and nearly his life.
Three days after the kidnapping, I contacted Nikolai and explained what had happened to my business empire.
Since my companies were the primary clients of Greatis, the news was devastating for his agency. But Nikolai took the blow stoically.
“The important thing is that you’re all right,” he said. “The papers are full of stories of businessmen much less fortunate.”
We talked some more and decided that I’d market Greatis’s services to U.S. clients. We were going to become the first agency to advertise Russian companies and products in the United States.
Jones Day, America’s second largest legal firm, incorporated Greatis USA. Nikolai became chairman and I took on the president’s role. I rented a spacious office in the historic Willard building, right next to the Treasury and the White House, and hired an assistant.
Back in business!
Partnering with Michael Khodorkovsky
Michael was, at that time, the founder and CEO of MENATEP, the main competitor of my Russian Exchange Bank. Through superb networking skills and organizational brilliance, Michael had developed one of the great business empires in Russia. His bank had introduced numerous innovations, and I was quick to imitate him. And vice-versa. Michael and I hit it off from our first meeting back in Moscow, largely, I think, because we were of the same age and similar backgrounds, with much in common.
After listening to my account of the KGB’s hijacking of my companies, he said he’d rather continue the conversation in person.
“I’ve been thinking a lot about what happened to you,” said Michael when we met in Washington a few weeks later. “As you know, our businesses are very similar, so I’m facing similar risks. Frankly, what happened to you made me think that maybe it would be better to quit the game while I’m ahead.”
“You are leaving Russian business?”
“I’ve decided to stay. I’ll just have to avoid making the mistake you made.”
“Mine was a dumb mistake,” I admitted. “But the KGB is inventive, Michael, and there is more than one way to skin a cat. They are coming back to power and I think this trend is irreversible. Do you really think you can cover yourself from all angles?”
“I’ll try.”
For the next twelve years, I would marvel over not only Michael’s survival skills, but also how he became one of the world’s richest men while skillfully dodging endless hazards.
We talked some more, and Michael made me the offer I had been hoping for. “Alex,” he said, “with you no longer in the game, MENATEP is now the most successful private bank in Russia. My goal is to build an international financial group with a strong presence in every key market. The problem is that neither I nor my staff really understands foreign markets.”
“I know,” I replied. “Back in Russia, I had the same objective but didn’t have time to study international markets.”
“So, seeing how you’re free now, why don’t we join forces to make MENATEP truly international? We’ll be partners. I’ll pay all expenses and you’ll get half the profits on international operations you develop.”
It was a generous offer and I accepted without bargaining. We shook hands and, shortly thereafter, Michael returned to Russia.
Terra Incognita
Opening the very first Russian bank in America was an exciting
prospect. MENATEP could become the bank of choice for most American corporations doing business in Russia. I researched U.S. banking laws and asked the Jones Day attorneys to draw up the paperwork. Then, a few days later, one of them called with discouraging news.
“We talked with the Board of Governors of the Federal Reserve,” the attorney reported. “The Fed people said they wouldn’t permit Russian banks to open subsidiaries in the U.S. They think many Russian banks are Mob-controlled.”
“But not MENATEP!” I replied indignantly. It was painful to think that my whole nation was now blacklisted.
On one hand, the world was hailing the nascent Russian democracy and trailblazing Russian businesses. On the other, the Fed wouldn’t even consider issuing a license to a Russian bank. How much sense did that make?
But then, as I simmered down, I realized my indignation was misplaced. My own story was the best evidence: there was simply no guarantee that any Russian bank wouldn’t be taken over by hoodlums.
If the United States was off-limits for Russian banks, then I had to develop an alternative strategy. I researched the regulations and policies of many other countries, and then prepared a plan for the international development for MENATEP.
Stage One of the plan called for opening branches in three jurisdictions.
Austria was one location I selected. Traditionally, it had served as a cultural bridge between East and West. It seemed like an ideal place for a MENATEP subsidiary. My Austrian attorney said there’d be no political barriers for us, but that the licensing procedure normally took upwards of two years.
Uruguay was another country I suggested. It was the banking capital of MERCOSUR, the economic union of Uruguay, Argentina, Brazil, and Paraguay. Located on a continent notorious for volatile politics and military coups, Uruguay was known as the “Switzerland of South America” because of its relative political stability.
For decades, Uruguay and Argentina had been supplying meat and leather to Eastern Bloc countries in exchange for automobiles and industrial equipment. That arrangement came to a sudden halt when the Soviet Union and its only foreign trade bank collapsed. Nobody had yet rebuilt a financial bridge between the two trading blocs, and I saw this as a fantastic opportunity for MENATEP.
With Khodorkovsky’s approval, I spoke to Uruguayan officials, who invited me to visit.
Our timing was perfect. Because it was an election year, politicians knew that resuming trade with Russia promised to improve the lives of the nation’s farmers and thus secure their votes. Interest in restoring trade with Russia was so high that Elena and I were treated as VIPs by the Uruguayan ministers. We were even issued Uruguayan passports for visa-free entry to their country.
I also recommended that Michael incorporate an offshore bank in the Caribbean. Practically all the major financial groups had offshore subsidiaries, and for a good reason: legal tax shelters.
As soon as Khodorkovsky approved my proposal, I retained Coopers & Lybrand, one of the Big Six accounting firms, and set things in motion. As a 50 percent partner in three international banks, I was certain I’d soon develop a higher net worth than before the kidnapping.
Sandbagged by the KGB
Just as things were starting to look up, I learned that Volevodz,
the Russian investigator who had assured me that justice would be
restored, was formally accusing me of having plundered $8.1 million
dollars from my own bank. Though I was bitter, I certainly wasn’t surprised. After the KGB railroaded Colonel Ivanov for “stealing” my car, I figured it was only a matter of time before similarly absurd charges were leveled against me. Stealing from myself was apparently the most imaginative crime my nemesis could devise.
Unfortunately, absurd as the charges were, it was not a laughing matter, as the major acted on orders from the new Russian Attorney General, an official so crooked that he would later be jailed for corruption.
A week after Coopers & Lybrand sent me the banking license for East European International Bank they had registered for us in Antigua, Khodorkovsky phoned with alarming news.
Michael said, “Volevodz and another colonel just stopped by to ask if I was doing business with you.”
“And?”
“I told them it was none of their business. Damned if I’m going to let two KGB clowns push me around.”
By this time, Michael had become one of the most powerful men in Russia, one of the so-called “Oligarchs” who later pulled off the almost-impossible task of getting an unpopular President Yeltsin reelected. Unfortunately, Michael had underestimated the enemy, and the KGB made him pay dearly for it.
A “classified government report” was cooked up and leaked to the international media. It falsely stated that MENATEP was the Russian Mafia’s Number One bank. The shocking news made headlines all over the world.
The damage was colossal. Apart from ruining our reputations, the KGB also scuttled our joint banking venture. No one was going to do business now with a bank that reputedly served the Russian Mob.
I could no longer appeal to Boris Yeltsin. By 1994, Yeltsin had known as well as anyone that the Russian Mafia was taking over the Russian economy, with the KGB as its brain center. A skillful politician whose only concern was staying in power, he chose to ride, rather than fight, this trend.
No prosecutions of major crimes would ever be launched under Yeltsin’s rule. The country would be allowed to remain, as Yeltsin himself worded it, “a superpower of crime.” By the end of his second term, Yeltsin and his inner circle would come to be known as “the Family.”
The End of the Partnership
Soon after the KGB killed our joint ventures, Michael and I met
again in Washington. I regretted inadvertently being the cause of the
huge damage the KGB had inflicted on his bank. I told him that, under the circumstances, it wasn’t worth continuing our partnership.
He agreed, we said our goodbyes, and I never saw him again. “I’m worried about Michael,” confided Elena after the meeting. “He’s a prime target for the Russian mob and the KGB. The popular mood in Russia has always been ‘all businessmen are exploiters and enemies of the people.’ Doesn’t he see the danger?”
“I told him all that. I also said the worst part of it is that, to stay in business, he will have to play by the new rules of the game, and they really stink. The time when it was possible to run an honest business in Russia is over.”
“Well, I’m glad we live here now,” replied Elena.
“Me, too.”
Cutting off the Oxygen
As expected, Volevodz wasn’t finished yet. Back in Russia, he
visited Greatis and pressured Nikolai into severing ties with me.
Afterwards, Nikolai called me, boiling with rage, and determined to
defy Volevodz. But I certainly didn’t want to have the demise of Greatis on my conscience, so I told him to cool it. I said I’d limit operations of Greatis USA to the domestic market, to minimize his direct involvement with me.
My business plans were shattered. The KGB had successfully derailed two ventures which could have netted me hundreds of millions. In KGB jargon, the operation against me was called “cutting off the oxygen”: deprive the target of income and supporters, and he becomes easy prey.
Meanwhile, Elena and I were making little progress in securing permanent residence in Canada. On the application form, I had to reveal that I had first visited Canada as part of President Yeltsin’s delegation, and this drew the scrutiny of the Canadian Security and Intelligence Service.
They interviewed me on four separate occasions, but my story made no sense to them. Canadian officials simply couldn’t believe that my business empire could have been stolen without a government investigation. And they couldn’t fathom how someone in his early twenties came to employ a former KGB Chairman and a host of other former top government officials.
I really couldn’t blame them. I realized that, for people who lived in a civilized country like Canada, the things that had happened to me must have sounded fantastic.
By the time I was called in for the fifth interview in Buffalo, we had already received approval of our green card application, and had decided to stay in the U.S.
Because of its security, Elena and I chose to live in the Watergate. We bought a spacious apartment, withdrew our Canadian application, and prepared to settle down.
Offshore Finance
When the KGB forced Khodorkovsky to sever ties with me, his
stock in the orphaned Antiguan bank we had established was sold to
a prominent Hungarian businessman. The new owner’s goal was to serve clients mostly from Western Europe, so he changed the bank’s
name from East European International Bank to European Union
Bank. He asked my advice on a winning strategy for his new venture and I recommended making the bank the first to be internationally accessible via computer. He loved the idea and asked me to stay on as Vice President, with the task of making this dream a reality
I still owned almost half of the bank’s stock and wanted to make sure the bank succeeded. I accepted the offer, and in October of 1994 Elena and I moved into a beautiful house in a tropical paradise. By early 1995, we were in business.
Offshore banking historically had been a perk of large corporations, financial institutions, and those wealthy enough to afford expensive tax consultants. My goal was to revolutionize the offshore financial industry by making the same information, services, and benefits available, via the nascent Internet, to the middle class.
One American bank beat us to our goal of becoming the first bank to offer Internet access, but we did manage to become the world’s first offshore bank accessible through the Net.
I proudly felt that we were revolutionizing the industry.
After the disastrous 1992 and 1994 setbacks courtesy of the KGB, things were again looking good for me. I was the co-owner of a bank poised to take a share of the enormous offshore financial market. And Elena and I were reveling in our sun-soaked Caribbean lifestyle.
Back in Russia, however, things continued to deteriorate. Russian citizens had grown weary of democratic “reforms”, and seemed to crave a strong hand that would restore order. A complete takeover of Russia by the KGB was inevitable.
I was done fighting the KGB. But, as I would soon find out, the KGB wasn’t done fighting me.
Manhunt
In May of 1995, Elena and I were having a light dinner on
our terrace, which overlooked the spectacular English Harbor in
Antigua. We had just returned from a leisurely walk along a pristine
beach near our house. As we dined, we watched the sun set over the
horizon, bathing a flotilla of yachts in the harbor with golden light.
Then the phone rang. “Hi, Alex,” said my Washington attorney, Donald Bucklin. Donald was a partner at Squire, Sanders & Dempsey, one of the country’s biggest firms. “Are you okay?”
“Yes,” I replied, alarmed by his anxious tone. “Why do you ask?”
“The FBI visited me today. They’ve just learned that the U.S. branch of the Russian Mafia has taken out a contract on you.”
“Jesus. Did the FBI say anything else?”
“Yes. They advise you not to reveal your whereabouts to anyone on the Russian side. They also confirmed your account of the kidnapping in Hungary. I’m faxing you a letter that details everything.”
“Thanks,” I replied, suddenly feeling very tired. “I’ll call you tomorrow.”
“Wait, there’s more. The FBI gave me a copy of Russian government documents you need to see. They show that the KGB is looking for you everywhere. They even tracked your phone number in Uruguay.”
Donald added that the Americans had only found out about this because of the Russian government’s request to extradite me. As soon as the Department of Justice determined that it had been made by a corrupt prosecutor on behalf of the Mafia, the extradition was denied. More than that, the Department of Justice even sent the Russian files to my attorney.
I hung up, dazed. Elena and I sat on the terrace, gazing out to the harbor. We wondered when the KGB’s persecution would end, and to which remote corner of the world we’d have to trek to be free of them.
“We can’t let them make our lives miserable,” I told Elena finally. “If that happens, then they’ve won.”
“I agree.”
Suddenly, Antigua was no longer safe. From here, I had made calls to Khodorkovsky, and those could easily have been intercepted and traced.
Antigua was too small to hide in, and the police on this laid-back resort island could provide no real protection against Mafia assassins. We had to move back to the States, where I felt law enforcement agencies could protect us. But first, I needed to create a diversion.
To throw the KGB off our trail, Elena and I flew to Austria. Knowing that news of my sudden appearance would quickly be passed along to their new bosses, I visited the offices of RosFinConsult, a company I had co-founded with a former Austrian Vice-Chancellor and Finance Minister. After the KGB took over my bank, he had resigned as chairman, but some of the original employees stayed on.
I stopped by unannounced, chatting with the staff about politics and other matters. I also casually mentioned I was very happy in my new, secluded home in the Austrian Alps.
Hoping that the KGB’s manhunt would now be centered in Austria, Elena and I returned to Washington.
I was extremely grateful that the FBI – and the Department of Justice – had gone out of their way to save our lives. What I didn’t yet know was that the FBI had since sold us out to the Russians.
Chapter Five
Russia’s Most Wanted
Bushwhacked at the Watergate
Elena and I were working in our home office at the Watergate on
June 27, 1996 Dina, the black kitten I had given her for her birthday,
two months earlier, slept on Elena’s lap. There was a knock on the door, and I got up to answer it. Through the peephole, I saw the familiar face of Charlie, the maintenance man. I opened the door.
“Immigration Service,” someone bellowed as four men in suits rushed past Charlie into our apartment. They were followed by four more suits, who stepped out of the hallway elevator. Two headed straight to our office and ordered Elena to stay put.
to be continued...s78
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