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Lost Gems Bought Firm Life of Luxury

SAN FRANCISCO -- In the months after the collapse of the Soviet Union, Golden ADA emerged among the crop of new companies seeking fortunes from the marriage of Russian raw materials and Western know-how.

Golden ADA boasted the best asset a Russian business could have: personal connections to President Boris Yeltsin's government.

Russia shipped hundreds of millions of dollars in uncut diamonds to the San Francisco company, which was supposed to cut, polish and return them.

But few, if any, ever returned. Now, up to $400 million in diamonds, gold and cash has vanished from Golden ADA, and federal investigators suspect the Russian mob stole the riches. The company's Russian owner, Andrei Kozlenok, is also missing.

Investigators want to know where the valuables are and why Russia continued to ship them even though the company had failed to pay.

Russia contends Golden ADA illegally sold its diamonds and kept the cash. Some of the money apparently helped buy a stunning array of luxury items, including a Faberge egg created for Tsar Nicholas II, a $377,000 Rolls Royce, nine speedboats, a $20 million Learjet and a $4.4 million Lake Tahoe estate used in "The Godfather Part II," outside auditors found.

Kozlenok, a relative of Yeltsin's Deputy Finance Minister Anatoly Golovaty, also used his money to buy connections on this side of the Pacific. Golovaty refused a request for an interview.

After it was launched in 1992, Kozlenok's company showered California politicians with money, including $25,000 to the failed gubernatorial campaign of Kathleen Brown and thousands more to state and city politicians.

In January 1995, Kozlenok recruited two well-connected San Francisco politicians to rescue his company after Russia in mid-1994 finally cut off further shipments and demanded an accounting of the gems and money. He hired veteran state Senator Quentin Kopp, a powerful California legislator, as corporate counsel, and made Jack Immendorf chief executive. Immendorf was then-Mayor Frank Jordan's campaign finance chairman and still heads the city Recreation and Park Commission.

In a February 1995 letter to Yeltsin, Immendorf warned that Golden ADA would fail disastrously if Russia did not resume shipments of diamonds. But the appeal was unsuccessful.

Until the shipments were cut off, Russia kept sending the gems because "it was a question of trust,'' said Russia's California attorney, Mark Beck. Russia's diamond marketing agency has admitted shipping at least $178 million in uncut diamonds, gold coins and other valuables to Golden ADA without pre-payment or security, in violation of its own rules.

Diamond industry experts say the embarrassed Russian government may be concealing its real losses, which could hit $400 million.

Political pressures both in Moscow and Washington could smother the U.S. investigation, which gives ammunition to Yeltsin's opponents in Russia's presidential elections in June. Yeltsin's critics have repeatedly accused his government of corruption and of helping to plunder Russia's vast natural resources.

One federal law enforcement official who spoke on condition of anonymity said the U.S. investigation was going slowly because "there is concern in Washington."

Immendorf and Kopp left the company shortly before Russia filed a lawsuit in October and the IRS raided Golden ADA's headquarters in November, seizing its remaining assets for $63 million in unpaid taxes. Investigators are now trying to determine whether Russian organized crime siphoned off Golden ADA's assets. Immendorf blames Russian incompetence, not crime, for Golden ADA's woes.

Louise Shelley, an American University professor and an expert on Russian organized crime, said she told the FBI last year that the case has the earmarks of Russian organized crime. "It's not the Mafia along the Italian model or U.S. model," she said. "In Russia, you have high-level corruption linked with organized crime. And they will strong-arm anybody who gets in their way."

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