A U.S. news magazine reported this week that Russia's inclusion on a money-laundering blacklist was lobbied for by U.S. officials because of President Vladimir Putin's alleged ties to a St. Petersburg real estate developer whose co-founder was indicted last month on fraud and money-laundering charges in Europe. However, financial security officials responsible for the list refuted the report, saying the reasons for placing Russia on the list were much broader.
Quoting an unnamed "former top U.S. official," Newsweek reported that "a key reason" for including Russia on the blacklist ?€” issued by the Paris-based Financial Action Task Force in June 2000 ?€” was "a sheaf of intelligence reports linking Putin to SPAG," a German-Russian joint venture founded in 1992 with cooperation from the St. Petersburg city government, where Putin served at the time.
SPAG, the German acronym for St. Petersburg Immobilien und Beteiligungs AG, re-entered the media spotlight when one of its founders, Rudolf Ritter, was arrested in May 2000 in Liechtenstein on charges of financial machinations, money laundering and ties with organized crime.
Shortly after Ritter's arrest, the French daily Le Monde broke the news of Putin's ties to SPAG, which bought and developed property in St. Petersburg at a time when Putin headed City Hall's External Economic Relations Committee from August 1991 to July 1996. Le Monde wrote that Putin and Trade and Economic Development Minister German Gref, then also a member of the city government, served as SPAG's unpaid "advisers." More important, the paper cited a 1999 report by the BND, Germany's secret service, as saying that Russian criminal groups had transferred money to SPAG through a Romanian bank for the purchase of real estate in Russia.
The BND could not be reached for comment and has never made its report public. But Le Monde and Germany's Der Spiegel have both reported that the agency has been exerting pressure on Liechtenstein, a notorious financial haven, to clean up its act and prosecute white-collar criminals.
According to legal documents provided to The Moscow Times by Ritter's lawyer Hermann Boeckle, Ritter, a national of Liechtenstein who runs at least 24 trust funds there, was indicted July 13. In a telephone interview from the capital Vaduz, Boeckle said that his defense team had chipped away at many of the charges against Ritter in hopes of keeping the case out of criminal court.
The Newsweek report, slated for the magazine's Sept. 3 issue and posted on its web site this week, said that Putin maintained regular contacts with some of SPAG's key officials and "even signed important St. Petersburg city documents for the company's benefit."
The Kremlin has denied that Putin worked for SPAG, 25 percent of which is owned by Munich-based securities bank Baader Wertpapierhandelsbank AG.
SPAG spokespeople have said Putin and other city officials maintained the kinds of ties with the company that were necessary to attract foreign investors to Russia in the early and mid-1990s.
In its May 2000 article, Le Monde quoted SPAG director Markus Rese as saying that both Putin and Gref had vague adviser status and provided the firm with "some kind of patronage."
Nikolai Maximov, the general director of Real Estate Projects & Investments Management Ltd. ?€” which has been trying to develop one of SPAG's biggest projects, the Znamenskaya shopping mall, now known as the Nevsky Trade Center, in downtown St. Petersburg since 1995 ?€” said Putin, Gref and other top officials from the city's property, architecture and construction committees were listed as SPAG advisers to give the project credibility when it was presented in Germany to potential investors.
"At that time support by top city officials for the project meant a lot to investors," Maximov said in a recent interview. He added that the role of such officials was to "explain different legal and property issues."
"They answered us just because it was their job," Maximov said. "But they have never been paid for anything."
Both Le Monde and Newsweek raised the issue of Putin's ties to SPAG's then-general director Vladimir Smirnov, who now serves in the Kremlin's property management department, and Smirnov's alleged ties to the powerful Tambov organized crime group, which has been reported to have great influence over St. Petersburg's government.
"The real key to the mystery surrounding Putin's role may be the relationship between him and the ambitious entrepreneur Smirnov," Newsweek wrote, adding that in 1994 Putin transferred the city's 200 shares in SPAG in trust to Smirnov to vote on the city's behalf.
Smirnov was not available for comment.
"He [Smirnov] provides us, the government and the presidential administration with stationery," said Sergei Grigoryev, a spokesman for the property department. "We are tired of these allegations. There have been hundreds of commissions and investigative teams in St Petersburg. Nothing criminal has been found."
Ritter's lawyer Boeckle said that his client is now facing only two charges. One involves machinations with SPAG shares that, prosecutors say, defrauded buyers of 300,000 Deutsche marks.
The second charge, which involves money laundering, has nothing to do with SPAG, according to Boeckle.
The lawyer said that prosecutors have accused Ritter of accepting $1.4 million given to his investment funds by Juan Carlos Saavedra, who law enforcement officials say works for Colombia's Cali drug cartel.
Boeckle said the cash was brought in bags from Milan and Madrid over the Liechtenstein border ?€” "which is not too unusual and of course is not illegal." He added that Ritter took Saavedra for an honest businessman and did not know about any of his alleged ties to drug dealers.
Boeckle also said that an appeals hearing could take place as early as this week and that he expects the remaining charges against his client will be dropped.
As far as Russia's blacklisting is concerned, Alison Benney, a spokeswoman for FATF, said in a telephone interview from Paris that the Putin-SPAG connection is not among the reasons that Russia was placed on the list.
"The reasons are much broader and they are all listed in our report issued June 22," she said.
The report says that Russia meets 10 criteria for defining "non-cooperative countries," including:
?€? absence of or ineffective regulations and supervision for all financial institutions;
?€? existence of anonymous accounts or accounts in obviously fictitious names;
?€? absence of an efficient mandatory system for reporting suspicious or unusual transactions to a competent authority;
?€? lack of monitoring and criminal or administrative sanctions in respect to the obligation to report suspicious or unusual transactions;
?€? obvious unwillingness to respond constructively to requests;
?€? inadequate or corrupt professional staff in either governmental, judicial or supervisory authorities;
?€? lack of a centralized unit or of an equivalent mechanism for the collection, analysis and dissemination of suspicious transactions information to competent authorities.
Quoting an unnamed "former top U.S. official," Newsweek reported that "a key reason" for including Russia on the blacklist ?€” issued by the Paris-based Financial Action Task Force in June 2000 ?€” was "a sheaf of intelligence reports linking Putin to SPAG," a German-Russian joint venture founded in 1992 with cooperation from the St. Petersburg city government, where Putin served at the time.
SPAG, the German acronym for St. Petersburg Immobilien und Beteiligungs AG, re-entered the media spotlight when one of its founders, Rudolf Ritter, was arrested in May 2000 in Liechtenstein on charges of financial machinations, money laundering and ties with organized crime.
Shortly after Ritter's arrest, the French daily Le Monde broke the news of Putin's ties to SPAG, which bought and developed property in St. Petersburg at a time when Putin headed City Hall's External Economic Relations Committee from August 1991 to July 1996. Le Monde wrote that Putin and Trade and Economic Development Minister German Gref, then also a member of the city government, served as SPAG's unpaid "advisers." More important, the paper cited a 1999 report by the BND, Germany's secret service, as saying that Russian criminal groups had transferred money to SPAG through a Romanian bank for the purchase of real estate in Russia.
The BND could not be reached for comment and has never made its report public. But Le Monde and Germany's Der Spiegel have both reported that the agency has been exerting pressure on Liechtenstein, a notorious financial haven, to clean up its act and prosecute white-collar criminals.
According to legal documents provided to The Moscow Times by Ritter's lawyer Hermann Boeckle, Ritter, a national of Liechtenstein who runs at least 24 trust funds there, was indicted July 13. In a telephone interview from the capital Vaduz, Boeckle said that his defense team had chipped away at many of the charges against Ritter in hopes of keeping the case out of criminal court.
The Newsweek report, slated for the magazine's Sept. 3 issue and posted on its web site this week, said that Putin maintained regular contacts with some of SPAG's key officials and "even signed important St. Petersburg city documents for the company's benefit."
The Kremlin has denied that Putin worked for SPAG, 25 percent of which is owned by Munich-based securities bank Baader Wertpapierhandelsbank AG.
SPAG spokespeople have said Putin and other city officials maintained the kinds of ties with the company that were necessary to attract foreign investors to Russia in the early and mid-1990s.
In its May 2000 article, Le Monde quoted SPAG director Markus Rese as saying that both Putin and Gref had vague adviser status and provided the firm with "some kind of patronage."
Nikolai Maximov, the general director of Real Estate Projects & Investments Management Ltd. ?€” which has been trying to develop one of SPAG's biggest projects, the Znamenskaya shopping mall, now known as the Nevsky Trade Center, in downtown St. Petersburg since 1995 ?€” said Putin, Gref and other top officials from the city's property, architecture and construction committees were listed as SPAG advisers to give the project credibility when it was presented in Germany to potential investors.
"At that time support by top city officials for the project meant a lot to investors," Maximov said in a recent interview. He added that the role of such officials was to "explain different legal and property issues."
"They answered us just because it was their job," Maximov said. "But they have never been paid for anything."
Both Le Monde and Newsweek raised the issue of Putin's ties to SPAG's then-general director Vladimir Smirnov, who now serves in the Kremlin's property management department, and Smirnov's alleged ties to the powerful Tambov organized crime group, which has been reported to have great influence over St. Petersburg's government.
"The real key to the mystery surrounding Putin's role may be the relationship between him and the ambitious entrepreneur Smirnov," Newsweek wrote, adding that in 1994 Putin transferred the city's 200 shares in SPAG in trust to Smirnov to vote on the city's behalf.
Smirnov was not available for comment.
"He [Smirnov] provides us, the government and the presidential administration with stationery," said Sergei Grigoryev, a spokesman for the property department. "We are tired of these allegations. There have been hundreds of commissions and investigative teams in St Petersburg. Nothing criminal has been found."
Ritter's lawyer Boeckle said that his client is now facing only two charges. One involves machinations with SPAG shares that, prosecutors say, defrauded buyers of 300,000 Deutsche marks.
The second charge, which involves money laundering, has nothing to do with SPAG, according to Boeckle.
The lawyer said that prosecutors have accused Ritter of accepting $1.4 million given to his investment funds by Juan Carlos Saavedra, who law enforcement officials say works for Colombia's Cali drug cartel.
Boeckle said the cash was brought in bags from Milan and Madrid over the Liechtenstein border ?€” "which is not too unusual and of course is not illegal." He added that Ritter took Saavedra for an honest businessman and did not know about any of his alleged ties to drug dealers.
Boeckle also said that an appeals hearing could take place as early as this week and that he expects the remaining charges against his client will be dropped.
As far as Russia's blacklisting is concerned, Alison Benney, a spokeswoman for FATF, said in a telephone interview from Paris that the Putin-SPAG connection is not among the reasons that Russia was placed on the list.
"The reasons are much broader and they are all listed in our report issued June 22," she said.
The report says that Russia meets 10 criteria for defining "non-cooperative countries," including:
?€? absence of or ineffective regulations and supervision for all financial institutions;
?€? existence of anonymous accounts or accounts in obviously fictitious names;
?€? absence of an efficient mandatory system for reporting suspicious or unusual transactions to a competent authority;
?€? lack of monitoring and criminal or administrative sanctions in respect to the obligation to report suspicious or unusual transactions;
?€? obvious unwillingness to respond constructively to requests;
?€? inadequate or corrupt professional staff in either governmental, judicial or supervisory authorities;
?€? lack of a centralized unit or of an equivalent mechanism for the collection, analysis and dissemination of suspicious transactions information to competent authorities.