Russian Fraud Case At $15 Billion - Report

Updated 1:51 AM ET August 26, 1999WASHINGTON (Reuters) - Russian organized crime figures laundered at least $15 billion through two New York banks at the direction of President Boris Yeltsin's government, USA Today reported Thursday.

Quoting unidentified senior U.S., British and Russian law enforcement officials, the newspaper said the money might include $10 billion in International Monetary Fund loans.

The money was laundered through four accounts at the Bank of New York and one account at the Republic National Bank, also based in New York, according to the report. The officials said they do not know where the money is.

The new figure is $5 billion more than previously reported.

The officials told the newspaper all the accounts were under the name of a company called Benex Worldwide Ltd., which was founded by a leader of Russia's largest organized crime group.

Officials of Russia's prosecutor general's office and Britain's National Criminal Intelligence Service said at least five current or former members of Yeltsin's government, all of whom had access to the IMF money, are being investigated to determine their roles in laundering the money.

According to the newspaper report, they include Yeltsin's daughter and adviser Tatyana Dyachenko, his former chief of staff and Finance Minister Anatoly Chubais and former Finance Minister Alexander Livshits.

Senior officials of Russia's prosecutor general's office told USA Today that it was "hard to believe" that Yeltsin was not involved or at least not aware of what was taking place.

Russian Finance Minister Mikhail Kasyanov said Wednesday that Russia had used every cent of IMF aid as agreed and all of it had been accounted for.

Bank of New York has suspended two employees and is cooperating with law enforcement officials, but there have so far been no allegations of wrong-doing by the bank itself.

The IMF has launched its own investigation into whether any funds it lent to Russia may have been misappropriated. But the director of the fund's department dealing with Russia, John Odling-Smee, defended its record in a letter to the Wall Street Journal Europe published Tuesday.

"The fact is that IMF loans have been used for legitimate government purposes, such as helping to finance the budget deficit," he said. "They have been made in support of economic programs that addressed the basic problems of the economy."

USA Today said at least six U.S. government agencies, including the FBI and the Treasury Department, are investigating the case, along with British officials.

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When the history books are written on the world financial debacle it won't be pretty.

Ray

-- Ray (ray@tottacc.com), August 26, 1999