terrorist acts that didn't happen? The ones all the painstaking work may have prevented? In fact, most of the successes will never be made public.
Telling the story of the arrests of James Elshafay and Shahawar Matin Siraj gave the NYPD an unusual opportunity to get the word out.
Justin Kane and Jason Felch
To Catchan Oligarch
from San Francisco magazine
The strange and epic case of the United States of America versus Pavel Ivanovich Lazarenko, which this spring asked twelve Bay Area residents to decide whether the former prime minister of a country six thousand miles away had broken the nation's laws more than a decade ago, actually began one cool night in January 1998 when FBI special agent Bryan Earl paid a visit to a small Dumpster in Sausalito.
Earl is not the type to skulk under cover of darkness. A smoothfaced man with hints of gray at his temples, gentle blue eyes, and a profound sincerity, he looks more like a tax accountant than one of Louis Freeh's or Robert Mueller's blue-suited special agents. His pious demeanor hints at his Mormon upbringing on the quiet side of Las Vegas, and it's easy to picture him wandering around Mexico in a suit and tie, with a small black name tag on his chest and the Book of Mormon under his arm, as he did twenty years ago. Not the first man you would imagine in the FBI, he is the first man you would want working there-the embodiment of God, family, and country.
At age thirty-two, tired of practicing corporate law in D.C., he had sent an application to the FBI on a whim and then surprised himself by joining up. A year later, as a rookie fresh out of Quantico, he found himself in San Francisco, eventually part of the FBI's local ten-member Eurasian Organized Crime Squad, investigating financial fraud and money-laundering schemes linked to the former Soviet Union and, in some cases, the infamous Red Mafiya. Earl enjoyed being part cop, part missionary, spreading the gospel of the American legal system among former communists for whom the distinction between politics, business, and crime had fallen with the Berlin Wall.
In late 1997, Earl had been handed the name of Peter Niko-layevich Kiritchenko, a Sausalito businessman whom Ukrainian authorities had asked the FBI to check out. It was a routine foreign police request, the kind, Earl's supervisor would later say, that most FBI agents would fulfill and forget. According to the Ukrainians, Kiritchenko had come up in the early stages of a Ukrainian investigation into the just-deposed prime minister, Pavel Lazarenko. At the time, Ukraine was a new ally of the United States, helping reduce the dangerous stockpile of nuclear weapons in the former Soviet Union, and nobody wanted to endanger the fragile relationship that had been forged with Ukraine's autocratic president, Leonid Kuchma. Lazarenko was Kuchma's biggest political rival. Many Ukrainians considered the investigation into the upstart presidential challenger to be a politically motivated ploy.
But Earl pushed on. By January 1998, he had pieced together an outline of Peter Kiritchenko's story. Three years earlier, Kirit-chenko had uprooted his life as a middle-aged Ukrainian commodities trader in Warsaw to move his wife, daughter, and business to the Bay Area. A compact man with sandy blond hair, cheeks ruddy from vodka, and a taste for excess, Kiritchenko stuck out in San Francisco's Russian-speaking community. He drove a burgundy Bentley and, on a two-acre lot high atop Tiburon, was building a Mediterranean-style mansion with a 360-degree view of three bridges that he dubbed Shangri-la. His neighbors knew him from his petition asking the city to let him install a shooting range in the basement. Meanwhile, he had invested about $25 million in local real estate, snapping up a Sausalito condo, two small San Francisco apartment buildings, and over eighty undeveloped acres in Tiburon. The Ukrainian, Earl thought, was worth a closer look.
At 10:00 p.m. one weeknight that January, Earl tucked his young child into bed, kissed his wife good night, and slipped into jeans and a sweatshirt. From his home in the city, he drove north across the Golden Gate Bridge into the hulking darkness of the Marin Headlands, following the necklace of lights to the Sausalito shoreline. From Bridgeway he turned onto Harbor Drive and pulled his standard-issue domestic sedan into the empty parking lot of the brown three-story office building at One Harbor Drive. In a Dump-ster at the back of the lot, he found a single trash bag with the day's detritus from Kiritchenko's office. He tossed it in his trunk and drove away. No search warrant needed. By eleven, Earl was home in bed.
The 'trash cover,' as agents call it, became Earl's nightly routine. Every weekday morning for eighteen months he would bring the bag thirteen floors up the elevator of the Phillip Burton Federal Building on Golden Gate Avenue and dump its contents on his desk. Occasionally Earl felt silly taking off his suit jacket to sift through garbage like a Tenderloin hobo. His colleagues ribbed the rookie for the mess he made. But it was fruitful. The trash yielded clues- envelopes from something called European Federal Credit Bank; a Post-it note with the word Dugsbery scrawled on it; envelopes bearing the return addresses of some of San Francisco's most respected banks. All of it suggested to Earl that the Ukrainians could be right-there appeared to be a multimillion-dollar pipeline between Ukraine and the Bay Area.
Among San Francisco's thirty thousand Russian-speaking emigres-many of whom are Jews and political refuseniks who arrived as refugees over the past thirty years and congregate in the bakeries, churches, and restaurants along Geary Boulevard-only a small number have attracted the attention of the Eurasian Organized
Crime Squad. In the 1970s, the KGB released thousands of hardcore prisoners from the Soviet gulags, where they had formed tight-knit criminal clans, and allowed them to emigrate across the globe. Over time these clans evolved into the sophisticated Russian Mafiya, operating multinational drug, prostitution, and insurance and welfare fraud rings, among other enterprises. The California Department of Justice has reported that Russian criminal groups are operating in California, including 'approximately three hundred former Soviet Union crime figures and associates in the San Francisco Bay Area.' Many are from the Ukraine, members of an offshoot of the Odessa Mafiya.
The Bay Area, one of the world's banking hubs as well as home to many Russian-speakers, has become a favorite place for the Mafiya to launder some of its global take. Much of the EOC squad's work involved tracking that money down. For example, as Earl staked out Kiritchenko's Dumpster by night, by day he was helping investigate a young Russian emigre, Alexander Lushtak, who had bilked the local Russian community out of millions with an elaborate Ponzi scheme that promised tax-free returns of up to 25 percent. Lushtak pleaded guilty in June 2000 to money laundering. During his trial, according to one published report, an FBI memo emerged claiming Lushtak had laundered as much as half a billion dollars of Russian organized-crime money through his bank account in New York.
But not all the Russian loot that has flooded into San Francisco comes from the Mafiya. As the Soviet Union collapsed, state-owned industries were divvied up among politicians, crooks, and entrepreneurs. These new oligarchs built a Wild West capitalist economy in which pay-to-play was the rule. Government contracts, international trade deals, the rights to natural resources-every potential profit came at a price. Later, as the young countries tried to impose the rule of law on the chaotic system, the oligarchs responded by spiriting their politically embarrassing fortunes out of the country and into banking systems where they couldn't be touched.
It was an influx for which Earl was prepared. His course work in international and Soviet law at Columbia University Law School and experience in financial litigation made him an immediate asset to the squad, and he began taking Russian classes. Earl knew that investigations into complex financial crimes-considered among the FBI's most challenging-hew to a single axiom: follow the money. The scraps from Kiritchenko's office that Earl riffled through each day were threads in a dense web of holding companies, offshore corporations, and beneficial trusts. It looked designed to disguise something, but what was this small-time trader hiding?
It was no secret that Kiritchenko advertised his ties to Pavel Lazarenko, handing out gold-embossed business cards reading: adviser to the prime minister. In photos, Lazarenko-who was said to have accumulated up to a billion dollars, despite earning about five thousand dollars a year in government salary-towered over the crowds gathered to see him, an unnerving glare on his fleshy face. He was a bear of a man, about six-foot-three, counting his full, starchy head of hair.
The prime minister had begun his career driving a tractor on a collective farm, but by age twenty-four, 'Pasha,' as his friends called him, had already become the powerful director of a state farm in the Soviet Republic of Ukraine. By thirty-three, he headed all agriculture in his home region of Dnepropetrovsk. Even the fall of the Soviet Union in 1989 did not slow Lazarenko's rise. A year after Ukraine declared its independence, he was appointed governor of Dnepropetrovsk, and by 1996, Lazarenko had moved to Kiev to accept the premiership, the second most powerful man in a nation of fifty million. He was forty-three.
'He had an aura,' recalls Olena Prytula, a leading Ukrainian journalist. Prytula came to Stanford University on a fellowship this year and was one of the few Ukrainians to cover Lazarenko's trial. She first met Lazarenko in 1996 at a ceremony outside of Kiev commemorating the Soviet victory over Germany. 'He looked like the devil to me. I thought, 'This man is capable of killing someone,' ' she says. 'He would say something, and everyone would do it immediately. All of the journalists called him haziain, master.'
Kiritchenko always called Lazarenko not Pasha but Pavel Ivanovich. The use of the formal patronymic made it clear who held the power. But Kiritchenko's connection to the Ukrainian leader wasn't just business. At the same time Earl began investigating, Lazarenko had flown from Ukraine to San Francisco to attend the christening of Kiritchenko's first granddaughter. During a simple ceremony at St. Nicholas Cathedral, a cozy Russian Orthodox Church on Fifteenth and Church Streets, Pavel Lazarenko was named the child's godfather.
Afterward, at a party Kiritchenko hosted at the now-defunct Mediterranean restaurant Splendido in Embarcadero Center, the two men traded toasts, thanking each other for years of business success. After the toasts, Lazarenko and Kiritchenko began singing together. There had been much wine and vodka, but the song was not a drunken one. It was an old Ukrainian song, soft and heartfelt, a song about never-ending loyalty. 'More than best friends, they were brothers,' says a Ukrainian who was there.
Yet as Earl spent the summer investigating Kiritchenko, Lazarenko, safely outside U.S. jurisdiction, remained in the background. That changed, however, when an obscure company called Dugsbery Incorporated closed a deal with Marin County real estate agent Nan Allen to purchase a $6.75 million Novato estate once occupied by comedian Eddie Murphy. Rumor had the buyers as Russians.
dugsbery-Earl had seen the word scrawled on a Post-it note in Kiritchenko's trash. From the public record, he'd discovered it was a shell company owned by Kiritchenko with a single account at WestAmerica Bank. Kiritchenko was already building his Shangri-la. Why would he need an even bigger mansion, with twenty rooms, five swimming pools, two helicopter landing pads, a full-sized ballroom, gold-plated doorknobs, and a master bedroom larger than entire Nob Hill apartments?
The answer was in the news. Back in Ukraine, the godfather was in a fight for his life. Now he had a hideout, just in case.
Earl was eager to explore the Ukrainian connection himself. In December 1998, he boarded a commercial flight to Kiev with Martha Boersch, an assistant U.S. attorney with the San Francisco Organized Crime Strike Force, who had been assigned to work with him just days earlier. Like Earl, Boersch was well suited to the case, and a lot less green. A graduate of Berkeley's Boalt law school, she had been a government prosecutor for six years, had already won a number of complex fraud cases, and was lead attorney on Lushtak's Ponzi-scheme prosecution. She also spoke Russian.
On the flight, Earl updated Boersch. A month earlier his findings had been included in an FBI memo requesting help from Swiss authorities who were investigating Lazarenko's and Kiritchenko's numbered Swiss bank accounts. It was titled simply 'Re: Peter Kiritchenko, Russian Organized Crime' and laid out the FBI's ideas: While living in Warsaw, Kiritchenko had been 'involved in myriad criminal schemes,' including moving millions in 'stolen Ukrainian government funds.' He disguised the money as trade in ferrous metals, wheat, and sunflower seeds. He was also suspected of selling prefabricated houses made in Elk Grove, California, to the Ukrainian government at almost a 200 percent markup using falsified invoices.
Earl's most intriguing find, however, came from a discarded FedEx envelope from European Federal Credit Bank. The offshore bank based in Antigua had been cofounded by someone Earl and Boersch knew well, Ponzi schemer Alexander Lushtak. It was now chaired by Alex Liverant, a Ukrainian Jew who had immigrated to San Francisco in 1979. When EuroFed needed capital, Earl had learned, Kiritchenko became its primary investor and was now sharing a business address with Liverant. Under Kiritchenko's watch, EuroFed began opening U.S. dollar correspondent and investment accounts in San Francisco financial institutions big and small: Merrill Lynch, Bank Boston Robertson Stephens, Hambrecht and Quist, Pacific Bank, and Commercial Bank of San Francisco. The memo concluded that
'millions of dollars have been obtained illegally' and that Kiritchenko was using EuroFed to 'minimize his tax exposure in the U.S.'
It was a classic money-laundering case, Boersch thought- moving the proceeds of certain illegal activities through U.S. financial institutions with the intent to conceal their origins. But there was one huge twist: the money wasn't the proceeds of crimes committed here. The alleged frauds all had taken place in Ukraine.
