That didn't matter, Boersch argued. Read liberally, the criminal code implied that anyone in the world who committed fraud or extorted money could be charged with money laundering if they ever brought that money here. This was a daring approach-so daring it had never been tried in U.S. courts.
Armed with their novel legal theory, Boersch and Earl arrived jet-lagged at the Kiev airport for what they thought would be a low-profile trip to meet with Ukraine's government investigators and confirm their ideas about Kiritchenko. They were greeted by a crowd of people waving signs and chanting, 'Free Lazarenko!'
Boersch and Earl were stunned when their hosts explained that while they had been in the air, the Swiss investigators tracking Lazarenko's assets had charged the presidential challenger with money laundering in Switzerland. Since Lazarenko had left office the previous year under a haze of allegations, the Swiss and a team of about fifty Ukrainian investigators had dogged him even as his opposition party won a bloc of seats in Parliament. The Swiss were expected in Kiev any moment.
The turn of events transformed the fact-finding trip into a multinational swap meet, with the Swiss, Ukrainian, and American investigators exchanging leads in their overlapping investigations. Boersch and Earl spent their days bundled in winter clothes in an unheated interrogation room interviewing potential witnesses. The witnesses explained how Lazarenko used his political power to direct government contracts for housing to Kiritchenko. From the
Swiss, the pair soon learned that before Kiritchenko had invested close to $100 million in EuroFed, Lazarenko had asked for $96 million in cash from his Swiss accounts before settling on withdrawing two $48 million bearer checks.
Earl is a family man through and through, and he missed his kids-he'd just had his second-during his trip. But he was picking up Russian and also enforcing criminal law in an exotic foreign locale, which he loved. 'It was snowy and there were beautiful parks, big trees,' he says. 'In Dnepropetrovsk I'd go run in the mornings, freezing cold. My Ukrainian people thought I was crazy.' On the drive back from the provincial capital to Kiev, he says, 'everybody was out ice fishing, and we'd stop by these little markets and look at all these big fish. It was an experience.'
At night, the Ukrainians hosted elaborate six-hour banquets to celebrate the historic cooperation. For a country whose criminal corruption makes it 'the epicenter for global badness,' in the words of a former State Department official, teaming up with the FBI was a sign of acceptance. The vodka toasts continued to midnight, and Earl, who doesn't smoke or drink, was obliged to attend. His fascination with two things Russian began to wane. 'It's a game-let's see who can outdrink who-but I don't think they enjoy it,' he says. 'And the pickled food! It's their history, how they preserved stuff. But it's horrible.'
Soon after Earl returned home, he found his investigation turned on its head. Lazarenko's wife, Tamara; son, Oleksandr; and twin daughters, Katya and Lessia, had moved into the Novato mansion. With the Ukrainians' legal vise closing in, the oligarch was feathering his nest. Earl put Lazarenko's name on an FBI watch list that would alert him the moment the former prime minister stepped on a plane to the United States.
The call came just a month later. As Kuchma's 'anticorruption' campaign came to fruition, Ukraine's parliament voted to revoke Lazarenko's immunity from prosecution. The politician fled to Athens and on February 19, 1999, boarded a plane bound for JFK
International Airport. Earl knew he was coming before Lazarenko had fastened his seat belt.
Suddenly the routine police request had exploded into the biggest case in the Eurasian Organized Crime Squad's history and one of the highest-profile cases within the FBI.
When INS agents briefed by Earl greeted Lazarenko at the arrival gate, the imperious Ukrainian immediately requested political asylum. He would take his chances on America's legal system rather than Ukraine's or Switzerland's.
On the face of it, Lazarenko's application for political asylum had some validity. He had been running for president as a reformer against a brutal autocrat who wanted him in jail or dead. Some Ukrainians suspected Lazarenko's only crimes were failing to share his 'profits' with Kuchma, and then having the audacity to use that money to run against him for president. In audiotapes secretly recorded by a bodyguard of the president and first released in November 2000, Kuchma can be heard mentioning Lazarenko as an oligarch whose demise might conveniently satisfy the American government, which was pushing him to do something about the country's rampant corruption. 'Who from the oligarchs?' an aide asks. 'Who embarrasses you most of all? Whom can I give to the American intelligence?' (The same tapes revealed Kuchma authorizing the sale of stealth radar to Saddam Hussein and allegedly ordering the death of a top Ukrainian journalist-the cofounder of Olena Prytula's publication-who was later found beheaded in a forest outside Kiev.) Lazarenko was no saint, but some observers wondered if the United States had been conned into doing Kuchma's dirty work.
Lazarenko's arrival, meanwhile, threw the U.S. government into a tizzy. Ukraine was calling for his head, and the Swiss were preparing to file for his extradition. While the State Department madly debated the options, Lazarenko was detained until his asylum petition was considered. At his own request, he was transferred to Marin County Jail so he could be closer to his family. He was eventually moved to the Camp Parks Federal Correctional Institution in the Contra Costa County town of Dublin.
For Earl and Boersch, Lazarenko's surprising appearance was also problematic. He had always been a secondary concern in the investigation. Most of the evidence Earl had accumulated against Kirit-chenko implicated Lazarenko, but there was not enough for an indictment against either of them.
Still, the endgame was on. Earl's Swiss colleagues had gathered enough evidence to include Kiritchenko in their case against Lazarenko and asked the agent to present the extradition warrant. One morning at 6:00 a.m., Earl knocked on the door of Shangri-la, finally coming face-to-face with a bleary-eyed Kiritchenko. After eighteen months, his covert investigation had just become overt.
Earl's Victory was tempered by a decision by the Bureau of Prisons, which, over the objections of Earl and Boersch, put Peter Kiritchenko and Pavel Lazarenko in the same jail cell at Camp Parks, two miles from downtown Dublin and thirty long miles from Shangri-la. For six months, the two men would spend all day together plotting a defense.
Their confinement was a classic example of what game theory calls, with good reason, the prisoner's dilemma. Given two prisoners, both implicated heavily in a case, the best group outcome is achieved if they refuse to cooperate with the prosecution. But while sticking together may save them both, each prisoner knows the surest ticket to freedom-or a favorable plea bargain-is to betray the other.
Under these psychologically grueling conditions, paranoia set in. Though the available evidence indicates that Lazarenko had not met with Earl or Boersch to discuss cooperating, Kiritchenko believed he was about to be betrayed and did the only rational thing. He asked for a meeting with Earl and Boersch. Earl did not want to give up on prosecuting Kiritchenko, whom the FBI not only suspected of masterminding the money laundering but was investigating for deeper connections to Russian Mafiya. But Kiritchenko was what the case against the bigger fish needed: an eyewitness who could put a human face on the complex financial transactions for a jury.
The government's ultimate offer hinted at just how badly it needed him. He would cop to one felony count of interstate transportation of stolen property, for which he would be allowed to appeal any sentence over thirty-seven months. But when it was all over, he and his wife and daughter would go back to their enviable lives unscathed and with guaranteed green cards to boot. Apart from a $3 million 'voluntary restitution,' he'd be allowed to keep everything he owned: his $11 million Shangri-la, all his businesses and other properties-including a $3 million condo in Los Angeles-and his yacht. After accepting the offer, Kiritchenko packed up his belongings and walked out of the cell with Lazarenko watching. He had won his freedom-and broken his brotherhood- by telling Earl where the money had come from and gone.
Itwas quite a tale. As the Soviet Union crumbled, Kiritchenko, a low-level Communist functionary, had rushed into the void left by the central government, hoping to set up a small import-export company to trade in the resource-rich Dnepropetrovsk region. He learned that the regional governor, Lazarenko, controlled everything and demanded a cut of the business done on his turf. On January 13, 1993, Kiritchenko met with Lazarenko in a Warsaw hotel. The two walked to a nearby financial institution called American Bank in Poland, and the trader gave the governor $40,000 to open a dollar account. It was a down payment, Kiritchenko said. As they left the bank, Lazarenko told him, 'I work with everyone fifty-fifty.' For the next five years, Kiritchenko faithfully sent half of his profits to Lazarenko, who in return made Kiritchenko a very rich man.
When Earl and Boersch heard that story, they saw the potential underlying crime under Ukrainian law. As long as they could convince a jury that the lowly commodities trader had been, in that moment, victimized by the all-powerful politician's scheme, it was extortion. Alone, that seemed enough to pursue the money-laundering charge.
Yet the rest of Kiritchenko's story complicated matters, for it was not a victim's tale. He quickly became Lazarenko's partner, often traveling between Marin County and Europe to serve as bagman. Well acquainted with European banking, he opened Swiss bank accounts, making sure money from Lazarenko's rapidly growing wealth was flowing smoothly out of Ukraine. The two men flew together to Panama to purchase Panamanian passports for $100,000 (to allow them to travel on the down-low), to Switzerland to meet with their bankers, and to Hawaii and Canada to vacation with their families. It was a deal so sweet that Kiritchenko forgot to stop paying Lazarenko when he was booted out of office.
When Lazarenko became a political hot potato, Kiritchenko's importance to his patron only grew, he told Earl and Boersch. Now the safety of Lazarenko's wealth depended on him. With investigators breathing down Lazarenko's neck, Switzerland was no longer a haven. That's when Kiritchenko approached Liverant, the co-owner of EuroFed, and bought a discreet place to stash money. After a quick trip to Antigua to check out EuroFed's books, Kiritchenko paid $1.1 million for two-thirds of the bank. Soon the two $48 million checks withdrawn from the Swiss accounts poured through the Bahamas and into EuroFed.
Earl and Boersch thought they had more than enough. They approached Robert Mueller, who was then head of the U.S. attorney's office in San Francisco, and presented their case.
Mueller's reply: 'Go ahead. Indict.'
The grand jury indictment of Pavel Lazarenko came down in May 2000, charging him in a sweeping conspiracy to launder what eventually became $114 million through San Francisco financial institutions. It would be an international prosecution the likes of which had never been seen. The last time the government had put a former head of state on trial, armed forces had invaded Panama in Operation Just Cause to capture General Manuel Noriega. This time, the government enlisted a Bay Area jury to call a former prime minister to account.
Even so, the prosecution's case shared elements of a foreign invasion. It represented a zealous expansion of American jurisdiction across the world. If Lazarenko was convicted, it would give U.S. attorneys the authority to judge whether anyone anywhere had committed fraud or extortion under their own nation's legal code, and then to hold them accountable in U.S. courts, as long as their money had moved through ubiquitous dollar accounts.
The world's crooks and their cronies weren't the only ones watching Lazarenko's case. Anyone in America who moves large, sometimes mysterious sums for a living, including investment bankers and real-estate brokers, had a stake in the outcome. It's illegal to deliberately ignore the tainted source of a deposit. So far the FBI and IRS have worn kid gloves on such 'willful blindness' cases, never once criminally charging a U.S. bank in a money-laundering case. Still, finance watchers have wondered if the winds could shift. (In this case, the city's bankers were never called to testify. Yet in August the Justice Department launched a criminal probe into a Washington, D.C., bank's possible role in laundering money for former Chilean dictator Augusto Pinochet and other foreign officials.)
Lazarenko would not go down without a brawl. The millions in his EuroFed accounts had been frozen in Antigua, but he still had hundreds of millions hidden out of the United States' reach and spent it freely. From jail, he hired a string of the Bay Area's top defense attorneys to argue the United States was overstepping its bounds, craftily dragging out the trial's approach each time he changed horses. Over the course of three and a half years, University of San Francisco Law School dean Joseph Russoniello, East Bay defense attorney Cristina Arguedas, who assisted on the O. J. Simpson case, and Harold Rosenthal, who handled the Billionaire Boys Club case, all came and went.
Eventually Lazarenko assembled a dream team. Dennis Riordan, Rosenthal's partner and ranked among the nation's best appellate lawyers, was in charge of motions and legal arguments. From behind thick, oversized glasses, Daniel Horowitz, a death-penalty lawyer and occasional TV commentator, conducted depositions of foreign witnesses in Ukraine and across Europe. Then, three months before the trial began, Doron Weinberg, a tough and preen-ingly confident civil rights attorney turned white-collar defense attorney, came on to argue the case in court.
Yet center stage belonged to Lazarenko. During opening statements this past March, the twelve Bay Area jurors-initially ten women and two men-often glanced furtively at him, trying to figure him out. Lazarenko, sitting perfectly upright on the other side of the court, was dressed impeccably in an understated black suit. During recesses, he stood outside in the hall, chest thrust forward and
