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. Last Updated: 07/27/2016

Arrests of Berezovsky, Smolensky Ordered




Prosecutors issued warrants Tuesday for the arrest of Boris Berezovsky and Alexander Smolensky, two of Russia's most powerful and politically connected businessmen.


Berezovsky, who was in France this week, is wanted on charges of money laundering; Smolensky, who was by some accounts in Austria, is sought on charges of embezzlement and banking fraud. Prosecutors said they had already left numerous subpoenas with Berezovsky's aides, to no avail.


Berezovsky responded late Tuesday that he would return to Russia to clear his name f even though he could be arrested on arrival. He denied reports suggesting he would settle into a comfortable Paris political exile f the route taken by former St. Petersburg Mayor Anatoly Sobchak, another self-styled liberal who faces corruption charges he claims innocence of.


"I know there are many shameless and not very bright people in the prosecutor's office who violate laws," Berezovsky told Interfax in a telephone interview.


In past, Berezovsky has enjoyed the protection of President Boris Yeltsin's Kremlin, and Kremlin spokesman Dmitry Yakushkin told ORT television late Tuesday that Yeltsin had not been told beforehand of this impending arrest warrant.


It was not clear what point, if any, Yakushkin was trying to make f but that suggested Berezovsky, though weakened, might still be able to fight back.


Another sign that Berezovsky's arm remains long was the immediate firing of the prosecutor who signed his arrest warrant. Mikhail Katyshev, a senior prosecutor and a loyal ally of the embattled Prosecutor General Yury Skuratov, lost his job within hours of signing the warrant, a source in the prosecutor's office told The Moscow Times.


Always a political animal, Berezovsky told Interfax on Tuesday he would defend himself by "investing all resources" to "seriously influence" Russia's parliamentary elections later this year and the presidential elections in 2000.


Berezovsky and Smolensky were empire builders in Boris Yeltsin's Russia. Smolensky founded Stolichny Savings Bank, which he has said he dreamed of turning into Russia's largest and best retail bank. And he succeeded, for a time, when Stolichny swallowed the Soviet-era Agroprombank, in a sweetheart privatization deal that created SBS-Agro. Berezovsky parlayed a used car dealership called LogoVAZ into a sweeping fiefdom that included stakes in Aeroflot, in ORT national television and in newspapers like Nezavisimaya Gazeta.


The two empires went halfsies in 1995 to purchase a majority stake in Sibneft, Russia's seventh largest oil company, under "loans-for-shares" privatization f a program whose rigged Potemkin auctions have become a synonym for corruption in Russia.


Berezovsky, who has held several low-level Kremlin-appointed jobs, was particularly notorious. If a fuming Alexander Solzhenitsyn coined the vague idea of an "oligarchy" running Russia, Berezovsky gave it concrete expression.


In Berezovsky's vision, it was 13 of the nation's leading business people f the men who signed the so-called "Letter of 13" published in 1996 in every major media and calling on Yeltsin and the Communists to postpone presidential elections in the name of stability. Later, after Yeltsin ignored that call and won re-election, Berezovsky's vision of the oligarchy shrank to seven leading entrepreneurs f financiers like himself and Smolensky, who Berezovsky claimed had funded Yeltsin's re-election, dictated Kremlin policy and controlled half of the economy.


It was always hard to say how much of that was braggadocio and how much reality. But the oligarchs had money, media, access to the Kremlin f and when it came to Berezovsky, that purported favorite of the Yeltsin family, sacked officials from Skuratov to former Prime Minister Sergei Kiriyenko to former Kremlin security chief Alexander Korzhakov blamed him for engineering their ouster.


Today, however, the oligarchs have been lain low by the collapse of the stock market, the treasury bill pyramid, the ruble and the banking system. Left-wing political forces led by Prime Minister Yevgeny Primakov are ascendant f and hostile. And with the balance of power shifting, long-simmering allegations against the oligarchs of corruption and wrong-doing have suddenly taken on a new life.


The charges against Smolensky were vague on Tuesday f law enforcement officials told Interfax only that he faced charges of financial machinations and banking fraud. But last month, the Interior Ministry announced it was conducting a seven-year-old investigation into allegations that Smolensky had embezzled $32 million from a bank in Kazakhstan in the early 1990s.


Berezovsky stood accused on Tuesday of diverting funds from the national airline Aeroflot to an offshore company in Switzerland called Andava, a company prosecutors say Berezovsky helped set up. An arrest warrant was also issued on Monday for Nikolai Glushkov, a former first deputy general director of Aeroflot and an old LogoVAZ ally of Berezovsky's. Both are suspected of what their warrants describe as "money-laundering and illegal enterprise."


The Aeroflot-Andava story has been around since Moskovsky Komsomolets broke it in 1997 f in a version that had Berezovsky working to engineer the appointment of Yeltsin's son-in-law as Aeroflot general director.


Berezovsky's fortunes truly sank with the arrival in the government of Primakov. Berezovsky criticized the new prime minister; soon he found his business interests, from Sibneft to Aeroflot to LogoVAZ, facing law enforcement raids. On Tuesday, Berezovsky's arrest warrant was issued only hours after he had again attacked Primakov, who he said was "embarking on an evil tragic route for Russia."


Soon Yeltsin had moved to sack Berezovsky from an obscure post as executive secretary of the Commonwealth of Independent States, and last Friday, after some griping, the CIS leaders made Yeltsin's order official.


On Tuesday, Moscow's powerful Mayor Yury Luzhkov hailed the arrest warrants as "a very serious decision that was well-grounded."


"Society has consolidated in its negative attitude towards Berezovsky," Luzhkov told Interfax, adding that he expected extradition of Berezovsky from France could be organized with the help of Interpol.