Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Shady Swiss Banker at Crossroads of Scandal




At the intersection of allegedly illicit Russian money and the Bank of New York is Bruce Rappaport, a Swiss banker who has had brushes with governmental investigators in the past and who has long had an important connection to the bank.


Together with the Bank of New York, Rappaport owns a bank in Switzerland that helped provide the American bank with important business contacts in Russia, according to Western bankers familiar with the operation.


And millions of dollars that were channeled through the Swiss bank, known as Bank of New York-Inter Maritime, are linked to what U.S. federal investigators describe as possibly one of the biggest money-laundering schemes in the United States, according to a person close to the investigation.


The Bank of New York, which for years aggressively sought business in Russia, is currently engulfed in a money-laundering investigation that led to the suspension of two senior officers who oversaw the bank's Russian business, and the firing of one of them. U.S. investigators are also looking into the activities of their husbands, both of whom are involved in businesses that have ties to either Rappaport or his Swiss bank.


The money moving through the Bank of New York-Inter Maritime raises the question of why the Bank of New York worked closely with a man who has frequently drawn the attention of government regulators and law-enforcement officials worldwide.


A Boston lawyer representing Bank of New York-Inter Maritime, William Shaw McDermott, did not respond to requests to interview Rappaport or talk about the Justice Department suit.


The interest of investigators is heightened, one official said, because Rappaport, who is 76 years old and lives in Switzerland, was recently appointed Antigua's Ambassador to Russia. Antigua, this official noted, has been a major center of Russian money-laundering for many years.


Rappaport, who has never been convicted of any wrongdoing, is well known in Russian banking circles. He helped solicit business during the boom times in Moscow. In fact, for a brief time, Bank of New York Inter-Maritime was used in 1994 by the Bank of New York to conduct business in Russia.


Born in Haifa, now Israel, Rappaport has used his base in Geneva to pursue investments and business in a wide range of places, including Oman, Nigeria, Haiti, Thailand, Indonesia, Belgium and the United States. Rappaport opened Inter-Maritime in Geneva in 1966.


By the 1980s, he was one of the Bank of New York's largest individual shareholders, controlling millions of dollars in stock amounting to a nearly 8 percent stake in the company.


Although virtually all of that stock has been sold, back in the 80s, Rappaport's hefty stake gave him entree to the bank's senior management, including the chief executive at that time, Carter Bacot. Bacot is said by a former Bank of New York senior executive to have approved the bank's decision to buy a large stake in Rappaport's bank, which was known then as Inter Maritime.


By 1992, the Bank of New York reportedly owned about 28 percent of what became known as Bank of New York-Inter Maritime.


In the money-laundering investigation of the bank that surfaced two weeks ago, one of the accounts authorities are looking at is Benex, which moved funds through the Bank of New York as well as the Bank of New York-Inter Maritime.


The sole director of Benex Worldwide, a British affiliate, according to corporate records in London, is Peter Berlin. He is the Russian-born husband of Lucy Edwards, who was fired last week by the Bank of New York. Edwards, 41, oversaw Russian accounts in the Bank of New York's London office.


Berlin is believed by American investigators to have had authority over the Benex account at the Bank of New York.


Edwards reported to Natasha Gurfinkel Kagalovsky, who is based in New York and supervised all of the bank's Eastern European business.


Kagalovsky, 44, was suspended because of the money-laundering investigation. Her husband, Konstantin Kagalovsky, is a former senior executive at Bank Menatep, one of Russia's largest banks. And Menatep, according to Western law-enforcement officials, has also had dealings with Rappaport.


Menatep, now virtually insolvent, is part of an industrial empire overseen by Mikhail Khodorkovsky, who now heads the Yukos oil company. Bank of New York had an active relationship with Menatep and helped the bank list its stock for trading in the United States.


U.S. investigators are trying to determine whether some of the money that may have been laundered through the Bank of New York came from Menatep. Menatep, and related companies in Russia, are suspected by Western investors and Russian regulatory authorities of having looted money from the country, assertions that Khodorkovsky and his representatives have firmly denied.


In 1994, Khodorkovsky briefly served as a director of the European Union Bank, an Internet bank based in Antigua. Khodorkovsky has said that he served as a director of the on-line bank for only one week and had no further involvement with it. The bank later collapsed amid accusations from various regulators that it was a scam.