Install

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

. Last Updated: 07/27/2016

New Book Links Putin to Underworld

MTPutin, seen here in 1993, headed the city's foreign economic relations department.
How involved was President Vladimir Putin in the activities of a decade-old German company now at the center of a pan-European probe into St. Petersburg mobsters, Colombian cocaine and transcontinental money laundering?

The question has intrigued investigators and journalists since a German foreign intelligence report was leaked to the press during Putin's rise to power. The report alleged that SPAG, a company set up ostensibly to invest in St. Petersburg real estate, was actually laundering funds for Russian criminal gangs and Colombian drug lords.

The French daily Le Monde was first out of the gate with the story, raising some uncomfortable questions about Putin's tenure on SPAG's supervisory board, which lasted from when he was deputy mayor of St. Petersburg in the early 1990s until he entered the Kremlin. Newsweek magazine followed a year later with a report that raised even more questions, but despite contradictory denials and clarifications from Putin's press service, the story quietly went away. Until this May, that is, when German police launched a nationwide raid on the homes and offices of more than 200 people connected with the company.

Now, as prosecutors in Germany and Liechtenstein tighten the noose and move closer to the courts, a new book has hit German bookstores offering the most in-depth look yet at SPAG, its ties with Putin, and into Rudolf Ritter, a co-founder of the company who is now awaiting trial in Liechtenstein for allegedly laundering cocaine cash for the Cali cartel.

Thumbing its nose at attempts by Vladimir Kumarin, the reputed head of the St. Petersburg-based Tambov mafia ring, to quash the book, called "Die Gangster aus dem Osten" or "Gangsters From the East," the publisher, Europa Verlag, is actually touting it to other international publishers at the ongoing Frankfurt book fair, the world's largest.

In his 305-page work, J?rgen Roth details how German investigators --with little or no help from their Russian counterparts -- uncovered a complex web of relationships and transactions that link SPAG to St. Petersburg's criminal underworld and beyond. The book fails to tie Putin directly to any criminal activity, but does paint a convincing argument that he was more involved with SPAG's activities than previously acknowledged.

Like the Le Monde and Newsweek articles, "Gangsters From the East" links Putin to alleged mobster Kumarin (who has since changed his name to Barsukov) through Vladimir Smirnov, the former head of SPAG's St. Petersburg operations and an old associate of the president.

In 1994, as deputy mayor of St. Petersburg, Putin awarded the St. Petersburg Fuel Company, or PTK, the highly prized right to be the sole supplier of gasoline to the city. At the time, Smirnov was a major shareholder in PTK and local media reported that the company was controlled by the Tambov. What followed could aptly be described as a gang war, as high-profile killings of major players in the fuel market rocked the city, contributing to its reputation as Russia's version of 1930s Chicago. In 1998, Smirnov took over PTK and appointed Kumarin/Barsukov as his deputy.

Since Putin came to power, Smirnov has vaulted from relative professional obscurity in Russia's second city to influential positions in the capital. First he was given a post in the powerful Kremlin Property Department -- where Putin once worked -- and now he heads the lucrative trading arm of the Nuclear Power Ministry, Tekhsnabexport.


MT

The affidavit purportedly signed by Putin giving the city's voting rights to Smirnov.



Aside from SPAG co-founder Ritter, no arrests have been made to date and no criminal investigation has been opened in Russia, but a senior German prosecutor said that he expects to bring laundering charges within the next few months against either SPAG or people related to SPAG, which is officially known as St. Petersburg Immobilien und Beteiligungs AG, or St. Petersburg Real Estate Holding Co.

Meanwhile, in Liechtenstein, Robert Walner, the chief prosecutor in the capital city Valduz, said by telephone that Ritter's trial is expected to open this month.

Adding to the increased attention SPAG is receiving is Roth's book, the subject of which has already irritated the Kremlin. A spokesman in the presidential administration called the book's allegations of Putin's close ties to SPAG "slanderous lies" -- but the Kremlin has taken no legal action against either Roth or Europa Verlag.

The Kuchma Tapes



One of the most tantalizing new pieces of evidence that Roth has come up with suggests Putin's links with SPAG and Ritter go deeper and are more worrisome to the Kremlin than previously thought.

A transcript of taped conversations between Ukrainian President Leonid Kuchma and his security chief Leonid Derkach on June 2 and June 4, 2000 suggests the Kremlin had been doing its utmost to cover-up any and all information linking Putin to SPAG and/or Ritter.

Derkach is cited as saying that his security service has managed to get a hold of one of the few remaining documents potentially damaging to Putin and suggests some kind of trade with the FSB, Russia's Federal Security Service.

"Yes and about that affair, the drug smuggling. Here are the documents. They gave them all out. Here's Vova Putin too," Derkach tells Kuchma. "The Russians have already been buying everything up. Here are all the documents. We're the only ones that still have them now. I think that [FSB chief] Nikolai Patrushev is coming from the 15th to the 17th. This will give him something to work with. They want to shove the whole affair under the carpet."

The conversation was taped by former presidential bodyguard Nikolai Melnichenko, who later fled to the United States -- just before the publication of the conversations he bugged had, among other things, unveiled Kuchma's possible participation in the murder of opposition journalist Georgy Gongadze.


MT

SPAG co-founder Vladimir Smirnov



The head of Ukraine's parliamentary commission on corruption, Grigory Omelchenko, said by telephone from Kiev that the tapes, including the conversations about Putin, had been judged to be authentic by a U.S.-based company run by a leading former FBI specialist. U.S. government investigators have also declared as authentic at least one part of the tapes -- the part where Kuchma is heard approving the sale of radar systems to Iraq. (The transcript published in Roth's book is an exact translation of a transcript of the conversation posted on a web site dedicated to the tapes called www.5element.net.)

A spokeswoman for Kuchma, however, said the Ukrainian president had repeatedly said that the tapes were fabricated. The Kremlin has also refuted them.

Roth's unearthing of the tapes, however, is just one fragment of his exhaustive investigative account of the probes into Ritter and SPAG in Liechtenstein and Germany, which is based on the work of top-level law enforcement officials in both countries.

Roth cites anonymous sources in German law enforcement as saying they believe SPAG was a conduit to launder funds for the powerful St. Petersburg-based Tambov crime group. Company documents are cited as showing the alleged head of the group, Kumarin-Barsukov, as being a partner in Znamenskaya, one of SPAG's St. Petersburg subsidiaries.

A senior German prosecutor contacted by The Moscow Times refused to comment on any of the allegations in Roth's book, citing ongoing investigations. Nor would he comment on any possible links between the case and Putin. Kumarin/Barsukov, who has denied running the Tambov group, could not be reached for comment.

Putingate?



In his book, Roth attempts to delve into every possible tie between SPAG and Putin, but ultimately, despite investigating the matter for nearly three years, comes up with only fragments of a potentially damning picture.

Indeed, Roth believes the whole story will never be known. The German government, he says, does not want the extent of Putin's involvement in the affair revealed because it does not want to sour burgeoning ties with Russia. "There was a cover-up in 2001," he said.

"[German Chancellor Gerhardt] Schroder was very afraid that there were direct links between the Liechtenstein investigations and Putin. This was a time when Russia and Germany had good relations for the first time," he said. "But the connection between Putin, Kumarin and Smirnov cannot be part of investigations in Germany. Only prosecutors in St. Petersburg can do this."

What is known about Putin's involvement in SPAG is this: Company officials acknowledge that Putin took a place on the company's supervisory board in his capacity as deputy mayor in charge of St. Petersburg's foreign economic relations in the early 1990s. But they have downplayed the post as an "honorary position" that did not involve participating in the company's day-to-day operations.

However, citing documents from the company's first prospectus in December 1992, which have been obtained by The Moscow Times, Roth's book alleges that Putin played a more active role as deputy chairman of SPAG's advisory board representing the city's stake in the company. Major shareholders of the company, including Ritter and Smirnov, were also on the advisory board, which SPAG officials say had more powers than the supervisory board, but deny that Putin was ever on it.

A further sign of Putin's relationship with Smirnov and his participation in company decisions is a copy of a December 1994 affidavit that Putin signed giving Smirnov "voting rights in our absence" to 200 SPAG shares, or about 20 percent of the company at the time. A copy of that document, cited in the book, has also been made available to The Moscow Times.

Roth quotes an unnamed German accountant as saying he met with Putin, Smirnov and then St. Petersburg Mayor Anatoly Sobchak during a visit by city officials to Frankfurt in 1992, around the time SPAG was founded. During that visit, they met with another co-founder of SPAG, Klaus Peter Sauer, who at the time was head of corporate finance at KPMG Peat Marwick Treuhand GmBH, the German branch of the international consultancy firm.

But despite the welter of detail in the book, the links it charts between Putin and SPAG, although tantalizing, remain spurious. Roth cites Liechtenstein's Justice Minister Heinz Frommelt, who was a key player in the Ritter investigation, as saying "the role of Putin in connection with SPAG was at first larger, but was then made ever smaller."

Frommelt, however, is also cited as saying "I think [the Germans] had information about the ties between Putin and the Tambov crime group -- estimations, but no hard proof."

SPAG co-founder Sauer, however, believes these ties are being cooked up and exaggerated. "I think that a certain faction of the German government is trying to find something against Putin in order to blackmail the Russian government," he said in a recent telephone interview from Germany. "I think that the objective is to bring Putin into relations with Kumarin/Barsukov and blackmail him in relation to that."

However, Sauer said he had met with Putin five or six times in both Frankfurt and St. Petersburg, sometimes over dinner, to discuss SPAG's St. Petersburg subsidiaries. "I contacted him a couple of times to do with the business of Inform Future and Znamenskaya," he said.

Conflicting Stories



The Kremlin has at times denied that Putin ever worked for SPAG. At other times it has said that Putin's role as Sobchak's deputy in charge of foreign economic affairs meant that he held many "honorary" positions on the supervisory boards of joint ventures in the city. The Kremlin press service, however, could not provide a breakdown of how many such posts Putin held.

While the questions about Putin's role may never be answered, Roth traces the German investigators' probe to two individuals, Boris Grinshtein and Peter Haberlach, both of whom are under suspicion for being the Tambov group's pointmen in Germany, according to his sources in German law enforcement.

Investigators believe that one of the ways funds were laundered through SPAG was via share issues in the company. At least two companies connected to Grinshtein and Haberlach are pinpointed by Roth as having taken part in such deals.

In December 1994, a firm called E.C. Experts Ltd., which was then headed by Grinshtein, bought shares in SPAG for 500,000 German marks (about $1.6 million at the time). Then in July 1995, it took part in another share issue, buying up 13,000 shares for 110 marks each, for a total of about $1 million. In October of that year, again according to Roth, Ritter signed off on the sale of 10,000 shares for 140 marks each to a firm called ICI International Consulting Investment.

Haberlach is a director of E.C. Experts and is also under investigation in Hamburg on allegations of human trafficking and running a prostitution ring. Haberlach's brother, Roth writes, is married to the former wife of Kumarin/Barsukov.

Roth cites the BundesKriminalAmt (BKA), or German police, as saying it suspects "ICI International Consulting Investment to have played a central role in founding SPAG and its affiliated companies and that through this company certain people also wielded influence over the chain of money flows into SPAG."

"The firm Euro-Finanz also appears to have played a similar role," BKA is quoted as saying.

In what could be a vital link between the SPAG case and the case against Ritter for laundering Colombian drug money, Euro-Finanz is also identified in a Liechtenstein prosecutors' indictment against Ritter, a copy of which has been obtained by The Moscow Times.

The indictment identifies it as being a key part of the I.C. Gruppe, which, it alleges, created a series of shell companies for a Colombian national named Juan Carlos Saavedra Molina. The companies, Liechtenstein prosecutors allege, "attempted to disguise the origin" of funds transferred by Saavedra.

The indictment says the U.S. government considers Saavedra a money launderer for the Cali cartel.

Ritter, according to the indictment, was the director of both Euro-Finanz and I.C. Gruppe.

Ritter denies the charges.

Airing Laundry



SPAG co-founder Sauer said Grinshtein and Haberlach had helped SPAG establish contacts in St. Petersburg and that he knew them as "associates of Smirnov."

He said Grinshtein sat on the supervisory board of SPAG for half a year and helped translate. Referring to ICI Investments and E.C. Experts as "peanuts companies," he said he did not remember whether either of these companies had taken part in the share issues alleged by Roth. However, he did say it was "possible" that they were ownership vehicles for Smirnov or his relatives.

Officials at Tekhsnabexport, also known as Tenex, said on several occassions that Smirnov was away on business and not available for comment.

Sauer denied Kumarin/Barsukov played any role in SPAG. Conceding that he met with him on several occasions during trips to St. Petersburg, he said he asked him personally whether he was a shareholder in SPAG or its subsidiaries and he said "no."

"He expressed at a certain time his interest in acquiring SPAG shares. For that reason I had discussions with him," Sauer said. "We only discussed this in very general terms. He did not become a shareholder. He never owned SPAG, nor Znamenskaya, nor Inform Future."

SPAG's current managing director, Markus Rese, said that he, too, had met with Kumarin/Barsukov several times in St. Petersburg. "He was a partner of Mr. Smirnov," he said. "But he did not say 'Hi, I'm Mr. Barsukov. I'm a murderer and a money launderer.' What the heck."

Rese said Kumarin/Barsukov had also offered to sell land and real estate in St. Petersburg to SPAG, but that the company had turned him down because the price was too high.

Both Sauer and Rese denied that SPAG had ever engaged in money laundering.

"We are the cleanest company in the world. We have no fake balances. There is no money washed in our company. All this is absolutely boring. It is always the same shit," Rese said. "The true story of SPAG is how a normal, good-working company is getting ruined by rubbish, by shitty investigations."

Rese said Sauer is pressing slander charges against Roth. "Mr. Roth is a liar," he said.

Sauer said SPAG had been forced to postpone construction in St. Petersburg because media reports of the money-laundering investigations had frightened away investors. "We already had commitments from two large banks. But all of a sudden they refused to honor their commitments [after the May raids in Germany]," he said.


Sergey Grachev / MT

One of the few projects SPAG completed is this office building on Tambovskaya Ulitsa.



Dashed Dreams



Sauer's links with the St. Petersburg city government go back a long way. In 1992, during the St. Petersburg delegation's visit to Frankfurt, Sauer said that he was introduced to Sobchak at a dinner organized by Deutsche Bank and that Sobchak later invited him to visit St. Petersburg. He said he could not remember whether or not he met Putin at that dinner, but before Sobchak left Frankfurt, Sauer said the mayor asked him to come to St. Petersburg and run the city's privatization program.

At that time, Sauer said, he had taken part in many privatization deals in the former East Germany in his capacity as head of corporate finance at KPMG Peat Marwick Treuhand. He said he had not known Putin during Putin's KGB posting in Dresden.

A report by Dow Jones from March 1992 said that KPMG Peat Marwick Treuhand had been named adviser to the St. Petersburg city government, and that a coordination committee would meet later that month in Frankfurt to discuss possible privatization projects with German banks and companies. The committee included Sobchak, Putin and Sauer.

Sauer, however, said that major German banks, including Deutsche and Dresdner, later lost interest in investing in St. Petersburg. He said he decided to go ahead with his own venture to invest in infrastructure and real estate first before embarking on privatization projects. "There was no place to work in St. Petersburg that corresponded to Western standards," he said. "We decided to invest in office buildings."

More than 10 years later, however, only one of SPAG's construction projects, the Inform Future office building on the aptly named Tambov Street, has been completed. The other, Znamenskaya, a project set up to create a major international office center on a prime piece of real estate downtown, sits idle. The building, one of the few buildings on Nevsky Prospekt, the city's major thoroughfare, that has yet to be renovated, is covered with fabric advertising Western fare.

Sauer claimed it had taken time and $26 million to buy up all the leases to the building. Now, he said, the company needs another $40 million to $50 million to begin construction -- but he can't find anyone willing to invest.

He said he met SPAG co-founder Ritter "by coincidence" through a business associate in Frankfurt about six months before SPAG was established. "Ritter showed an interest. He said he was prepared to invest. We were very happy," he said. "I never knew about his activities in Liechtenstein. He was seen with someone from a Colombian drug cartel in Madrid. That's how it started. But he's not been prosecuted yet."

"It would have been a wonderful business, had we received financing for reconstruction," he said. "The banks were not ready to make investments in St. Petersburg, so we did it on a private, individual basis. And for that we are being punished by Germany."

"Someone doesn't like it and in my view this all comes down to politics."

Nor has he found support from his former colleagues who have since moved on to powerful positions in Moscow.

"Mr. Smirnov has cut all contacts with us. I have not seen him for years," he said.

As for Putin, "unfortunately I don't meet him anymore," Sauer said. "I'd like to. I'd like to discuss world politics with him."

The Kuchma Tapes

June 2, 2000
Derkach: Leonid Danilovich. We've got some interesting material here from the Germans. One of them has been arrested.
Kuchma (reading aloud): Ritter, Rudolf Ritter.
Derkach: Yes and about that affair, the drug smuggling. Here are the documents. They gave them all out. Here's Vova Putin, too.
Kuchma: There's something about Putin there?
Derkach: The Russians have already been buying everything up. Here are all the documents. We're the only ones that still have them now. I think that [FSB chief] Nikolai Patrushev is coming from the 15th to the 17th. This will give him something to work with. This is what we'll keep. They want to shove the whole affair under the carpet.
June 4, 2000
Kuchma: The handover should only take place with the signature of Patrushev. This really is valuable material, isn't it?
Derkach: About Putin?
Kuchma: About Putin.
Derkach: Yes. There is some really valuable stuff. This really is a firm, which ...
Kuchma: No, tell me, should we give this to Putin, or should we just tell him that we have this material?
Derkach: Yes, we could. But he's going to be able to tell where we got the material from.
Kuchma: I will say the security services, and ... I will say that our security service has some interesting material.
Derkach: And we should say that we got it from Germany, and that everything that there was is now in our hands. Otherwise no one else has it, yes? Now, I got all the documents about Putin prepared and gave them to you.
Kuchma: Probably, if that's necessary. I'm not saying that I will personally hand them over. Maybe you'll give them to Patrushev?
Derkach: No. I'll just ... when we make a decision we'll have to hand them over anyhow because they've bought up all these documents throughout Europe and only the rest are in our hands.
Kuchma: Or perhaps I will say that we have documents, genuine facts from Germany. I won't go into details.
Derkach: Hmm.
Kuchma: I will say, 'Give your people the order to connect with our security service.' And when they get in touch with you, you say, 'I gave it to the president, damn it. And I can't get it from him now.'
Derkach: Good.
Kuchma: We need to play with this one.