About $10 billion in ill-gotten gains by Russian companies may have been laundered through the Bank of New York since early 1998 – including $4.2 billion just from October to March – The New York Times reported on Aug. 19.
The big news is that the account holder is probably part of one of the most notorious mobs ever spawned in the post-USSR, which is led by the Ukrainian-born Lviv University economics graduate, Semion Mogilevich (Simon Mohylevych). Prior to this money-laundering scandal, the FBI and Israeli intelligence suspected Mogilevich of being involved in gun-running, drugs, prostitution and investment scams.
Three trails tie Mogilevich's name to the Bank of New York scandal: the companies Benex and YBM, as well as the two Bank of New York employees in charge of Russian accounts at the Bank of New York.
It is the Benex accounts at the Bank of New York – one of the oldest and richest banks in the United States – that the $10 billion were laundered through. Officially, Benex is a distributor of a Hungarian-American company called YBM, which also officially makes and sells industrial magnets. YBM was founded, and is owned, by Mogilevich.
Judging by its Bank of New York account, Benex's main activity seemed to be to act as a money-launderer for dirty money from Russia through Western banks to off-shore accounts.
Through its 18 accounts at the Bank of New York, $10 billion was laundered within two years. U.S. investigators received 3,500 pages of Benex bank transactions from the Bank of New York. New evidence is emerging that it held accounts in other banks, like Credit Suisse Group and Banque Internacionale a Luxembourg.
For its Bank of New York accounts, Benex gave an address in Queens, New York – but police investigators didn't find its office there. Instead they traced it to near London, England, at Wordford Green in Essex. It was registered under the name of Benex Worldwide and its director – Peter Berlin – had the authority over the Benex accounts in the Bank of New York.
Like many of the characters involved in the story, Berlin was an American citizen who came from the USSR in the 1980s. More importantly, he's married to a Bank of New York executive, Lucy Edwards, who also acquired American citizenship after emigrating from the USSR. Edwards worked in the Bank's Eastern Division in London.
Edwards' counterpart in the bank's Eastern Division in New York City was Natasha Gurfinkel Kagalovsky. She also was born in the former USSR. Her husband, Konstantin Kagalovsky, is the deputy chairman of Yukos, Russia's second largest oil company and part of the Menatep empire headed by Russia's super-oligarch Mikhail Khodorkovsky. Kagalovsky was Russia's representative to the International Monetary Fund in the early 1990s under Prime Minister Yegor Gaidar.
Natasha Kagalovsky purchased in January 1997 an apartment in mid-Manhattan for about $800,000 in cash, The New York Times reported on Aug. 20.
The Bank of New York has suspended Lucy Edwards and Natasha Kagalovsky for the duration of the investigation. Both have declined to speak to the press.
On Aug. 18, the day before The New York Times made its revelation, Britain's national crime squad raided the apartment of Berlin and Edwards, located in the Marylebone district of London, Britain's Guardian newspaper reported on Aug. 21.
Berlin's connection to Mogilevich is through Benex as the distributor of Mogilevich's YBM. YBM Magnex International was founded in Hungary by Mogilevich. He probably selected Hungary as his worldwide headquarters – and not Israel where he took up citizenship after leaving the USSR in the 1980s – because it was safer for his criminal activities. Settling in Hungary was helped by marrying a Hungarian, Katalin Papp.
In the last few years, while Benex was money laundering, YBM was fleecing North American investors. Mogilevich set up a YBM office in Newtown, Penn., and a factory in Kentucky. YBM tricked auditors – Parente, Randolph, Orlando, Carey & Associates in 1996 and Deloitte & Touche in 1997 – to raise hundreds of millions on the Toronto stock exchange. YBM's business activities turned out to be a scam. In June of this year, YBM Magnex pleaded guilty to conspiracy to commit securities fraud and since filed for bankruptcy. Shareholders lost about $429 million from 1993-7.
YBM's chief executive from 1996-8 was Jacob Bogatin, a recent American citizen who came from Russia in the 1980s. While Jacob managed YBM, his brother David was serving an eight-year prison term in New York state for a multi-million dollar gasoline tax fraud, according to the New York City's investigating newspaper, Village Voice, on May 26, 1998.
What happened to the YBM money is still under investigation, but the investors will probably never see it again. The accounting firm – Miller, Tate – found that the chief operating officer of YBM – Igor Fisherman, also a former Soviet citizen – seemed to have diverted company funds to a Cayman Islands registered company called United Trade.
Mogilevich's companies are said to be active in Eastern Europe. His gangs supposedly control all smuggling through Moscow's Shermetyevo airport, and own much of the Hungarian armaments industry – including companies like Digep General Machine Works, Army Co-op and Magnex 2000 – and are thus a NATO supplier, according to the Village Voice.
In Ukraine, Mogilevich's companies sell diesel and oil products to Ukrainian railways, have an YBM factory, and nightclubs in Kyiv, the Village Voice. reported. His contact at the railway administration was a high-ranking official called Vahtang Ubiriya. In March 1994 the FBI photographed Ubiriya at a Republican Party presidential fundraising event in Dallas.
The Village Voice also claims that Mogilevich's gang – dubbed the Red Mafia – is strongest in Ukraine, Hungary, the Czech Republic and the United States. Authorities should make a statement on whether the Red Mafia operates in Ukraine, especially the charges about Mogilevich's relations with a government ministry. Jaroslav Koshiw is the Post's national editor.
