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03 Saturday

2nd Russian Indicted in U.N. Corruption Probe

By Colum Lynch
NEW YORK, Sept. 2 -- Federal authorities arrested a Russian diplomat and indicted him on charges that he conspired with a U.N. procurement officer to launder hundreds of thousands of dollars in bribes, U.S. officials said Friday.
Vladimir Kuznetsov, a Russian Foreign Ministry official who served as chairman of an influential General Assembly budget committee, is the second Russian national employed at the United Nations to be charged with corruption in less than a month.
He pleaded not guilty at an arraignment in Manhattan federal court Friday afternoon and was released on a $1.5 million bond and agreement to surrender his travel documents, according to Reuters.
A Russian procurement officer, Alexander Yakovlev, pleaded guilty early last month to three counts of wire fraud and money laundering. Today's indictment, which was issued by David N. Kelley, the U.S. attorney for the Southern District of New York, said Kuznetsov worked with a co-conspirator, who was not identified but was referred to as "CC-1." The indictment, however, said CC-1 had established a company called Moxyco Ltd., and in previous court filings that person has been identified as Yakovlev.
Efforts to reach Kuznetsov or his attorney were unsuccessful. Yakovlev's attorney, Arkady Bukh, said he was unaware of the latest charges and could not comment.
The charges have grown out of Kelley's ongoing criminal probe into corruption in the $64 billion U.N. oil-for-food program for Iraq. A separate U.N. inquiry into corruption is expected to release a report Wednesday that will sharply criticize Secretary General Kofi Annan's administration of the largest U.N. humanitarian program as lax; an Annan adviser said the report will not conclude that Annan engaged in misconduct.
The latest arrest comes less than two weeks before a Sept. 14 summit that will draw more than 170 world leaders to U.N. headquarters to address, among other issues, management gaps that allowed corruption to occur. A senior U.S. official said it was too soon to determine whether the case "would help or hinder" U.S efforts to strike agreement on a proposal to impose greater independent oversight of U.N. spending.
The Bush administration is facing intense resistance from Russia, China and the "Group of 77" developing countries to proposals aimed at strengthening outside scrutiny of the United Nations' books. The Russian government, meanwhile, has vigorously opposed a U.N. reorganization plan that would undercut the power of Kuznetsov's committee.
John R. Bolton, the U.S. ambassador to the United Nations, wrote to U.N. delegates this week that independent oversight of the world body's finances "is absolutely critical to reforming the U.N."
"It is essential that we have an organization that is fully accountable, transparent and efficient, with a workforce based on the highest standards of integrity and competency," Bolton wrote.
Bolton appealed to Annan on Thursday on behalf of the U.S. Justice Department to waive Kuznetsov's diplomatic immunity. On Friday, Bolton thanked Annan for "his personal and very prompt" waiving of Kuznetsov's diplomatic immunity from arrest and prosecution.
Senior Russian officials said that U.N. authorities informed them of the arrest only after it happened and that they were still studying whether Kuznetsov might be covered by immunity as a Russian diplomat. They issued no formal protest of the U.S. action.
Konstantin K. Dolgov, the fourth-ranking ambassador at Russia's mission to the United Nations, said: "All the legal aspects as well as other aspects are to be clarified. We don't have much information."
The alleged scheme first came to light last month when former Federal Reserve chairman Paul A. Volcker, the head of a U.N.-appointed independent inquiry committee, accused Yakovlev of soliciting a bribe from a Swiss company seeking business through the oil-for-food program. He also accused Yakovlev of depositing more than $950,000 in bribe money in an offshore bank account in the Caribbean.
The indictment unsealed Friday said that Kuznetsov set up an account at the same bank, Antigua Overseas Bank, in 2000 under the name of a company called Nikal Ltd. It charges that hundreds of thousands of dollars were transferred into the account from front company Moxyco Ltd., which officials have said was Yakovlev's firm.
The indictment said that CC-1 told Kuznetsov in 2000 that he was collecting "secret payments from foreign companies that were seeking to secure contracts to provide goods and services to the United Nations." The two agreed to divert a share of the proceeds, which amounted to hundreds of thousands of dollars over five years, into Kuznetsov's account according to the indictment.
Kelley praised the investigative efforts of the FBI, which detained Kuznetsov.
He also thanked the U.N. Office of Internal Oversight Services, which is responsible for investigating fraud in the organization, for assisting in the investigation. The U.N. unit is continuing its investigation.
09 Tuesday

Oil-Food Official Pleads Guilty

NEW YORK, Aug. 8 -- A federal prosecutor investigating corruption in the $64 billion oil-for-food program issued the case's first criminal charges against a U.N. official, accusing a former Russian procurement officer of receiving hundreds of thousands of dollars in bribes from companies doing business with the United Nations.

Alexander Yakovlev, 52, pleaded guilty to three counts of wire fraud, conspiracy to commit wire fraud and money laundering, said David N. Kelley, the U.S. attorney for the Southern District of New York. The charges could carry a penalty of up to 60 years in prison.

The case against Yakovlev grew out of the United Nations' own investigation of its marred oil-for-food program, and it came on a day when a U.N.-appointed panel accused Benon V. Sevan, the program's former director, of receiving nearly $150,000 in kickbacks from a company run by relatives of former U.N. secretary general Boutros Boutros-Ghali.

The criminal charges represent a turning point in the U.N. scandal, which until now had yielded no public evidence that U.N. officials had broken any laws. Even so, the allegations of corruption have damaged Secretary General Kofi Annan's standing and shaken confidence in the organization.

Monday's events also signaled that U.N. investigators and prosecutors have expanded their probes beyond the oil program to include allegations of corruption in other parts of the U.N. bureaucracy.

Former Federal Reserve chairman Paul A. Volcker, who is leading the U.N. investigation, said Yakovlev tried to solicit bribes from a Swiss company that was bidding for business in the oil program. In addition, Volcker alleged that Yakovlev received more than $950,000 in an offshore bank account from contractors doing other types of business with the United Nations.

A senior U.N. official said that Annan waived Yakovlev's diplomatic immunity from prosecution Monday and was prepared to do the same in the case of Sevan, who has denied wrongdoing and who recently returned to his native Cyprus. Cyprus does not have an extradition treaty with the United States covering financial crimes.

In a document outlining charges Monday, Kelley's office said Yakovlev faxed privileged bidding information in 1996 to a company pursuing business through the oil program. Yakovlev was also charged with creating a front company, Moxyco Ltd., "to facilitate the illicit and secret payment of money to him by foreign companies" trying to do business with the United Nations.

Yakovlev was released from custody Monday on a $400,000 bond and restricted from travel, said Megan Gaffney, a spokeswoman for Kelley. Yakovlev declined to comment through his attorney, Arkady Bukh. Bukh would not say whether his client was cooperating with Kelley. But he said he expected a "substantially more lenient" sentence than the maximum allowed.

Congressional leaders conducting their own investigations said the latest revelations underscore the need for far-reaching changes in the way the world body does business. "This report demonstrates the United Nations lacks the institutional red lights and alarms necessary to warn of misconduct," said Rep. Christopher Shays (R-Conn.). "This absence of basic oversight has allowed individual corruption to flourish system-wide."

John R. Bolton, the U.S. ambassador to the United Nations, did not respond to a request for comment.

The oil-for-food program was created in 1996 to permit Iraq, which had been under U.N. sanctions since its 1990 invasion of Kuwait, to sell oil in order to buy food and medicine and pay war reparations. Saddam Hussein's government used the program to collect more than $2 billion in kickbacks from companies, according to a report last year by CIA adviser Charles A. Duelfer.

In April of last year, Annan appointed Volcker to lead an inquiry into allegations that senior U.N. officials, including Sevan, profited from the program.

Volcker accused Sevan in a February report of engaging in a "grave conflict of interest" by asking senior Iraqi officials to give business to Africa Middle East Petroleum Co. (AMEP), a Panamanian-registered company controlled by Fakhry Abdelnour, Boutros-Ghali's cousin. AMEP bought 7.3 million barrels of Iraqi oil from 1998 to 2001 and sold them for more than $1.5 million in profit.

Monday's report accused Sevan of accepting cash from Abdelnour and Boutros-Ghali's brother-in-law, Efraim "Fred" Nadler, an officer at the company.

The evidence against Sevan presented Monday included telephone and bank records and was largely circumstantial. The report cited Nadler's withdrawal of $257,500 from a Geneva bank in November 1998 and October 2001, when Sevan was in the Swiss city. Shortly after his return to New York, Sevan and his wife, Micheline, made deposits totaling $147,184, the report said.

"Mr. Sevan, with the assistance of Mr. Nadler and Mr. Abdelnour, corruptly derived substantial financial benefits by soliciting and receiving oil allocations for AMEP from the government of Iraq," the report said.

Abdelnour's attorney in Geneva did not respond to a request for an interview. Efforts to reach Nadler, who has declined to speak to investigators, were unsuccessful. Sevan's attorney, Eric L. Lewis, issued two statements over the past week saying that Sevan is innocent and that he is being made a scapegoat.

Volcker said he will issue a more comprehensive account of the oil program's failings in September. That report will revisit allegations of influence peddling by Annan, whose son, Kojo, received payments from a company that conducted business in the U.N. program. It will also examine Boutros-Ghali's role in establishing the program and the U.N. Security Council's oversight of it.

16 Wednesday

U.S. Alleges 18 Plotted To Smuggle Soviet Arms

NEW YORK, March 15 -- U.S. authorities charged 18 people in an alleged scheme to smuggle grenade launchers, shoulder-fired missiles and other Russian military weapons into the United States, officials announced Tuesday.

The arrests resulted from a yearlong investigation in which an FBI informant posed as an arms buyer with ties to al Qaeda.'

The case, which took investigators to South Africa, Armenia and the Republic of Georgia, included wiretaps on seven phones and intercepts of more than 15,000 calls, according to prosecutors, the FBI and police.

The informant, an explosives expert, contacted the FBI after he was approached by a man who said he had access to weapons from the former Soviet Union and believed the informant could find a willing buyer, federal prosecutors said.

Using a digital camera, members of the ring, which included Armenians and South Africans, provided pictures of the weapons they said they had available for sale, prosecutors said. The pictures, apparently taken in Armenia, showed antitank missiles, a Russian missile launcher and an antitank rifle, among other weapons, officials said.

Seventeen of the 18 people charged were in custody Tuesday, arrested in New York, Los Angeles or Florida, authorities said. Prosecutors alleged that the defendants were preparing to import the weapons, including antitank missile systems, into the country from Eastern Europe.

The FBI is working with Armenian and Russian authorities to secure the weapons, authorities said.

A criminal complaint unsealed in U.S. District Court in Manhattan charged five men with conspiring to transport destructive devices and 13 others with weapons trafficking for their alleged roles in supplying machine guns and other assault weapons destined to be sold to the informant.

According to the complaint, the informant met defendants Artur Solomonyan and Christiaan Dewet Spies on several occasions in New York to discuss the weapons deals.

Solomonyan, an Armenian citizen who lives in New York and Los Angeles, and Spies, a South African citizen who lives in New York, were arrested Monday night at a Manhattan hotel after meeting one last time with the informant to finalize their plans before leaving the country to obtain the weapons, prosecutors alleged.

If convicted, each would face a prison term of up to 30 years.

16 Friday

Child Porn Operation Busted, FBI Says

NEWARK, Jan. 15 -- Federal officials said Thursday that they have broken open a global Internet child pornography ring that probably has tens of thousands of paying customers in the United States.

FBI agents began rounding up some of those customers Thursday, arresting 15 people in New Jersey -- including a pediatrician, a minister and a high school bandleader -- and charging them with downloading graphic child pornography images onto their home computers. Those arrested had used credit cards to pay for memberships on about 50 pornography sites run out of Belarus and Latvia, prosecutors said.

The company had advertised its Web sites as "underground pedo worlds," with names such as "Lo Littles," "Dark Feelings" and "Boyz Movies." Visitors to the sites often take out monthly subscriptions.

Three of the four executives of the Belarusan company, Regpay Co., were arrested last summer in Spain and France, where they are being held while the United States seeks to extradite them. An American credit card processing company, Connections USA of Hollywood, Fla., helped process payments for Regpay. Eugene Valentine, an executive with that company, has acknowledged knowing about the child pornography and pleaded guilty to money laundering, according to court documents.

Valentine is working with federal prosecutors.

"This is the first time that this sort of computer investigation has been able to go after child pornography from the top to the bottom," said U.S. Attorney Christopher J. Christie, flanked by an array of federal officials at a news conference here. "We've started at the top."

The Internet child pornography companies appear to have found a vast customer base in the United States. Regpay and Connections USA processed 270,000 credit card transactions in the past year on Visa and MasterCard alone. About 100,000 of these transactions involved American customers.

Christie cautioned that there could be some duplication, but he said "it would be safe to say" that American customers number in the tens of thousands.

"We are talking about a large number of targets," Christie said. "We're expecting many more arrests."

Federal prosecutors ordered the arrest of one of the customers last October, when FBI agents picked up a Chicago pediatrician, H. Marc Watzman. He is accused of having thousands of images of child pornography on his desktop computer at home. But until Thursday prosecutors had not directly linked his case to their investigation of Regpay and Connections USA.

The year-long investigation began with federal prosecutors in New Jersey and now spans two continents and many federal and international agencies, along with the cooperation of Visa and MasterCard companies. Prosecutors said they decided to follow the money up the chain and within six months were able to arrest owners of the Web sites.

Past investigations of global Internet child pornography have come asunder because the United States does not have extradition treaties with some of the former Soviet republics, including Belarus, where many child pornography Web sites are based.

In this case, however, officials said that the Belarusan police appeared eager to cooperate, not least because the pornographers often shoot their videos in Belarus.

"The police there know that it's their children who are being abused," said Michael J. Garcia, assistant secretary of homeland security in charge of the Bureau of Immigration and Customs Enforcement.

What makes this case different, however, is that for the first time federal authorities have broken through the electronic veil of the Internet and gotten ownership and billing records. "We're exploiting the weakness in this enterprise," Garcia said. "It's not like file swapping. You have to use credit cards to access this stuff, and that leaves a trail."

18 Thursday

Two accused of taking bribes in U.N. contract deal with U.S. company

UNITED NATIONS -- A U.N. anti-corruption task force has accused an Italian executive and a former U.N. official of taking bribes from a U.S. security contractor seeking to do business with the United Nations, according to a confidential U.N. letter obtained by The Washington Post.

Ezio Testa, chief executive of IHC Services, and Alexander Yakovlev, a former Russian procurement official at the United Nations, were charged by U.N. investigators with steering a 2001 contract for bulletproof vests to Armor Holdings, a company based in Jacksonville, Fla.

The U.N. letter, written in December 2008, also links the two men for the first time to a criminal probe by the Justice Department's fraud division into a bribery scheme involving former executives at Armor Holdings, which was acquired by BAE Systems in July 2007.

"Mr. Alexander Yakovlev and Mr. Ezio Testa entered into a corrupt agreement to steer a valuable United Nations contract to Armor Holdings in exchange for promises of sums of money to be paid to the individual participants," says the letter from the now-defunct U.N. Procurement Task Force.

The revelations add to a widening federal probe of Armor Holdings, whose former executives stand accused of bribing officials in the Netherlands and at the United Nations. The U.N. letter also provides fresh insights into suspected corrupt practices in the U.N. procurement department as the world body ramped up its peacekeeping operations in the late 1990s.

Reached by phone, Testa declined to discuss the letter's findings and said he had no idea whether federal authorities were probing his alleged links to Armor Holdings. "I am unaware of what you are telling me," he said before hanging up.

Testa, who received U.S. citizenship in 2004, began working in the late 1990s as a liaison for multinational companies seeking contracts for food, body armor and other supplies for U.N. peacekeepers. In 1998, he struck up a friendship with Yakovlev, then at the United Nations, and promised to help him start a marketing business in Moscow, according to a December 2006 report by the U.N. Procurement Task Force.

Testa gave Yakovlev a free cellphone and hired Yakovlev's son, according to the report. Yakovlev gave Testa and his clients internal U.N. documents that helped the firms secure U.N. business, the report and the letter said.

Yakovlev resigned from the United Nations in June 2005. He was subsequently arrested and pleaded guilty to wire fraud and money laundering. As part of his plea agreement, he agreed to cooperate with the prosecution, said his attorney, Arkady Bukh. Bukh said that he did not think Yakovlev was a target of the federal investigation but that he could not reveal whether he was cooperating with federal investigators in the case. "I'm not admitting or denying," Bukh said.