Janine Wedel - Collision and Collusion - The Strange Case of Western Aid to Eastern Europe

112. Russian Privatization Center, 1994 Annual Report, pp. 5 and 24.

113. The World Bank figure was provided by Ira Lieberman (interview of July 23, 1996), while the EBRD figure was supplied by Renae Ng (conversation of September 24, 1996).

114. Mark C. Medish, Confidential Report on USAID Programs Supporting Commercial Law and Other Legal Reform in the Russian Federation, Washington, D.C., September 1996, p. 6.

115. Ibid., p. 17.

116. Interview with Ira Lieberman, July 23, 1996.

117. According to Ira Lieberman in his July 23, 1996, interview, Fedorov objected to items of the loan on professional grounds.

118. Shortly before the Russian presidential election of 1996, Eduard Boure, the new managing director of the RPC, said, “It’s better if we get the loan before [communist presidential candidate Gennadii] Zyuganov gets too far.” Interview with Eduard Boure, June 25, 1996.

119. Documents and information from Veniamin Sokolov, head of the Chamber of Accounts of the Russian Federation (interview of May 31, 1998 and talk at American University of June 2, 1998). In 1994, both the Duma and the head of the GKI requested a detailed accounting from the RPC. They got nothing. Sergei Zavorotnyi, “The Traces of ‘Privatization’ Go Overseas,” Komsomolskaya Pravda, April 8, 1997.

120. Interview and documents provided by Chamber of Accounts auditor Veniamin Sokolov, May 31, 1998.

121. Interview with Thomas A. Dine, August 16, 1996.

122. U.S. General Accounting Office, Foreign Assistance: Harvard Institute for International Development’s Work in Russia and Ukraine, Washington, D.C.: GAO, November 1996, pp. 26, 27, and 60.

123. Conversation with Stanley R. Nevin, September 24, 1996.

124. Conversation with Ira Lieberman, August 27, 1996.

125. Ibid.

126. Interview with USAID’s Cecilia Ciepiela, August 5, 1996.

127. Interviews with a representative of Price Waterhouse, July 18, 1996; Dennis Mitchem of Arthur Andersen, August 18 and 19, 1996; and Robert Otto of Carana, August 27, 1996.

128. Interview with a representative of Price Waterhouse, July 18, 1996.

129. Interview with Dennis Mitchem, August 19, 1996.

130. Interview with Cecilia Ciepiela, August 5, 1996.

131. Interview with Dennis Mitchem, August 18, 1996.

132. Interview with Dennis Mitchem, August 19, 1996.

133. Interview with Robert Otto, August 27, 1996.

134. U.S. General Accounting Office, Foreign Assistance: Harvard Institute for International Development’s Work in Russia and Ukraine, Washington, D.C.: GAO, November 1996, p. 52.

135. Mark C. Medish, Confidential Report on USAID Programs Supporting Commercial Law and Other Legal Reform in the Russian Federation, Washington, D.C., September 1996, p. 16.

136. Ibid.

137. GAO sources confirm this observation (conversations of October 28, 1997, and April 23, 1998 with Louis H. Zanardi). One example of this involves RPC interference with efforts by the U.S.-funded Senior Executive Service Corps.

138. Interviews with USAID-paid contractors and U.S. government sources. A member of the GAO audit team confirms this observation (conversations of October 28, 1997 and April 23, 1998 with Louis H. Zanardi).

139. Letter of May 20, 1997, to HIID director Sachs from USAID suspending further payments to HIID.

140. For the U.S. Government suit, see United States Attorney District of Massachusetts, “United States Sues Harvard and Others for False Claims Relating to USAID Programs in Russia,” Press Release, U.S. Department of Justice, September 26, 2000.

In a separate investigation, Hay, together with Dart Management, Inc., is the subject of a civil suit (under U.S. racketeering laws) filed in the U.S. District Court of New Jersey brought by Avisma Titano-Magnesium Kombinat over an alleged fraud and money-laundering scheme. Avisma is seeking $150 million in damages. (In the United States District Court for the District of New Jersey, Civil Action no. 99-CV-3979 [JWB], filed on December 13, 1999.) The suit alleges that a group of American investors who took over the company from the Russian bank Menatep skimmed at least $50 million from profits over a period of two years. The suit also alleges that Hay arranged the purchase from Menatep through the Moscow Institute for Law Based Economy, the USAID- and World Bank-created and funded organization. According to documents presented by Avisma, Hay “assisted in structuring the transfer of the illegal scheme from Menatep to the investors” (“ Avisma Court Case Filing Targets More Banks,” Metals Week, January 3, 2000, vol. 71, no. 1, p. 2).

The suit also alleges that Natasha Garfinkel Kagalovsky, wife of Menatep executive Konstantin Kagalovsky and Bank of New York employee, arranged accounts at the bank to help channel funds that Menatep had diverted. According to Metals Week, “the deal … included back-door payoffs to the investors through the same network of bank accounts and offshore entities as Menatep had used.” (For further details, see “ Avisma Court Case Filing Targets More Banks,” Metals Week, January 3, 2000, vol. 71, no. 1, p. 2; John Helmer, “Deliberate Blindness to Fraud,” The Moscow Tribune, December 17, 1999, p. 3; and Padraic Cassidy, “From Russia with Suit: Russian Factory Files RICO Suit Against U.S. Investor and Company,” New Jersey Law Journal, August 30, 1999.)

141. This episode is detailed in Anne Williamson, Contagion: The Betrayal of Liberty, chapter 13. See also United States District Court, District of Massachusetts, Civil Action no. OOCV11977DPW, United States of America, Plaintiff, v. The President and Fellows of Harvard College, Andrei Shleifer, Jonathan Hay, Nancy Zimmerman, and Elizabeth Hebert, Defendants.

142. Matt Taibbi, “Picked Clean: How a Small Clique of Americans Scavenged the Remains of Defrauded Russians,” Exile, January 15, 1998, reprinted in Johnson’s Russia List, no. 2021, January 16, 1998.

143. Carla Anne Robbins and Steve Liesman, “How an Aid Program Vital to New Economy of Russia Collapsed,” Wall Street Journal, August 13, 1997.

144. Ibid.

145. U.S. sources close to the investigation.

146. The uncritical application to Russia of Western dichotomies of state and private is analytically problematic. For detailed discussion of the applicability to Central and Eastern Europe and the former Soviet Union of conventional models of institutional change (often used in comparative politics, public administration, and sociology), see the author’s “Informal Relations and Institutional Change: How Eastern European Cliques and States Mutually Respond,” presented at the World Bank, Social Development Group, Washington, D.C., April 20, 1998; and “Clans, Cliques, and Captured States: How We Misunderstand ‘Transition’ in Central and Eastern Europe and the Former Soviet Union,” prepared for the National Council for Eurasian and East European Research and the National Institute of Justice, Washington, D.C., 2000, and forthcoming as a National Council Working Paper (section titled “Dichotomies that Distort”).

147. For example, HIID paid the salaries of expatriates in executive positions.

148. For further analysis, see, for example, Anne Williamson, Contagion: The Betrayal of Liberty, chapter 2, and commentaries on Johnson’s Russia List by Jerry F. Hough (no. 3051, February 11, 1999), S. Lawrence (no. 3072, February 28, 1999), and Edwin G. Dolan (no. 3073, March 1, 1999).

149. See the author’s “Informal Relations and Institutional Change: How Eastern European Cliques and States Mutually Respond,” presented at the World Bank, Social Development Group, Washington, D.C., April 20, 1998; and “Clans, Cliques, and Captured States: How We Misunderstand ‘Transition’ in Central and Eastern Europe and the Former Soviet Union,” prepared for the National Council for Eurasian and East European Research and the National Institute of Justice, Washington, D.C., 2000, and forthcoming as a National Council Working Paper (section titled “The Social Organization of the State”).