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The Bank of New York
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Russian Mob Scandal



Inkomban`fk Former Management May End Up Behind Bars
by: Emily Topol

Moscow 05/08/2001(MT~Newswire). Inkombank's insolvency was premeditated said Rosbank president Michael Prokhorov testifying before the Russian Parliament's (Duma) Committee on Bankruptcy and Restructuring of Credit Institutions. Prokhorov heads Inkombank's creditors committee. According to Prokhorov, Inkombank's management removed from the bank's balance and secreted approximately US$ 1 billion.

The assets transferred out of Inkombank and "sold" to shell companies controlled by Inkombank's management include the shares of the factory Rot Front, military industrial concern Sukhoy, a Baltic Plant Severny Verfy, Lenenergo and Gazprom.

Foreign creditors of Inkombank, who lost over US$800 million when the bank collapsed in October 1998,  may hope to get back no more of 15 cents on the dollar.  

The largest foreign creditor of Inkombank is German governmental agency Hermes holding US$120 million. Failure to resolve the conflict with Hermes may play an important adverse role in future negotiations with the Paris Club, according to Russian and Western analysts.

The Office of the Prosecutor General recently announced commencement of criminal proceedings with respect to several former officers of Inkombank including its ex-chairman Vladimir Vinogradov.

The investigation is headed by the senior investigator of "most emergent probes", Valery Nikolayev. MT learned that that Nikolayev's investigation focuses, amongst other matters on the sale of expensive Inkombank real estate abroad to related persons at dumped prices. 

According to the prosecutors, these machinations caused "serious harm" to the bank, its depositors and the Government of Russia.

Nikolayev said that he does not want to discuss the ongoing investigation, naming names and concrete sums of money stolen by Inkombank's former management.

This is a complex matter, said Nikolayev, but we are confident that our investigators will "sort everything out."

A number of lawsuits filed in the United States charge that the Bank of New York actively aided the  corrupt Inkombank in dissipating Inkombank's assets and funneling hundreds of millions of dollars into offshore companies controlled by certain officers of both banks.

The bank has previously claimed that the suit is baseless and the charges ``scurrilous" and "based almost entirely on unsupported allegations provided by Emanuel Zeltser”, a director of the American Russian Law Institute and a lawyer in a companion lawsuit brought against BoNY by depositors of Inkombank. (See Bank of New York Management Attacks Director of American Russian Law Institute (MT 09/12/2000)

However the Federal Judge Denny Chin presiding over one of the lawsuits brought by the BoNY shareholders ruled that the “substantial charges” against BoNY have been supported by “detailed factual allegations” and are "nonfrivolous."

State Supreme Court Justice Beatrice Shainswit concurred with the federal judge. In her decision she wrote that "the misconduct [of BoNY's directors], as alleged, was illegal, occurred in a heavily regulated industry, took place over a period of six or seven years, and involved billions of dollars."



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