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Crime Squad. In the 1970s, the KGB released thousands of hardcore prisoners from the Soviet gulags, where they had formed tight-knit criminal clans, and allowed them to emigrate across the globe. Over time these clans evolved into the sophisticated Russian Mafiya, operating multinational drug, prostitution, and insurance and welfare fraud rings, among other enterprises. The California Department of Justice has reported that Russian criminal groups are operating in California, including "approximately three hundred former Soviet Union crime figures and associates in the San Francisco Bay Area." Many are from the Ukraine, members of an offshoot of the Odessa Mafiya.
The Bay Area, one of the world's banking hubs as well as home to many Russian-speakers, has become a favorite place for the Mafiya to launder some of its global take. Much of the EOC squad's work involved tracking that money down. For example, as Earl staked out Kiritchenko's Dumpster by night, by day he was helping investigate a young Russian emigre, Alexander Lushtak, who had bilked the local Russian community out of millions with an elaborate Ponzi scheme that promised tax-free returns of up to 25 percent. Lushtak pleaded guilty in June 2000 to money laundering. During his trial, according to one published report, an FBI memo emerged claiming Lushtak had laundered as much as half a billion dollars of Russian organized-crime money through his bank account in New York.
But not all the Russian loot that has flooded into San Francisco comes from the Mafiya. As the Soviet Union collapsed, state-owned industries were divvied up among politicians, crooks, and entrepreneurs. These new oligarchs built a Wild West capitalist economy in which pay-to-play was the rule. Government contracts, international trade deals, the rights to natural resources-every potential profit came at a price. Later, as the young countries tried to impose the rule of law on the chaotic system, the oligarchs responded by spiriting their politically embarrassing fortunes out of the country and into banking systems where they couldn't be touched.
It was an influx for which Earl was prepared. His course work in international and Soviet law at Columbia University Law School and experience in financial litigation made him an immediate asset to the squad, and he began taking Russian classes. Earl knew that investigations into complex financial crimes-considered among the FBI's most challenging-hew to a single axiom: follow the money. The scraps from Kiritchenko's office that Earl riffled through each day were threads in a dense web of holding companies, offshore corporations, and beneficial trusts. It looked designed to disguise something, but what was this small-time trader hiding?
It was no secret that Kiritchenko advertised his ties to Pavel Lazarenko, handing out gold-embossed business cards reading: adviser to the prime minister. In photos, Lazarenko-who was said to have accumulated up to a billion dollars, despite earning about five thousand dollars a year in government salary-towered over the crowds gathered to see him, an u
The prime minister had begun his career driving a tractor on a collective farm, but by age twenty-four, "Pasha," as his friends called him, had already become the powerful director of a state farm in the Soviet Republic of Ukraine. By thirty-three, he headed all agriculture in his home region of Dnepropetrovsk. Even the fall of the Soviet Union in 1989 did not slow Lazarenko's rise. A year after Ukraine declared its independence, he was appointed governor of Dnepropetrovsk, and by 1996, Lazarenko had moved to Kiev to accept the premiership, the second most powerful man in a nation of fifty million. He was forty-three.
"He had an aura," recalls Olena Prytula, a leading Ukrainian journalist. Prytula came to Stanford University on a fellowship this year and was one of the few Ukrainians to cover Lazarenko's trial. She first met Lazarenko in 1996 at a ceremony outside of Kiev commemorating the Soviet victory over Germany. "He looked like the devil to me. I thought, 'This man is capable of killing someone,' " she says. "He would say something, and everyone would do it immediately. All of the journalists called him haziain, master."
Kiritchenko always called Lazarenko not Pasha but Pavel Ivanovich. The use of the formal patronymic made it clear who held the power. But Kiritchenko's co
Afterward, at a party Kiritchenko hosted at the now-defunct Mediterranean restaurant Splendido in Embarcadero Center, the two men traded toasts, thanking each other for years of business success. After the toasts, Lazarenko and Kiritchenko began singing together. There had been much wine and vodka, but the song was not a drunken one. It was an old Ukrainian song, soft and heartfelt, a song about never-ending loyalty. "More than best friends, they were brothers," says a Ukrainian who was there.
Yet as Earl spent the summer investigating Kiritchenko, Lazarenko, safely outside U.S. jurisdiction, remained in the background. That changed, however, when an obscure company called Dugsbery Incorporated closed a deal with Marin County real estate agent Nan Allen to purchase a $6.75 million Novato estate once occupied by comedian Eddie Murphy. Rumor had the buyers as Russians.
dugsbery-Earl had seen the word scrawled on a Post-it note in Kiritchenko's trash. From the public record, he'd discovered it was a shell company owned by Kiritchenko with a single account at WestAmerica Bank. Kiritchenko was already building his Shangri-la. Why would he need an even bigger mansion, with twenty rooms, five swimming pools, two helicopter landing pads, a full-sized ballroom, gold-plated doorknobs, and a master bedroom larger than entire Nob Hill apartments?
The answer was in the news. Back in Ukraine, the godfather was in a fight for his life. Now he had a hideout, just in case.
Earl was eager to explore the Ukrainian co
On the flight, Earl updated Boersch. A month earlier his findings had been included in an FBI memo requesting help from Swiss authorities who were investigating Lazarenko's and Kiritchenko's numbered Swiss bank accounts. It was titled simply "Re: Peter Kiritchenko, Russian Organized Crime" and laid out the FBI's ideas: While living in Warsaw, Kiritchenko had been "involved in myriad criminal schemes," including moving millions in "stolen Ukrainian government funds." He disguised the money as trade in ferrous metals, wheat, and sunflower seeds. He was also suspected of selling prefabricated houses made in Elk Grove, California, to the Ukrainian government at almost a 200 percent markup using falsified invoices.
Earl's most intriguing find, however, came from a discarded FedEx envelope from European Federal Credit Bank. The offshore bank based in Antigua had been cofounded by someone Earl and Boersch knew well, Ponzi schemer Alexander Lushtak. It was now chaired by Alex Liverant, a Ukrainian Jew who had immigrated to San Francisco in 1979. When EuroFed needed capital, Earl had learned, Kiritchenko became its primary investor and was now sharing a business address with Liverant. Under Kiritchenko's watch, EuroFed began opening U.S. dollar correspondent and investment accounts in San Francisco financial institutions big and small: Merrill Lynch, Bank Boston Robertson Stephens, Hambrecht and Quist, Pacific Bank, and Commercial Bank of San Francisco. The memo concluded that