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The government's ultimate offer hinted at just how badly it needed him. He would cop to one felony count of interstate transportation of stolen property, for which he would be allowed to appeal any sentence over thirty-seven months. But when it was all over, he and his wife and daughter would go back to their enviable lives unscathed and with guaranteed green cards to boot. Apart from a $3 million "voluntary restitution," he'd be allowed to keep everything he owned: his $11 million Shangri-la, all his businesses and other properties-including a $3 million condo in Los Angeles-and his yacht. After accepting the offer, Kiritchenko packed up his belongings and walked out of the cell with Lazarenko watching. He had won his freedom-and broken his brotherhood- by telling Earl where the money had come from and gone.
Itwas quite a tale. As the Soviet Union crumbled, Kiritchenko, a low-level Communist functionary, had rushed into the void left by the central government, hoping to set up a small import-export company to trade in the resource-rich Dnepropetrovsk region. He learned that the regional governor, Lazarenko, controlled everything and demanded a cut of the business done on his turf. On January 13, 1993, Kiritchenko met with Lazarenko in a Warsaw hotel. The two walked to a nearby financial institution called American Bank in Poland, and the trader gave the governor $40,000 to open a dollar account. It was a down payment, Kiritchenko said. As they left the bank, Lazarenko told him, "I work with everyone fifty-fifty." For the next five years, Kiritchenko faithfully sent half of his profits to Lazarenko, who in return made Kiritchenko a very rich man.
When Earl and Boersch heard that story, they saw the potential underlying crime under Ukrainian law. As long as they could convince a jury that the lowly commodities trader had been, in that moment, victimized by the all-powerful politician's scheme, it was extortion. Alone, that seemed enough to pursue the money-laundering charge.
Yet the rest of Kiritchenko's story complicated matters, for it was not a victim's tale. He quickly became Lazarenko's partner, often traveling between Marin County and Europe to serve as bagman. Well acquainted with European banking, he opened Swiss bank accounts, making sure money from Lazarenko's rapidly growing wealth was flowing smoothly out of Ukraine. The two men flew together to Panama to purchase Panamanian passports for $100,000 (to allow them to travel on the down-low), to Switzerland to meet with their bankers, and to Hawaii and Canada to vacation with their families. It was a deal so sweet that Kiritchenko forgot to stop paying Lazarenko when he was booted out of office.
When Lazarenko became a political hot potato, Kiritchenko's importance to his patron only grew, he told Earl and Boersch. Now the safety of Lazarenko's wealth depended on him. With investigators breathing down Lazarenko's neck, Switzerland was no longer a haven. That's when Kiritchenko approached Liverant, the co-owner of EuroFed, and bought a discreet place to stash money. After a quick trip to Antigua to check out EuroFed's books, Kiritchenko paid $1.1 million for two-thirds of the bank. Soon the two $48 million checks withdrawn from the Swiss accounts poured through the Bahamas and into EuroFed.
Earl and Boersch thought they had more than enough. They approached Robert Mueller, who was then head of the U.S. attorney's office in San Francisco, and presented their case.
Mueller's reply: "Go ahead. Indict."
The grand jury indictment of Pavel Lazarenko came down in May 2000, charging him in a sweeping conspiracy to launder what eventually became $114 million through San Francisco financial institutions. It would be an international prosecution the likes of which had never been seen. The last time the government had put a former head of state on trial, armed forces had invaded Panama in Operation Just Cause to capture General Manuel Noriega. This time, the government enlisted a Bay Area jury to call a former prime minister to account.
Even so, the prosecution's case shared elements of a foreign invasion. It represented a zealous expansion of American jurisdiction across the world. If Lazarenko was convicted, it would give U.S. attorneys the authority to judge whether anyone anywhere had committed fraud or extortion under their own nation's legal code, and then to hold them accountable in U.S. courts, as long as their money had moved through ubiquitous dollar accounts.
The world's crooks and their cronies weren't the only ones watching Lazarenko's case. Anyone in America who moves large, sometimes mysterious sums for a living, including investment bankers and real-estate brokers, had a stake in the outcome. It's illegal to deliberately ignore the tainted source of a deposit. So far the FBI and IRS have worn kid gloves on such "willful blindness" cases, never once criminally charging a U.S. bank in a money-laundering case. Still, finance watchers have wondered if the winds could shift. (In this case, the city's bankers were never called to testify. Yet in August the Justice Department launched a criminal probe into a Washington, D.C., bank's possible role in laundering money for former Chilean dictator Augusto Pinochet and other foreign officials.)
Lazarenko would not go down without a brawl. The millions in his EuroFed accounts had been frozen in Antigua, but he still had hundreds of millions hidden out of the United States' reach and spent it freely. From jail, he hired a string of the Bay Area's top defense attorneys to argue the United States was overstepping its bounds, craftily dragging out the trial's approach each time he changed horses. Over the course of three and a half years, University of San Francisco Law School dean Joseph Russoniello, East Bay defense attorney Cristina Arguedas, who assisted on the O. J. Simpson case, and Harold Rosenthal, who handled the Billionaire Boys Club case, all came and went.
Eventually Lazarenko assembled a dream team. De
Yet center stage belonged to Lazarenko. During opening statements this past March, the twelve Bay Area jurors-initially ten women and two men-often glanced furtively at him, trying to figure him out. Lazarenko, sitting perfectly upright on the other side of the court, was dressed impeccably in an understated black suit. During recesses, he stood outside in the hall, chest thrust forward and hands clasped behind his back, drawing his linebacker's frame over his gaggle of supporters, with whom he consulted in Russian. Lazarenko's wife had returned to Ukraine, and his twin daughters appeared rarely, but his two aides and translators, both named Yuriy, one fat, the other ski
Lazarenko looked like a free man, and in a way he was. Nine months earlier, he'd been allowed to post his frozen EuroFed accounts-though he no longer had control of them-as an essentially illusory $86 million bail so he could be released into house arrest in a two-bedroom San Francisco apartment at an undisclosed location.