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>From www.insightmag.com/articles/story1.html
> <Picture>
> Vol. 15, No. 36 -- September 27, 1999
> Published Date September 3, 1999, in Washington, D.C.
> www.insightmag.com
>
>
> <Picture: buttonbar2.gif><Picture><Picture><Picture><Picture><Picture>
>
> Gore's Embrace
>
> ------------------------------------------------------------------------
> By J. Michael Waller
> ------------------------------------------------------------------------
>
> Money-laundering charges have raised questions about the vice president's warm
> relationship with Russian President Boris Yeltsin's corrupt, inept
> administration.
>
> <Picture: V>ice President Al Gore is in the doghouse over his no-holds-barred
> support for Russian President Boris Yeltsin, and it isn't just his Republican
> critics who are pointing the fingers. One of the Democrats' shining stars,
> former New Jersey senator Bill Bradley, who is challenging Gore for the
> presidential nomination, blasted the administration's Russia policy after
> reports that Russian gangsters, possibly in league with top Russian officials,
> laundered billions of dollars of U.S.-backed loans through New York banks. . . .
> . "Our assistance and lending policies," said Bradley, "have done very little to
> further our strategic goal, the needs of the Russian people or the cause of
> Russian reform. Billions of dollars have been promised to Russians, but far too
> much money has been siphoned off by untrustworthy Russian 'capitalists.'" It was
> an implicit swipe at Gore, who was one of the main champions of the
> taxpayer-subsidized loans to the Russian Central Bank believed to have been
> laundered through the Bank of New York, which happens to be in the state that
> first lady Hillary Rodham Clinton wants to represent in the Senate. . . . . No
> one is rushing to Gore's defense. With most of official Washington out of town
> for the Labor Day holiday, few were available for comment. But a spokesman for
> retiring New York Democratic Sen. Daniel Patrick Moynihan, the influential
> foreign-policy voice whose seat Hillary Clinton hopes to take next year, tells
> Insight, "He's following the issue but we have not made any statement." The
> Democratic Leadership Council, which President Clinton headed when he was
> governor of Arkansas, said it had no one qualified to comment. And a spokeswoman
> for Mrs. Clinton, when asked for comment, said, "Ugh. I don't know about that
> one." . . . . Painting Gore further into the corner are revelations from the
> U.S. intelligence community that while the vice president was pushing for more
> cash to Russia, he was rejecting CIA reports that his Russian interlocutors were
> crooked or involved with organized crime. . . . . "Though no one has charged
> that Gore knew of the financial diversions," reported the Washington Post, "the
> still emerging money-laundering scandal has tendrils that could run close to the
> vice president." Newsweek opined, "It may be Al Gore who pays for the sins of
> the Russian elite." In a Washington Post op-ed, David Ignatius asked, "What did
> the vice president know about the looting of Russia by organized crime, and why
> didn't he do more to stop it?" . . . . Gore finds himself in the hot seat
> because of his unique relationship with certain Russian leaders alleged to have
> participated in some of the looting. Unlike any vice president in U.S. history,
> he has taken a lead strategic foreign-policy role. The first Clinton
> administration was just three months old in April 1993 when, in partnership with
> then-Prime Minister Viktor Chernomyrdin, Gore headed the U.S.-Russian Commission
> on Economic and Technological Cooperation, popularly known as the
> Gore-Chernomyrdin commission. . . . . The commission was designed to work on a
> range of energy, industrial, technological and economic issues and to cut
> through bureaucracy. Supporters say that in the course of the often rocky
> U.S.-Russian relationship, the commission provided an even keel for conducting
> bilateral relations on a daily basis. Critics argue that it was a funnel for
> U.S. cash and technology into Russia's corrupt bureaucracy and banking sectors.
> . . . . Gore won bipartisan accolades for his commission work, gaining himself
> statesmanlike status. But Chernomyrdin, ousted last year, lost his luster amid
> reports he had privatized a nine-figure portion of Gazprom, the Russian
> natural-gas monopoly he once headed, to himself. With the latest reports that
> the U.S.-backed International Monetary Fund, or IMF, loans which Gore helped
> engineer to prop up Yeltsin may have been diverted and laundered through the
> Bank of New York, Gore's relationship with Chernomyrdin suddenly threatened his
> undoing as a world statesman. . . . . Surveying the ruins of the
> administration's Russia policy that in the end failed to foster permanent
> pro-Western, free-market reforms, the New York Times Magazine reported, "When
> this checkered record is eventually held up to the light during a presidential
> campaign, Gore will have much to answer for." . . . . The Gore-Chernomyrdin
> commission, whose informal name has changed with each new Russian premier, has
> operated as part of the Russia policy developed by senior administration
> officials, including Deputy Secretary of State Strobe Talbott. Gore's
> national-security adviser, Leon Fuerth, is regarded as the commission's de-facto
> executive secretary and operates as a peer to the national-security adviser,
> secretary of state and secretary of defense. The commission helped muster
> bipartisan domestic support for continued bailouts of Moscow, in part by
> enlisting the political clout of the various U.S. banks and corporations that
> benefit from its taxpayer-funded programs. The U.S.-Russia Business Council, a
> private organization promoting bilateral trade, has boasted in its literature of
> setting the agendas of several of the commission's semiannual meetings. . . . .
> The commission, observers say, also fostered an atmosphere of cronyism and
> corruption among U.S.-based recipients. "If you look at the composition of the
> working groups of the Gore-Chernomyrdin commission, it has a very unhealthy
> overlap between people either implicated or directly the subjects of a criminal
> investigation of maldistribution of aid," says Peter J. Stavrakis, a professor
> at the University of Vermont who five years ago authored one of the first
> academic studies of cronyism within Washington's Russian aid program. "The
> internal infrastructure of Gore-Chernomyrdin contains people who became major
> players in the [Russian] stock market, buyers and sellers of assets of the
> former Communist Party. The conclusion is inescapable: Some Gore-Chernomyrdin
> people were deeply involved in activities that were suspect and possibly
> criminal." . . . . They include Harvard University economist Andrei Schleifer,
> special coordinator of the commission's Capital Markets Forum Working Group. The
> U.S. Agency for International Development, or USAID, fired Schleifer in 1997 for
> "having abused the trust of the United States government by using personal
> relationships, on occasion, for private gain," according to an agency statement.
> Schleifer was Moscow project director of the Harvard Institute for International
> Development's, or HIID's, $57 million USAID contract to promote economic reform
> in Russia. After House International Relations Committee Chairman Benjamin
> Gilman, a New York Republican, initiated a General Accounting Office probe of
> HIID's activities in Moscow, the USAID inspector general conducted its own
> investigation. USAID also alleged that Schleifer's HIID colleague, Jonathan Hay,
> misused federal resources to help private financial work of Schleifer's wife,
> Nancy Zimmerman. A USAID termination letter to Hay alleged that his
> taxpayer-funded staff was improperly involved in "buying and selling Russian
> bonds, tracking deposits and withdrawals from the investments' Russian bank
> accounts, consulting about tax aspects of the investments and possible
> additional investment opportunities." Hay's girlfriend, Beth Hebert, who headed
> the Pallada Mutual Fund in Moscow, also may have benefited from inside
> information while she was a member of the Gore-Chernomyrdin commission's working
> group headed by Schleifer. A lawyer for Hay and Schleifer rejects the
> allegations. . . . . Despite his office's daily work with Russian officials and
> its vigorous promotion of Russia as a bonanza for U.S. companies, Gore never
> sought to protect U.S. investments there. "U.S. investors still don't have an
> investment treaty with Russia," says Richard Palmer, a former CIA officer with
> experience in the former Soviet Union who is now with a firm helping recover
> assets and performing due diligence on Russian companies. That failure, in his
> view, has only encouraged corrupt Russian officials and "biznismen" to defraud
> U.S. companies. "The European Union has such a treaty. What does that mean? The
> EU has an immensely easier time trying to recover assets when they've been
> ripped off or fraudulently deprived of funds. Because of the way the treaty is
> written, Europeans can try their cases in Europe, not Russia. By taking it so
> easy on the Russians, Gore was endangering U.S. investors whom he was
> encouraging to invest there." . . . . The greatest symbol of abuse was
> Chernomyrdin himself, who has become a caricature of the kleptocracy Russia has
> become. Other Gore-Chernomyrdin commission members from the Russian side include
> top agriculture, energy and space-agency officials cited by Washington for
> diversion of U.S. humanitarian aid and for the illegal sale of ballistic-missile
> and nuclear-weapons technology to Iran. Gore's personal relationship with
> Chernomyrdin, Stavrakis argues, put the U.S. leadership in league "with the very
> forces who robbed Russia's chance of becoming a free society." . . . . The hook
> in the new controversy is the question of whether Gore's Russian interlocutors
> ordered or condoned the laundering of money from IMF loans through New York
> banks. Gore, more than most administration officials, has been a consistently
> strong advocate of multibillion-dollar cash infusions into the Russian Central
> Bank and, according to Senate sources, turned the screws on the IMF to relax its
> standards and increase its cash outlays to Moscow. . . . . Senate aides are
> looking at a possible paper trail that might lead from the vice president
> through the IMF and into the very money allegedly laundered through the Bank of
> New York. In early 1996, as Yeltsin was purging his government of the young
> economic "reformers" on the eve of his reelection campaign, the IMF became
> reluctant to lend any more cash to the Russian Central Bank. "Gore was
> personally the one who arm-twisted [IMF Managing Director Michel] Camdessus to
> force through the $10 billion tranche just prior to the Russian presidential
> elections" that year, according to a senior Senate aide. "If you want to trace
> the pool of money that was most stolen, there it is right there. The 1996 deal
> was the biggest, worth $10.2 billion. That's what funded the war in Chechnya,
> Yeltsin's political campaign, and left plenty as a slush fund." . . . . House
> Banking Committee Chairman Jim Leach, an Iowa Republican, already has announced
> several days of hearings into the matter, winning praise from Bradley. Leach's
> findings could drive a stake into the heart of more Kremlin cash bailouts. . . .
> . "I think the general problem of corruption in Russia, and now the fact that
> IMF money may have gotten caught up in that, is a real serious problem for
> U.S.-Russian relations," says Condoleezza Rice, who served as senior director
> for Soviet affairs on President Bush's National Security Council. "It makes what
> has been at best tenuous support for economic assistance of any kind to Russia
> -- it probably breaks that consensus." Now a leader of the national-security
> team for Republican Texas Gov. George W. Bush's presidential campaign, Rice
> tells Insight, "I'm very much of the mind of those who say that, until we have a
> good sense of what's happening to this money, it makes no sense" to send more. .
> . . . Gore spokesmen insist they knew about Russian corruption all along and
> point to the vice president's appetite for reading intelligence reports.
> However, the administration applied intense pressure on the intelligence
> community not to produce reports linking top Russian officials to corruption and
> organized crime. According to Fritz Ermarth, a recently retired CIA officer who
> served twice on the National Security Council and chaired the National
> Intelligence Council, the Clinton-Gore administration in particular insisted on
> intelligence analysis that did not undermine its policy of unflinching support
> for Yeltsin, Chernomyrdin and successive prime ministers. Through a combination
> of post-Cold War downsizing and management changes at the CIA, a sharply
> increased demand for reports and briefings and the administration's ambitious
> Russia agenda, intelligence reports deteriorated from "deep analysis" to ones
> with an "agenda" that he describes as "supportive of daily business," Ermarth
> says. "Our policymakers did not want, and our intelligence analysts had little
> incentive to provide, a big-picture, long-term assessment of Russian realities.
> They mainly wanted to get through the next Gore-Chernomyrdin meeting, or the
> next quarrel about Russian missile dealings with Iran." . . . . Career diplomats
> at the U.S. Embassy in Moscow agree with Ermarth's view. E. Wayne Merry, head of
> the internal political section from 1991 to 1994, and his successor, Thomas E.
> Graham, Jr., recently have spoken out. According to former Washington Post
> Moscow correspondent Robert Kaiser, Merry "said the embassy was under constant
> pressure to find evidence that American policy was producing tangible successes,
> especially after the creation of the Gore-Chernomyrdin working group.... This
> organization absorbed the energies of many American diplomats in Moscow, Merry
> said, and it soon became 'a Soviet-style bureaucracy in which success was
> mandatory, and any information that would contradict success simply was filed
> forever.'" . . . . A top secret 1995 CIA report on Chernomyrdin and other
> Russian leaders, which reportedly contained information on their corrupt
> activity and ties to organized criminal figures, enraged Gore and his senior
> staff, who angrily returned it to the CIA with the now-famous "barnyard epithet"
> scribbled across the cover. . . . . Insight has learned that in the months
> following the report on Chernomyrdin, a debate raged in the intelligence
> community about whether it should be de-tasked from reporting on the corruption
> of the administration's Russian partners. Some intelligence officers tell
> Insight they believe the de-tasking order came from Gore's office. "It got worse
> in 1997," says a former CIA official. "They reorganized everything [in the CIA]
> to remove everyone with experience. They took the Russian organized-crime [duty]
> from the old Russia and KGB hands" and reassigned it to the anticrime unit -- "a
> stockpile for deadwood," in the words of the former official. The CIA anticrime
> office, according to the source, had little experience in Russia or on the
> Russian intelligence services involved with organized crime, yet "put their own
> spin on everything" in analyses to decisionmakers. . . . . Gore long has taken a
> see-no-evil approach to shady businessmen, criminals and gangsters. Indeed,
> former congressional investigator Ed Timperlake says this attitude has blinded
> the vice president toward high-level corruption in Russia. In 1995, Gore and
> Clinton posed for photos at a Miami campaign fund-raiser with Ukrainian tycoon
> Vadim Rabinovitch -- whose visa the State Department had revoked a month earlier
> on the grounds that he is tied to organized crime. Rabinovitch vigorously denies
> the State Department allegations. Congressional investigators found that the
> Clinton-Gore reelection campaign accepted more than $1 million in illegal
> donations from Macao prostitution racketeer Ng Lapseng and individuals connected
> with the Chinese Triad organized-crime group and that Gore had John Huang, the
> Democratic National Committee fund-raiser and alleged Chinese spy, accompany him
> on his 1996 fund-raising event at a Buddhist temple in California where Chinese
> money was laundered into the Clinton-Gore campaign. At a 1994 fund-raiser, Gore
> posed with Andrei Kozlenok and Soviet-born David and Ashot Shagirian of a San
> Francisco company called Golden ADA, then under FBI and IRS investigation for
> selling tons of diamonds, gold and antique jewelry looted from the Russian
> national treasury. The Feds ultimately shut it down. Ashot Shagirian pleaded
> guilty to tax evasion in early 1998; his brother David is believed to be in
> hiding in Europe. . . . . Some want to make Gore's Russia debacle a
> presidential-campaign issue. Bradley, however, has been criticizing the
> administration's Russia policy for years. Four years ago, in a speech
> ghostwritten by scholar Greg Guroff, Bradley warned, "Not only do we fail to
> influence the course of Russian reform, we actually create an anti-American
> backlash based on disappointed expectations." His current criticism is
> little-changed. . . . . Bush's presidential campaign also is critical of the
> administration's Russian policies. "We need to step back from Russian domestic
> politics," argues Bush security adviser Rice. "We've made ourselves an actor or
> actual player in Russian politics, and that's not good. We have a very large
> agenda with the Russians on things that should be of direct interest to both of
> us." But she's withholding judgment on how the Clinton administration, and Gore
> in particular, handled the Russian government's corruption problem: "I hope
> everybody goes after this very aggressively." . . . . Now, with former
> secret-police chief Vladimir Putin as prime minister, the administration is
> faced with a new set of embarrassing issues. KGB veteran Putin is considered an
> experienced operational hand at moving money and the strongest protector of "the
> Family" of oligarchs surrounding Yeltsin (see "Yeltsin Keeps It All in 'the
> Family,'" Sept. 6). . . . . So will the administration be more objective in
> working with the Gore-Putin commission? An intelligence official gives Insight
> little reason for optimism: "The White House is pressuring the intelligence
> organizations again. Right now there are tremendous fights within the government
> that there can be no mention in any Putin biographies or assessments that he has
> ties to organized crime or corruption. That's gone on all along with each
> Russian leader, and it's still going on today. They don't want to hear it." . .
> . .
>
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A<>E<>R
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