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Thousands Appear to Have Lost Millions to a Slick Operator

June 09, 1994|CAREY GOLDBERG | TIMES STAFF WRITER

MOSCOW — It takes no more than six months to become a millionaire on the lam in Russia these days.

Take the case of Alexander Melnikov, whom police, victims and City Council members name as the main culprit in the rise and fall of the Independent Oil Concern, the biggest flimflam money operation to collapse in Moscow.

Melnikov began with just about 5 million rubles--roughly $2,500, according to Gennady Babakhanov, chairman of the victims' group.

He said that Melnikov got his company registered as the Independent Oil Concern, a joint-stock society, even though there was no mention of oil in its charter. (Oil bespeaks riches to Russians; one financier quipped that a fund could not fail if it named itself "Oil-Diamond-Invest-Sausage-Gold-Mining," thus encompassing all the country's main assets.)

Melnikov became general director and put out advertisements last winter offering the highest interest around on investors' money--1,010% annually on rubles.

When police and prosecutors later checked the firm's documents, they were all reportedly found to be in order. That means, Babakhanov alleged, "it could all not have been done without bribes" to the officials who control the red tape.

Beginning Jan. 26, the money began to roll in, largely from pensioners. The first quarterly dividends were supposed to be paid to shareholders April 26.

But suddenly on March 31, the fund's bosses failed to appear and security guards called the police and asked them to seal the office because there was nothing left for them to protect, Babakhanov said.

The victims' organization puts the number of investors at up to 40,000, each having put an average of 1 million rubles--$500--into the kitty, meaning the whole pot may have run to about $20 million. Only about $2 million has been recovered from a Russian bank, and Babakhanov believes that the rest was converted to dollars and may be in banks in France and Canada.

Police believe that Melnikov is still in Russia, but he is, as one officer understated, "not exactly cooperating with the police investigation."

In other words, they have not managed to bring him in. If they do, police said, he could face charges for fraud.

If Melnikov is found guilty of fraud that brought "major damage" to its victims, he could face a prison term of three to 10 years.

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