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Russia Settles Suit Against S.F. Jewelry Concern

Courts: Golden ADA was accused of stealing $171 million of the country's diamonds and precious metals.

November 16, 1996|MICHAEL A. HILTZIK | TIMES STAFF WRITER

Closing a chapter in a scandal that cost one crony of Russian President Boris Yeltsin his Kremlin job, the Russian government said Friday that it has settled a lawsuit against a mysterious San Francisco firm it accused of stealing up to $171 million of the country's diamonds and precious metals.

The settlement gives the Russian Committee of Precious Metals and Gems ownership of all the remaining assets of Golden ADA, which was set up in 1992 by a group of Russian citizens purportedly to process rough diamonds consigned by Russia.

The committee, which supervises the processing and export of Russian diamonds and precious metals, charged that Golden's owners instead misappropriated virtually all the diamonds, gold and other valuables sent from Moscow to San Francisco.

They allegedly liquidated most of the goods to finance a world-class shopping spree for yachts, luxury cars, aircraft and real estate before leaving the area and disappearing, possibly overseas. Among their acquisitions was a four-story building in the San Francisco jewelry district in which they installed a state-of-the-art diamond-cutting factory.

All but $50 million of the goods and money is still missing, according to Mark Beck, a Los Angeles-based lawyer for the Russian Committee.

The disappearance of the Russian goods provoked a public uproar in Moscow, where it was seen as evidence that government officials were spiriting the country's natural resources overseas for their own profit. The scandal forced Yeltsin last February to dismiss the head of the Russian Committee, an old friend named Yevgeny M. Bychkov.

This week's settlement gives the committee title to as much as $165.4 million in Golden ADA assets, most of which remains the subject of a worldwide search.

Left unresolved is a $63-million lien imposed on Golden's assets by the Internal Revenue Service, which moved against the company earlier this year on the theory that stolen assets are fully taxable.

Beck said Friday that the Russian government would work "via diplomacy, negotiation and possibly litigation" to get the lien dissolved on the grounds that all of Golden's assets belong to Moscow and should be returned untaxed.

The Russian Committee also continues to pursue fraud charges against Golden's founder, Andrei Kozlenok, a Russian with alleged ties to the Soviet-era KGB and to Russian security officials, and against two of his partners. Whereabouts of Kozlenok and the partners are unclear.

In formal terms, the Russian settlement was with Rajiv Gosain, a Malaysian-born U.S. businessman who acquired Golden from Kozlenok last year. Gosain, who said in an interview that much of Golden's troubled history was "not disclosed to me" at the time of the sale, was not accused of any wrongdoing by the Russian government.

Gosain declined to say how much he paid for title to the company. He said, however, that he had settled the case with the Russian government in hopes of acquiring a steady supply of Russian rough diamonds to process in the factory.

"The supply of diamond rough is a fairly tricky business," he said. "This essentially leaves me with goodwill and good relations with the Russian Committee."

Beck, however, noted that any suggestion that Gosain had any right to operate the factory for his own profit was incorrect.

"The Russian Committee takes every last nickel," he said, "because it belongs to them."

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