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Clinton's Russia Team Not Told About Fraud Probe : Crime: Information was withheld because no proof of official involvement was found, officials say.

September 08, 1999|TYLER MARSHALL and RICHARD C. PADDOCK | TIMES STAFF WRITERS

WASHINGTON — President Clinton's senior Russia policymakers, including Vice President Al Gore, were kept in the dark for five months about a Justice Department investigation of alleged money laundering involving Russian criminal elements and a major U.S. bank, U.S. officials disclosed Tuesday.

Clinton administration officials said the lack of notification is significant because efforts to curtail corruption in Russia, including money laundering, have been a key issue in U.S.-Russian relations and the subject of discussions within a bilateral commission co-chaired by Gore.

Those officials, who requested anonymity, said Gore and others involved in formulating U.S. policy toward Moscow were informed about the investigation only after it was described in media reports late last month.

They said the information had been withheld by federal law enforcement officials on grounds that the investigation into Russian money channeled through the Bank of New York had turned up no clear connection either with Russian government officials or with public funds.

The administration sources said the investigators apparently concluded that, because they had no proof of official involvement, the scandal contained no significant national security or foreign policy ramifications.

Asked about the characterization of events offered by the administration sources, a Justice Department official said "it was standard practice" to withhold details of an ongoing investigation from other federal agencies. "When it does have serious foreign policy implications, we obviously try to coordinate with them," the official said.

In his role on the U.S.-Russia joint commission, Gore provided some of the impetus for measures approved by Russia's lower house of parliament earlier this year to curb money laundering.

Russian President Boris N. Yeltsin shocked U.S. policymakers this summer by vetoing the legislation.

It is unclear whether broader knowledge of the money-laundering probe and possible pressure from Gore or other U.S. officials might have averted Yeltsin's veto. If nothing else, the fact that those responsible for shaping U.S. policy were unaware of such a major scandal raises questions about coordination between U.S. government agencies.

"There certainly are legitimate questions," said Alan Stoga, an international consultant in New York and former Treasury Department economist. "Was [the State Department] doing its job? Was Treasury doing its job?"

The administration sources said the U.S. government first became aware of the alleged money laundering when officials from another government, believed to be Britain, passed on a tip via the State Department. Treasury Department officials learned of the problem the following month from a separate source.

Both departments informed federal criminal investigators, who rebuffed requests by policymakers at the White House and elsewhere for details, the sources said.

In a related development Tuesday, former Russian Deputy Prime Minister Anatoly B. Chubais, once among Yeltsin's closest advisors, denied allegations that he traded in high-yield Russian treasury bills while holding a position in the government.

Chubais issued a statement on the Internet in response to an article Sunday in The Times reporting that Russian prosecutors were investigating whether 780 current and former officials, including Chubais, improperly traded in short-term securities known as GKOs while in office.

"I never carried out any transactions on the GKO market during my tenure as a state official," Chubais said in the statement. "Nor were any of my family members engaged in any transactions with securities. All such conjectures are unfounded and mendacious."

The Times article was based on an interview with suspended Prosecutor General Yuri I. Skuratov, who said the prosecutor's office was investigating whether any of the officials abused their positions by using inside knowledge when buying and selling GKOs.

Skuratov was suspended from his post in April after state television broadcast a video of a man closely resembling him in bed with two prostitutes. Skuratov has declined to discuss the video but asserts that Kremlin insiders wanted to oust him because he was zeroing in on high-level corruption. An investigation into Skuratov's conduct is underway, but the upper house of parliament has refused to approve his removal from office.

Skuratov named three of the 780 officials being investigated: Chubais, former Deputy Prime Minister Valery M. Serov and former Foreign Minister Andrei V. Kozyrev. Serov could not be reached for comment, but Kozyrev vehemently denied any wrongdoing.

*

Marshall reported from Washington and Paddock from Moscow. Staff writer Jonathan Peterson in Washington contributed to this report.

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