Corruption Watch: February 27, 2003

On 18 February, a 56-year-old-man who suffered a stroke in 2001 that left him partially paralyzed entered the South Korean city of Daegu's subway shortly after rush hour and ignited a plastic milk carton filled with a flammable liquid. The ensuing fire rapidly spread to another train, putting some 400 passengers at risk. The inferno killed 130 people and injured another 139, with that death toll expected to rise, according to international media.

The tragedy raised a number of questions -- about safety as such in South Korea's subway system, the availability of fire extinguishers, emergency lighting, ventilation systems, and communication among train drivers. A second set of questions is bound to concern security and intelligence organizations worldwide. If one mentally deranged individual can create such havoc, what measures of protection are in place to prevent a planned terrorist attack on a similar target? If airplanes are considered prime targets for terrorists, and billions of dollars is spent every year to provide security for airline travelers, might not extra measures be needed for the hundreds of millions of daily commuters riding the "A" train in New York, the Metro in Paris, the Tube in London, or the Moscow subway?

According to the official New York City website (http://www.essentialbigapple.com/facts.html), 77.5 million passengers pass through the city's airports every year. When it comes to the New York subway system, there are 1.2 billion riders per year, with 468 stations serving them. During rush hour on a typical weekday, some 100,000 riders use the Grand Central subway station alone. Checking each for the presence of high explosives or flammable fluids in plastic containers can be a daunting task for any police force, even the 3,000-strong New York Transit Police.

On 20 March 1995, the Japanese Aum Shinrikyo religious cult released sarin nerve gas into the Tokyo subway system, killing more than 10 and injuring thousands. It was a planned terrorist attack by a highly organized group. More ominous, as "Jane's Terrorism and Security Monitor" of 20 February pointed out: "In 1997 the FBI narrowly disrupted a plan by two Palestinian suicide bombers in New York City. The bombers were planning to detonate five deadly pipe bombs in the Atlantic Avenue station, one of the city's largest interchanges." "Jane's" continued: "Mass transit systems combine large numbers of civilians, in a confined space, in awkward locations, often either elevated or underground. Furthermore, at present these systems are almost devoid of any pre-emptive security screening."

Beyond the potential loss of human life, the economic losses of such an attack could be enormous. "Jane's" predicted that public-transit systems risk being paralyzed for months, at least. The chaos, fear, and confusion such an attack could create in a major urban center could easily be followed by a rapid set of deadly, coordinated attacks. Can such a scenario be prevented? As Matthew Brzezinski wrote in the New York Times Magazine on 23 February 2003 "There is no clear consensus yet on how to go about protecting ourselves." RK

Tajik drug-indictment officials set a new record by seizing a 345-kilogram consignment of heroin on the night of 18-19 February, AP and Asia-Plus reported. It was the largest single haul in the republic's history, according to Major General Tohirjon Normatov, head of operations and inspections at the Tajik Interior Ministry. This distinction was previously held by a 280-kilogram load of heroin confiscated by Russian border guards on the Tajik-Afghan border in December. Reuters said on 10 February that Russia had deployed 10,700 border guards along this frontier to try to stem the flow of drugs and weapons from Afghanistan.

This consignment, however, with a street value of approximately $10 million, was confiscated on Tajikistan's northern border with Uzbekistan. The drugs had passed from Afghanistan across the Panj River into Tajikistan, through southern Khatlon Raion, through the capital Dushanbe northward into Sughd Oblast's Ayni Raion, where they were seized together with some 20 members of an organized-crime gang, AP reported on 19 February, citing an unidentified source in the Interior Ministry. The source claimed that police had monitored the drugs' passage through the country all the way from the Afghan border. If true, this would indicate extraordinary professionalism, confidence, and patience on the part of Tajik law-enforcement officials, especially since Normatov told journalists that the heroin did not move as a single package but as many small packages traveling along different smuggling routes and brought together in Sughd Oblast. Perhaps more likely, as Normatov himself indicated to Asia-Plus, was that the drugs had been seized in a special operation following a tip-off about a drug ring operating in Ayni Raion.

On the other hand, Asia-Plus reported that on 18 February at a spot on the Tajik-Uzbek border, officers from Tajikistan's presidential Drug Control Agency seized more than 30 kilograms of heroin hidden in a truck that the agency had successfully been tracking from Dushanbe.

Meanwhile, Russian border guards in Khatlon discovered yet another drug cache containing 21 kilograms of heroin last weekend, Asia-Plus reported on 17 February. More than 600 kilograms of narcotics has already been seized in Tajikistan in 2003, of which two-thirds was heroin, the Drug Control Agency's press service said on 13 February. Last year, Russian and Tajik border guards confiscated a record 6.5 tons of narcotics, 4.9 tons of which was heroin (see "RFE/RL Newsline," 9 January 2003).

These figures bear out a remark made by Russian President Vladimir Putin to his Tajik counterpart Imomali Rakhmonov at January's informal CIS summit in Kyiv to the effect that efforts to attack the heroin problem at its source by inducing Afghan farmers to stop growing opium poppies have largely failed. Putin took that opportunity to offer closer cooperation between Russia's and Tajikistan's intelligence services to track and seize the drugs once they inevitably start in motion. The United States is also providing new training programs and financial assistance to the Drug Control Agency and Tajik Border Protection Committee (see "RFE/RL Newsline," 29 January 2003). On the domestic front, the Drug Control Agency has also reported an alarming rise in the number of drug addicts in Tajikistan during 2002. According to Asia-Plus on 13 February, there are 8,000 registered addicts in the country, 70 percent of whom are hooked on heroin. But as the agency's department chief for legal drug circulation, Safol Musoev, acknowledged, the true number of drug addicts in the republic might exceed the official statistics by eight to 10 times. Adam Smith Albion

Officials in Zagreb have turned to Austrian authorities in order to find approximately 50 million euros that had been deposited by members of the Croatian diaspora into a local bank. The money had been collected in the early 1990s by the government of then-President Franjo Tudjman and his Croatian Democratic Community (HDZ) party in order to buy weapons, thus bypassing the UN-imposed arms embargo on Croatia.

According to the Institute for War and Peace Reporting on 23 December: "Investigators claimed, for example, that 1.6 million US dollars, 500,000 Australian dollars and 700,000 German marks were switched from the Austrian account into that of an HDZ official named Ferdinand Jukic, enabling him to buy up a well-known drinks manufacturer. They also said they have evidence that 3.25 million US dollars were transferred into the accounts of two HDZ officials, Marinko and Zeljko Mikulic, as a result of which they bought up a paper factory in Zagreb. Jukic has denied the claim against him, and the Mikulics have refused to comment on the allegations leveled at them.

In another new development in the case, Radovan Smokvina, a Croatian expatriate in Switzerland who contributed 60,000 Swiss francs (roughly $44,000) to Villach's account, told the daily "Jutarnji list" that the diaspora never received the financial statements it asked for concerning how the money was spent.

Some Croatian emigres claim that the present government has known of this scheme to defraud the diaspora contributors for many years but choose to ignore it. The Institute for War and Peace Reporting quoted Drago Pilsel, a political commentator from an emigre background in Argentina, who said locating the missing money is not the authorities' main motive. "Racan's government are engaged in acrobatics to stay in power," he said. "They have known about the HDZ account for a long time. Only now have they decided to start an investigation." RK

Fifty-one percent of Russians rank the police as the most corrupt government agency, according to a survey conducted in 2002 by a Russian polling agency and quoted by "The Moscow Times" on 7 February. In a study of Russian police corruption conducted by the Institute for Socioeconomic Problems of Society in 2000-01, it was shown that police officers make extra money by engaging in up to 50 activities unrelated to their duties, many of which are illegal. These illegal activities include bribe taking, registering stolen cars, drugs and arms dealing, selling fake passports, and kidnapping. Legal activities include retail trade, driving gypsy cabs, and providing guard services.

Leonid Kosals, a researcher at the institute who headed the corruption study, said firing or jailing officers would not put an end to the problem. "Police corruption has became such a systematic phenomenon that attempts to get rid of it by merely prosecuting guilty officers are no longer sensible," said Kosals. "The authorities know this but do little about it because it is in their financial interests to have corrupt officers."

Kosals told "The Moscow Times": "Federal and regional authorities need corrupt officers because they can then ask them to carry out favors -- and the officers have little choice but to comply." Among those favors are police raids in business disputes, he said. "For example, if a businessman wants to take over a rival's firm, all he has to do is bribe a state official, who in turn calls up the police, and the job gets done."

Meanwhile, the new head of the main directorate within the Russian Interior Ministry for combating organized crime, known as GUBOP, Duma Deputy Nikolai Ovchinnikov, told ITAR-TASS on 18 February that he intends to step up the battle against organized crime. In order for this to be effective, it is necessary to pass a law on counteracting corruption, Ovchinnikov told a news conference in Yekaterinburg. RK

Millions of dollars have disappeared from a project to mark the 300th anniversary of Russia's second city of St. Petersburg, audit officials were quoted as saying by the BBC on 23 February. Criminal proceedings have begun aimed at explaining why only half of 59 planned projects to celebrate the occasion will be completed by the middle of the year. In one case, more than $30 million allocated for the construction of new roads was "simply hidden in the bushes," according to the chairman of the Russian Audit Chamber, Sergei Stepashin. RK

Russian security services disclosed that a gang of counterfeiters has been active in the city of Makhachkala, Daghestan printing $100 and $50 dollar bills of very high quality, Russia's REN-TV reported on 1 February. The gang was allegedly composed of Chechens who then sold the bills at 20-25 rubles to the dollar and earned several million dollars in the process. According to the television report, the resulting money was used to finance "terrorist" activities, including the bombing of the administrative center in Grozny in December. Investigators believe the criminals had access to the Goznak state-securities printing house, which is used to print high-quality state banknotes and coins. Along with the money, investigators found the forged IDs of a prosecutor, a State Duma deputy aide, and an Interior Ministry adviser. RK

Speaking from the podium in parliament on 18 February, a former Ukrainian Prosecutor-General who is now an elected member of parliament accused his successor, Svyatoslav Piskun, of having been engaged in corrupt activities while serving in the State Tax Administration prior to becoming prosecutor-general in June, Ukrainian media reported the same day. Mykhaylo Potebenko charged that under his own tenure as prosecutor-general, an investigation revealed that Piskun was providing cover for a group of what he called "common racketeers" in the Tax Administration who, under the pretext of confiscating goods that had been "illegally imported," took these same goods, mainly expensive automobiles, and resold them to friends, pocketing the profits. Potebenko identified the company through which the confiscated goods were allegedly sold as Rekon. The following day, Potebenko appeared at a special press conference and recanted his accusations against Piskun, saying the new prosecutor-general had been "set up" by his coworkers.

A former head of the Tax Administration who is currently a deputy prime minister and under whom Piskun once worked, Mykola Azarov, condemned Potebenko's accusations the same day. Appearing on ICTV, Azarov said the allegations were "unethical" and that Potebenko should have made his concerns known when he was prosecutor-general.

Recordings made by former presidential bodyguard Mykola Melnychenko, suggest that Azarov, as head of the Tax Administration, might have been involved in protecting members of President Leonid Kuchma's inner circle of supporters from prosecution on charges of fraud and theft. Those implicated include Ihor Bakaj, the former head of Naftogaz Ukraine. On 15 February, Piskun vowed that he would bring charges against Bakaj for allegedly stealing millions of dollars from the state. RK

AUTO THIEVES REAPING BILLIONS

By Roman Kupchinsky

Kaliningrad, the tiny Russian exclave nestled between Poland and Lithuania, is considered by most a depressed region of Russia. Isolated from the rest of the country, the oblast has no industry to speak of, few tourist attractions, and an aging industrial base. Yet the streets are crowded with the latest-model BMWs, Mercedes', U.S.-made Jeeps, and Japanese-made SUVs, all bearing Russian license plates. These symbols of wealth and power prowl Kaliningrad's streets day and night to the amazed stares of impoverished citizens. The story of such expensive cars in this depressed region closely parallels the story of modern criminality in Russia. Many of these pricey vehicles were stolen in Western Europe and brought to Kaliningrad as a transit point before delivery further east.

According to police estimates, there are some 1.5 million stolen cars on the streets of Russia. Some 600,000 of them are in Moscow. Not all are luxury sedans from Munich or Frankfurt -- many are Ladas, stolen in Russia and simply resold to other Russians. Some of the more expensive cars are built to order, according to specifications supplied by the buyer. A good number of them have been "legalized" with proper documentation and registered with the Russian authorities. Their theft is big business, netting billions of dollars every year for the organized gangs that specialize in this activity. This business, along with insurance fraud, is costing European and U.S. drivers millions of dollars in the form of high insurance costs. It is not a high-priority crime for Russian law-enforcement agencies -- one of the reasons being that many high-ranking Russian police officers, members of the State Duma, prosecutors, and businessmen are said to ride around in stolen cars. They could really care less about the insurance rates a German, British, or U.S. family has to pay.

Car theft in Europe began thriving with the collapse of the Iron Curtain and the relaxation of border controls between East and West. It existed earlier, and in fact supplied the traditional markets for stolen cars in North Africa and the Middle East. But with political and economic transformation, suddenly a new market of millions of potential buyers appeared. These societies -- which were limited to a choice between a Zhiguli, Skoda, or Trabant and only dreamed of owning a BMW or a Ford -- were ripe for both legal and stolen Western cars.

This sea change was soon followed by another development that worked in favor of the thieves: European Union directives and the disappearance of borders within Europe itself under the Schengen agreement. Now, a well-organized gang can steal a Mercedes in France and drive it unimpeded to the Russian border at Kaliningrad before the owner even realizes that the car has been stolen. From there, the vehicle might be driven to one of the Baltic countries, where it undergoes a transformation: The original vehicle-identification number of the chassis is replaced with a number from a wrecked vehicle or the car is redesigned to meet the fancy of the owner who might have ordered the car in Moscow. With new paperwork and a new leather interior, along with a Dolby surround-sound CD system, the car is then driven or transported by truck to its final destination, and the final sales transaction is completed.

Car theft is both a well-organized and a haphazard occupation. There are professional and semi-professional car thieves. The semi-professionals are usually young males who will steal a car by themselves or with the help of some friends, take it for a joy ride, and then either abandon it or sell it to a so-called chop shop, where it is cannibalized for valuable parts that are then sold to garages or to gangs who transport such parts for sale in other countries.

Professional auto-theft gangs are highly structured organizations run much like any other business. The head of the organization is usually removed from the dirty work and often resides outside the country in which the cars are actually stolen. His role is to make deals with buyers, provide new identification for the stolen car, and launder the proceeds.

Such organizations carefully follow the automobile market and consumer trends to avoid wasting time stealing unpopular models that are, in turn, difficult to sell. The most popular models for car thieves are currently the Toyota Camry and Honda Accord, according to the FBI. They are popular not only with Europeans, but also Americans and Russians. The most popular color remains red. Mercedes cars and SUVs -- so often seen on the streets of Moscow, Kyiv, and other former Soviet capitals -- remain at the upper end of the stolen-car business.

Speaking to reporters in Moscow on 23 January, Walter Schmoelzing, a representative of leading European insurance companies operating in Russia, estimated that as many as half of the 1.5 million cars illegally imported into Russia in recent years were stolen in Europe, mainly in Germany. German insurance companies have thus been hit particularly hard by the massive cost of organized auto theft. "About 30,000 cars are stolen each year from Germany," Schmelzeng said, according to "The Observer" of 26 February. "On average they cost 15,000 euros ($16,135). This means the trade costs 450 million euros ($484 million) a year."

Other stolen vehicles arrive in Russia from as far away as the United States and Canada. "In Kaliningrad the local police requested assistance in identifying numerous vehicles that had been imported from Miami, Fla. Subsequent investigations revealed an organized ring involved in the illegal export of stolen sports utility and luxury vehicles from the South Florida area to Russia," according to the U.S. Customs Service website (http://www.customs.ustreas.gov/custoday/aug2000/naec2.htm). "The vehicles stolen were being renumbered, and exported using counterfeit titles bearing counterfeit U.S. Customs export stamps." Nine members of that gang were eventually apprehended. Most were Polish nationals who had entered the country illegally using counterfeit German passports. By their own admission, in a one-year period they had exported over 400 vehicles with a combined value of several million dollars.

The Dutch Justice Ministry meanwhile conducted a survey of 27 car thieves, all men between 15 and 43 years old. In all, they were responsible for the theft of some 10,000 cars. According to the Dutch investigation: "A majority of the (semi-) professional offenders estimate [the] chances of being caught for theft, receiving, altering the identity of the car and/or stripping it as low or zero" (http://www.minjust.nl/index.htm).

Speaking at the Moscow press conference on 23 January, insurance-industry representative Schmoelzing said it is difficult to recover these cars, since many of them have been re-registered and now have new owners. The situation in Russia, Schmoelzing added, is further complicated by the fact that many state officials, including high-ranking Interior Ministry officers, are themselves using stolen cars. "Komsomolskaya pravda" noted that no Interior Ministry representatives attended Schmoelzing's press conference.