2nd Russian Indicted in U.N. Corruption Probe

By Colum Lynch
Washington Post Staff Writer
Saturday, September 3, 2005

NEW YORK, Sept. 2 -- Federal authorities arrested a Russian diplomat and indicted him on charges that he conspired with a U.N. procurement officer to launder hundreds of thousands of dollars in bribes, U.S. officials said Friday.

Vladimir Kuznetsov, a Russian Foreign Ministry official who served as chairman of an influential General Assembly budget committee, is the second Russian national employed at the United Nations to be charged with corruption in less than a month.

He pleaded not guilty at an arraignment in Manhattan federal court Friday afternoon and was released on a $1.5 million bond and agreement to surrender his travel documents, according to Reuters.

A Russian procurement officer, Alexander Yakovlev, pleaded guilty early last month to three counts of wire fraud and money laundering. Today's indictment, which was issued by David N. Kelley, the U.S. attorney for the Southern District of New York, said Kuznetsov worked with a co-conspirator, who was not identified but was referred to as "CC-1." The indictment, however, said CC-1 had established a company called Moxyco Ltd., and in previous court filings that person has been identified as Yakovlev.

Efforts to reach Kuznetsov or his attorney were unsuccessful. Yakovlev's attorney, Arkady Bukh, said he was unaware of the latest charges and could not comment.

The charges have grown out of Kelley's ongoing criminal probe into corruption in the $64 billion U.N. oil-for-food program for Iraq. A separate U.N. inquiry into corruption is expected to release a report Wednesday that will sharply criticize Secretary General Kofi Annan's administration of the largest U.N. humanitarian program as lax; an Annan adviser said the report will not conclude that Annan engaged in misconduct.

The latest arrest comes less than two weeks before a Sept. 14 summit that will draw more than 170 world leaders to U.N. headquarters to address, among other issues, management gaps that allowed corruption to occur. A senior U.S. official said it was too soon to determine whether the case "would help or hinder" U.S efforts to strike agreement on a proposal to impose greater independent oversight of U.N. spending.

The Bush administration is facing intense resistance from Russia, China and the "Group of 77" developing countries to proposals aimed at strengthening outside scrutiny of the United Nations' books. The Russian government, meanwhile, has vigorously opposed a U.N. reorganization plan that would undercut the power of Kuznetsov's committee.

John R. Bolton, the U.S. ambassador to the United Nations, wrote to U.N. delegates this week that independent oversight of the world body's finances "is absolutely critical to reforming the U.N."

"It is essential that we have an organization that is fully accountable, transparent and efficient, with a workforce based on the highest standards of integrity and competency," Bolton wrote.

Bolton appealed to Annan on Thursday on behalf of the U.S. Justice Department to waive Kuznetsov's diplomatic immunity. On Friday, Bolton thanked Annan for "his personal and very prompt" waiving of Kuznetsov's diplomatic immunity from arrest and prosecution.

Senior Russian officials said that U.N. authorities informed them of the arrest only after it happened and that they were still studying whether Kuznetsov might be covered by immunity as a Russian diplomat. They issued no formal protest of the U.S. action.

Konstantin K. Dolgov, the fourth-ranking ambassador at Russia's mission to the United Nations, said: "All the legal aspects as well as other aspects are to be clarified. We don't have much information."

The alleged scheme first came to light last month when former Federal Reserve chairman Paul A. Volcker, the head of a U.N.-appointed independent inquiry committee, accused Yakovlev of soliciting a bribe from a Swiss company seeking business through the oil-for-food program. He also accused Yakovlev of depositing more than $950,000 in bribe money in an offshore bank account in the Caribbean.

The indictment unsealed Friday said that Kuznetsov set up an account at the same bank, Antigua Overseas Bank, in 2000 under the name of a company called Nikal Ltd. It charges that hundreds of thousands of dollars were transferred into the account from front company Moxyco Ltd., which officials have said was Yakovlev's firm.

The indictment said that CC-1 told Kuznetsov in 2000 that he was collecting "secret payments from foreign companies that were seeking to secure contracts to provide goods and services to the United Nations." The two agreed to divert a share of the proceeds, which amounted to hundreds of thousands of dollars over five years, into Kuznetsov's account according to the indictment.

Kelley praised the investigative efforts of the FBI, which detained Kuznetsov.

He also thanked the U.N. Office of Internal Oversight Services, which is responsible for investigating fraud in the organization, for assisting in the investigation. The U.N. unit is continuing its investigation.

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