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The Rodhams, Back in Georgia

By David Ignatius

Wednesday, December 29, 1999; Page A27

Despite assurances last September that they would withdraw from an embarrassing business venture that involved harvesting hazelnuts in the former Soviet republic of Georgia, the first lady's brothers, Hugh and Tony Rodham, were back in the Georgian port city of Batumi this month.

Local media reported their journey as if it were a traveling carnival. "Hillary's Interesting Brothers in Istanbul," read the headline in the Dec. 8 edition of the Turkish daily Hurriyet. A photo showed the two beefy brothers, dressed in blue jeans and sneakers, en route to Batumi. "Hazelnut Tycoons," joked the photo caption.

The rambling Rodhams spent several days in Batumi, according to local press reports, "in hopes of reviving a failed deal to . . . sell hazelnuts" through a company called Argo Holdings. A Russian-American newsletter called Intercon's Daily quoted the local political boss in Batumi, Aslan Abashidze, touting their return.

"This visit of the Rodhams to Batumi shows that the scandal caused by the hazelnut business of the Rodhams was groundless," said Abashidze, who is the leading political rival of Georgia's president and staunch U.S. ally, Eduard Shevardnadze.

Now, this is precisely the sort of political fallout that infuriated national security adviser Sandy Berger when the Rodhams' business venture was first reported in this column last September. Abashidze was claiming back then that the Rodhams' venture was a sign of "political support . . . by U.S. President Bill Clinton." That irked Shevardnadze, and a chagrined Berger urged the Rodhams to drop the Batumi connection like a hot hazelnut. They refused his initial request but, under what was described as "White House pressure," agreed to withdraw.

Or did they? In an interview last week, Tony Rodham confirmed that he was still working with Argo Holdings to export Georgian hazelnuts. Now, he said, he's just in the distribution end of the business, with no investment in the hazelnut processing factory in Batumi. His brother Hugh has dropped out entirely, he said. "We're just looking to sell hazelnuts," Tony Rodham explained.

Has Tony Rodham checked this new arrangement with Sandy Berger or the NSC staff? "Under no circumstances," he replied. "Why should I? I'm a private businessman. I'm not involved in politics."

Rodham's insistence that he's just an ordinary guy is reminiscent of other wayward presidential kin, from Donald Nixon to Billy Carter. Despite his protestations, he's not just another private businessman. He has a blood connection to the White House, and he's seen that way around the world.

This is a particularly bad moment, as it happens, for members of the First Family to be wandering the Caucasus. Russia is fighting a bloody war in Chechnya, just across the border from Georgia. The Russians have been squeezing Georgia, too, including recent military attacks on Georgian border posts. Meanwhile, the Rodham's pal Abashidze is reportedly getting Russian help in his political battle against Shevardnadze. So there's more at stake here than nuts.

The White House is not amused. Late yesterday, spokesman Joe Lockhart issued the following statement: "In September, after discussing it with the president, Mr. Berger urged the Rodhams to end their involvement with this venture. . . . The Rodhams indicated at that time that they would do so. If in fact this project is still going forward, we don't approve and will continue to make clear to Georgian officials that this venture has no connection with or sanction from the U.S. government."

Tony Rodham's path to the hazelnut business illustrates the pitfalls for presidential relatives. The initial connection came through Robert B. Kay, a New York lawyer who says he first met Tony Rodham in the early 1990s at a Democratic Party event. Kay later helped start a banking-support business in Russia called IBN Limited, which sought to use "smart cards" for ATM machines and purchases.

Kay says IBN hired Rodham to help make arrangements for a 1997 visit by a Russian delegation, including Moscow Mayor Yuri Luzhkov, to conclude an agreement to test the smart cards. The group met in Washington with Sen. Barbara Boxer, who is Rodham's mother-in-law, and with Berger at the NSC--a meeting at which President Clinton himself made a brief appearance.

Kay says he doesn't know if Rodham was the person who arranged the presidential meeting--which was bound to impress the Russians with IBN's political connections. "If he was, great," says Kay.

Rodham also co-signed a letter in April 1996 to Rem Ivanovich Vyakhirev, chairman of the board of the giant Russian energy company Gazprom, whom he had met at a dinner in New York.

Rodham proposed that Gazprom employees "should be among the first to be issued IBN cards as part of the IBN pilot program." The Clinton administration was working closely at that time with Gazprom's former chief and then Russian prime minister, Viktor Chernomyrdin.

The Russian smart-card business foundered in 1997 because of Russia's growing economic problems. But through Kay and IBN, Tony Rodham had met a Georgian emigre named Vasili Patarkalishvili. The Georgian had founded a bank in Batumi, known as Liberty Bank, for Georgians who wanted to hold money in offshore accounts, but it, too, was suffering from the financial crisis. Now Patarkalishvili persuaded the Rodhams to join him in the hazelnut business, through Argo Holdings.

The adventures of Tony Rodham, the man who would be hazelnut king, won't do any lasting damage to U.S. foreign policy. But the tale does make you wonder about the perspicacity of Hillary Rodham Clinton. If she can't keep tabs on her own brothers' travels in exotic lands, what on earth will she do about all the lobbyists who'll be swarming around her if she wins that Senate seat?

© Copyright 1999 The Washington Post Company

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