Federal authorities have stepped up their investigation of Lucy Edwards, a former Bank of New York executive who recently was fired because of her role in the establishment of bank accounts that moved about $7.5 billion from Russia, sources said today.
Authorities are actively exploring whether Edwards--the wife of a pivotal figure in the case who helped open the accounts--broke any laws while performing her duties as vice president of the bank's Eastern European branch, said one person familiar with the matter. While the probe has focused on whether the accounts were used for money laundering, investigators have not uncovered activity that could be prosecuted under U.S. money-laundering laws.
Investigators "are looking at the possibility of illegal activity other than that which has been publicly disclosed," said the source, declining to be more specific. Edwards resided in London with her husband, Peter Berlin; authorities could bring charges in an effort to secure her cooperation with the investigation.
In testimony before the House Banking Committee, Bank of New York Chairman Thomas A. Renyi said that Edwards had referred the accounts now under investigation and that bank officials decided not to pursue questions about the high level of activity in the accounts because Edwards was a "well-regarded" figure at the bank.
"Still to this day there is no evidence of money laundering," said one person familiar with the accounts, adding that money flowing through the accounts probably included money gained from "quasi-legitimate, legitimate and almost certainly criminal" activities in Russia.
"Berlin went to contacts in Russia and said, 'Look, if you want to get money out of Russia, I've got the system,' " the source said.
Through their attorney, Edwards and Berlin repeatedly have denied any wrongdoing.
At the same time, U.S. law-enforcement officials also are turning their attention to an offshoot of the original investigation--the discovery of off-shore bank accounts containing about $2 million maintained by the son-in-law of Russian President Boris Yeltsin, sources said. The accounts became known to investigators several weeks ago, after the Bank of New York began sifting through its records for information about anyone who might be related to the case.
Investigators are unsure if they will find a direct link between the two cases. A recent analysis of the Cayman Islands accounts of Leonid Dyachenko, husband of Yeltsin's daughter Tatyana, found that the accounts held about $2 million, including deposits by a company called Belka Trading Corp. But no money was wired to or from the accounts under investigation in New York, sources said.
Dyachenko heads an oil products trading company, East Coast Petroleum, so there could be legitimate business reasons for the accounts. A subsidiary of East Coast Petroleum, Belka Trading was involved in a deal to publish Yeltsin's memoirs.
"There is at this point, to our knowledge, no relation," said one person familiar with the review, adding that information about other people also has been turned over to investigators in recent weeks, but none as prominent as Dyachenko.
The Kremlin has declined to comment on recent allegations of corruption against Yeltsin's family.
At least one other bank account in the United States associated with Dyachenko has surfaced in recent days. In 1995 Dyachenko deposited about $100,000 at Chase Manhattan Bank, apparently with the intention of establishing himself in the U.S. banking system and then getting a reference to open other offshore accounts at the Bank of New York, sources said today.
In opening the account, Dyachenko described himself as an engineer who worked for Belka Trading, which already had an account at the bank, sources said. New York state business records describe Belka as a "domestic business" and give a Manhattan address, though it remains unclear what the company does.
For about a year, Dyachenko did little with the account. Then, in 1996, he asked Chase officials for a reference citing his account history, said a person familiar with the details of the account.
It is common practice for the Bank of New York and other financial institutions to request a reference before opening an account for a foreign national, and a reference by a major bank eases the way considerably. Based on the activity of Dyachenko's account, sources said, it appears he was using a "two-step" process to insinuate himself into the U.S. banking system.
"He was virtually an inactive customer," said one person familiar with the account. Bank officials are exploring whether he has any other accounts, sources said.
Little is written in the Russian press about Dyachenko. He is mainly described as the mild-mannered, modest husband of the powerful Tatyana. He graduated from the Moscow Aviation Technical Institute, then worked in a design bureau that also employed his future wife.
Russian newspapers characterize his first few forays into the business world as less than successful. He started out at a stock and commodity exchange, then moved to a company that produced and sold lumber. According to Russian newspapers, his connections to President Yeltsin landed him a job at Interural, a enterprise in the Urals that exports metallurgical products with the help of a Swiss partner.
Dyachenko also co-owned a commercial bank called Zaryathat that dealt with financing trade, according to some reports. Most recently, he has been tied to East Coast Petroleum and Belka.
Staff writer Sharon LaFraniere contributed to this report from Moscow.