Money Laundering Germany Puts Suspected Russian Mafia Boss on Trial

German prosecutors are putting a suspected Russian mafia boss on trial in a case that could set a ground-breaking precedent and make life very hard for money launderers in Germany in future.


Kidnappers being arrested in Russia. German prosecutors are opting for a legal trick to put a suspected mafia boss on trial.
REUTERS

Kidnappers being arrested in Russia. German prosecutors are opting for a legal trick to put a suspected mafia boss on trial.

German investigators are putting a presumed Russian Mafia boss on trial in Germany for the first time -- on daring charges.

Russian citizen Alexander A., 41, is a devout man -- so much so that he is reluctant to travel without his very own supply of holy water. He pays the salary of a priest in his Moscow neighborhood, and he is generous with the needy.

But for almost a year now Moscow's poor have had to make do without their benefactor's generosity. Alexander A., for his part, can now attend religious services in the chapel at a prison in the southern German town of Schwäbisch Hall, where he is in detention awaiting trial.

Prosecutors in nearby Stuttgart believe that they have now collected enough evidence to be able to bring the Russian to trial on October 16. Alexander A. and two other defendants are charged with having laundered about €8 million for "Izmailovskaya," a Russian Mafia organization, through real estate deals in Germany. Investigators are convinced that Alexander A., the good Christian, is one of the leaders of the Moscow Mafia syndicate, which they believe has earned a fortune with contract killings and protection rackets.

In bringing the charges, German courts are taking the unprecedented step of taking legal action against an alleged Russian mafia boss who is also believed to have close ties to some of the country's billionaire oligarchs. The indictment itself is daring. Instead of furnishing evidence of the actual crime that generated the laundered money in the first place -- evidence that would normally be difficult to come by when foreign suspects are involved -- the German prosecutors base their charges solely on the defendant's alleged membership of a criminal organization.

Sensitive Case

The investigators were aware of the sensitivity of the case from the start. As a precaution, they kept the German justice ministry constantly updated, also regularly sending reports to the Chancellery and the BND, Germany's foreign intelligence agency.

There is nothing complicated about the charges against the defendants. According to the indictment, Alexander A. opened several accounts with Berliner Bank and a branch of Commerzbank in the southern Germany city of Esslingen, as part of a plan to invest Mafia millions in Germany, and established a Germany company, S+L Iba GmbH, to manage the funds. Alexander L., 59, a former Russian investigating magistrate, was made managing director of the company. An old friend from Moscow, Oleg R., 47, was given the job of handling transactions.

The trio acquired buildings and property in Stuttgart and the surrounding area. But then Alexander A. became nervous when the 10 percent returns he and his squad had expected failed to materialize. To make matters worse for A., his friends began striking out on their own and investing the money he had sent them.

What the Russians didn't know was that the banks had already reported the big financial transactions to the authorities, and that the investigators, suspecting money-laundering activity, had tapped the Russians' phones. According to the prosecution, Oleg R. had been especially talkative, providing detailed information about Izmailovskaya and the source of the funds.

At first Alexander A. allowed himself to be stalled by his friends in Germany, but then he decided to pay them a visit on Aug. 18, 2006. He arrived in the company of several powerfully built men, supposedly his bodyguards. German authorities arrested Alexander A. shortly after his plane landed in Stuttgart. Four other suspects were also taken into custody, but the bodyguards were sent back to Russia.

Legal Trick

The investigators painstakingly reconstructed the money trail and identified the properties the trio had purchased, which they then seized. But what the Germans don't know is how -- illegally, they assume -- the Russians made the money in the first place. To circumvent this all-too-common problem in mafia investigations, the Stuttgart prosecutors are using a legal trick and accusing Alexander A. of having acted as a member of a criminal organization, which they say proves that the investments in Germany were indeed money-laundering activity -- regardless of where the millions may have come from. If the prosecutors' argument holds up in court, life will get very tough for money-launderers in Germany in future.

The investigation goes as far back as the wild days that followed the collapse of communism, when capitalism broke out in the countries of the former Soviet Union. A man named Malevsky is believed to have founded Izmailovskaya, named after Izmailovo, a Moscow neighborhood, in those early post-Soviet days. According to the prosecutors, the group specialized in extorting protection money and committing contract killings during the brutal struggles that followed the deregulation of the aluminum industry. They also believe that the organization worked for men who are now among Russia's richest oligarchs and invest their billions in Western construction outfits or companies in the automotive industry. Their brutal henchmen at Izmailovskaya are believed to control assets worth about $800 million today.

According to the prosecutors, Izmailovskaya's leader, Malevsky, moved part of this fortune to the British Virgin Islands, where it was invested in shady companies or deposited into the bank accounts of high-ranking Izmailovskaya members. "The system was designed to conceal the sources of the funds," says Bettina Vetter, one of the Stuttgart prosecutors.

The prosecutors claim that Alexander A., as a senior member of the organization, siphoned off up to $800,000 a month to pay his employees. According to the indictment, so-called soldiers of the Mafia received $1,000 each, while "officers" were paid up to $30,000. Investigators believe that about 250 families depended on Alexander A. financially.

According to his attorney, Wolfram Ziegelmeier, an expert on commercial law, Alexander A. denies all charges against him, claiming that he has no ties to the Mafia, and that he is certainly not a senior member of Izmailovskaya.

From Chewing Gum to Real Estate

Ziegelmeier claims that the money Alexander A. invested came from his personal assets, which he acquired through perfectly legal means, selling Western products like chewing gum and beer at Moscow subway stations, then shrewdly investing the profits in real estate.

Ziegelmeier does not deny that Moscow investigators have already set their sights on his client in the past, and apparently took a decidedly less civilized approach than the Germans. When he was arrested in 1994, Alexander A. was hit in the head and neck by gunfire. Ziegelmeier claims that his client was the victim of an illegal attack by the police, but that he was quickly released.

The search for the source of the Russian millions took investigators with Stuttgart's state office of criminal investigation to the United States, Austria and Liechtenstein. They also traced the money trail all the way to the Caribbean. However, they never filed an official request for assistance with their Russian counterparts, based on the assumption that Izmailovskaya enjoys excellent relations with the Russian authorities.

Jalol Khaidarov, the former general director of a vanadium processing plant in the Ural Mountains, is the key witness in the case. Khaidarov was once arrested in Israel on money-laundering charges and admits that he too was a member of Izmailovskaya. He claims that he knew Alexander A. and that he was one of the organization's leaders. According to Khaidarov, Alexander A. was a brigade commander whose job was to collect protection money and debts. When Malevsky, the man believed to have headed Izmailovskaya, died in a parachuting accident in South Africa in 2001, the pious Alexander A., Malevsky's right-hand man at the time, took the opportunity to move up the organization's corporate ladder.

Translated from the German by Christopher Sultan

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