As First Published in the September,
Bank of NY Laundromat
The Bank of New York Scandal is
a Window Into the Decay of The U.S. Economy and The "Biblical"
Looting of Russia
TAKE IT TO THE BANK!
January 1, 2000 in Russia Will Be
Michael C. Ruppert
Over several months FTW has been covering
issues illustrating how the entire U.S. economy is now sustained
by drug profits and the profits derived from "organized
crime." We have also been offering articles showing
that there are profitable alternative methods for sustaining
healthy economic growth. Nothing more clearly demonstrates
this than the current scandal erupting around Alexander
Hamilton's Bank of New York - Address: 1 Wall
Street, New York, NY.
Let's be detectives, shall we? Here are your clues. Pay
- Gross Domestic Product (1997) = $450 billion. Gross Domestic Product
(1999) = $167 billion. Two year decline = 64% [Source:
The NY Times]
- 1999 criminal activity (e.g. drug dealing) may account for another
$80 billion. [NY Times]
- The Ruble traded at 6:1 against the dollar in 1998. Today it trades
at 25:1 [Knight-Ridder]
- The number of Russians living in poverty climbed from 2 to 60
million in less than five years. [Knight-Ridder].
- Russia has accumulated more than $150 billion of foreign debt,
with the burden of debt service reaching 29% of export earnings.
[Mark Weisbrot - The Preamble Center, Washington, D.C. in
Knight-Ridder papers 9-1-99]
- The amount of money looted out of Russia and laundered through
U.S. Banks could top $100 billion. This from a country that
is one of the three most important military powers in the
world [ Rep. Jim Leach - Chair of the House Banking Committee]
- "The scandal could top $100 billion." [The London Times
- "Russian men can now expect to die in their fifties."
- The amount of stolen and criminally originated money laundered
through the Bank of New York alone could top $15 billion.
[ AP, Reuters, Interpol, AFP].
- According to AP (9-14-99) "The Gartner Group, Inc., an analyst
firm in Stamford, Connecticut, last month identified Russia
as the highest risk for Y2K failures, followed by India
and a cluster of countries that included Venezuela, Norway,
Japan, Taiwan and Finland. Principal areas of concern, from
a number of sources: utilities, nuclear reactors and infrastructure.
- The State Department's strongest warnings for Y2K failures center
on Russia and the Ukraine. [http://state/travel.gov]
- The British government has issued a travel advisory warning all
of its citizens to stay out of the Ukraine over the New
- "According to a study by Canadian
and Russian economic institutes, capital flight from Russia
totaled about $130 billion from 1992 to 1998." [NY
The Bank of New York (BoNY)
- In the current scandal the Bank of New York is suspected of laundering
as much as $10-12 billion worth of Russian "organized
crime" and capital flight money since 1995. The Bank
of New York has admitted to investigators that, in addition
to profiting from substantial increases in foreign deposits,
it has charged as much as $250 million a month in "fees"
for these transactions. [Sources: Wall Street Journal, New
York Times, AP, Washington Post, etc.]
- In testimony before the House on 9/22/99, BoNY Chairman Thomas
Renyi stated that BoNY has relations with 160 Russian banks.
In the weeks leading up to the August 1998 financial crisis,
which led to the devaluation of the ruble, BoNY exchanged
from $3.2 - $3.8 billion per day with those banks.
- Foreign deposits at BoNY in 1995 were $9.5 billion. At the close
of 1998 they were $17.2 billion - an increase of 81%
[Source SEC filings at www.sec.gov - The "EDGAR"
- Domestic deposits in 1995 were $26.4 billion. In 1998 they were
27.5 billion - an increase of 4%. [EDGAR]
- Average share price in 1995 = $12.19 [EDGAR]
- Average share price in 1998 = $40.25 [EDGAR]
- BoNY's stock has split 2 for 1, three times since 1994. [EDGAR]
- Foreign deposits in BoNY increased by $2 billion in the first
half of 1999 alone. [EDGAR]
- Compensation Increases of Directors and key execs
(salary + bonus) [EDGAR]:
- Thomas Renyi (Chair & CEO) -- $1.23 million (1994) v.
$7.38 million (1998)
- Gerald Hassel (Pres.) -- $1.44 million (1996) v. $3.14 million
- Alan R. Griffith (Vice Chr) -- $1.87 million (1996) v. $3.62 million
- Deno D. Papageorge (Sr. Exec. VP) $1.41 million (1994) v.
$4.37 million (1998).
- The single largest stockholder of BoNY is J Carter Bacot who owns
2,174,966 shares and has options to purchase an additional
1,166,556 shares. The exercise of those options could net
him an instant profit, at press time, of more than $30 million.
- Under U.S. banking laws for each dollar on deposit a bank may
lend nine dollars.
- The increase in foreign deposits at BoNY in 1999 alone indicates
that BoNY is capable of making $18 billion in loans based
on foreign deposits received so far this year.
- BoNY's lending is heavily weighted in the
entertainment and mass media industries. In recent years
much of BoNY's biggest lending has involved Viacom (which
just purchased CBS), Tele-Communications, Inc., Universal/MCA
and Black Entertainment Television. BET may have been the
beneficiary of a 1998 $600 million transfer from overseas
accounts into domestic investments.
The Prize Winning Statements of
Witnesses and Suspects
- "I have no doubt that some of this money ended up in the
stock market." [ Rep. Jim Leach, quoted in the NY Times
"The individuals who raised questions raised them without
much vigor,"[BoNY Chairman Tom] Renyi told the (House
Banking) Committee, "They took comfort that those accounts
were referred by a very well-regarded bank officer, who
happened to be Mr. Berlin's wife."
The Usual Suspects and More
Historically, the International Monetary
Fund (IMF), "Washington's most powerful financial institution"-
according to Weisbrot, has been an almost brutal rescuer
of struggling economies around the world. Whenever an IMF
bailout occurs, whether in Latin America, Asia or Europe,
the IMF strings attached invariably include severe, even
brutal application of monetary controls, which serve to
suck liquid capital and wealth out of the country as payment.
But in the case of Russia, there appears to be almost a
kind of collusion which FTW believes, is a part of a larger
plan to turn Russia into a non-industrialized, Third World
colony. It also appears that the IMF worked in collusion
with key Russian leaders to loan billions of dollars, which
were immediately moved to BoNY and other institutions as
the Russian elites cashed in.
As reported in Agence-France Presse (AFP), Reuters and USA
Today, a key $4.8 billion IMF loan last summer immediately
caused a flurry of bond speculation as more than 700 key
Russian officials used the money to liquidate their positions
in the ruble which collapsed as soon as they got their (IMF)
money out of the country. Interpol leaders from Europe have
been quoted as saying that the IMF money just passed through
Russia on it's way back to the U.S., leaving Russia with
all of the debt and no benefit. One Interpol source even
hinted that Interpol didn't really know whom to contact
in Russia because the highest levels of government were
part of the looting.
Things begin to look a bit stinkier for BoNY when you consider
that two key employees, implicated in the scandal are married
to criminal suspects in the probe. Lucy Edwards, a BoNY
Vice President operating out of London who has engineered
many of the key Russian deposits is married to Peter Berlin,
a (US) naturalized Russian who ran a company called Benex.
According to various sources, Benex, and a series of other
New York and U.S. shell companies, including General Forex
- all connected to Berlin - were transparently moving hundreds
of millions of dollars into BoNY accounts. Berlin's operations
have been connected to Russian organized crime boss Semyon
Another BoNY executive, a senior VP in charge of Eastern
European operations, Natasha Kagalovsky is the wife of Russian
Konstantin Kagalovsky who was Russia's representative at
the IMF from 1992-5. Mr. Kagalovsky is now a Vice President
of the Russian oil giant Yukos and had, after 1995 served
as an executive of the Menetep Bank which handled some of
the earlier IMF bailout funds.
The BoNY Board has fired Edwards and suspended Kagalovsky.
The Bank of New York is by no means the only institution
involved in the looting of Russia. Additional news stories
have revealed links to Massachusetts banking giants Fleet
Financial and Bank of Boston. Other news stories have suggested
connections to Russian organized crime operatives in San
Francisco. This story could go anywhere as evidenced
by the fact that the FBI has now queried institutions in
45 countries and the Swiss government has frozen a number
of accounts connected to the case. Additional leads are
pointing to Israeli bankers and financial interests, which
makes sense given the number of Russian Jews who have emigrated
to Israel. As one observer noted, "Not all capital
flight is illegal." No, but legal "flight"
is also widening the hole below Russia's waterline. Nor
should it be overlooked that during the Iran-Contra era,
Swiss-Israeli financier Bruce Rappaport who reportedly held
a large interest in BoNY, turned up in the mix of Ollie
North's secret financial dealings. BoNY is clearly no ingenue
in the world of dirty money.
Putting the Pieces Together
It is impossible to remove more than
a hundred billion dollars in liquid wealth from a country
like Russia and not destroy or seriously damage it. As far
back as 1989, when then President George H. W. Bush dispatched
career covert operative, drug dealer, and economic pillager
Richard Armitage to the former Soviet Union as an economic
adviser, this writer predicted that Russian organized crime,
the drug trade and all related activities would suddenly
explode. They did. As FTW documented in the April issue
(Of Ducks and Dinosaurs), Armitage's appearances in an around
Kosovo and Albania in 1996-7 presaged the economic looting
of that region and the eventual military conflict that served
as a major boondoggle for Wall Street. Just last month FTW
warned that the appointment of former KGB operative Vladimir
Putin presaged a move toward martial law in the event of
complete economic collapse - probably triggered by Y2K.
Indeed, some experts have described the current process
as the deliberate reversion of Russia to Third World status.
Yet Russia has the largest stockpile of nuclear warheads
outside of the U.S. Russians rightfully have a penchant
for stuffing money in mattresses but what will they stuff
in their heaters in the middle of a Russian winter?
Based upon dire Y2K predictions from official sources -
a crisis that will involve primarily utilities and infrastructure
- it is impossible to conceive of Russia's immediate future
as anything less than cataclysmic. That prediction would
fit nicely with the sudden rash of apartment bombings by
so-called terrorist groups in Russia that are setting the
stage for the approaching imposition of martial law by Putin.
One can only wonder what the Russian people will do when
they realize that their nation has been looted and colonized,
in part, to sustain the U.S. stock market and economy. This
is Kosovo but on a much larger scale and with potentially
much more serious consequences.
Two other questions need to be asked. What is the largest
politically stable industrial power close to Russia, which
has financial security, a good Y2K posture and a strong
military? Answer: Germany. What two countries fought against
each other in World Wars I & II and sustained the heaviest
loses? Answer: Russia and Germany. Germany might presume
to intercede as a "peacekeeper," if for no other
reason than to secure all the nukes. Ivan will not like
that. Look at a map.
And there are equally serious consequences and implications
here at home. On September 22, Treasury Secretary Anthony
Summers, in testimony before the House Banking Committee,
indicated that the Treasury Department was monitoring the
situation closely and that it was important for Russia to
reduce its indebtedness to the IMF. That can only be the
signal for more capital flight, IMF looting and a more painful
disaster for the Russian people. It also brings the United
States Treasury closer to looking like organized crime itself.
Maxine Waters Speaks
In public comments on the scandal, California
Representative Maxine Waters (D), Los Angeles, demanded
that the Justice Department, which prosecutes money laundering,
withdraw banking charters for institutions "convicted
of the crime." Waters, who sits on the House Banking
Committee, received a notable public response from Assistant
Attorney General James Robinson who stated that such measures
might be appropriate if the bank's upper management was
aware of the activity.
FTW doubts however, the willingness of the government as
a whole to bite in measure with Waters' bark. Certainly
not if Wall Street's overall health would be affected.
But that is the problem when the organized crime model takes
over an economy as it has done here in the U.S. The model
must change or else it must become increasingly more corrupt
until it eats itself.
The Mission for FTW Readers
A list of the full Board of Directors
of the Bank of New York is available at www.sec.gov using
the EDGAR data base. The interrelationship of those directors,
as well as BoNY's investment stake/loan exposure in many
other firms can be mapped out from that point. An interesting
case which merits further attention is that of BoNY Board
member John C. Malone. Malone sits on many other boards
including those of Tele Communications, Inc. where he served
with chief Al Gore fundraiser Tony Cohelo for years. Malone
also has connections to Viacom, which just bought CBS, and
to Black Entertainment Television. Using Malone as an example,
the following issue could be researched using the EDGAR
and Federal Elections Commissions databases at their respective
web sites: Which of the major campaign donors to Gore, Bradley
and Bush sit on the boards of companies tied to the Bank
of New York by interlocking directorates and/or financing,
banking services or loans? Start at www.sec.gov
go to EDGAR, or try the back door, which works better, at
If you want to
know MORE about this subject,
may we recommend the following:
- The CIA
Drug Economy and The Way Out
- The Aztlan Tape
- The Salon at Fraser Court
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