îå îáäï "ìñ-ìñ" !!! - Vol. II

KremlinGate - October 19th, TBC....

The Washington Post¿ The Guardian The New New York Times

The New York Times
October 19, 1999, Tuesday, Late Edition - Final

HEADLINE: THE MONEY MOVERS: A special report;
Tracking How Pair Went From Russia to Riches

By TIMOTHY L. O'BRIEN and LOWELL BERGMAN;

Six years ago, a self-effacing Russian emigre with scant business experience set up a modest New Jersey company
that planned to introduce entrepreneurs from the new Russia to American capitalists.

Peter Berlin's venture, Benex International Company, got off to a slow start. But after a few years of arranging
shipments of stereos and other electronic products to Russia, Mr. Berlin hit on something simpler and more lucrative
to move around the world: money.

It proved an inspired choice. Nearly everyone in Russia with any money, from businessmen to gangsters, was
searching for ways to hide their cash from onerous taxes or overly inquisitive investigators. Mr. Berlin offered a fast,
discreet vehicle for moving dollars offshore -- lots of dollars.

Mr. Berlin's companies opened accounts at the Bank of New York, where his wife, Lucy Edwards, was an
executive, and began whisking billions of dollars a year out of Russia. Ms. Edwards was in an ideal position to help.
Just as he began his new business in 1996, she was promoted to a prestigious job at the bank in London drumming
up commercial clients in Russia.

The couple prospered. According to people involved in the investigation, they earned millions of dollars from
Benex's dealings, depositing the money offshore in accounts in the British Channel Islands and elsewhere. Mr.
Berlin and Ms. Edwards, who had previously owned a small home in upstate New York, bought a $500,000
apartment in central London and enrolled her daughter in an expensive private school.

Associates say little distinguished them from other Russian immigrants aspiring to upper-middle-class success in the
United States. The diminutive Ms. Edwards, who rose from an entry-level job to executive in just eight years at the
Bank of New York, was known for her diligence and energy in recruiting clients. Russian businessmen say Mr.
Berlin had no obvious links to the titans of Russia's new market economy.

Nonetheless, the couple is now at the center of the biggest Federal money laundering investigation in history as law
enforcement officials try to sort out how more than $7 billion sluiced through Mr. Berlin's companies over three
years. Much remains unknown.

Federal investigators, for instance, suspect that Mr. Berlin's transformation from small-time businessman to leader
of a widely used company was orchestrated by someone in Russia with ties to business or political leaders. But so
far, neither they nor British investigators have been able to figure out who that might be.

Ms. Edwards' role remains equally unclear. British investigators who raided the couple's apartment in London in
August found business cards and stationery for the Benex company that carried the Bank of New York logo.
Prosecutors assert that Ms. Edwards was directly involved in expediting at least one transfer through Benex. And
Western financiers say she ran financial seminars in Russia in which Benex's consulting services were promoted
using the Bank of New York name.

Investigators are still trying to unravel whose money washed through Mr. Berlin's companies. Some of the more
than 87,000 electronic transfers, they say, appear to involve legitimate Russian companies financing the purchase of
imported goods and evading taxes. Some have been linked to Russian racketeers.

The Bank of New York, which is cooperating with the investigation, has not been accused of doing anything wrong.
In an indictment in September that Federal prosecutors said was just the beginning of a far-reaching international
inquiry, Mr. Berlin, Ms. Edwards and an associate were charged with illegally operating a money transfer business
and taking deposits.

The case has already had an impact that few could have foreseen. It has roiled relations between Washington and
Moscow, sparked a Congressional inquiry, given new momentum to corruption investigations into the financial
dealings of Russia's business titans and President Boris N. Yeltsin's family, and become an issue in coming
presidential elections here and in Russia.

Mr. Berlin and Ms. Edwards are still living in London, where their apartment is frequented by photographers and
journalists seeking interviews. They and their lawyers have declined comment. Ms. Edwards's London-based lawyer
has said that she has done nothing wrong and that the bank had no grounds for firing her.

The Beginnings
Two Long Roads From Russia


Mr. Berlin and Ms. Edwards came of age in a country in which banking was depicted as the glue holding together
America's morally bankrupt economic system.

Ms. Edwards, born Lyudmila Pritzker in Leningrad, was the first of the two to make her way to the West. In 1977,
Ms. Pritzker married Brad Edwards, a 19-year old American merchant seaman she had met at a club in Leningrad.
After a civil wedding at the American consulate in Leningrad, they moved to Illinois, where their daughter, Amy,
was born. The couple then settled in Colorado, where Ms. Edwards held a succession of jobs as a bank teller and
waitress.

After the marriage fell apart in 1988, Ms. Edwards almost immediately landed an entry-level job handling
commercial accounts at the Bank of New York, one of the country's oldest and most prestigious banks.

In 1988, the Bank of New York took over Irving Trust, which was doing extensive business in Eastern Europe and
the former Soviet Union. Ms. Edwards joined the new Eastern European division in 1992 and became a loan officer
two years later, moving for the first time into the executive ranks.

Ms. Edwards's bosses in the Eastern European unit were two well-regarded bank officers, Vladimir Galitzine, an
American-born Russian with a royal pedigree, and Natasha Gurfinkel, an Ivy League-educated woman who, like
Ms. Edwards, was a Russian immigrant to the United States.

The bank's strategy was straightforward. It hoped to become a key overseas player in Russia by making it easier for
Russian companies to conduct business overseas. Ms. Edwards's verve in searching for clients immediately set her
apart, associates say.

"What distinguished her to everyone was her energy, incredible energy," said a former colleague of Ms. Edwards.
"When others would see four or five clients a day, she would see 10 or 12."

Peter Berlin's road to Western success appears to have been less smooth.

Records show that a man named Peter Berlin graduated from the Moscow Institute on Physics and Technology in
1978 with a degree in molecular chemical physics.

Mr. Berlin left Russia about 10 years ago, just as Communism was collapsing.

A trim, bearded man who stands about 5 feet 9 inches, Mr. Berlin may have lived inIndiana before he moved to New
Jersey. His immigration status when he came to the United States is not clear; many Russians who travel under such
circumstances leave Moscow on a tourist visa and then stay in the United States illegally. He later became an
American citizen.

In the summer of 1992, Mr. Berlin married Ms. Edwards, a union that would have solved any immigration problems.
A relative would say only that they met and married in the same year.

By 1993, he was trying his hand at business. He founded Benex, which listed his apartment in Cliffside Park, N.J.,
as its operating address. After several years, Mr. Berlin hooked up with a major Moscow-based dealer in consumer
electronics and began brokering sales of televisions and other items.

As Ms. Edwards rose through the ranks at the Bank of New York, the couple's finances modestly improved. They
bought a house in Narrowsburg, N.Y., for $125,000. Acquaintances say Mr. Berlin has a taste for fine art,
particularly Impressionist paintings, but some found him, and his wife, uninspiring.

"They were not high-cultured and didn't seem to have much spiritual value," said Vadim Borshai, a Russian artist
and a neighbor who lived near them in Narrowsburg. "There was no poetry in their soul."

The couple also had brushes with local law enforcement. Seven years ago, in a Nordstrom department store in
Edison, N.J., Ms. Edwards tried to steal more than $1,400 worth of clothing. She was arrested and pleaded guilty,
only to repeat the offense two years later at a Bloomingdale's store in Hackensack, N.J. -- this time, with 15-year-old
Amy in tow. She was arrested again and later pleaded guilty.

The Bank of New York, which was employing her, did not learn of either arrest until after Federal investigators
began scrutinizing the Benex accounts.

Mr. Berlin was arrested for shoplifting six years ago, records show, when he was charged in Fairview, N.J., with
stealing sinus medicine from a local A.&P. He retained a lawyer, and the charges were later dropped.

The Companies
Red Flags Ignored By the Bank


On a winter day three years ago, Mr. Berlin took a step that would change his life: He strolled into the Bank of New
York's Wall Street headquarters and opened an account in the name of Benex International. Six months later, in July
1996, he opened an account in the name of Becs International at the same branch.

Closer scrutiny by the Bank of New York would have revealed corporate records on file with the State of New
Jersey showing that one of its employees, Ms. Edwards, was one of two officers at Benex (Mr. Berlin was the other).
The bank's own records noted that Ms. Edwards had authority to withdraw money from the Becs account.

Both of those facts should have been red flags at the bank. Banks typically restrict employees from playing a direct
role in customers' businesses. The Bank of New York allows such arrangements only with permission of its
chairman. Ms. Edwards's formal links to her husband's ventures, the bank says, did not surface until late 1998, after
the Federal inquiry began.

Bank employees knew that Mr. Berlin and Ms. Edwards were married, but this apparently served only to shield the
accounts from scrutiny. In Congressional testimony last month, the bank's chief executive, Thomas A. Renyi, said
the fact that Mr. Berlin was married to "a well-regarded bank officer" had dissuaded bank auditors from looking
more closely at the money in the accounts. He described that as "a lapse on the part of the bank."

There was plenty to look at. It is not clear precisely when the companies began moving money out of Russia, but by
1996 they had become one of the more heavily used pipelines for sending out cash. Millions of dollars a day coursed
through the network, pouring through the Bank of New York unchecked.

Banks do not typically make much profit transferring money from one country to another. They charge their better
clients as little as a few dollars per transaction.

But Federal investigators say that in Russia's volatile economy, Mr. Berlin was able to charge a premium for a
service that ran through the reliable, prestigious Bank of New York. His companies, investigators say, were paid a
percentage of the total transferred, earning millions of dollars in profits.

There were some uniquely Russian forces fueling the demand for Mr. Berlin's services. Russia's high taxes and
import tariffs give businessmen powerful incentives to hide the true costs of their deals, whether importing goods,
buying property, or consummating routine deals. Offshore accounts help hide the volume of trade and commerce.

A few months after Mr. Berlin opened his first account at the bank, Ms. Edwards was courted by a Moscow-based
bank but was persuaded to stay at Bank of New York with a prestigious promotion. She was sent to London by Ms.
Gurfinkel and appointed a vice president, responsible for finding new business among Russian companies.

While both Mr. Berlin and Ms. Edwards wore off-the-rack business suits, a former colleague said, they sometimes
spent weekends in Italy.

"Between 1996 and 1998, there seemed to be more money," the colleague said. "Peter was doing better, or that is
what everyone attributed it to. But there was no ostentation, no high-priced clothing or jewelry."

Mr. Berlin's companies appear to have transacted much of their business from an office building in Queens, where a
handful of people working with computers arranged hundreds of electronic transfers a day.

Russian investigators have told their American counterparts they believe that crime groups in Russia exercised some
form of control over the operation. American officials say they have no evidence of that, but are still trying to
understand how Mr. Berlin corralled so much of the money-moving business so quickly.

The customers appear to have covered the entire range of Russian commerce. Some of the money, Federal
investigators say, was moved by Russian criminal groups. Italian prosecutors have found that Russian gangs
operating out of northern Italy, for instance, used Benex to transfer several million dollars out of Russia.

More than half of the $7 billion handled by Mr. Berlin's companies moved through the accounts before any
suspicions arose. But in early 1998, investigators in two countries, working on different cases, began asking
questions about Becs, Benex and Mr. Berlin.

The Manhattan District Attorney office, working with British officials on a money laundering and stock
manipulation case, found that a Russian emigre they were investigating, Roman Amiragov, was moving $300,000 to
$500,000 a week through Benex into the Bank of New York.

A few months later, the Russian Government separately asked the Federal Bureau of Investigation for help in tracing
the ransom in a kidnapping case. The money, it turned out, had moved through a Benex account at the Bank of New
York on its way to Russian organized crime figures, prompting the bureau to open its own inquiry.

The inquiry focused more closely on Mr. Berlin in August, 1998, after Republic Bank told the F.B.I. that $10
million had passed from Russia through an account controlled by one of his companies.

Mr. Berlin's money-moving operations continued at full throttle through the fall of 1998. But something had
changed. His companies were being watched.

The Investigations
Startling Disclosures After Slow Start


In its initial phases, the case did not make much of a stir.

Federal investigators served a subpoena on the Bank of New York in September of 1998 for account records relating
to Mr. Berlin's companies, among hundreds of such requests the bank receives each year.

Bank officials did not alert Mr. Renyi, the bank's chairman.

Federal investigators were startled by what they found. The records showed a dizzying array of transfers out of
Russia and to dozens of countries, including in some cases back to Russia.

British investigators began electronic surveillance of Mr. Berlin's and Ms. Edwards's conversations, and the F.B.I.
received transcripts, according to American law enforcement officials.

In March, confronted with requests for more information, the Bank of New York officials finally informed Mr.
Renyi, the bank's chief executive, that a problem had arisen with the accounts used by Mr. Berlin's companies.

"The interest of the investigative agencies heated up in March, and that's when it went to the C.E.O," said one
person with knowledge of the investigation at the bank. "There were people who knew there was a big-time amount
of money there after the first subpoenas came in September of '98. But it wasn't until six months later that it went to
the C.E.O."

There are conflicting views of how actively the F.B.I. pursued the case.

Numerous officials, including current and former members of the New York Police Department, the Federal
Reserve, the New York State Banking Department and the National Crime Squad of Britain, assert that the bureau
moved too slowly.

Federal law enforcement officials maintain that they made a choice, at the outset, to investigate the case covertly.
Mr. Berlin's accounts, they say, offered a rare window into Russian financial chicanery, provided that the inquiry
could be kept secret.

Federal officials were trying to determine whether the rapid-fire transfers were money laundering, a difficult case to
make because the law requires prosecutors to prove that the cash at issue was used in a crime such as drug dealing,
extortion or fraud. The F.B.I., officials said, hoped to infiltrate the organization and find out more about how
Russians launder their money.

"A lot of people got frustrated because we were trying to do the investigation without letting the targets know we
were doing it," a Federal law enforcement official said. "We were actively investigating the money laundering case,
but we restrained ourselves from doing anything that would tip them off. "

Mr. Berlin and Ms. Edwards were surprisingly open about the links between their two careers. For instance,
brochures for Mr. Berlin's companies carried the Bank of New York logo. The couple traveled together to Russia
and in 1996 and 1997, and Mr. Berlin sometimes signed his name to tabs billed to Ms. Edwards's expense account at
the Bank of New York.

That discrepancy was eventually noticed by bank auditors in 1998, before the Federal inquiry began, but it did not
prompt a closer look at the couple's financial dealings, according to people close to the bank.

Meanwhile, Federal investigators were struggling to understand a case that was largely unfolding in Moscow. The
leads, law enforcement officials said, went in myriad, sometimes unfruitful directions.

Federal investigators at one point contemplated using an American diplomat in Moscow as an undercover agent. Ms.
Edwards and Mr. Berlin had made contract with the diplomat in 1998 in an attempt to secure United States
Government backing for their plan to convert a Russian defense factory to civilian uses.

Mr. Berlin was later taped by British investigators as he boasted about his ties to the diplomat. The plan was called
off after The New York Times disclosed the inquiry in August.

Today, with the Federal investigation now a very public event, Ms. Edwards and Mr. Berlin, those investigating
them and the Bank of New York all face complicated problems.

The F.B.I. can no longer conduct a covert investigation, leaving the bureau with the more difficult task of piecing
the Benex puzzle together with help from Russia, or by persuading witnesses to come forward.

The Bank of New York has been cooperating with the investigation, but Federal authorities have indicated that they
still plan to take a hard look at how the bank handled various issues surrounding Mr. Berlin's accounts. The
Manhattan District Attorney's Office has its own investigation under way, with uncertain consequences for the bank.

And with a Federal indictment hanging over their heads, and their bank accounts frozen, the pressure on Mr. Berlin
and Ms. Edwards to cooperate with the Federal investigation has increased. But so far they have remained silent,
declining all interview requests from the authorities or the press.

Last week, as Ms. Edwards remained holed up in her London apartment, she used her building's intercom system to
decline an interview request.

"I wish I could help you, but I can't," she said.


GRAPHIC: Photo: Peter Berlin and Lucy Edwards, who were indicted in September. (Times Newspapers Ltd.)(pg.
A1)

Chart: "At the Center of an Investigation" -- How the lives of Lucy Edwards and Peter Berlin changed as their
business dealings came under question by the F.B.I. and the Bank of New York.

1988 -- Lucy Edwards gets a job at the Bank of New York.

1990 -- Peter Berlin moves from Russia to the United States.

1992 -- Ms. Edwards and Mr. Berlin are married.

1993 -- Benex is founded by Mr. Berlin.

1996 -- American citizenship is granted to Mr. Berlin. Ms. Edwards is promoted to vice president of the Bank of
New York's London office. Mr. Berlin opens a Benex account at Bank of New York and six months later, a Becs
International account.

1998 -- Benex International Company goes into business in London. The F.B.I. begins an investigation into money
moving through Benex accounts at the Bank of New York.

March/1998 -- The chairman of the Bank of New York is told about the investigation.

July/1998 -- Beginning January 1996 and ending in July of 1999, almost $7 billion is funneled through Benex and
Becs accounts at the Bank of New York.

Aug./1998 -- Ms. Edwards is fired by the Bank of New York. The Bank of New York freezes Benex accounts.

Sept./1998 -- Both Ms. Edwards and Mr. Berlin are indicted on charges of operating a money-transferring business
without a license. (pg. A12)


The Washington Post


October 18, 1999, Monday, Final Edition

HEADLINE: Russia's Obscure Perk Boss; Yeltsin Ally at Heart Of Corruption Probe

Sharon LaFraniere, Washington Post Foreign Service

The figure at the center of the storm over alleged Kremlin corruption is a quiet hulk of a man, little known to the
Russian public, in the seemingly banal job of supervising supplies and property. Few would assume that he might
know the secrets of President Boris Yeltsin's family finances or pose any threat to Yeltsin's regime.

Yet from a plain brick office building with a scruffy entrance, Pavel Borodin manages a multibillion dollar empire
of breathtaking scope, encompassing 200 state-owned businesses, palaces, planes and other assets. A survivor of
countless staff upheavals, he is one of few in the Kremlin who answers directly to Yeltsin, via the pale yellow phone
that sits on the right side of his desk.

Borodin's press secretary suggests, without too much exaggeration, that Borodin is second only to Yeltsin in his
ability to "pull the levers of power." And levers he has: As the chief dispenser of perks, he hands out the dachas
once enjoyed by the Soviet elite, the Mercedes-Benzes that race down the VIP lane of Moscow's streets, the
vacations at the state-owned resorts, and much more.

For years, no one questioned how Borodin kept up the government's palaces and planes. Now a Swiss-led criminal
inquiry into Kremlin building contracts has unsettled the president's inner circle. Investigators are looking into
whether Borodin and others accepted bribes from the Swiss-based contractors, and whether profits were skimmed
from a huge oil sale meant to help fund the $ 800 million project.

Prosecutors have uncovered a series of front companies and offshore entities that transferred millions of dollars to
several dozen Swiss bank accounts, according to sources familiar with the inquiry. Investigators believe they have
linked the accounts to Borodin and others in his department or to firms that may be connected to them, the sources
said.

The inquiry has touched Yeltsin because one of the Kremlin contractors, Mabetex Project Engineering, allegedly
paid tens of thousands of dollars in credit card expenses for the Yeltsin family and transferred $ 1 million to a
Budapest bank account for Yeltsin's use, supposedly on his 1996 re-election campaign.

After first ignoring the allegations, the Kremlin is issuing stronger and stronger denials. On Friday, Dmitri
Yakushkin, Yeltsin's spokesman, said the Western press is reporting "unverified facts" and "discrediting the Russian
government system." This "may boomerang and harm our relations with the West," he said.

Yeltsin last week denied that he has any foreign bank accounts. His wife, Naina, has said false allegations of
gratuities have hurt her whole family.

In an interview last week, Borodin said he is amazed to be suddenly portrayed as a possible channel of illicit funds
to the Yeltsins. "Before, who knew this great manager?" he said, adding that now, "I am corruption figure number
one."

The charges are "just wild, absurd," he said. "We have dirty politics here. They are trying to get into power using all
means. Whatever they write about me, it's there to deceive."

The suggestion that Borodin might play an important, confidential role in the government is not entirely new. Four
years ago, Roger Tamraz, an American seeking to build a trans-Asian oil pipeline, told the CIA that Borodin and
Alexander Korzhakov, then head of security for Yeltsin, had met him in Milan. He said Korzhakov promised
Yeltsin's support in exchange for a $ 100 million donation to Yeltsin's 1996 re-election campaign. Borodin has
denied the entire story.

So far, Yeltsin continues to stand by Borodin. Indeed, in a government that discards prime ministers like used memo
pads, Borodin's 6 1/2-year tenure is almost a record.

An amiable man with a lop-sided grin and a love of anecdotes, Borodin, 52, is close enough to Yeltsin to be invited
on trips with him, and, before Yeltsin's doctor forbade it, to hit a tennis ball with him. A book by Korzhakov
includes photos of Borodin, slightly taller and even broader, standing next to his boss in athletic shoes and bare-
chested by a riverside. Borodin's apartment is even in the same brick building in western Moscow where Yeltsin
lives with his wife and two daughters.

Borodin nonetheless says he doesn't relax with Yeltsin. "It is strictly a businesslike relationship," he said. "There is
no question of friendship; he is my boss."

Borodin's freedom to operate outside the normal chain of command disturbed more than one Kremlin aide. Anatoly
Chubais, who served as deputy to former prime minister Viktor Chernomyrdin, reportedly tried to force Borodin out.
But when Borodin seemed on the verge of losing his job last year, Yeltsin announced Borodin would keep it.

Borodin's special role is dispensing perks, and perks are worth far more than government officials' paltry salaries.
Borodin, for example, says his salary rank is the third-highest in the government--14,000 rubles, or $ 560 a month.
But it comes "with many perks," he said. "A car, security, and I fly free." Borodin once declared that he would do
his best to preserve privileges for Kremlin officials, saying "it's not right for the good things in life to be enjoyed
only by merchants."

His far-flung empire had a modest start. At Yeltsin's invitation, he came to Moscow in 1993 from the Siberian city
of Yakurtsk, where he was mayor, to run a small management office of 12,000 people. Now, with the help of
150,000 employees, he runs hotels, a major medical center, automobile pools, airplanes, farms, resorts, a furniture
factory, catering offices, drug stores, a photo laboratory, a laundry and a tailor shop. He estimates the value of the
property under his control at $ 600 billion.

There is hardly an official in the Russian government who is not beholden to Borodin. He dispenses medical
treatment, vacations, apartments, cars, food and clothing. "It is a huge service," said Borodin simply. Yeltsin made
no bones about Borodin's usefulness when he was trying to convince the lower house of the legislature, the State
Duma, to approve Sergei Kiriyenko as prime minister in early 1998. He said publicly that he had instructed Borodin
to pay special attention to the legislators' requests.

Even Vladimir Ustinov, the acting Russian general prosecutor, is in Borodin's debt. Documents obtained by the
Moscow newspaper Versiya and provided to The Washington Post show Borodin allotted Ustinov an apartment
worth roughly $ 400,000 on one of the toniest streets in Moscow. Yet Ustinov is expected to lead the Russian
inquiry into Borodin's relationship with Kremlin contractors.

That is nothing unusual. Ustinov's predecessor as prosecutor, Yuri Skuratov, who says he was forced out because he
investigated Borodin, ordered 14 suits from Borodin's office. Now Behjget Pacolli, president of the Mabetex
construction firm, says he provided Skuratov suits, shirts and underwear for free.

Borodin says he doesn't actually pick who gets what, he just fulfills orders. He is successful at that and his other
tasks, he suggests, partly because the operation is self-financing. While other ministers bemoan their sorry budgets,
Borodin has his own access to funds, including investments in a huge diamond deposit in Archangelsk.

His office has founded 200 state-owned commercial firms, so many that he has said he can't remember the names of
all the subsidiaries. "He is a classical Soviet bureaucrat turning into oligarch," said Vyacheslav Nikonov, a political
consultant.

Borodin's method of financing the Kremlin renovation is now an important aspect of the Swiss inquiry. A firm
called International Economic Cooperation (MES) was allowed to export 4.5 million tons of Russian oil--worth as
much as $ 500 million--in exchange for giving Borodin's office about $ 70 million in profits for renovations.

Skuratov, who was briefed by Swiss investigators earlier this year, said they were trying to find out whether Mercata
Trading & Engineering, one of the renovation firms, joined in the oil deal. Mercata Trading records list Andrei
Siletski, Borodin's son-in-law, as vice president.

A spokesman for MES denies Mercata was involved, and says the entire deal was aboveboard. Borodin says he
didn't pick either oil export firm or the renovation contractors.

He says his son-in-law never worked for Mercata Trading, and the corporate documents are false. "Those are not
documents--those are copies of documents. And you can manufacture any type of copy," he said.

Pavel Borodin allocates a huge store of assets owned by the government


The Guardian (London)
October 15, 1999

HEADLINE: Swiss bank hardens Yeltsin sleaze claim

Ian Traynor in Moscow

The allegations of sleaze and corruption at the centre of Russian politics hardened yesterday when a Swiss bank
confirmed that it had been asked to guarantee credit cards allegedly issued to President Boris Yeltsin and his family
by a Swiss building firm.

Banca del Gottardo in Lugana said Mabetex had asked it to guarantee three cards in the names of Boris Yeltsin and
his daughters Tatyana Dyachenko, a close political adviser, and Yelena Okulova.

Mabetex, which is also based in Lugano and won lucrative contracts to refurbish the Kremlin, and the Yeltsin family
both deny any impropriety. But yesterday's disclosure appeared to contradict their protestations, for the first time
since it became known in August that the Swiss and Russian authorities were investigating alleged bribes paid to the
Yeltsins' by the building company.

It was not clear whether the cards had actually been issued to the Yeltsins, but bank guarantees are required in
Switzerland for credit-card holders who do not have bank accounts in the country.

A terse Kremlin statement yesterday said Mr Yeltsin had never owned property abroad or held foreign bank
accounts.

The revelation followed Mr Yeltsin's third failure to get the upper house of parliament to sack the prosecutor
general, Yuri Skuratov.

Mr Skuratov has been working with Swiss investigators on the corruption allegations since secretly launching an
inquiry into the links between Yeltsin aides and Mabetex a year ago.

The president suspended him from office in April when state-controlled television, which is sympathetic to Mr
Yeltsin, showed Mr Skuratov in bed with two prostitutes.

Mr Skuratov said on Wednesday that 'the president's and his family's interests' were behind the campaign to hound
him from office.

Mr Skuratov says he has seen documents seized from the Mabetex offices and brought to Russia by Swiss
investigators proving that the credit cards were issued to the Yeltsins, that the daughters used them on shopping
expeditions, and that the bills were paid by Mabetex.

Mabetex's Albanian owner, Behxet Pacolli, denies all the allegations. But Marco Streun of Banca del Gottardo
confirmed yesterday that the company had asked it to guarantee the three cards.

It had done so for a period of two months But he did not know whether the cards had actually been issued or used.
Special report on the Guardian network at www.newsunlimited.co.uk/russia