of NY Laundromat
As First Published in the September, 1999 issue
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
by 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 attention.
Gross Domestic Product (1997) = $450 billion. Gross Domestic Product
(1999) = $167 billion. Two year decline = 64% [Source: The NY
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
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 9-1-99]
"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,
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
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 Year. [CNN]
"According to a study by Canadian and Russian economic institutes,
capital flight from Russia totaled about $130 billion from 1992 to 1998."
[NY Times 9/12/99]
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" data base]
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
Gerald Hassel (Pres.) -- $1.44 million (1996) v. $3.14 million (1998)
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
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. [EDGAR]
Under U.S. banking laws for each dollar on deposit a bank may lend nine
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
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 9-1-99]
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 Mogilevich.
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
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
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 www.freeEDGAR.com .
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