World

Yeltsin Denies Wrongdoing

By CBSNews.com staff CBSNews.com staff

August 26, 1999 / 4:49 PM EDT / CBS

The Kremlin, responding to a newspaper report, denied that President Boris Yeltsin or his wife or daughters had received payments from a Swiss firm into a foreign bank account.

"In connection with publications in certain media, we would like to remark that the president of Russia, his wife and his children have never opened accounts in foreign banks," a Kremlin spokesman said by telephone.

"The incomes of the family of the president have been declared according to the legally established order," he said.

The Corriere della Sera newspaper in Rome reported this week that Swiss prosecutors believed a firm, Mabetex, which won hundreds of millions of dollars in contracts to renovate Kremlin buildings, had paid $1 million that ended up in an account in Hungary for Yeltsin's use.

The paper also said prosecutors believed Mabetex or its boss, Behgjet Pacolli, had paid credit card bills for Yeltsin and his two daughters, Tatyana Dyachenko and Yelena Okulova.

Pacolli denied the allegations, which come as Russian politicians are preparing for elections for parliament in December and for the presidency in mid-2000, when Yeltsin must step down after his second term.

Asked whether Mabetex had ever paid bribes to secure Russian contracts, Pacolli said "Never, never, never. I repeat it three times. Never, never."

"These are lies," Pacolli said of the Corriere della Sera allegations. "Mabetex is a victim of political games between Russians -- between the opposition and the presidential administration," he said.

Meanwhile Thursday, another investigation was announced into an even larger scandal that has further taken the gleam off the Russian image: A money laundering scam involving organized crime and a major U.S. bank.

How does it work? Instead of Russian exports producing an inflow of much-needed western currency, the proceeds are often mixed with criminal profits from overseas prostitution rings and the like. Then it's all deposited in foreign accounts.

The FBI has identified Russian crime boss Simyon Mogilevich as a prime player in this racket, reports CBS News Correspondent Mark Phillips.

It is alleged the Bank of New York was used to launder as much as $15 billion.

There are also accusations of kickbacks for construction projects in Moscow.

Many of those who have worked inside Russia's new world of cowboy capitalism say the only surprise is why it's taken so long for scandals like these to break.

"If you look under virtually any rock that has money around it you are likely to find some corruption, some mismanagement, some capital flight," said Charles Blitzer, a Russian financial expert.

But under the increasingly detached stewardship of Boris Yeltsin, Russian police have been too weak or too corrupt themselves to take effective action.

And until the government attitude and the business culture changes, it sees some of the wealth produced in the new Russia will continue to go astray.