RUSSIAN ORGANIZED CRIME (ROC)

Russian organized crime has become a significant problem for California law enforcement agencies. During the past several years, some Russian emigres have established a growing number of loosely structured criminal networks in this state that are involved in sophisticated criminal activities. The law enforcement intelligence community has also become aware of at least four structured Russian criminal organizations operating in California.

Russian organized crime includes crime groups from all the republics which comprised the former Soviet Union. These crime groups are operating in many of the major cities in California including Los Angeles, San Francisco, San Jose, Sacramento, and San Diego. Russian crime figures have been identified in cases involving extortion, prostitution, insurance and medical fraud, auto theft, counterfeiting, credit card forgery, narcotics trafficking, fuel tax fraud, money laundering, and murder.

Russian organized crime networks are also operating in New York, Boston, Chicago, Miami, Cleveland, Philadelphia, and Seattle. Many of the California-based networks communicate and, in many cases, are connected with these out-of-state groups in their criminal activities.

Many Russian organized crime groups in the United States have ties to organized crime groups in Russia. A report on organized crime presented to President Boris Yeltsin by Russia's Analytical Center for Social and Economic Policies, stated "The growth of organized crime threatens the political and economic development of Russia and creates conditions that could help bring the national socialists to power."

An estimated 80 percent of the private enterprises and commercial banks in Russia's major cities are forced to pay a tribute of 10 to 20 percent of their profits to organized crime.

On April 21, 1994, during a Senate hearing, CIA Director R. James Woolsey said, "Organized crime is so rampant in Russia that it threatens Boris Yeltsin's presidency and raises concern that syndicates will obtain and smuggle Russian nuclear weapons to terrorists or foreign agents."

Wooisey revealed that organized crime syndicates from Russia, Asia, and Africa are forming alliances with traditional Italian and Latin American organizations, creating a formidable threat to international peace and stability.

In recognition of this threat, the FBI recently established a Moscow office that will focus on Russian organized crime encroachment into the United States along with the potentially disastrous threat of trafficking in nuclear weapons. U.S. Aftorney General Janet Reno has named Russian organized crime groups in the United States a priority target for the U.S. Department of Justice. Law enforcement agencies throughout the U.S. now consider Russian organized crime a major threat and are developing strategies and forming task forces to counter that threat.

During the 1970s and 1980s, according to the U.S. Immigration and Naturalization Service, approximately 200,000 Soviet citizens, many who were Russian-Jewish refugees, immigrated to the U.S. Although the Soviet government liberalized its Jewish immigration policy, it is believed that under this guise the KGB also emptied their prisons of hard-core criminals, much like Cuban dictator Fidel Castro did during the Mariel boatlift of 1980. Many of these criminals are believed to have continued their life of crime in the United States.

The flow of Soviet refugees increased following congressional enactment of the Lautenberg Amendment in November 1989, which allows up to 50,000 Soviet refugees to enter the U.S. each year. This was followed by the adoption in May 1991, of Russia's first law granting its citizens the right to immigrate and travel freely.

In 1994, according to the U.S. Immigration and Naturalization Service, the majority of former Soviet emigres and refugees entering the U.S. declared as their intended state of residence New York, followed by California, Washington, Illinois, Pennsylvania, Massachusetts, Maryland, New Jersey, Ohio, and Oregon.

According to an April 1986 report by the President's Commission on Organized Crime, the first indication of an organized crime element among Russian immigrants came in 1975 when a gang from the Odessa region of Russia was discovered to be involved in major fraud. The victims were other Russians living throughout the United States. The group became known as the "Potato Bag Gang" because victims believed they had bought a sack of gold coins but actually received only a bag of potatoes.

Soviet criminal networks gradually expanded into other criminal activities such as extortion, theft, prostitution, and actively preyed upon newly arriving groups of Russian emigres by extorting money from them. The Brighton Beach area of New York City became the hub for Russian organized crime in this country during the mid-1970s. There, Russian criminals developed a working relationship with the La Cosa Nostra (LCN) which allowed them to establish fuel tax fraud schemes in certain areas of New York. The LCN forced the Russian criminals involved in these frauds to pay a large portion of their proceeds as a "tax" to operate.

Russian Organized Crime Groups and Structure in Russia - In early 1993, the Russian Ministry of Internal Affairs reported there were over 5,000 organized crime groups operating in Russia. These groups were comprised of an estimated 100,000 members with a leadership of 18,000. Although Russian authorities have currently identified over 5,000 criminal groups in that country, Russian officials believe that only approximately 300 of those have some identifiable structure. Organized crime groups in Russia are not nearly as structured as those in the U.S., such as the LCN.

Knowledgeable sources within the Financial Crimes Enforcement Network (FinCEN) have provided one model of the structure of groups in Russia. The principle behind this structure is to minimize contact with other cells that could lead to the identification of the entire organization.

Each boss, called a "pakhan," controls four criminal cells through an intermediary called a "brigadier." The boss employs two spies that watch over the action of the brigadier to ensure loyalty and that he does not get too powerful. At the bottom of the structure are criminal cells specializing in various types of criminal activity or functions such as drugs, prostitution, political contacts, and "enforcers." A similar structure places an elite leadership on top which is buffered by support and security personnel from the street operators who are commifting the crimes. Street operators are not privy to the identity of their leadership. Strategy and planning is done only at the top echelon in order to minimize the risk of detection.

According to law enforcement sources, those structures described above would fall into the old style of Soviet criminal enterprises. It is quite possible as organized crime has changed in Russia, so has the structure of these groups.

Thieves' Code of Conduct - There is a traditional code of conduct within this old style of organized crime in Russia called "Vory v Zakone," or thieves in law. This group existed throughout the Soviet era and continues today throughout the republics of the former Soviet Union. In this society the thieves in law live and obey the "Vorovskoy Zakon," the thieves' code. The members are bound by 18 codes and if they are broken, the transgression is punishable by death.

Law enforcement officials in the former Soviet Union indicate that most of the organized crime groups are well organized with sophisticated technical equipment, computers, transportation, financial support, and an excellent counterintelligence network. Those groups are involved in extortion, precious metal and raw material smuggling, money laundering, fraud, weapons smuggling, narcotics trafficking, and black marketing.

1.Forsake his relatives--mother, father, brothers, sisters... 2.Not have a family of his own -- no wife, no children; this does not however, preclude him from having a lover. 3.Never, under any circumstances work, no mafter how much difficulty this brings-, live only on means gleaned from thievery. 4.Help other thieves -- both by moral and material support, utilizing the commune of thieves. 5.Keep secret information about the whereabouts of accomplices (i.e. dens, districts, hideouts, safe apartments, etc.). 6.In unavoidable situations (if a thief is under investigation) to take the blame for someone else's crime; this buys the other person time of freedom. 7.Demand a convocation of inquiry for the purpose of resolving disputes in the event of a conflict between oneself and other thieves, or between thieves. 8.If necessary, participate in such inquiries. 9.Carry out the punishment of the offending thief as decided by the convocation. 10.Not resist carrying out the decision of punishing the offending thief who is found guilty, with punishment determined by the convocation. 11.Have good command of the thieves'jargon ("Fehnay"). 12.Not gamble without being abie to cover losses. 13.Teach the trade to young beginners. 14.Have, if possible, informants from the rank and file of thieves. 15.Not lose your reasoning ability when using alcohol. 16.Have nothing to do with the authorities (particularly with the ITU [Correctional Labor Authority]), not participate in public activities, nor join any community organizations. 17.Not take weapons from the hands of authorities; not serve in the military. 18.Make good on promises given to other thieves.

Although Russian organized crime activity in the United States has been expanding for the past 20 years, its most significant growth has occurred during the past five years. In August 1993, the FBI reported there were 15 organized crime groups in the United States with former Soviet ethnic origins. There is considerable debate in the law enforcement community as to the level of organization and structure of Russian organized crime groups in the United States. Additionally, many of the Russian emigres who are involved in criminal activity in this country may be career criminals specializing in crime areas having little or nothing to do with Russian organized crime groups.

Current information indicates that most Russian organized crime groups are loosely organized and do not have elaborate levels of structure. These groups are often influenced by their ethnic or regional backgrounds. They have formed networks that operate in situations of mutual interest and often shift alliances to meet particular needs.

There is ample information that Russian crime groups operating on the East Coast cooperate and communicate with West Coast groups. Additionally, Russian organized crime groups in the U.S. communicate and operate with organized crime groups in Russia. FBI Director Louis Freeh stated that over 200 of Russia's 6,000-odd crime gangs operate with American counterparts in 17 U.S. cities in 14 states. According to intelligence reports, members of criminal groups in Russia are sent to reinforce and consolidate links between groups in Russia and the United States. Russian organized crime figures are also sent to this country to perform a service such as a gangland murder or extortion.

According to law enforcement sources, Vyatcheslav Ivankov ("Little Japanese") a Russian organized crime leader, was believed to have traveled to the United States to organize ROC groups in the U.S. and establish links to ROC groups in the former Soviet Union. Ivankov is considered to be a highranking organized crime leader, or thief in law, both in Russia and the U.S. Ivankov was arrested in Brooklyn, New York, on June 8, 1995, for trying to extort $3.5 million from a Wall Street investment firm.

Vyatcheslav Ivankov Some descriptions of the more publicized Russian organized crime groups in the United States are as follows:

According to law enforcement sources, there are approximately 300 former Soviet Union crime figures and associates in the San Francisco Bay Area, including San Jose. There are approximately 600 to 800 Russian crime figures and associates in the Los Angeles area, home to the second largest number of Russian immigrants in the United States. These figures include members of the Russian and Armenian organized crime groups.

Northern California Auto Theft Group - A Northern California auto theft group came to the attention of law enforcement personnel in Sacramento and other parts of Northern California, Oregon, and Washington State in early 1993. This group is primarily made up of blue collar type workers from the Ukraine and Western Russia. Specializing in auto theft and VIN switching, younger members of this group steal vehicles while the older members operate body shops. This group utilizes Interstate 5 to travel to Oregon and Washington to sell the stolen vehicle parts to other Ukrainian and Russian criminals. Additionally, this group is becoming involved in extortion, cellular telephone fraud, prostitution, and trafficking small amounts of narcotics. Group members have been known to carry weapons and are becoming increasingly violent.

This group does not appear to have any clear cut, well defined structure, though its members appear to have formed networks and cooperate with each other in their criminal endeavors.

Odessa Mafia - The Odessa Mafia is considered the dominant Russian organized crime group in the United States. This group established itself in the Brighton Beach area of New York City between 1975 to 1981. In the early 1980s the Odessa Mafia sent two sub-groups to San Francisco and Los Angeles with their leadership remaining in Brighton Beach. The San Francisco Bay Area Odessa Mafia group, unlike their southern counterpart, appear to be highly structured and well organized.

Secrecy surrounds their activities and the language barrier creates additional problems for law enforcement authorities. This has resulted in very liftle information concerning the hierarchy, the scope of their operations, and the number of members. This crime group is believed to be involved in extortion, money laundering, fraud, loan sharking, and homicide.

Armenian Organized Crime Groups - The Hollywood area of Los Angeles and the city of Glendale are the focal points for Armenian organized crime activity. This area has the largest Armenian population outside of the Republic of Armenia.

According to law enforcement sources, several Armenian organized crime groups are becoming well organized with a structured hierarchy. There are in excess of 450 members and associates of these groups. These crime groups are involved in extortion, fuel frauds, credit card fraud, murder, kidnap, and narcotics trafficking. One group is believed to have approximately 150-200 members. Several members of this organized crime group were convicted in 1994 in Los Angeles of attempted murder, kidnaping, and extortion. This group is believed to be responsible for extorting a number of victims in the Armenian community.

Russian organized crime in California is involved in extortion, narcotics, murder, auto theft, and loan sharking, as well as insurance, fuel, telecommunication, and credit card frauds. The following cases are examples of several different crime categories.

Extortion - Five members of an Armenian organized crime group in Los Angeles were convicted in 1994 for extortion, kidnaping, and attempted murder. They forcibly detained and threatened victims and their families with great bodily harm unless they paid the suspects money. This group is believed to have extorted the Armenian community in the Los Angeles area for the last 13 years.

Fuel Frauds - Fuel frauds, mostly in Los Angeles and New York, cost both the federal and state governments approximately $2 billion annually in tax revenue. The majority of the fuel frauds are committed by Russian and Armenian organized crime groups operating in Southern California. There are a variety of schemes involving the fuel fraud including falsifying state and federal tax forms, use of fictitious companies, known as a "burn" company, extending fuel by blending tax free additives such as transmix or alcohol, rigging fuel pumps, manipulating dyed fuels designated for off-road purposes, and selling lower grade fuel as a premium product.

The "daisy chain" scheme is the predominate method of fuel tax fraud. The daisy chain scheme starts with a string of companies created by Russian and Armenian organized crime groups and is designed to create a massive paper trail. In the daisy chain, a "burn" company is created and exists only on paper. By the time auditors and investigators unravel the series of transactions to determine the tax liability, the "burn" company has disappeared without a trace of records or assets. These groups are pocketing up to 50 cents per gallon in federal and state taxes which enables them to sell the petroleum products below cost. Selling fuel below cost forces the legitimate operators out of business. Often these groups force legitimate businesses out of business using intimidation tactics through kidnaping, assaults, and bombings.

On September 13, 1995, 13 Russian Armenian subjects were arrested and charged with racketeering, including multiple acts of mail and wire fraud, money laundering, extortion, and distribution of heroin and other narcotic controlled substances. The Russian Armenian group, called the Mikaelian Organization, after the group's leader and self professed "godfather" of the Russian Mafia, Hovsep Mikaelian, ran a black market diesel fuel network that supplied gas stations and truck stops throughout Southern California. They defrauded the Internal Revenue Service and the California Board of Equalization through various fraudulent schemes, by purchasing millions of gallons of diesel fuel and avoiding a huge tax liability.

The Mikaelian Organization used wholesale permits obtained fraudulently to purchase tax-free diesel fuel that was intended to be used solely for off-road purposes such as farming and construction. The fuel was then diverted and sold at numerous independent diesel fuel stations, several of which were controlled by this organization. Up to 42 cents per gallon of the federal and state tax collected at the time of sale was pocketed by this organized crime group.

This group was also involved in gaining control, through threats and extortion, of a large segment of the independent diesel fuel wholesale and retail service station and truck stop markets. Permits were also obtained by submitting fraudulent paperwork. In some cases, jet fuel, which can be purchased tax free, was added to the diesel fuel and sold at the service stations and truck stops.

According to the U.S. Aftorney in Los Angeles, this group managed to avoid paying $3.6 million in taxes in just one year. The arrests culminated a two-year joint task force investigation conducted by the Federal Bureau of Investigation, the Internal Revenue Service, the Los Angeles Police Department, the Long Beach Police Department, the California Department of Justice, the Department of Defense, and the Department of Transportation. The task force confiscated more than $2 million in cash and property, including a BMW, Jaguar, and two Rolls Royces.

In order to counter the diesel tax frauds, Senate Bill 840, introduced by former Senator Robert Presley and former Assembly member Johan Klehs, was passed into law and took effect July 1, 1995. The purpose of the new law, which now parallels federal law, is to reduce diesel fuel frauds by imposing tax collection at a higher point (terminal level) in the distribution chain. Under the new law, taxes will be collected on tax exempt fuel by the terminal operator and refunded by the state (tax refund). A terminal is defined as a storage facility where fuel is stored and delivered to buyers. Fuel is delivered to the terminal directly from the refinery which is the first level in the distribution chain.

Telecommunications Fraud - Russian crime figures in the Los Angeles area are extensively involved in telecommunications fraud (cloned cellular phones). Law enforcement sources indicate that the activity is spreading to Northern California. This illegal process involves stealing electronic serial numbers of customers' cellular phones and programming them into computer chips, thus making a duplicate or clone of the telephones. While cloning has been going on for some time, it has grown rapidly and become more sophisticated as the industry has expanded. One cellular station in the Hollywood area is losing approximately $2 million a month in fraudulent calls made on cloned cellular telephones. Armenian organized crime figures are believed to be responsible for the majority of this fraudulent activity.

Narcotics - ROC groups are not extensively involved in narcotics distribution in California. However, there have been significant events and cases that indicate a possible future trend in this area.

On March 4, 1993, a Russian emigre was arrested for pefty theft. The Burbank Police Department recovered two kilos of cocaine and $2,200 in cash from the emigre's vehicle. It was later learned the emigre was also involved in shipping stolen vehicles to Russia.

On May 1, 1993, a Russian emigre was arrested for immigration violations. Information from the Immigration and Naturalization Service indicates that the emigre was involved in smuggling cocaine from the U.S. to Russia through his import/export business in Southern California. This emigre had spent 13 years in a Russian prison.

In February 1995, Tracey Hill, believed to be a courier for a ROC group, was arrested in Redding, California, for possession of 18 kilos of cocaine. Hill was en route to Vancouver, B.C., from the Los Angeles area.

On May 4, 1995, seven kilos of heroin was seized from a member of an Armenian organized crime group based in the Glendale area. The heroin came from the Middle East and was intended for distribution in the United States.

Medical/insurance Fraud - In Los Angeles, Russian organized crime figures have been involved in various frauds that run the gamut from staged auto accidents to false billing schemes. In 1991, in a case considered the largest of its kind, the U.S. Aftorney's Office in Los Angeles charged 13 defendants in a $1 billion false medical billing scheme that was headed by two Russian emigre brothers, Michael and David Smushkevich. The Smushkevich brothers have long been suspected of being part of a loosely organized Soviet crime syndicate operating in the Los Angeles area during the late 1980s and early 1990S. .14 The 175 count indictment capped a six-year investigation by federal, state, and local agencies.

Authorities reported that the brothers orchestrated a massive fraud scheme to use mobile medical laboratories to conduct unnecessary and false tests on patients. They then sent inflated and false bills to insurance companies and collected large fees. The scam eventually spread to Missouri, Illinois, and Florida. On September 20, 1994, the alleged ringleader, Michael Smushkevich was sentenced to 21 years in prison for fraud, conspiracy, racketeering, and money laundering. Smushkevich was also ordered to forfeit $50 million in assets, pay more than $41 million in restitution to government agencies and insurance companies victimized by the scheme, and pay a $2.75 million fine. David Smushkevich testified for the prosecution and received probation. It is estimated that the Smushkevich brothers pocketed between $50 and $80 million in profits. It is believed the brothers hid their money in an unknown country.

Loan Sharking - In October 1991, two Russian organized crime figures were convicted in Los Angeles of extorting a Russian emigre businessman. The two Russian organized crime figures lent money to the victim at a 30 percent interest rate. The victim borrowed $125,000 and over eight years had paid back $480,000 but still owed $120,000. The suspects threatened the victim and his family if they didn't pay the rest of the money that was owed.

Auto Theft - The Northern California auto theft group specializes in auto theft and operates in Sacramento, other parts of Northern California, Oregon and Washington. Younger members of this group steal vehicles while the older members operate body shops. The body shops are used as chop shops where stolen auto parts are used to reconstruct vehicles bought from salvage pools. Vehicles are also stolen, surgically stripped, and the hulls dumped where they are easily found by law enforcement personnel. These vehicles end up at salvage yards where members of this auto theft group buy the surgically stripped hull and ultimately put the vehicle back together at the chop shops. Vehicles are also bought at the salvage pools for their VIN numbers. The VIN numbers are switched to stolen vehicles.

The vehicles are then taken out of state and re-registered in an attempt to conceal or clear the salvaged title. Many of the stolen vehicles are believed to be shipped out of the country through Seattle, Oakland, and other port cities. This crime group may be using Russian organized crime groups to ship the vehicles to Europe or Russia where they are sold for substantial profits.

Murder - Andrey Kuznetsov and an associate, Vladimir Litvinenko, were shot to death in Kuznetsov's rented house in West Hollywood on January 26, 1992. Kuznetsov was believed to have been the leader of a Los Angeles fraud ring with ties to Russian organized crime in New York and Russia. His widow claimed he introduced her to Russian organized crime leaders and members in Los Angeles and New York.

Los Angeles Sheriffs Deputies arrested two Russian emigres at the murder scene. Sergei Ivanov was drenched in blood and carrying a handgun. An accomplice, Alexander Nikolaev, was also arrested with Ivanov. Sheriffs deputies found the two suspects in the act of cufting off the victims' fingers to hinder identification. Found in the house along with the bodies were numerous boxes of electronic equipment, copiers, TV sets, fax machines, and stereo components. Authorities state most of the equipment was stolen or bought illegally through the use of fraudulent'credit cards and check kiting.

Money Laundering - Russian organized crime groups in the former Soviet Union are wire transferring huge amounts of money, ranging from several thousand to millions of dollars from bank accounts located in Finland, Cayman Islands, and Europe to U.S. banks.

The source of this money is believed to come from narcotics activity, illegal trade in arms and antiques, and prostitution. Money is also stolen from the Russian government. According to a Russian newspaper, upwards of 1.5 trillion rubles (worth in excess of $1 billion) were stolen from the state with forged documents in 1992 to 1993.

ROC groups launder the money through a elaborate trail of fictitious companies set up in Russia. The money is wire transferred to "tax haven" countries such as those in the Caribbean Islands. Money is also reportedly wire transferred to other countries in Europe, such as Switzerland and Finland. A substantial amount of this money is ending up in U.S. banks. Most of the wire transfer activity is occurring in California's larger cities such as San Francisco and Los Angeles. It is believed that once the money has been exchanged into U.S. dollars, some of the money is sent back to Russia and is invested in lucrative financial and industrial projects, real estate, enterprises, and banks.

The Russian emigres connected to the U.S. bank accounts are opening import/export businesses in the Los Angeles and San Francisco areas. These business may be set up for the sole purpose of shipping large amounts of U.S. dollars to and from Russia.

In New York, the LCN and Russian organized crime figures have formed working relationships in areas of fraudulent fuel tax schemes. The LCN is believed to have forced the Russians to pay tribute on the profits they made on these schemes.

There is no information indicating that the LCN is exacting tribute from Russian fuel tax fraud operations in California.

Colombian cocaine distributors are believed to have formed an alliance with organized crime groups in Russia to import large quantities of cocaine into that country. These ties became evident after a 1.1 metric ton shipment of cocaine was seized in St. Petersburg, Russia in February 1993.

Criminal intelligence reports indicate Russian organized crime groups are not extensively involved in narcotics distribution in California. However, the following significant case illustrates a possible future trend and the alliances that are forming.

On September 8, 1993, several Russian crime figures were arrested in St. Augustine, Florida for conspiracy and intent to import 800 kilos of cocaine. These subjects were attempting to establish a drug distribution route from Florida to Detroit and New York. It is believed groups of Russian organized crime figures in Los Angeles and New York were part of this operation. The Russian group was dealing with Costa Rican drug traffickers and had plans to smuggle a large quantity of cocaine from Colombia to Italy aboard a vessel. The Russian group was dealing with the Sicilian Mafia in this venture.

Although at the present time law enforcement authorities are not aware of any additional ties between Russian organized crime groups in California and other organized crime groups, it is probable that formalized alliances will occur in the future.

From the mid 1960's to the 1980's, approximately 35 million people were incarcerated in Soviet prisons. Approximately 28 to 30 million Russian inmates were tattooed. According to criminologist Arkady G. Bronnikov, who has studied taftoos of Russian prisoners for 30 years, inmates wore tattoos only after they had committed a crime. The more convictions a criminal received, and as the terms of incarceration became more severe, the more tattoos a convict would have.

Taftoos spell out lives of crime and establish the hierarchy of inmates. According to Bronnikov, at the top of the hierarchy are "pakhans" or organized crime bosses. The pakhans use the second level of the echelon known as the "authorities," (also known as enforcers, fighters, or soldiers) to carry out their orders. The "men" are the hard laborers and are the third level in the hierarchy. The lowest category are the "outcasts." These individuals are basically slaves to the upper levels of the echelon.

The tattoos present a picture of the inmate's criminal history. According to Bronnikov, "Tattoos are like a passport, a biography, a uniform with medals. They reflect the convict's interests, his outlook on life, his world view." A prisoner with an incorrect or unauthorized tattoo could be punished or killed by fellow inmates.

Law Enforcement agencies in California and the United States can expect to see more of these tattoos as the Russian criminal element surfaces. The tattoos may be of assistance in determining the subject's criminal background and activity.

Among the most significant organized crime groups to come to the aftention of law enforcement in California in recent years, are the Russian organized crime groups. These criminal organizations have the potential to become part of large international networks allowing them to launder money, smuggle goods, and narcotics, and import criminals to carry out specific crimes.

According to the U.S. Immigration and Naturalization Service, California is attracting the second largest number of Russian emigres settling in any state in this country. California is also experiencing a migration of Russian crime figures from the East Coast. This may be occurring because of the lack of strength the LCN has on the West Coast. The Russian organized crime groups would not have to pay a mob tax or tribute, thereby increasing their profits.

A comparison can be drawn between Russian immigration and that of previous emigrant groups who have become organized crime powers in the United States such as the La Cosa Nostra and Triads. These new Russian emigres will be a fertile source for recruitment by existing Russian organized crime groups. Many of these groups are still in an embryonic stage such as the Northern California auto theft group. However, as immigration increases, these Russian crime groups can be expected to expand and new groups will be established.

Russian organized crime groups in the United States and Russia have formed alliances with the La Cosa Nostra, the Colombian cocaine cartels, and the Sicilian Mafia. These alliances allow these groups to potentially become a dominant wholesale cocaine and heroin distribution factor in California.

As Russian organized crime continues to expand in California, it is probable they will form working relationships with other criminal groups such as the LCN, white collar criminals, or other non-traditional organized crime groups.

Because of their experience at "working the system" in the former Soviet Union, Russian organized crime groups can be expected to continue their involvement in sophisticated criminal schemes, such as fuel and insurance frauds in the United States. Russian organized crime groups specialize in targets of opportunity and take advantage of bureaucratic mazes to build their profit base. They bring with them knowledge and methods to operate complicated fraud schemes which allow these white collar criminals to flourish. While public and law enforcement attention is drawn to gangs and street violence, Russian organized crime groups will make inroads into California using these complex criminal schemes requiring extensive investigative efforts.

Law enforcement sources directly involved in the investigation of fuel frauds indicate that SB 840 will not eliminate the fraudulent schemes. Russian and Armenian organized crime groups will continue to defraud state and federal governments out of excise fuel taxes by coming up with elaborate refund schemes. It is believed that these groups will pool their resources to purchase their own terminals. Once in possession of a terminal and using falsified federal and state tax exemption forms the criminal groups can hide the true ownership of the fuel. They will continue to blend fuels, under-report volume of fuel sold, improperly dispose and store hazardous waste, and sell lower grades of fuel as a premium product. Legitimate terminal operators may be bribed or even threatened into accepting fraudulent state and federal tax exemption forms.

These criminal groups will import tax exempt fuels from other states or Mexico. Fuel will be exported out of state. Once exported out of state, the tax liability will be extremely difficult to track.

These groups discriminately use violence to intimidate competing fuel distributors to force them out of business or sell their business to the criminal groups at reduced prices. These frauds also allow the criminal groups to sell fuel below market price which forces the legitimate operator out of business or into illegal activity to maintain their livelihoods.

Members of Russian organized crime groups are violent but violence is usually employed for specific reasons such as eliminating competition and informants or punishing those who abscond with funds. They are much like the LCN and not like street gangs who use indiscriminate violence. Additionally, law enforcement authorities in California have had several confrontations with crime figures from the former Soviet Union. These crime figures are not afraid of American law enforcement or the criminal justice system and pose a potential threat to police officers.

According to law enforcement sources, drug trafficking has not yet become a major focus for Russian organized crime groups in this state. Given the profits to be made and the experience many of these groups have with drugs in the former Soviet Union, it is highly probable that this will become a growing part of their illicit operations in California. Law enforcement agencies in California have begun to make some inroads against Russian organized crime. However, more information and resources are needed to determine the scope of their criminal operations, the structure and size of their organizations, intra and interstate networks, and their international ties to organized crime in Russia.

Because there is a lack of intelligence data relating to Russian organized crime groups and their structure in this country, it is almost impossible at the present time to determine their magnitude or scope of operations. Based upon this lack of information, it is difficult to develop efficient strategies to counter them.

The law enforcement community needs to work together in order to combat this new threat. In California efforts to combat Russian organized crime are underway. Three law enforcement groups meet routinely to share criminal intelligence and information on these organized crime groups.

"Mobsters Threaten the World's Nuke Safety CIA Chief Says." Boston Globe, April 1994.

Myer, Joseph, "Glasnost Gangsters in Los Angeles." Los Angeles Times, April 10, 1992.

Raab, Sylvian. "Top Echelon of Mobsters Pose Threat." New York Times, August 23,1994.

Russian Mafia

My name is Anton. I moved to Anchorage from Magadan in 1993. I would like to tell you about organized crime in Russia and America, or what is known as the Russian Mafia.

The Russian Mafia is all over the United States, but Brighten Beach, Brooklyn, in New York City is the place where you can definitely find the Russian Mafia. There is a part of town which is called "Little Odessa" which has many Russian stores, casinos, restaurants and hotels. In America the Russian Mafia is involved in smuggling drugs, guns and nuclear materials. They also control prostitution. Another way of making money for Russian Mafia is to hustle rich Russian sport stars. Some Russian hockey players have been threatened by the Russian Mafia. In some cases Mafia would kidnap athletes' parents who live in Russia and hold them for ransom or as a way to blackmail the athletes.

In Russia the Mafia's influence is becoming huge. They manipulate the economy of Russia by controlling banks, industry and commerce. They also have infiltrated the world of politics through bribery and by placing their members in public office. Russian Mafia provides security for business. If business has a problem with labor or another business, the business owner contacts a Mafia representative who takes care of the problem and problem is quickly, quietly and efficiently resolved. Also the Mafia signs contracts on those people who don't want to be part of illegal scams. The Russian government is trying to fight against the Russian Mafia, but it's extremely difficult because of the mafia's strong influence in the government. Last year in Russia around 40,000 people were murdered and 70,000 disappeared-probably never to be heard again. The murder rate in Russia is three times higher than in New York City. The Russian Mafia is considered one of the cruelest organized crime families.

Vagit Alekperov - Oil Magnate
Vagit Alekperov, 52, was born in 1950 in Baku, Azerbaijan, one of the earliest centers of the international petroleum industry. His father worked in the oil fields all his life and inspired Alekperov to follow in his footsteps. He was 18 when he landed his first job in the industry. Alekperov attended Azerbaijan Institute of Oil and Chemistry, then trained as an engineer to work in the nearby Caspian Sea oil fields. In 1979, he was sent to western Siberia, where he would later become general director of local oil and gas producer Kogalymneftgaz, a position he held until 1990. By 1991, Alekperov had established himself as an industry expert, winning an appointment as first deputy minister of fuel and energy, then as acting minister. He used his newly attained power to lobby for the consolidation of Russia's three oil producers into one company -- then assumed presidency of the new company. His nicknames, "the General," "Alek the First" and "the Don," are indicative of his indisputable authority at LUKoil, whose name came from the first letters of the three companies that consolidated-- Langepas, Urai and Kogalym. Today LUKoil is among the world's most powerful oil companies, with reserves second only to Exxon. Like many other oligarchs, Alekperov has moved into banking and media.

Estimated Worth:
$1.3 billion

Current Position:
Chairman, LUKoil

Major Holdings:
LUKoil

Other Interests:
Imperial Bank; in the television industry, TV-31, REN-TV, and TCN; the newsdaily Izvestia; Russian Oil magazine

Political Connections:
While acting minister of fuel and energy, Alexperov conceived of, created and secured the presidency of LUKoil.

New Plays:
In 2003, LUKoil negotiated new exploration contracts in western Iran, Egypt's Gulf of Suez, Azerbaijan and Kazakhstan. In 2002, LUKoil signed a six-year contract with Ecopetrol (Empresa Colombiana de Petroleos), the Colombian state oil company, to explore and produce in the Llanos petroleum basin. LUKoil also owns its own refineries and filling stations, including 1,300 in the United States, which it acquired after its purchase of Getty Oil in 2000. LUKoil was the first Russian company to acquire a publicly traded U.S. corporation.

Notoriety:
In 1997, the Russian newsdaily Izvestia detailed allegations linking top LUKoil officials to organized crime. In a blow against press freedom, LUKoil, a major shareholder in the newspaper, promptly took over a majority on the newspaper's board and fired its top editors.

Giuliani is associated with criminals......

FBI Tracked Alleged Russian Mob Ties of Giuliani Campaign Supporter

By Knut Royce, The Center for Public Integrity

WASHINGTON, December 14, 1999 — The Center for Public Integrity is investigating how billions of dollars of allegedly corrupted money from the former Soviet Union have found a haven in the United States, despite strict anti-laundering laws. Last month, the Center reported how a small San Francisco bank became a conduit for questionable funds as it, like many other banks around the country, aggressively pursued the cash from the former Soviet Bloc.

Today the Center reports on how political campaigns, also aggressively chasing after cash, end up with equally questionable contributions as suspected Russian organized crime figures seek to move into the U.S. political mainstream In future articles, the Center will show how the failure to sift the good money from bad is being replayed all over America.

A prominent commodities trader who acknowledges a business history with a reputed Soviet Bloc crime figure and a notorious arms dealer has been one of (then) New York Mayor Rudy Giuliani's top campaign supporters. Giuliani is expected to be the Republican candidate next year for a U.S. Senate seat from New York.

Commodities trader Semyon (Sam) Kislin and his family also lavished thousands of dollars in contributions to Democratic Sen. Charles Schumer, to the Clinton-Gore re-election campaign, to former Republican Sen. Alfonse D'Amato and to a number of state and city politicians. Kislin sits on the New York City Economic Development Board.

Denies Laundering Funds. Kislin denied that his firm had ever laundered funds. "Never, never," he said. New York FBI spokesman Joseph Valiquette, told that the Center was preparing an article about Kislin based in part on FBI documents, declined to comment. What the FBI and other law enforcement organizations knew or suspected was never shared with the public.

To his neighbors and friends, the 64-year-old Kislin, who immigrated from Odessa, Ukraine, in 1974, is an enormously successful businessman who generously shares his wealth with charitable causes. And to Giuliani, Kislin is one of his staunchest supporters. Kislin and his wife, Ludmila, gave Giuliani a total of $14,250 in direct contributions between 1994 and 1997. In addition, when Giuliani's campaign chest approached the maximum he could spend for re-election in 1997, $9.7 million, Kislin was one of several top backers of the mayor who supported the Liberal Party, which had endorsed the mayor and helped finance his campaign, according to The Village Voice. One of Kislin's companies gave $30,000 to the Liberals.

Kislin also kicked in $7,700 to Jules Polenetsky, who was running with Giuliani for the city's office of public advocate and could share political advertisement costs with the mayor. Giuliani's campaign manager had asked the mayor's major contributors to help finance Polenetsky's campaign.

Giuliani Fund-Raiser. In 1996, Kislin hosted a fund-raiser for Giuliani, a former hard-charging federal prosecutor, at the Lido Restaurant in Brooklyn. And last May 25, Kislin also was a co-chair for a Giuliani fund-raiser at the Sheraton New York Hotel and Towers. The bash raised $2.1 million for his probable run for the Senate next year.

"I did a lot of fund raising for Giuliani," Kislin acknowledged. "He's a good man, doing a good job for the city of New York." Bruce Teitelbaum, the spokesman for Giuliani's Senate campaign exploratory committee, refused through an aide to comment on Semyon Kislin's support of Giuliani. Teitelbaum refused to return calls himself. The mayor's press secretary, Sunny Mindel, said "I don't know anything about the mayor's contributors," and referred the question to Teitelbaum. The campaign did return a $2,000 check last August that it had received at the Sheraton Hotel fund-raiser from Philip Castellano, son of the late racketeer Paul Castellano, even though the younger Castellano has never been accused of a crime. Arik Kislin, Semyon's nephew, contributed $1,000 to the mayor in 1995.

--SNIP--

Here is a partial list of prominent politicians who have received campaign donations from Kislin and other people mentioned in police reports. Records were checked from 1994 to the most recent available.

LONG READ/GO HERE FOR LIST:

http://72.14.203.104/search?q=cache:hEltFDTB_aYJ:www.publicintegrity.org/report.aspx%3Faid%3D323

Another excerpt from that link:

Emphasis: >>>One of the Russian companies allegedly shipping money to be laundered by three "affiliated" companies in the United States was Magic Ltd.<<<

Elaborate Scam

According to Russian authorities, the Chernoys in the early 1990s defrauded the Russian Central Bank of more than $100 million through an elaborate scam involving dozens of fictitious companies. The brothers then used the funds as seed money as they and a London-based holding company, Trans World Group, through a maze of offshore companies and alliances, rapidly gained control of Russia's aluminum industry and acquired a large stake in the processing and distribution of other metals and petroleum products.

Kislin said Mikhail Chernoy tried to enlist him as "cover" or "legitimate front" in the plan to grab control of the aluminum industry, but that he declined. "I said aluminum is not for me," Kislin said. "I cannot do with aluminum because aluminum is a very dangerous business (in Russia)." Indeed, what followed has been dubbed "The Aluminum Wars" by the Russian press, as many businessmen, most of whom opposed the Chernoy takeover, were killed.

Kislin said that the brothers obtained licenses "to buy the aluminum for $10 and sell it for $1,500" by bribing top Russian officials. "The corruption is unbelievable," he said.

And, he said, he severed his business relation with Mikhail.

In the mid-1990s, Russian investigators asked U.S. law enforcement for assistance in tracking allegedly embezzled funds that had been laundered in the United States around 1993. One of the Russian companies allegedly shipping money to be laundered by three "affiliated" companies in the United States was Magic Ltd., according to a federal law enforcement official who did not want to be further identified. He said that Trans Commodities was one of those "affiliated" companies identified by the Russian authorities.

It is unclear whether U.S. investigators provided the Russians with significant information.

But Kislin said that he and his company were cleared of any suspicion in that investigation and that he received a letter from the U.S. Attorney's Office in Los Angeles in 1996 notifying him that he no longer was a target. He provided the Center with a copy of the letter, which says, in part, that the prosecutors had "declined to pursue a civil penalty action against Trans Commodities or Sam Kislin."

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