The Center for Strategic and International Studies issued this 1997 report on Russian organized crime as part of its Global Organized Crime Task Force headed by William H. Webster, former FBI chief. Excerpted here are sections dealing with the pervasive link between Russian organized crime and sports; how 'krysha,' (a term cited several times in FRONTLINE's report "Mafia Power Play") is a key component integrating criminal and legal economies in post-communist Russia; and how Russian organized crime has links with other organized crime groups worldwide.
The full CSIS report is available (pdf format) on the CSIS web site.
An entirely new and broader segment of the U.S. population became aware of ROC when professional hockey players Alexei Zhitnik, Vladimir Malakhov, and Alexander Mogilny were targeted for extortion by Russian gangsters. According to a congressional hearing in 1996, Mogilny was able to evade the threat with the help of the FBI, while Zhitnik allegedly solved the problem by going to a "more powerful criminal to take care of the problem."
Sports and OC have become increasingly connected in the former Soviet Union in several ways. First, there are documented cases of embezzlement of funds from the former Goliath of Soviet sport, the Central Red Army Sports Club. The president of the Russian Ice Hockey Federation was murdered In April 1997. Another major sports club, Moscow Spartak, lost its director general in a contract killing in June 1997.
Second, the National Sports Fund (NSF), ostensibly a government enterprise for ruling sports activities, allegedly was exploited in a variety of ways by members of the inner circle. There are numerous media reports that link the NSF with an individual named Otari Kvantrishvili. Until his death amid a hail of gunfire at a public steam bath house in 1994, Kvantrishvili was a major figure in ROC. His krysha was composed mostly of bodybuilders and former competitive weight lifters and was centered around the NSF. He allegedly used his influence over the tax-exempt NSF to import vodka and cigarettes improperly. Portions of the profits from the sale of these items are believed to have been used as bribes for officials in the Russian government. An August 6, 1996, article in the International Herald Tribune notes that Sports Minister Shamil Tarpishchev and then-presidential security chief Aleksandr Korzhakov were involved actively in efforts to build up the NSF through the importation of vodka and cigarettes (possibly through Kvantrishvili). After forcing out NSF chairman Boris Fedorov, the article notes that Korzhakov funneled money to the Yeltsin reelection campaign.
A final problem in the area of sport and OC has fewer implications for Russian politics but is illustrative of the damage ROC is causing in Russian civil society. The Russian hockey system was to have been restored to its former glory on the basis of lucrative transfer fees paid to the Russian clubs by National Hockey League teams eager to sign Russian talent. Despite the over $10 million in transfer fees paid for Russian players to date, however, there is little evidence of reinvestment in Russian hockey. Although perhaps a trivial example to some, the corruption in Russian sports illustrates the breadth of the effects of OC on Russian society.
To date, U.S. Iaw enforcement [36] officials have established a clear relationship between ROC groups and La Cosa Nostra (LCN), the Italian-American criminal network in the United States. The LCN is cooperating with ROC groups on activities related to gambling, extortion, prostitution, and fraud. In the "Red Daisy" case, FBI and Internal Revenue Service (IRS) observance of a ROC fuel excise tax fraud scheme in New Jersey led to the indictment of 15 Russian immigrants and provided information that conclusively linked the involved Russians with members of the LCN. This case eventually proved that the ROC group was paying dividends to the LCN for each dollar of the illegal $140 million in profit earned through the fraud scheme.
Cooperative efforts between ROC groups and the Colombian drug cartels are centered in Miami, where the local FBI of office characterized the Russian gangsters as "very brutal...they are very sophisticated. They are computer literate. They hit the ground running." Miami represents a gateway to both the United States and Latin America. The Drug Enforcement Agency (DEA) and FBI disrupted one scheme that involved a plan to use a Russian-built submarine to smuggle cocaine from Colombia to the United States.
ROC is also known or is reported to be involved in criminal activity with other major international OC groups, including the Sicilian Mafia, the 'Ndrangheta, the Camorra, the Boryokudan (Japanese Yakuza), Chinese Triads, Korean criminal groups, Turkish drug traffickers, and Colombian drug cartels and other South American drug organizations. [37] These groups have cooperated with their Russian counterparts in international narcotics trafficking, money laundering, and counterfeiting.
Two major drug smuggling cases in 1996 illustrate the transnational reach of ROC. The first involved Russians as well as individuals from the Netherlands, Ukraine, Belarus, and African countries in an attempt to smuggle four tons of drugs via Russia. The second case involved ROC operations in five West European countries and Russia; the illicit activities led to a joint operation among the involved governments against a transnational drug trafficking group--and to the confiscation of 2.5 tons of drugs.
In testimony before the U.S. Senate, FBI director Louis Freeh stated that some 27 ROC groups had been identified as operating in the United States. The activities of these groups are believed to center primarily around such major U.S. cities as San Francisco, Los Angeles, Miami, Chicago, and New York. One MVD official stated that ROC activities in the United States include money laundering, illegal money transactions, and narcotics trafficking. Other countries with a known and active ROC presence include Germany, with 47 groups; and Italy, with 60 groups. The MVD estimates that over 100 ROC groups are active in at least 50 countries.
36 U.S. federal law enforcement entities involved ;n the fight against ROC include, but are not limited to, the Bureau of Alcohol, Tobacco, and Firearms Immigration and Naturalization Service; Financial crimes Enforcement Network, Internal Revenue Service; DEA; U S Customs Service; US Secret Service; and FBI. Several of these groups, as well as elements of the foreign affairs and intelligence communities of the U.S. government, also are involved in the provision of training and technical assistance. More information on the training aspect can be obtained through the of Office of Ambassador Richard L Morningstar, Coordinator of U.S. Assistance to the Newly Independent States.
37. "White Paper on Russian/Eurasian Organized Crime."
The notion of a criminal-syndicalist state is central and essential to understanding the findings and conclusions of the Russian Organized Crime Task Force. The task force concludes that, in the absence of significant reforms, the Russian Federation itself is likely to become a full-blown criminal-syndicalist state. In many respects, such a criminal syndicalist state already exists in Russia today. In the findings of the task force, such a state is composed of, and characterized by, interactions among the following:
i. corrupt officials at all levels throughout the government bureaucracy, from minister to tax collector to low-level factotum;ii. successful, full-time "professional" criminals; and
iii. businessmen for whom existing Russian law--and Western norms of commerce--are simply obstacles to be overcome in one way or another.
Even at the lowest level of activity, this dangerous mix of criminality, government, and business--with a strong, shared interest in self-enrichment, survival, and power--precludes normal interaction with those outside it. The most important, and perhaps the most significant and troubling finding of the task force, is that, at the level of state-to-state interaction, it will become impossible for the United States and other states to have traditional satisfactory dealings with an emergent Russian criminal-syndicalist state. As corrupt bureaucracy, organized crime, and "commerce without rules" in Russia blur into one another, how will it be possible for others to conduct normal dealings in matters of diplomacy, military affairs, economic and commercial activities, intelligence and security, and even law enforcement? Under such circumstances, how will the United States government determine whether the Russian government is dealing in what is traditionally regarded as its "national interest" rather than in the interests of individual self-enrichment, survival, and power that are shared by those with whom the United States normally negotiates? How can the United States or other countries hope to build enduring relationships in matters of international cooperation, economics, and security with representatives of a criminal-syndicalist state?
One of the most prominent terms of the new Russian criminal jargon is krysha, which literally means "roof." Throughout the Cold War, Soviet intelligence services used this term to refer to a cover set up for intelligence of officers in a foreign country. In the context of ROC, however, krysha is now used to refer to an umbrella of protection, or "bandit roof." This protection can come in the form of a criminal overlord protecting members of his organization. It also can come in the form of a criminal group's declaring that a specific business is paying it extortion money and is therefore under its protection. Finally, a krysha also can include certain forms of corrupt government protection, including the militsiya, tax police, the military, customs, and border guards.
Why has ROC prospered? The lawless criminal climate in Russia today makes it very difficult for business to survive and prosper without being defended and kept safe by some kind of organized security force. This type of force may come from public sector law enforcement agencies or private-sector guard services as well as an organized crime body. In many cases, the business will have to pay from 10 to 60 percent of its pre-tax income for protection regardless of who provides it. These costs to business contribute to the shortfall in tax revenue received by the of official government, corrupt of officials within the government, however, also divert tax receipts for their own illicit purposes, whether as individuals or as part of criminal organizations. If the criminals fund a business particularly attractive, they will demand an ownership share of it.
When a business comes "under the roof' of a ROC group, it is not always viewed as a clear case of extortion. Often, the krysha offers a range of services. The business can expect to be defended from other racketeers, including corrupt law enforcement; effective technical and guard protection of property; debt collection; assistance with customs clearances; legal and business advice from an adroit "legal staff'; and banking privileges at criminal-controlled banks. Banks are the linchpin of the criminal system: not only is the money kept in banks, but criminals use them to control their clients. Bank accounts, letters of credit, and wire transfers sometimes are the best sources for discovery of new, moneyed clients.
According to recent financial and business reporting from the American embassy that has been shared with the U.S. business community through the BISNIS online service, the krysha model is a key component of a significant postcommunist development in Russia - the integration of the criminal and legal economies. In the days of the Soviet Union, everyone understood and made use of the "parallel market," the euphemism for black market, that supplied what the state controlled economy could not. Today, the world of criminal enterprises exists side by side--and sometimes overlaps--a legitimate Russian business.
A krysha is a virtual necessity in most organized ventures in which sales, income, and profit are generated. They are a logical outgrowth of the old communist system, which orchestrated a system of unworkable socialism, confiscation, and perpetual shortages. Access to scarce goods could be acquired only through a structured mechanism of corruption. As the Communist Party's institutions of power collapsed in 1991, the krysha naturally surfaced to fill the organizational void; one variant of corrupt patronage, confiscation, and dispensation merely supplanted another. A krysha generally includes one or more of the following three elements:
-a connection to a financial/credit center or bank;-a deep penetration into governmental structures (local, republic, or national);
-an armed force, often illegal, sometimes from within the government itself.
Operationally, a krysha is an organization or individual that can provide the protection and patronage necessary to the conduct of business (or government activity). Membership in the krysha carries a price; a share of profits and/or some payback of service or favor is owed by the member corporation or individual to the krysha. In return for payment, individuals and corporations receive service in return from the krysha: ensured personal security, defense from attack and shakedown from another krysha, handling of payoffs and deals, intimidation of real or potential enemies and competitors, and advancement of the interests of the recipient for the established price. A krysha mistakenly is thought of as only criminal, that is, a mafia group that intimidates, beats, or murders, but it also can be governmental, able to deploy force from the power ministries for many of the same ends as a criminal krysha. A krysha can manipulate both the law and the bureaucracy in a business's favor--or against it. The Office of the Prosecutor General frequently institutes legal proceedings on the strength of a single telephone call. The new nomenklatura wins 9 out of 10 cases it initiates against the Russian media.According to the MVD and the militsiya, as cited in Moskovskaya pravda, 30 percent of all militia operational officers maintain "roofs.' The commercial structures they protect vary according to rank--precinct officers "maintain" vendors' stalls, while operations officers protect limited-liability companies and joint-sstock companies and their superiors even oversee banking structures. Before being fired by President Yeltsin in June 1996, General Aleksandr Korzhakov, (now a member of the State Duma) headed the Presidential Security Service and was said by many in Russia to direct one of the biggest kryshas in Russia. Kryshas are found not just In the major cities, but throughout the Russian Federation and in the former Soviet republics, including the Baltic states. The comments of one Moscow crime boss illustrate the pervasiveness of the krysha In Russian business today: "It's gotten impossible to work: one place the cops are providing roofs; somewhere else it's the KGB, and yet another place it's Korzhakov's boys or the Alfa group. Who can make any sense of it any more?"
Considering the depth and breadth of its presence, the krysha is likely to become a fixed feature of the post-communist Russian scene, and indeed, very well could mature into integrated and local elements of the Russian state, Russian society, and Russian business and Industry. Some observers believe this is happening already.
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