From Russia With Diamonds

In 1995, Golden ADA Inc., a San Francisco diamond-importing firm, collapsed, unveiling an international trail of theft and betrayal that embarrassed San Francisco luminaries involved with the company. Now, newly unsealed court files show that high-level m

In 1992, Russian President Boris Yeltsin named Fyodorov, then a 35-year-old banker, as his minister of finance. Fyodorov -- described in press accounts as both brilliant and arrogant -- quickly became known in the West as part of a reform-minded youth movement at the Kremlin. He advocated for quick transformation to a market-based economy. In 1994, apparently acting as a matter of conscience, Fyodorov resigned from Yeltsin's government, complaining that holdover Soviet-era managers were hamstringing reform.

Fyodorov's reputation as a reformer has continued in much of the Western press. In fact, Yeltsin recently brought Fyodorov back into the government, naming him the country's minister of taxation. Major U.S. newspapers approvingly quoted Fyodorov last month as he promised he would investigate, for tax purposes, the consumption habits of 1,000 of the country's wealthiest and best-known citizens.

There is another aspect to Fyodorov, however, that shows up in press clips -- a side that is at least acquainted with the corruption and intrigue plaguing the Russian government.

Between his stints as ministers of finance and taxation, Fyodorov ran the National Sports Fund, an agency Yeltsin created to raise money for Russian sports programs. The fund eventually became the focus of a massive corruption scandal connected to the agency's main money-raising venue -- the importation of alcohol and cigarettes, tax-free. This tax benefit, which Yeltsin granted to the sports fund to help it get off the financial ground, eventually would cost the Russian government more than $2 billion a year. And as time went on, sports organizations appeared to be getting very little of the proceeds.

According to news reports, in May 1996 Fyodorov was arrested on what he claimed were trumped-up drug charges (which apparently were dropped). In June of that year, he was shot and stabbed and seriously injured as he sat in a parked car in the center of Moscow.

Shortly thereafter, two interviews with Fyodorov -- tape-recorded before he was attacked -- were published in Russian newspapers. In those interviews, Fyodorov complained that other Russian officials and mobsters were squeezing millions from the sports fund. A Philadelphia Inquirer account said the interviews, though "often self-serving and intentionally deceptive," illustrated the thin line between Moscow officialdom and Russia's powerful organized-crime syndicates. In the interviews, the Inquirer reported, "Fyodorov acknowledges that he went along with these deals," but eventually balked when other officials became too greedy, demanding he provide them with $10 million in cash from the fund.

Fyodorov's professional history is a necessary backdrop to evaluating U.S. District Court records recently unsealed at the request of SF Weekly. Those records assert that beginning in mid-1992, Fyodorov, as Russian minister of finance, secretly authorized a plan to set up Golden ADA in San Francisco, and then to smuggle $180 million in state-owned gold and diamonds out of Russia to the private company.

The records do not directly implicate Russian President Boris Yeltsin in the illicit exportation of Russian gems and gold overseas. (The perpetrators seem to have complied with U.S. Customs laws.)

The newly unsealed records do, however, reveal a previously secret report, issued in the spring of 1995 by the Control Committee of the President of the Russian Federation, an investigative arm of Yeltsin's presidential office that has duties akin to those of the General Accounting Office in the United States. The report concludes that Fyodorov conspired with Yevgeniy M. Bychkov, the head of the Committee for the Russian Federation on Precious Metals and Gems (aka Komdragmet, or simply the Committee), to illegally transfer state-owned assets to Golden ADA. (According to the Control Committee report, other high-ranking officials, including a budget official working for Yeltsin, were actively involved in the smuggling operation. Fyodorov has denied general allegations that he played a role in the illicit diamond shipments. Attempts to contact him for comment on the Control Committee report were unsuccessful.)

With approval from on high -- either from Fyodorov or, if one disbelieves the Control Committee report, from another superior -- Bychkov allegedly instructed young Andre Kozlenok, a family friend, to travel to California and set up the diamond polishing factory. Kozlenok, his wife, Irina, and their small son, Alexei, duly headed for the Bay Area, where they met and almost instantly befriended a couple of Armenian brothers, David and Ashot Shagirian, who immigrated to the Bay Area in 1987.

In December 1992, Kozlenok incorporated a company. Stock certificates were printed. Without putting up a penny, the Shagirians became minority stockholders in Golden A(ndre) D(avid) A(shot) Inc. The Committee on Precious Metals and Gems provided all start-up funds and raw materials for the firm, but no one outside of Golden ADA would know of the connection for years.

And during those years, a cast of characters who might be at home chasing the Maltese Falcon -- among them a shadowy Russian oil and timber magnate who reportedly lives in Cyprus, a fast-talking businessman who claims to have renegotiated India's national debt to Russia, a California state senator with a penchant for ethics crusades, and a Bay Area private investigator who dabbles in politics -- move into and out of and all around Golden ADA, as more than $130 million in state assets simply goes poof.

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gleinmaxwell
gleinmaxwell

I am Dow Patten, an employment law attorney in San Francisco, working as a senior attorney in smith Patten. Who represents state, federal, and local government employees, as well as private employees in employment matters?

 

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