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

Golden Beginnings. Downtown San Francisco. December 1992 to December 1993.
Golden ADA's initial capital stake is relatively small -- $1.3 million that the Committee diverts from the famous Krystal diamond factory in Moscow. Kozlenok and the Shagirian brothers use part of that stake to lease an office on the 41st floor of the swanky Transamerica Pyramid in downtown San Francisco. They hire a pricey law firm -- Graham & James LLP -- as corporate counsel. Soon, Yevgeniy M. Bychkov -- head of the Committee and, therefore, king of Russia's gem industry -- is arranging for a $90 million consignment of gold coins and uncut diamonds to be smuggled out of Russia to Golden ADA.

Initially, company documents say, Golden is to "store" the product. But then, contract amendments show, Bychkov secretly transfers ownership of the consignment to Golden ADA. Over the next half-year, Kozlenok and the Shagirians sell those rough diamonds in Europe -- for $10 million. They have the gold coins smelted in Los Angeles, and sell the bullion for $54 million. A corporate bank account is opened at the Bank of America in San Francisco, and, court records show, the suddenly cash-rich partners create a network of offshore bank accounts, ranging from Switzerland to Bermuda (where Kozlenok purchases a villa).

In November 1993, Golden creates a Moscow-based subsidiary, Star of the Urals, JSC (joint stock company). Over several months, Bychkov transfers another $88 million of state-owned rough diamonds to Star of the Urals, which, in turn, ships the diamonds to San Francisco for "polishing." Instead of cutting and polishing the diamonds, however, court records show that Golden ADA sells them on the black market in Antwerp for $77 million. While Golden keeps some of the cash proceeds and some of the diamonds, most of the money is put in privately owned bank accounts in Russia, Switzerland, Finland, England, Ireland, and the Caribbean.

As they liquidate these two apparently illegal shipments of diamonds and gold and create a complex of companies and subsidiaries in both the U.S. and Russia, San Francisco's Golden boys also go on an astonishing shopping spree.

The Shagirians buy $8 million of real estate, including four Shell gas stations, from David's financially troubled brother-in-law, Jerair Panosian. Golden purchases the San Francisco Diamond and Jewelry Mart at 999 Brannan St. for $10.6 million. (It is, according to the former owner's appraisals, worth just $6 million.) The company acquires a fleet of top-of-the-line Lexus autos, three other luxury cars worth over $1 million from Beverly Hills Rolls Royce, including a $336,000 Aston Martin Volante (put in Bychkov's name), several armored vans, and six speedy yachts (for $2.5 million, including a half-million in kickbacks to the associates who picked out the boats). In addition to a $4.2 million mansion on Happy Valley Road in Lafayette, Kozlenok snaps up a Kamov 32C attack helicopter from Russia.

As 1994 dawns, Kozlenok throws an office-warming party. San Francisco's political elite swarms to 999 Brannan to meet Andre Kozlenok. The attack helicopter is landed on the roof during the party; the building is nearly blown apart by the downdraft from the copter's rotors. Sipping Russian vodka and holding onto their wigs, San Francisco's illuminati ooh and aah at fistfuls of diamonds sparkling under bulletproof glass.

Golden ADA is on its way.
Toward disaster.

The Slow-Motion Collapse. Moscow, 1994.
If a date can be set for the start of the wholesale looting of state assets that has paralleled the "reform" of the Russian economy, that date falls in August of 1990, when the Politburo -- Russia's main executive body -- adopted a resolution directing major Communist Party officials to set up holding companies abroad, using state assets. Since then, most every type of movable and valuable thing in Russia has been stolen and sold by government officials and their underworld partners. With as much as $25 billion a year in assets fleeing the ex-Soviet Union, the Golden ADA scam is but a ripple in a sea of smuggling and corruption.

But it is a ripple that moves in many directions.
Starting in 1993, Kozlenok wires at least $22 million of the proceeds from Golden ADA's strange diamond-and-gold-laundering program to Moscow, where associates create a dozen subsidiaries. Soon, Golden owns a bank; an exotic weapons factory; an art dealership; a firm for acquiring and renovating luxury apartments; and a mineral exporting company. Golden-Moscow employs a staff of 100: diamond cutters, security guards, drivers, maids, bartenders, locksmiths, chefs, waiters, blacksmiths, and consultants.

By August of 1994, Golden ADA has turned $178 million in state-owned gold and diamonds into hard, Western currency. On paper, the total value of the gold and gems is to be returned to Russia, minus a processing fee of about 10 percent. In reality, about $25 million in washed cash and gems is ultimately sent back to the Committee, so Bychkov can show some kind of return on what looks like an amazing loss. Also, there are physical assets in California -- the luxury toys, the houses, the gas stations, six magnificent condos at Lake Tahoe, a $20 million Gulfstream IV corporate jetliner, the cars, the boats, and the office tower -- all of which are worth something on the order of $50 million. And Kozlenok has bought a well-known New York City diamond retailer, Rubin & Sons (which subsequently goes broke) and a $1 million chalet in Antwerp.

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1 comments
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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