May 19, 2003
Putin's Name Surfaces in German Probe
By Catherine Belton
Caught in the center of a Germany-wide money-laundering investigation is a St. Petersburg real estate company whose advisory board once included President Vladimir Putin.
The Hessen, Germany-based company, SPAG, was among 28 firms and homes raided by police in Hessen, Hamburg and Munich last week.
The companies are suspected of laundering "tens of millions of euros" for "one of the biggest and most powerful" Russian organized crime groups, German prosecutors said in a statement.
Prosecutors believe the crime group is based in St. Petersburg and involved in "numerous crimes, including vehicle smuggling, human trafficking, alcohol smuggling, extortion and confidence trickstering," the statement said.
No arrests have been made.
Prosecutors said the firms are suspected of laundering funds for the St. Petersburg crime group through a complex web of international companies to boost the capital of a Hessen-based company and then sending the money back to Russia for investments in real estate.
Reached by telephone Friday, prosecutors refused to identify any of the companies or provide further details about the investigation.
But a German prosecutor told Germany's Der Spiegel magazine in
Monday's edition that the raids were part of a two-year investigation into SPAG, or the St. Petersburg Real Estate Holding Co.
A spokesman for a German bank that is a major shareholder in SPAG said in a telephone interview that more than 25 law enforcers raided his bank last week and seized all of its documents relating to SPAG.
"The investigations are in connection with people who worked at [SPAG] in the '90s," said Nico Baader, spokesman for Baader Wertpapierhandelsbank AG.
"SPAG's headquarters were raided, too," he said.
Baader said the bank owns a 30 percent stake in SPAG and organized the firm's initial public offering on the German stock exchange in 1998.
He said the bank had not known of SPAG's possible links with organized crime at the time and had agreed to handle the IPO partly because the company had such a highly placed patron as Putin on its advisory board. "We thought it was good business if there was someone like Putin on the board," he said.
He added that the bank has been unable to sell its stake in SPAG after the money-laundering allegations came to light three years ago, during a probe by the German foreign intelligence service.
Putin was named as a member of SPAG's advisory board when the company was founded in 1992, according to German registration documents obtained by Newsweek magazine two years ago. Back then, Putin was a deputy to St. Petersburg Mayor Anatoly Sobchak and in charge of attracting foreign investment.
By 1996, Putin was already on his way up the Kremlin ladder, moving to Moscow to work in the Kremlin's property department as a deputy to Pavel Borodin, who was later fined by Switzerland for his involvement in a money-laundering scheme. Borodin paid the fine but maintained his innocence.
Putin stepped down from his post on SPAG's board only upon his inauguration as president in March 2000, according to Newsweek.
A search of the Russian Federal Securities Commission database could not find Putin's name linked to the company.
SPAG chief executive Markus Rese refused to comment when contacted by telephone Friday. But he dismissed the money-laundering allegations in a recent interview with Germany's Manager magazine, saying the recent raids were "like firing a shotgun into a dark barn in the hope of hitting someone."
He also told the magazine that Putin had sat on the company's advisory board since 1992. He said this was an "honorary" position only and Putin had never visited the company's premises.
The Kremlin press service on Friday denied that Putin had any ties to SPAG.
Last week's raids came as Liechtenstein prosecutors prepared to bring Rudolf Ritter, a SPAG advisory board member and company founder, to court on charges he and his associates laundered more than $1 million for the Colombian Cali drug cartel through a Liechtenstein-based financial company.
Ritter also faces separate charges of embezzling the proceeds of share trading in SPAG stock from clients.
According to company documents registered with the Federal Securities Commission, Ritter was deputy chairman of SPAG's advisory board and a board member of Znamenskaya, SPAG's main subsidiary in St. Petersburg. "The evidence [against] Mr. Ritter was enough for the courts to uphold our indictment against him," Liechtenstein's chief prosecutor, Robert W?lner, said by telephone Friday. "We expect to bring the case to trial soon."
He declined to comment further.
Ritter is the brother of a former Liechtenstein economics minister.
SPAG was singled out in the German foreign intelligence investigation as a company suspected of laundering funds for Russian criminal gangs and Colombian drug lords, according to reports in Newsweek and France's Le Monde in 2001 and 2000. The probe found that Russian crime lords transferred money through Ritter into correspondent accounts at a Romanian bank and then used it to buy St. Petersburg real estate via SPAG, Le Monde reported, citing German intelligence documents.
Ritter has denied these charges.
According to Western and Russian news reports, Putin at one time had a close friendship with the head of Znamenskaya, Vladimir Smirnov. In late 2000, Smirnov moved to Moscow to work in Putin's former fiefdom, the Kremlin property department. He now heads Tekhsnabexport, the arm of the Nuclear Power Ministry that oversees Russia's program to reprocess enriched uranium with the United States, Kommersant reported.
Before moving to Moscow, Smirnov headed the St. Petersburg Fuel Co., which has a virtual monopoly over gasoline sales in St. Petersburg. A company vice president, Vladimir Kumarin-Barsukov, is the alleged head of the Tambov organized crime group, Newsweek said.
The magazine, citing Russian corporate records, said Barsukov was the director of a SPAG subsidiary in St. Petersburg.
Representatives at SPAG's St. Petersburg offices could not be reached for comment Friday.