Preventative Arrests

mogilevich012608.jpgNewspapers have recently been awash with headlines about the dramatic arrest of the Russian mob kingpin Semyon Mogilevich, a criminal mastermind sought by Western law enforcement agents for his innovative and complex money laundering schemes, as well as other accusations of unsavory activities in arms dealing, narcotics, fraud, and prostitution. As a SWAT Team-like group of masked, armed men swarmed around to arrest Mr. Mogilevich and Vladimir Nekrasov, the owner of cosmetics retailer Arbat Prestige, it seemed like a scene pulled straight out of Hollywood. Russia again looks like the winner, taking down the internationally wanted “big fish” of organized crime. But given that Mr. Mogilevich has lived comfortably (and arguably thrived) under Russian protection since 2003, the story is far more complex under the surface.

There’s no shortage of aggrieved parties seeking to detain Mogilevich for questioning in a variety of investigations.Bob Levinson, special agent to the FBI, once described him during an interview as follows: “He’s a sophisticated racketeer who uses the cover of an international businessman to basically convince people ‘you’ve got nothing to hide by dealing with me, this is all a mistake and just take a look at my bank accounts, and the people that I run with and you’ll see that this is all an error on the part of the authorities’.”Indeed that’s just the beginning – Mogilevich is accused of being one of the world’s foremost experts in foreign stock fraud, with the ability to create false shells of companies with glossy prospectuses and websites, used to raise money that would only disappear into thin air. His alleged involvement in a scheme using the Bank of New York and several other financial institutions in the United Kingdom to launder $10 billion was among the most attention-grabbing of his various suspected exploits.However, at least in the case of the Kremlin, the most important activities of Mogilevich involve the shadowy Ukraine gas trade, where his connection to Dmytri Firtash and RosUkrEnergo (the Swiss-based trading company half-owned by Gazprom) are practically legendary for their lack of transparency and suspected corruption. Figures as diverse as Yulia Tymoshenko to Dmitri Medvedev have called for RosUkrEnergo to be eliminated from its monopoly position, and many are speculating that the arrest of Mogilevich may represent a major shift in the pricing agreements and non-transparent structures used to trade gas with the Ukraine.It is in my opinion highly suspicious that this individual, who was allowed to thrive for so many years under Putin and his puppets, is only now brought into custody once the Russians see that investigations are advancing and being taken seriously. The arrest probably also means that some of the more corrupt elements in the energy trade are losing their siloviki protectors in government. Vladimir Ovchinsky, former director of Russia’s Interpol bureau, told the Wall Street Journal that “The arrest of someone this big had to come from the president himself or from the circle around the president.“However there is also the possibility that the arrest was made at this time in order to keep Mogilevich beyond the reach of any serious investigation into the gas trade. The last thing that the Kremlin can allow is to let someone with whom they have conspired to fall into “enemy” hands. These “preventative arrests” bear some resemblance to past cases, such as Russia’s hardball lobbying to get Switzerland to extradite former nuclear minister Yevgeny Adamov to Russia instead of the United States – the Kremlin was famously successful in preventing Adamov from disclosing criminal details in an investigation.Again, in today’s Russia under the current leadership of the Kremlin, we cannot presume that prosecutors operate in anything resembling a regular process. These days high profile arrests are made to either shut someone up, or shut them down. Obtaining the truth and achieving justice are among the lowest priorities for the former spies running this show.