• CEO, TransparentBusiness
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    Created the largest bank in Russia by age of 25 before defecting to the United States in 1992 and starting from scratch.

"Ex-banker ordered to return to Russia"

Ex-banker ordered to return to Russia

Justice Department panel reverses '99 ruling that granted political asylum

Sun StaffIn February 1999, after a tangled legal battle that featured testimony from FBI, CIA and KGB officers, a U.S. immigration judge granted political asylum to former Russian banker Alex Konanykhin, saying he faced persecution and possible death if he were returned to Russia to face embezzlement charges.

Since then, Konanykhin and his wife, Elena Gratcheva, have built an Internet advertising business that creates slick video spots for companies selling on the Web. Their Manhattan company, KMGI Studios, employs 14 people, has been featured on CNN, and has attracted an impressive client list including Volvo and American Airlines.

But now a Justice Department appeals panel has reversed the ruling and ordered Konanykhin back to Russia. The three-member panel based its conclusion on a surprisingly rosy view of Russian justice.

"Most importantly ... we find no evidence to suggest that the Russian government employs corruption in its criminal justice system as a tool of political persecution," the Justice Department's Board of Immigration Appeals ruled in an 18-page opinion issued Nov. 20.

The ruling comes one month after an international furor was touched off by the arrest of Russia's richest businessman, Mikhail Khodorkovsky, who was hauled off an airplane by armed commandos and jailed to await trial on tax evasion and other charges. Foreign experts have called the arrest political revenge for Khodorkovsky's financing of political parties opposed to Russian President Vladimir V. Putin.

Konanykhin, 37, and Khodorkovsky, 40, were once friendly rivals who started competing banks as Russia emerged from Soviet rule. Later, from 1992 to 1995, Konanykhin served as vice president for international development of Khodorkovsky's bank, Menatep.

Eugene E. Huskey, a political scientist at Stetson University in Florida who is an expert on the Russian justice system, expressed surprise at the board's ruling. Misuse of prosecution for political purposes in Russia has grown worse, not better, since Konanykhin won asylum in 1999, he said.

"I think Russian justice has taken a turn for the worse in the last two or three years," Huskey said, noting that Khodorkovsky is the latest of at least three wealthy Russian "oligarchs" to face charges after challenging Putin or operating independent media outlets.

But Huskey said that given Putin's cooperation with President Bush in the war on terrorism, the United States may be reluctant to label the Russian justice system corrupt.

Reached at his office in New York, Konanykhin said he and his wife found the deportation ruling "deeply shocking."

"After 11 years of living in the United States and four years after being granted political asylum, it's the last thing I expected," Konanykhin said. "I certainly didn't expect the board to say that in Russia the government is not using prosecution as a political tool."

He said he knew the Immigration and Naturalization Service had appealed the 1999 asylum ruling, he said. But the government took two years to produce a transcript, so he assumed the matter was not a high priority, he said.

Konanykhin said he intends to ask a federal appeals court to stay the deportation order and hear the case. But he said he has been advised by attorneys that legal rules allow only very narrow grounds to reverse the deportation order.

If he is sent back to Russia, Konanykhin said, he is uncertain he would survive long enough to stand trial. He noted that an FBI agent testified in his immigration case that there was a contract from Russian organized crime figures on his life.

Given the involvement of political figures and former KGB officers, Huskey said Konanykhin's worries may not be exaggerated.

"He might be killed before he gets in the justice system," Huskey said. "But if they decide to let the justice system take its course, his fate would be pretty dismal, too. The conditions are absolutely horrendous in Russian jails, with high levels of tuberculosis."

The saga of Alexandre Pavlovich Konanykhine - he has Americanized the spelling to Alex Konanykhin - began in the 1980s, when he was thrown out of Moscow's most prestigious physics institute for turning a student construction brigade into a profit-making outfit. But under Mikhail S. Gorbachev's perestroika, he soon found the fledgling business was legal.

Over the next few years, he built a business empire, including a real estate company, a commodities exchange, a security agency and finally a bank. He invested some of his profits in Boris N. Yeltsin's rise to power, and his bank won a coveted license to trade foreign currency.

By 25, he was a multimillionaire with an eight-bedroom house, complete with gym and swimming pool. But then, as he tells it, former KGB officers he hired to help run his businesses decided to muscle him out.

In 1992, he says, he fled for his life through Hungary to New York. He wrote to Russian officials to protest that his bank had been stolen from him.

Russian authorities began to investigate his claims. Under the influence of his former KGB partners, he says, they turned the tables and charged him with stealing $8 million from his bank. He denies stealing anything.

Under pressure from Russia, INS agents arrested him in 1996 at his Washington apartment, accused him of visa fraud and jailed him in Virginia. After 13 months, a federal judge ordered him released. The immigration judge and the board of appeals have ruled that the fraud charges had no merit.

At his immigration trial in 1998, dueling experts argued over whether the charges against him were trumped up and whether the Russian justice system could deliver a fair trial. U.S. immigration Judge John M. Bryant ruled that Russian prosecutors "engineered the case against [Konanykhin] in order to punish him for exposing corruption amongst Russian government and business officials."

Now, nearly five years later, that ruling has been reversed by the Board of Immigration Appeals. The board's spokeswoman, Elaine Komis, said the long delay was the result of a backlog reduced over the past year from 58,000 to 38,000 cases.

Garrison Courtney, a spokesman for the Department of Homeland Security division that took over INS enforcement duties, said he had little knowledge of the case, but all immigration enforcement actions are "based on evidence presented to us."

"Just because someone's led a law-abiding life here in the U.S., that doesn't mean they didn't commit crimes in their own country," he said.

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More News...

Washington Post:
Konanykhin, one of the first Russian millionaires after the fall of the commies, left in 1992 and was granted asylum here in 1999. He's built a very successful Web advertising business in New York City. He had been chosen "New York Businessman of the Year." "As such, you will be honored and presented with your award," NRCC chairman Thomas M. Reynolds (R-N.Y.) said, at a "special ceremony" April 1. " President Bush and Governor Arnold Schwarzenegger are our special invited guests.
CNN:
Alex Konanykhin controlled Russia's largest commercial bank in the 1990s
Wall Street Journal:
Mr. Konanykhin was a whiz-kid physics student who became a pioneering Russian capitalist in early 1990s, building a banking and investment empire valued at an estimated $300 million all by his mid-20s. He was a member of President Boris Yeltsin's inner circle.
The Sun:
Alex Konanykhin fled Russia in 1992 and won asylum in the US after the collapse of the Soviet Union. The entrepreneur had set up 100 different companies in Russia and had an estimated net worth of $300million by the time he was 25. He is regarded as one of the first Russian millionaires after the fall of the Iron Curtain. One of the newly open country's leading lights, he even met with US President George HW Bush in 1991 on a joint visit with Russian leader Boris Yeltsin. However, he was then kidnapped in 1992 while visiting Budapest and all of his business assets were seized in Russia. … Being hunted by the Russian state, Konanykhin won asylum in the US in 1997 and set up a new life - but the shadow of the Kremlin continued to loom over him.He went on to rebuild a business empire and set up multimillion dollar firms such as TransparentBusiness in the US.
The Deal:
... a New York-based software startup called TransparentBusiness Inc. has drawn backing from Fortune 500 executives through a relatively new type of securities offering called 506(c) as part of an effort to raise $10 million this year ... Alex Konanykhin, CEO of TransparentBusiness, said he decided to reach out directly to accredited investors by purchasing ads in financial publications. One particularly bold ad includes the figure, 90,000%, with a question mark next to it. Konanykhin said the ad speaks to the large market opportunity for his company's software, which helps governments eliminate fraud by verifying billable hours charged by outside contractors. ... One of the investors, Ken Arredondo, told The Deal he invested in TransparentBusiness and agreed to serve on its board of directors because of the company's strong management team and the huge market opportunity to increase transparency of outsourced contracts worldwide. He believes in the company's product and said it's unique. "It's a Saas-based, easy-to-use tool," he said. "There are a lot of technology players out there that are a lot bigger, but none of them have what they have. There will be competition, but they have the product now. They have first-mover advantage."
The Baltimore Sun:
Business whiz kid.
WJLA TV / ABC:
Russian Bill Gates.
The Times:
By the time he was 25 he was one of the most important figures in post-Communist Russia. But in 1992, while on a business trip to Hungary, Alex Konanykhine was kidnapped.
The New York Times:
The Federal Bureau of Investigation notified Konanykhin that Russian organized crime figures had paid to have him killed.
Los Angeles Daily Journal:
Representing himself through much of the process, Konanykhin managed to convince an immigration judge of an alleged INS and KGB conspiracy and cover-up. Following the court's admonishment, the INS agreed to drop all charges and also pay $100,000..The judge also ordered an investigation of the Justice Department. In separate actions, Konanykhine subsequently won multimillion dollar libel judgments against two Russian newspapers. A $100 million lawsuit against the Justice Department is pending, alleging perjury, fraud, torture and witness tampering by U.S government officers on behalf of the Russian Mafia.
Profit Magazine:
Imagine you are a teenage physics genius who quickly amasses a $300 million empire of real estate and banking ventures, has dozens of cars, six hundred employees, several mansions and two hundred bodyguards—but you are nonetheless kidnapped by those you trusted, threatened with torture and death, and have your entire empire stolen from you one dark night in Budapest. You escape with your life by racing through Eastern-block countries and flying to New York on stashed-away passports—only to have the KGB and Russian Mafia hell-bent on your hide and the U.S. government jailing you and conspiring to serve you up into their clutches. All this before your 29th birthday. Sound like a Tom Clancy thriller? No. . . just a slice in the life of Alexander Konanykhine.