• CEO, TransparentBusiness
    TransparentBusiness SaaS platform was designated by Citigroup as the Top People Management Solution
  • International Entrepreneur
    Created the largest bank in Russia by age of 25 before defecting to the United States in 1992 and starting from scratch.

INS SAYS COURT'S DECISION IRRELEVANT

The Moscow Times

January 19, 2004

By Catherine Belton. Staff Writer

ALEXANDRIA, Virginia -- For a few minutes late on Thursday, it looked like controversial former banker Alexander Konanykhin would walk out of federal court a free man.

On the second day of hearings, U.S. District Judge T.S. Ellis nearly made a snap decision in favor of Konanykhin, who is being detained pending a ruling on his arrest and attempted deportation by U.S. authorities to Russia.

But then U.S. Assistant Attorney William Howard made it clear that the Immigration and Naturalization Service would by no means approve his release, no matter what Ellis ruled.

Even in the case of a favorable ruling for Konanykhin, "it is still up to the [INS] director whether to keep him in the slammer. I don't think so," said Ellis. "That should be repugnant to any person."

"Let's not be obtuse about this or blind. There is a significant interest in [Konanykhin's] return by the Russian government. And there is an interest by the U.S. government in satisfying that," Ellis said.

Ellis vowed, however, to continue looking into the case.

After a few minutes of deliberation, Ellis decided to give the defense more time in the complex legal wrangle. He scheduled the closing arguments for Jan. 26.

It was another moment of drama in a politically charged case marked by speculation, voiced by the presiding judge in particular, that the U.S. government is attempting to skew due process because it has entered into a pact with Moscow to return him to Russia, where he is wanted on embezzlement charges.

Konanykhin claims the sudden November overturning of the political refugee status that he gained in 1999, as well as his subsequent detention as he and his wife attempted to flee to Canada, is linked to the Kremlin's legal campaign against his former business associate Mikhail Khodorkovsky.

Khodorkovsky was arrested on fraud and tax evasion charges Oct. 25.

There is speculation that President Vladimir Putin could be seeking the return of Konanykhin as a key witness to settle scores with kingpins who squirreled billions of dollars out of the country during the presidency of Boris Yeltsin.

"If they get Konanykhin in Moscow, then they will be able to get those responsible for funneling the nation's billions out of the country," said Yury Shvets, a former senior KGB officer, who now has political asylum in the United States.

Konanykhin made a fortune at the age of 23 by running -- together with former KGB chairman Leonid Shebarshin -- the All Russian Exchange Bank, the first Russian bank to gain a license for hard-currency operations after the collapse of the Soviet Union.

According to Konanykhin, that relationship soured in 1992, and he fled to the United States where he hooked up with Khodorkovsky to run the U.S. operations of Bank Menatep.

But he soon came under scrutiny by Russian investigators for allegedly stealing $8.1 million from the All Russian Exchange Bank, and later by U.S. authorities on allegations of financial improprieties through his Antigua-based European Union Bank.

Konanykhin says he created the bank, touted as the world's first Internet bank, for Menatep. Khodorkovsky was a board member of EUB and president of Menatep.

According to a Federal Reserve Bank memo obtained by The Moscow Times, the chief partner of Konanykhin's bank was Swiss American bank, owned by banker Bruce Rappaport.

Rappaport was reported to be a key link in the Bank of New York money laundering affair, but no charges were brought against him

Konanykhin denies any wrongdoing. The Antiguan bank has since had its license revoked, but no criminal charges were ever filed.

On Thursday a senior officer for the INS conceded that the service had "a special interest" in sending Konanykhin back to Moscow.

"Konanykhin was of special interest to the U.S. government," Lisa Hoechst, acting chief for the INS team charged with the businessman's "removal" to Russia, said in testimony.

"Because he was wanted in Russia for a criminal offense and because of his previous history with the government of litigation, they wanted us to remove him before any additional suits could be filed," she said.

Ellis expressed disbelief.

"I think I understand. But if I do, it's astonishing," he said.

In the hearing Ellis is set to rule on the technical issue of whether or not the INS broke a 1997 agreement with Konanykhin by rushing to arrest and deport him to Russia before the courts had a chance to hear his appeal on his asylum case.

Konanykhin filed a $100 million lawsuit against the U.S. government in 1997 after a federal court ruled a 1996 attempt by authorities to deport him to Russia, and his subsequent jailing for 13 months, had been based on cooked-up charges of immigration and visa fraud.

In 1998 Konanykhin agreed for the damages suit to be put on hold pending final resolution of his immigration status, according to his lawyer J.P. Szymkowicz.

During hearings into his appeal against the immigration fraud charges in 1997, evidence was unveiled showing U.S. authorities had entered into a quid pro quo agreement with Moscow over Konanykhin.

According to a 1995 FBI internal memo obtained by The Moscow Times, Russian military prosecutors were requesting a return favor from the newly opened FBI office in Moscow for Russian cooperation on a U.S. investigation into American-based mobster Vyacheslav Ivankov, known as "Yaponchik."

"The general procurate is still treating the liaison process very much on a quid pro quo basis," it says. "In the absence of an extradition law, are there any immigration violations outstanding allowing immigration authorities to deport Konanykhin to Russia to stand trial for ... embezzlement?"

The memo was faxed from the Moscow office to headquarters in the United States.

It is not clear whether the Nov. 20 ruling by the U.S. Immigration Board of Appeals to overturn the asylum status he won in 1999 took more than four years because of a backlog of cases.

It is also not clear whether the decision to detain him and get him out the country was a move to head off paying damages Konanykhin had filed, or whether it was part of a pact to get him to Russia as quickly as possible.

"It makes me very sad and angry to know that the U.S. government is trying to send innocent people to death because of some dirty and petty political considerations," said Konanykhin's wife Yelena Grachyova in an interview.

Ellis urged Konanykhin's lawyers to seek a third-country haven for Konanykhin and his wife as the only way of testing whether the United States had made a deal to ship Konanykhin back to Russia or not.

The INS said it would not allow Konanykhin to go to Canada without refugee status because it is a country contiguous to the United States.

"My point is that the United States has the power not to return him to Russia," Ellis said. "If we don't have a deal with Russia, then let's see if he can go somewhere else."

Ellis pointed out the United States does not have an extradition treaty with Russia, the usual device for quid pro quo agreements on cooperation.

"One of the conditions of an extradition treaty is that we're happy in sending people to that country," he said. "Maybe we're not fully satisfied with due process available in Russia. I hope someone in the executive branch is asking themselves whether this is really the right thing to do in this case."

The INS claims it received confidential information from its Canadian counterparts that Canada would reject Konanykhin's asylum application there.

Law enforcement officials from both sides were not immediately available to comment, and the INS would not disclose the information it had received, citing a confidentiality agreement.

Ellis' ruling a week from Monday will hinge on whether Konanykhin had the right to travel freely in the United States under the terms of a 1997 settlement agreement he reached with the INS.

Although the original agreement specifies he should request permission every time he wanted to travel, Konanykhin claims he later reached a verbal agreement with INS officers.

The only evidence testifying to this agreement, he claims, is a letter from the INS that was in a suitcase put on the plane to Moscow during the December deportation attempt. It has not been returned.

Ellis' ruling will not decide Konanykhin's asylum status. Two other cases -- one to stay his deportation and another to appeal the Immigration Board's ruling -- are still pending.

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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.