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"Jury awards Russian $33M damage ruling"

The Arlington Journal

December 15, 1999

By Jessica S. Buel. Staff writer for The Arlington Journal

During a trial that included the testimony of a former American spy, an Arlington County Circuit Court jury has awarded a Russian entrepreneur and former Arlington County resident $33.5 million in damages, finding that two well-known Russian newspapers published defamatory articles about him.

The compensation recommended by the six-member jury is the highest Clerk of the Court David A. Bell said he has encountered in his tenure.

The jury's recommendation will be reviewed by Judge William T. Newman Jr.

In a lawsuit filed in February 1997, Alexander Konanykhine, 33, alleged Izvestia - a Russian daily newspaper - reported the businessman was involved in criminal acts such as defrauding the Federal Reserve, bribery, bigamy, theft and money laundering. Theinformation was erroneous and published with "reckless disregard for its truth or actual malice," the suit claimed.

"I was being made a villain of the people," Konanykhine said yesterday after his trial against a second Russian newspaper was continued. "What is ironic is that it was happening because I refused to join their way."

Konanykhine said Izvestia for years had assisted the KGB and Communist Party in persecuting dissidents by printing lies and character assassinations.

Court documents highlight two newspaper articles printed about Konanykhine in 1996 and 1997. He said the articles are available on the Internet and for purchase at specific newsstands in the Arlington County area, and some were reprinted in the American media.

Konanykhine said he believes former Communist leaders tried to use him as a scapegoat for the failing Russian economy.

Izvestia neither acknowledged the case by correspondence nor provided legal representation in court, said Konanykhine's lawyer, J.P. Szymkowicz said.

"When you don't have assets here, you have nothing to lose," Szymkowicz said.

A former American spy posing as an official working for the Communist Central Committee at the time of the events testified in Konanykhine's defense.

Konanykhine said he doubts he will ever get the full amount of the reward, but he said the money is not his concern. He said his priority is clearing his name.

The allegations have made it difficult to recruit financial backing and have stalled his hopes of clearance by the Securities and Exchange Commission, said Kohanykhine, owner of KMGI.com, an Internet business in New York.

"People take it seriously," Konanykhine said. "The new theory is that Russia is a democracy just like [the United States], and if the government says something, it considers it truth."

In 1983, Konanykhine was a student at the Moscow Institute of Physical and Technology and began work on a student construction team. He eventually parlayed the student experience into a successful construction company of his own.

But, according to court documents, he was expelled from the school for what he believes were the government's proddings against capitalistic endeavors.

As perestroika swept the former Soviet Union, Konanykhine established the Russian Exchange Bank, one of the largest commercial banks in Russia, and took control of four additional financial institutions. By the time he was 25 years old, Konanykhine estimated his net worth was more than $300 million, court documents say.

The young entrepeneur claims to have financed Russian President Boris Yeltsin in the 1990 elections.

After the fall of the communist system in 1991, former KGB and Communist Party officials began "taking back power," he said. "It took them a few months to get over the shock of being rejected of power."

In 1991, organized crime began to tighten its grip over the Russian economy and began to threaten many companies doing business in Russia, court documents say. Konanykhine said he was kidnapped in 1992 during a business trip to Budapest by a criminal group with close ties to the KGB.

He said the group seized all of his businesses.

Konanykhine escaped and asked Russian and Hungarian authorities for an investigation into the abduction but was instead persecuted for his actions, court documents said.

He and his wife, Elena, fled to the United States shortly after the kidnapping.

But, Russian authorities asked that Konanykhine be extradited, and the couple was arrested for alleged violations of immigration laws.

A U.S. District Court judge in Alexandria ruled Konanykhine's arrest unlawful and ordered he be released. A suit seeking monetary compensation for the year-long detention is still pending.

Konanykhine was cleared in February 1999 of similar charges by the U.S. Immigration and Naturalization Service, but said the INS relied on falsified Russian documents and witnesses.

Konanykhine's lawsuit against the Kommersant Daily, a Russian business newspaper, was delayed yesterday until Jan. 19 after Szymkowicz argued that the possible jury pool included people who had participated in Monday's trial or jury pool members who had heard about the case after the jury was released.

Kommersant Publishing House filed a motion to dismiss the lawsuit in March 1998, claiming Arlington County Circuit Court did not have jurisdiction over the case since the defendants' businesses were based in Moscow. That motion was denied.

"All the defendants are foreign corporations," the defendant's memorandum said. "Plaintiffs do not allege that any defendant does business in Virginia, or that any transaction or occurrence relating to this litigation took place in Virginia."

The McLean-based law firm which represented Kommersant in the motion for dismissal has since discontinued its representation and could not be reached for comment.

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Media About Alex

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.
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.
World Economic Forum:
How transparency can help the global economy to grow. By Alex Konanykhin. Countries around the world spend an estimated $9.4 trillion a year on procurement – 15% of global GDP. Indeed, UN figures estimate that public procurement can account for 15-30% of GDP for many countries. However, according to the UN’s Office on Drugs and Crime and the Organisation for Economic Co-operation and Development (OECD), 10-25% of the value of public contracts is lost to corruption.
The Baltimore Sun:
Business whiz kid.
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.
CBS "60 Minutes":
Alex Konanykhin didn't only have KGB after him… He had the FBI, the Justice Department, even the CIA all on his case, as a favor to the Russians, part of a deal to allow the FBI to keep a bureau in Moscow.
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.