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"The bear on the Web"

August, 1999

By Eric M. Troyer

He thinks the millions he lost at gunpoint in Russia was good practice for the billions he will make in America on the Internet

Alexandre Konanykhine, 32, looks nothing like a man who has been kidnapped by the KGB, robbed of his possessions, and informed by FBI special agents that there are two contracts on his life. He looks nothing like a man who has lost everything - maybe because he thinks he's just a couple of deals away from getting it all back in spades. “Russia is very class-oriented society,” he says in a thick Russian accent. “You are either boss or slave. I was boss.”

In 1992, Konanykhine was a 25-year-old multimillionaire in Moscow, hobnobbing with highly placed party officials. “I lived in a mansion with guards and traveled in a limousine in military car pools,” he says. During his capitalist heyday in Russia, Konanykhine owned more than two dozen companies ranging from construction and real estate to commodity exchange.

His most lucrative business, however, was the Russian Exchange Bank. When Konanykhine owned it, only two banks in Russia - his and the state's - possessed the necessary license to conduct both foreign and domestic currency transactions. When the soviet economy collapsed, so too did the state bank. The Russian Exchange Bank and Konanykhine found themselves in a unique position: “We had a monopoly on one-sixth of the world's currency transactions. [The bank] was a money-making machine.”

The KGB, originally hired by Konanykhine to protect his bank from the Russian Mafia, became more interested in the workings of foreign finance. Top KGB heavies suggested that the Russian Exchange Bank sell junk bonds to foreign investors in order to line the pockets of the agency's top brass. “A very senior KGB official came to me wanting to run such and such a scheme,” Konanykhine recounts. “There are several ways to say no. One is just, ‘No! Go to hell!’ That is not very wise to say directly to a senior KGB official. I would just say, ‘Sounds very interesting. Let me think about it.’”

Konanykhine's impassive nature infuriated the KGB. While in Budapest in 1992, he was kidnapped at gunpoint by a KGB crime group. He says they tried to coerce him into assigning ownership of most of his companies, including the precious Russian Exchange Bank, to the KGB. The agents took Konanykhine to his hotel to pick up the proper transactional papers. He had made plans to meet a friend for lunch that day. His friend's car was idling in front of the hotel when they arrived. Konanykhine jumped into the car and sped off, narrowly escaping with his life. Immediately afterward, Konanykhine and Elena Gratcheva, his former secretary and current wife, fled Russia to find sanctuary in the United States.

At age 29, Konanykhine became the 11th most wanted man in Russia. Shortly after learning of his exodus to the U.S., the Russian prosecutor general requested Konanykhine be extradited to Russia to face charges that he stole more the $8 million of investors’ money from his own bank. The INS, under pressure from the Russians, stormed the couple’s Watergate apartment and took them into custody for visa violations. Fearing deportation, Konanykhine requested political asylum. Gratcheva was let out on bond, but Konanykhine languished in a Virginia jail for 13 months.

Now that he is out of the jail - the INS arrest was declared illegal after a former KGB agent revealed the prosecutor general’s charges to be false - Konanykhine has set up operations. His new venture is called KMGI, based in the heart of New York City.

From a small four-room office in the Empire State Building, he plans to rebuild. “I don’t think it will take me, personally, more than three years to make my first billion,” he boasts. And Konanykhine genuinely believes he can do it, especially since he has one valuable weapon: cheap labor. “Most of our employees work in Russia. So many talented people there are not with work.”

From a lone desktop computer at the far end of his office, he offers a demonstration of his vision. He accesses KMGI.com, his company’s Web site. An animated butterfly flits gracefully across the screen; bold text appears that reads, “The Web will be more fun soon.” Konanykhine’s vision is Webmercials, five- to 12-second commercials that flicker animated sequences for a variety of products and services. These interstitial pages must be viewed before a user can access a particular page - similar to tolerating loud car commercials while waiting for your favorite prime-time show to return.

If Konanykhine has his way, Internet advertisements will become impossible to avoid. “You can kill the window, but it means you are not going where you want,” he says while demonstrating one of this Webmercials. “You waste more time trying to find another server. It’s best to just watch the Webmercial for a few seconds.”

In another small office, devoid of natural light, with two pasty-faced tech guys hunched over a monitor he explains, “It’s not that I am saying that Webmercials are good, but they are good advertising. This is a solution to the problem with Internet advertising. Banner advertising does not work. With Webmercials, Internet advertising is going to be a market measured in hundreds of billions of dollars where it was once just a billion.”

Despite potential re-enriched coffers, Konanykhine and Gratcheva can’t go home again. “If I return to Russia, I will be killed,” he says. “Or I will be put in a position where I would be better off dead. But I am happy to be in the country where what you build can’t be taken away at gunpoint.” Meanwhile, Konanykhine’s Russian animators and programmers are waiting for the orders to roll in so they, too, can start new lives.

Russian Immigrant
Russian Banker
Class-oriented Society

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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.