• Founder and CEO, Unicoin.com
    Unicoin is the official cryptocurrency of Unicorn Hunters which Forbes called “The most iconic business series of recent times”.
  • 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.

"Did KGB dupe INS?"

Legal Times

July 28, 1997

By Karen Alexander

It was bad enough for the Immigration and Naturalization Service that it lost its yearlong battle last week to keep a Russian banker behind bars while he fights deportation.

By week's end, the INS itself, as well as a high-ranking agency lawyer, had fallen under scrutiny over its handling of the case. It was facing a barrage of ethics allegations from the onetime INS prosecutor on the case and from a former KGB agent who consulted on the matter—charges that seem to have captured the attention of a U.S. district judge in Virginia.

The complicated case stems from an accusation by Russian prosecutors that Alexandre Konanykhine, who made a fortune in post-communist Russia, embezzled $8 million from a Russian bank.

In 1992, Konanykhine and his wife, Elena Gratcheva, entered the United States on multi-national business visas.

In June 1996, Konanykhine and Gratcheva were arrested for alleged visa violations at their co-op in the Watergate apartments. Gratcheva was released on bond, but Konanykhine was jailed in Winchester, Va. The two filed for asylum, claiming that Russian mobsters were trying to steal Konanykhine's businesses and have him killed.

The INS claims that Konanykhine, now 30, lied on his business visa, is a fugitive from justice in Russia, and must be kept in custody until he can be deported because he is a flight risk. An immigration judge denied Konanykhine asylum and found him deportable.

But in federal court last week in Alexandria, Va., Judge T. S. Ellis III, ruling on Konanykhine's third habeas petition, granted him temporary relief, allowing him to go home under house arrest. And two unlikely sources launched accusations against lawyers at the INS Washington district office in Arlington, Va.

The witnesses said INS officials including District Counsel Eloise Rosas, the top lawyer in the office, had misled the court about their reasons for detaining Konanykhine and had ignored suggestions that some of the evidence against him is flawed.

Antoinette Rizzi, a former INS attorney who originally prosecuted the case against Konanykhine while working for Rosas, and Yuri Shvets, a former agent of the KGB foreign intelligence service, portrayed INS officials as either dupes of the KGB or its knowing accomplices.

Konanykhine, a lanky, boyish-looking financier who once ran the All-Russian Exchange Bank, was worth an estimated $300 million in his mid-20s. He claims he is the victim of a conspiracy by Russian mobsters who have stolen his businesses and want him returned to his homeland on false criminal charges to be jailed or killed.

Judge Ellis seemed persuaded by the case for Konanykhine, which was made by his pro bono lawyers, John Nassikas III, of counsel at D.C.'s Arent Fox Kintner Plotkin & Kahn, and D. Jacques Smith, a senior associate at the firm.

"I find the testimony today to be credible and somewhat disturbing," Ellis said from the bench at the end of the all-day hearing on July 22. He ordered that Konanykhine be allowed to live with his wife in their small Northwest Washington, D.C., apartment until a permanent ruling is reached on his habeas petition. Konanykhine must wear an electronic anklet and cannot leave home.

Ellis noted that one of the reasons he ordered the temporary release was the "likelihood of success" of Konanykhine's quest for permanent release on bond.

In a separate matter, the Board of Immigration Appeals has agreed to hear oral arguments in the immigration case of Konanykhine and Gratcheva on July 31. The couple is represented in that case by the well-known immigration lawyer Michael Maggio of D.C.'s Maggio & Kattar. Maggio has also filed a motion to remand the case to the immigration judge on the basis that the evidence against Konanykhine is faulty.

Rosas, as well as two of her assistant counsel, Stephen Paskey and Deborah Todd, were in court during last week's hearing, but did not participate actively in the questioning of Rizzi and Shvets. INS attorney Genevieve Augustine conducted a sometimes faltering cross-examination, seeking to cast doubt on the credibility of Rizzi and Shvets and to portray Rosas as the target of a vendetta by Rizzi.

Rizzi testified that she had made numerous attempts to bring concerns about the evidence against Konanykhine to the attention of INS and Justice Department officials. Court filings and interviews indicate that the INS's conduct on the case had been raised with officials including David Martin, INS general counsel; Frederick Tournay, INS ethics officer; Jack Penca, INS regional counsel; Michael Shaheen, director of the Office of Professional Responsibility at the Justice Department; and Michael Bromwich, inspector general at Justice.

Rosas declines to discuss the Konanykhine case.

John Ingham, an INS spokesman said, "The INS has great confidence in its case against Alexandre Konanykhine and believes all of its actions have been proper and legitimate. The government has no reason to doubt the reliability of documents presented in the case."

In response to the three petitions for Konanykhine's release, the INS has told the court that the banker was being detained because he is a flight risk. But Rizzi says that INS attorneys, including Rosas, her former boss, have misled the court about the service's reasons for detaining Konanykhine.

Rizzi, now a solo practitioner in Falls Church, Va., alleges that Konanykhine has been detained because the INS—eager to please the Russian government in light of recent prosecutorial cooperation between the nations—had promised Russian prosecutors that he would be held in custody until he could be delivered back to Russia.

The United States does not have an extradition treaty with Russia. Under U.S. law, aliens who are deported are returned to the country from which they entered the United States. In Konanykhine's case, that country is Antigua.

Two Russian law enforcement agents have been instrumental in pressing the Russian government's case against Konanykhine: military prosecutor Alexander Volevodz and Igor Nisuev, a senior officer in the Russian Federation's Ministry of the Interior.

The two were in Washington at the time of Konanykhine's arrest and have met on several occasions with law enforcement officials, including representatives of the Federal Bureau of Investigation and the INS.

Rizzi testified that on June 28, 1996, in her capacity as assistant district counsel, she met with Nisuev and Volevodz to explain the deportation process to them. She said she told them that if Konanykhine and his wife were deported, they would be "sent by law to the country from which they came"—Antigua.

Rizzi testified that Rosas then entered the meeting "and said despite that law that Mr. Konanykhine would be returned to Russia."

"I sat in my chair and I was amazed," Rizzi recalled. "I said well, maybe I don't know the law as well as I thought I did."

Rosas "promised" Volevodz that Konanykhine would be held in custody until he was returned to Russia, Rizzi further alleged.

Rizzi also testified that Rosas later tried to coax her into filing an affidavit about the case that contained statements she did not believe were true, including assertions that the INS "had no interest in cooperating with Russia" and that Rizzi did not fear retaliation from Rosas for stating otherwise.

"Rosas went rooting through my trashcan for the affidavits because she had made marks about what I should add," Rizzi testified. A photocopy of the proposed affidavit, which allegedly bears Rosas' markings, was admitted as evidence.

Rizzi claims she was forced out of the INS in the fall of 1996 as a result of the concerns she raised.

On cross-examination, INS attorney Augustine indicated that Rizzi had been asked to resign because she failed her final background check due to some outstanding payments to the Internal Revenue Service.

Charges of Retaliation

This is not the only instance in which Rosas has been portrayed as a supervisor with a tendency to retaliate against employees who challenge her authority.

Rizzi alleged in court, and an INS source confirms, that three complaints alleging discrimination and retaliation have been filed against Rosas with the agency's Equal Employment Opportunity office by two employees. Rosas says that is not accurate, but declines further comment.

According to the INS source, one of the complaints has been accepted for investigation, and the other two are pending. EEO officials would not confirm the complaints against Rosas; such complaints are not a matter of public record unless they result in a finding of bias.

Also at last week's court hearing, Rizzi and Shvets, the former KGB agent, testified that they had expressed grave concerns about some of the evidence against Konanykhine.

Hundreds of pages in length and partly in Russian, the documents served as the basis for Konanykhine's arrest and the execution of a search warrant at his apartment, court papers show.

Rizzi testified that as the case against Konanykhine proceeded, she began to doubt the authenticity of some of the documents and expressed her concerns to Rosas.

"I told her I didn't think we should rely on those letters and she said she is the district counsel and she was going to rely on them," Rizzi stated.

Shvets, a KGB foreign service agent of 10 years' experience who was granted political asylum in the United States, was hired by the INS last summer to analyze the documents. He claims that Rosas and her subordinates ignored his findings that the documents showed strong indications of manipulation and corruption by KGB agents.

Shvets studied the documents for three days last summer. He testified that at the outset, Rosas told him, "The INS got instructions from the top to cooperate on this case and it looked pretty complex."

"I should tell that these two documents I read, they were screaming about the lies, about the fraud and manipulation," Shvets testified.

Shvets said he told Rosas and her deputies that they were "in big trouble with this case because you are asked to cooperate, but I saw strong indication that the documents are lying."

Shvets laid out in his testimony a conspiracy in which hundreds of millions of dollars were stolen from Russia by agents of the former KGB, and Konanykhine was a fall guy in a cover-up.

"The Russians believed no one would read this file carefully in the U.S.," he testified, "The Russians believed they could handle this behind the scenes."

Shvets says Rosas dismissed him after three days and told him it would be unnecessary to put his findings in writing or to present them in court.

For her part, Rizzi testified that Rosas removed her from the Konanykhine case and then relieved her of all of her duties as a result of the ethics concerns she raised. She was eventually placed on administrative leave and says she resigned "on the condition that the [Office of Professional Responsibility at the Justice Department] would continue its investigation."

At the hearing, Judge Ellis indicated that he took seriously the possibility that the INS had misrepresented both the evidence against Konanykhine and its reasons for seeking his continued detention.

The reasons presented for detaining Konanykhine "must be more than acceptable . . . they must also be the district director's bona fide or actual reasons," he said. "[I]t's my recollection that I was repeatedly assured that there was no desire to deliver Mr. Konanykhine to the Russians."

Both sides will be able to file additional briefs and written testimony, and the case before Ellis will resume Sept. 26.

Russian Immigrant
Russian Banker

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.
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.
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.