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    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.

The Konanykhine case

The New American Magazine

February 1, 2004

By William Norman Grigg. Senior Editor for The New American magazine

Alexander Konanykhine is a wildly successful 37-year-old Russian expatriate entrepreneur. The U.S. government has accused him -- on the basis of supposed evidence provided by Russian investigators -- of being an embezzler, a bigamist, and a draft dodger. Konanykhine's background is somewhat murky, perhaps even troubling, but this much is certain: He is a man who blew the whistle on the KGB's continuing stranglehold on Russia, particularly its banking industry. For this, the government of KGB veteran Vladimir Putin wants Konanykhine dead - and our Department of Homeland Security has done its best to give Moscow a helping hand.

Konanykhine and his wife Elena have lived in the United States since 1992. His first act upon arrival in New York was to contact the FBI and the Russian government (including a personal letter to then-President Boris Yeltsin) requesting an investigation of his business, the All-Russian Exchange Bank, which had been seized from him by KGB-connected Russian mobsters.

In early 1995, the FBI informed the young banker that the Russian mob -- which is an operational arm of the KGB -- had issued a contract on his life. But within a few months of that warning, the FBI began to collaborate in a Russian investigation of Konanykhine on charges of embezzlement. In June 1996, officials from the Immigration and Naturalization Service, in a joint operation with agents of the re-named KGB arrested Konanykhine and raided his apartment in Washington's Watergate complex. The KGB accused him of falsifying his employment history, thereby invalidating his visa. This cleared the way for Konanykhine's expulsion to Russia, where he faced imprisonment, torture, and death.

"In my country, I grew up fearing the KGB," Konanykhine told The New American while in federal detention. "I had nightmares of KGB agents breaking down my door in the middle of the night, arresting me, and hauling me away to prison. That never happened to me in Russia. But it happened to me here in America."

Following Konanykhine's 1996 arrest, Nickolai Menchukov, one of his business associates, tried to intervene with the INS. According to court documents, an INS supervisor "threatened Mr. Menchukov with arrest without so much as thinking of a pretext." This threat was reiterated three weeks later when Menchukov testified on his friend's behalf at a federal court hearing.

Russian efforts to silence Menchukov were even more forceful. As Konanykhine explained in a 1997 interview with The New American, "When you provoke the Russian mafia and the KGB, they don't just retaliate against you, they retaliate against your family and friends."

Shortly after Menchukov came forward, his mother-in-law was visited by Russian security agents. A few days after Menchukov testified, his brother-in-law was mysteriously gunned down in Russia. "In Russia today, it is the same terror system of the old days, just with different people," Menchukov lamented.

In 1997, Federal District Court Judge T.S. Ellis III ruled that the case against Konanykhine was based on corrupt, KGB-provided evidence and ordered the Department of Justice to pay $100,000 in legal fees. John Milo Bryant, a United States immigration judge in Arlington, Virginia, subsequently ruled that Konanykhine and his wife "have a well-founded fear of persecution on account of their political opinion if they are returned to Russia" and therefore "have met the statutory requirement for a grant of asylum."

One of those who testified on behalf of Konanykhine was KGB defector Yuri Shvets, who declared: "I have a firsthand knowledge on similar operations conducted by the KGB." Konanykhine had brought trouble on himself, Shvets continued, when he "started bringing charges against people who were involved with him in setting up and running commercial enterprises. They were KGB people … secretly smuggling from Russia hundreds of millions of dollars…. This is [a] serious case, and I know that KGB ... desperately wants to win this case, and everybody who won't step to their side would face problems."

Statements such as these prompted U.S. District Judge Ellis, who presided at the hearing, to interject: "I thought the KGB ceased to exist after the Soviet Union was dissolved. Is that not right?" "No, your honor, it is not correct," replied Shvets. "It exists, even though it has changed the name. The same people, the same tasks. The United States is, again, the main adversary. They are keeping spying on the United States, and this is the same repressive domestic agency."

A settlement with the INS allowed Konanykhine and his wife to remain in this country. After becoming the first Russian expatriates to receive asylum from "post-Soviet" Russia, the couple began the process of becoming U.S. citizens. They also filed a substantial wrongful arrest suit against the INS. This certainly didn’t endear them to Washington. A few months ago, Konanykhine's Russian enemies resumed their efforts to drag him back to that country.

In late 2003, the Russian government began an aggressive campaign against a group of tainted businessmen commonly called the "oligarchs." This included the arrest of 40-year-old Mikhail Khordokovsky, a banker reputed to be Russia's wealthiest man -- and a one-time business partner of Konanykhine.

This was essentially a turf war between different ruling factions in Russia. "Putin's team has a lot of power, but they're hungry for more," Konanykhine explained to The New American. "They went after Khordokovsky's whole team, which gave them an excuse to pressure Washington to expel me back to Russia."

On November 20, Konanykhine's asylum was revoked. Acting on the advice of his immigration attorney, Michael Maggio, Konanykhine decided to travel to Canada with his wife to consult with authorities there about receiving asylum. Trying to cross the border on December 18, the couple was swarmed by a dozen federal agents. Within an hour, they were taken to the Russian consulate in Washington, where arrangements had been made to fly them back to Russia.

Literally minutes before the couple was to be stuffed on a Moscow-bound plane, Judge Ellis issued an emergency stay of deportation in order to review the case. According to Maggio, sending Konanykhine back to Russia would be tantamount to a death sentence. "Here we have a case where literally a man's life is in question," Maggio told Judge Ellis. "I have lost deportation cases before, but I have never had a case where I had to really worry about someone dying."

If the federal government's desire was to expel Konanykhine from the country, why wasn't he allowed to go to Canada, which had indicated its willingness to take him in? Why the insistence on turning him over to the Russians? The conduct of federal authorities in this case, Maggio observed, was akin to that of East German border guards, and the seizure of Konanykhine and his wife at the Canadian border was "reminiscent of a movie about the Cold War with freedom right in sight and he gets grabbed…."

Washington's determination to hand Konanykhine over to Russia, concluded Judge Ellis in a hearing late last year, reflected a "sinister deal between the INS and the successors to the KGB. There's no treaty between Russia and the U.S., and they wanted this guy back for some reason, and the U.S. also wanted an FBI office in Moscow, and so they dealt. It was that simple."

"This has all the earmarks of something strange," commented Judge Ellis during a hearing last December. "I don't understand what's happening with this man and Russia and our country."

Part of the explanation may be simple, corrupt opportunism on the part of the Department of Homeland Security (which is now in control of the INS). "The INS knew that I would be killed in Russia," Konanykhine told The New American. Pointing to the fact that he has a $100,000,000 wrongful arrest lawsuit pending against the INS (and, by extension, the DHS), Konanykhine wryly comments: "Certainly, eliminating the plaintiff is the most effective way to avoid a lawsuit. The question is -- shall the U.S. Government be allowed to kill people to avoid judicial review?"

But this entire affair has its roots in the growing convergence of the U.S. and "post-Soviet" Russia -- a misbegotten marriage symbolized by the July 4, 1994 FBI-KGB cooperation pact signed in Moscow by then-FBI Director Louis Freeh. Konanykhine is a young man who had ascended to the rarefied heights of the Russian nomenklatura, or ruling class. He was part of Boris Yeltsin's inner circle, surrounded by the KGB-aligned figures who have plundered Russia, often with the help of U.S. subsidies.

As Yuri Shvets pointed out, Konanykhine's troubles began when he blew the whistle on this racket. That's why both Moscow and Washington want him dead.

Thank you for listening. Please join us again next time.

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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.