Russia May Have Used U.S. Aid for Political Purposes : Funding: Ads that were supposed to promote privatization are pulled after partisan overtones were added to them.


American foreign aid officials are investigating charges that the Russian government tried to divert U.S. aid money into the financing of election advertisements by a political bloc that supports President Boris N. Yeltsin.

The money was supposed to be used for television commercials promoting the government's privatization program, which allows Russians to invest in businesses with vouchers that were distributed to every citizen as a share of state property.

But the ads, which originally carried the tag line "Your Voucher, Your Choice," were changed in mid-October to say, "Your Choice, Russia's Choice."

Russia's Choice is the political party most closely associated with Yeltsin; among its candidates in the Dec. 12 parliamentary elections are several members of the president's Cabinet.

The ads were financed by the U.S. Agency for International Development, the leading foreign supporter of the privatization program, as part of its $80-million appropriation to help the Russian government's State Committee on Property, known by its Russian initials GKI.

The ads ran in their altered form for about a week, according to a knowledgeable Western official who spoke on condition of anonymity. They were pulled off the air when the Russian government was informed that financing such an openly partisan appeal with AID money would violate U.S. law.

GKI has since told U.S. officials, according to sources, that it will pay for the television time already used, a sum of about $7,000. The source of that money is unclear.

In an interview Tuesday with The Times, Igor N. Plotnikov, assistant press secretary at GKI, denied that the tag line had "a connection to any party. In my view it's just a good play on words, that the participation in the voucher program is going on the same path as Russia. The State Property Committee is not connected to any movement." He referred other questions to GKI officials who could not be reached.

First Deputy Prime Minister Yegor T. Gaidar, the head of Russia's Choice and its lead candidate, denied Tuesday that the party had used U.S. money. "Russia's Choice does not need to use such funding sources," he told The Times.

Among other charges raised by those close to the case, and among those being scrutinized by AID officials, is one that the Russian government canceled a contract with a U.S. public relations company when the firm refused to change the ads.

The controversy over the advertising suggests that U.S. officials may have been willing to overlook GKI's commingling of public and partisan campaigning.

Sources close to Sawyer Miller Group, the New York-based public relations company that produced the original privatization ads and designed much of the government's publicity campaign, say its employees informed AID officials in Moscow and Washington of GKI's intention to change the tag line.

AID's position, a knowledgeable Western official says, is that its local staff was not informed that the controversy over the tag line was "a significant factor" in Sawyer Miller's relationship with GKI. Walter Coles, the Washington-based AID official who supervises the privatization financing, was reported to be traveling in Russia on Tuesday and could not be reached for comment.

Sawyer Miller's relationship with GKI covered a wide range of publicity and other services. In addition to producing and placing TV commercials, a novel profession in Russia, the company organized "privatization days" at which members of the public across the country could meet privatization officials and hear them stump for the program.

Sources say GKI's relationship with Sawyer Miller began to sour Sept. 25 after the company reportedly turned aside GKI officials' request for a $250,000 disbursement out of AID funds without stating the purpose. At that point, Yeltsin had already dissolved the Parliament and scheduled the new elections for Dec. 12.

GKI sent Sawyer Miller a letter dated Sept. 29 detailing its dissatisfaction with the entire program.

The letter came "out of the blue," says a source close to the events. Although GKI evidently later told AID that its dissatisfaction dated back several months, sources say the agency was "unaware" of GKI's unhappiness before receiving a copy of the letter.

Subsequently, after Sawyer Miller refused to alter the privatization ad, GKI withdrew the company from a $1.2-million AID-financed advertising contract, which went to a Moscow office opened by Burson Marsteller, another U.S. public relations company. Sawyer Miller retained another contract worth about the same amount.

Burson Marsteller handled placement of the altered ad in November. The knowledgeable official said Burson's staff, being relatively new in Moscow, did not recognize the partisan overtones of the new tag line. Once they did, a few days later, "they counseled GKI to pull the ad, " he said.

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