COLUMN ONE : Can Russia Afford to Clean Up Capitalism? : Sergei Shashurin played by his own rules to build an empire. Now he’s caught in a crackdown on business crime that critics insist will stall economic boom.

Chafing at the bars of the defendant’s cage, with his prison-fed gut bulging at his flannel shirt and his tawny hair brushing his shoulders, Sergei Shashurin could pass for an American barroom bully on trial for brawling.

But his is a supremely New Russian tale. His meteoric rise to immense riches, his even more rapid fall and his current trial belong very much to this period of post-Communist turbulence.

In an era when the country’s new crooked capitalists can make millions one year and spend the next in jail, Shashurin’s plight serves as a cautionary tale. And it highlights the government’s dilemma: If nearly all Russian entrepreneurs are breaking the law, can it afford to come down hard on them?

“The government understands that the Russian economy won’t be able to function without the businessmen who are the real locomotives of the national economy,” sighed Cabinet spokesman Valery Grishin. “Hence, our current policy toward businessmen is that only the most brazen ones, the ones who have gone too far in breaking the law . . . are taken out of business.”

Shashurin never denied breaking laws. He simply lived by a different set of them, as do most of Russia’s proto-capitalists. He confessed to dodging taxes, but made up for it in private charity, he says. He admits fudging rules, paying bribes and fiddling funds, but he also invested in failing factories and gave work to thousands.

As he stands on trial for his life, he seems to symbolize the tremendous vulnerability of Russia’s new business culture, a game set up with such impossible rules that every player is in constant danger. So far, his trial is a rare event--but one that strikes fear into many a merchant’s heart and augurs the crackdown that must eventually come if Russian capitalism is ever to become civilized.

Early last year, Shashurin, 37, enjoyed a reputation as one of Russia’s most prominent--if shady--businessmen. He drove a pristine white limousine through dusty Kazan, the capital of the province of Tatarstan. He gave money to charities right and left and had gained a foothold in everything from Arctic coal to Sakhalin oil, from refrigerator production to farming.

Now, he spends these early winter days clicking his worry beads in the bus-stop-sized defendant’s cage of the Supreme Court of Tatarstan, a central region rich in oil and organized crime.

He is not well behaved. On Oct. 31, when his trial had just opened and his relatives were hissing at him from the courtroom to shush, Shashurin boomed, “There will be no silences!” When he snarled at the prosecutor for reading the indictment, “If you don’t stop, I’ll break your spine!” the judge had him removed to cool off.

Shashurin has never been tractable. He was, by his own admission, the head hooligan of Kazan in his crazed teen-age years, jailed for fighting with police and briefly committed to mental hospitals when nothing could calm his manic energy. He rose to become an organized crime kingpin in the mid-1980s, back when the decaying Soviet economy’s gaps meant gold for those able to exploit them.

Then times changed. Private enterprise became legal and the Soviet Union collapsed--and with it, much of the old order. Exploiting his mix of contacts in the underworld and industry, Shashurin quickly became one of the richest men in Russia.

In mid-1993, he was leapfrogging his Yak-40 plane across the great breadth of Russia in hot pursuit of a concept he calls his “Wheel”--a giant holding company that would link farmers, miners and metalworkers. His main company, TAN, claimed 200,000 employees among its 300 associated enterprises and was meant to serve as the framework for the Wheel.

He was on top of the world--or at least, close to the top of Russia. He became friendly with then-Vice President Alexander V. Rutskoi and started to give interviews preaching his Wheel idea. A top Tatarstan banker said no one else in the republic matched Shashurin’s financial clout.

Shashurin’s suburban mansion, a palace by Russian standards, was almost done when, in classic Greek tragic style, he flew too close to the sun. As the Russian daily newspaper Sevodnya put it, “Shashurin started to think about changing all of Russia. And that destroyed him.”

When President Boris N. Yeltsin went head to head with his defiant Parliament in the fall of 1993, Shashurin, loyal to Rutskoi, chose the wrong side. He not only spoke out, he supplied truckloads of food and fuel to the rebels who briefly took over the White House. Some say he supplied guns as well.

The next night, commandos from the elite KGB “Alpha” unit grabbed Shashurin from his hotel suite in a quiet Moscow suburb. Since then, he has been in jail.

Everyone else connected with the October rebellion has been free since February under a parliamentary amnesty. But the charges against Shashurin are technically not political, and Tatarstan prosecutors deny vehemently that he was arrested for helping Rutskoi.

The charges are economic, and have a Soviet ring: “Embezzling state property in especially great quantities”--a reference to more than 500 trucks missing from the Kamaz truck factory in Kazan. And “swindling in especially great quantities”--about $6 million Shashurin allegedly spirited away by means of false bank guarantees from suppliers he owed money to.

The accusations, when dryly read out in court, bring irrepressible outrage from Shashurin. “I helped the poor and everyone, and now it’s being said that it was with stolen money!” he cried at one point.

Then there is the little matter of attacking his interrogator. A Kazan reporter who saw a videotape of the incident said Shashurin seemed only to want to take the man by the collar and shove him from the room. But the charge is attempted murder, and its maximum sentence is death.

The trial, expected to last into 1995, has attracted attention from national media and the likes of renowned lawyer Genrikh Padva and brooding nationalist filmmaker Stanislav Govorukhin.

Padva, a defense attorney who was busy representing another top businessman in Moscow, said that cases like Shashurin’s concern him because they bespeak resistance from Soviet-style officialdom to the new market system. With so many outdated or Draconian laws on the books, virtually every entrepreneur is at risk of arrest--not an encouraging prospect for the dynamic types needed to get the fledgling private sector going.

“I’m convinced that in our country, in this transitional period, purely honest business is impossible,” Padva said. “Big business here almost always smells of something bad. But in this stage of establishing capitalism, you have to understand that if you obey all the bans, you can’t do business at all.”

With regret, the government and independent economists agree.

“I know for sure that every Russian businessman has violated the law at least once,” said economist Nikolai Shmelev. “This is a terrible thing, if you think about it. We are trying to build a state ruled by law that rests on the foundation of a market economy--which was itself built by illegal means.”

The Kremlin cannot ignore the scofflaw flavor of Russian business. But it also cannot put the entire Russian Fortune 500 in jail.

“To eliminate the best part of the Russian economic elite, the cream of society, so to speak, the people who are full of energy and know how to get things done and are eager to work, would be a grave mistake,” said Cabinet spokesman Grishin. “We already made a mistake like that in 1917.”

Instead, as it works laboriously to make laws and taxes more realistic and less contradictory, the government struggles also to decide which business leaders’ financial peccadilloes have gone so far beyond the pale that they must be stopped.

“It would not be exaggerating to say that the approach toward each businessman is very individual,” Grishin said with a strong hint at the influence of connections and political weight.

Shashurin, although he denies the charges against him, has long admitted to breaking tax rules and other laws. As one relative put it, “He stole like everyone else, but he wasn’t willing to keep quiet about it.”

Vladimir Potishny, head of a miners committee whose members came to the trial from the Arctic Circle town of Vorkuta to show their support, is convinced that Shashurin ended up in jail only because he crossed Yeltsin and thus laid himself open to an “individual approach.”

“Take any enterprise in Russia, any association, and you’ll find similar things,” Potishny said of TAN’s financial irregularities. “The point is that Shashurin is a political prisoner. The rest is all ordinary life in Russia. You should really imprison all of Russia, because the entire healthy population of Russia is trying to steal--and those who can’t are shouting ‘Thieves!’ That’s our country.”

But Shashurin’s lawyer, Tatiana Tyazhelkova, is not pressing the political angle. She argues that the Kamaz factory long ago withdrew any claims of damages against Shashurin, that the false bank guarantees were not his fault and that the attack on the interrogator should have brought a charge of “attempted bodily harm,” for which her client has already served enough time.

While Shashurin has languished in jail, his empire has foundered. TAN continues construction and some other limited projects in Tatarstan. But Shashurin’s grandiose programs in other parts of Russia can go nowhere without his motivating power.

“These things can’t be run from prison,” said Renat Yusupov, who is managing TAN while Shashurin is gone. “We need him a lot. He’s a person like an engine, a mover. At the moment, TAN does practically nothing; our bank account is frozen, and we’re working on paying back all our debts,” including nearly $1 million claimed by the tax police.

Shashurin’s wife, Lyuba, said the suburban mansion they were building remains unfinished and that the charities she helped manage have shut down. Parents of the disabled children she used to help come to her crying, she said, complaining that “no one bothers with us now.”

A Russian Orthodox priest and a Muslim mufti, also beneficiaries of Shashurin’s generosity, have been attending the trial and appealed, along with dozens of others, for Shashurin to be let out on bail. They submitted a written statement saying that his imprisonment “is not good for the economy of the republic.”

The judge denied the request, probably influenced by Shashurin’s rowdy behavior.

Shashurin also believes that he is a political prisoner, but he takes a different tack. He is intent on proving his innocence but also on pointing the finger at others.

Seeming at times on the verge of paranoia, seething with the pent-up energy of more than a year in jail, he told courtroom visitors during breaks in the trial that he could prove a government conspiracy to spirit away not his measly 500 trucks but something more like 6,500.

The scheme, as he described it later in a small jailhouse news conference, involved cheap government credits to cover thousands of subsidized trucks meant for Russia’s fledgling private farmers.

“Not one Kamaz (truck) went to a farmer,” he said, claiming that they were sold at full market price instead.

He also alleged that top government officials sold tens of thousands of tons of metal, under the table, to Germany and Japan; he accused the interrogator he attacked of being among the real thieves of the Kamaz trucks.

As he speaks, it is hard to tell whether Shashurin is crazy or Russia is. He has been without question a Russian magnate, yet these are the things he talks of: His driver, his assistant and a crew leader of his were murdered in recent years; Russian Interior Minister Viktor F. Yerin, his old nemesis from Kazan, is a killer; the October rebels considered bombing the Kremlin.

His driver and bodyguard, Tolya, was induced to betray him to the KGB Alpha group, Shashurin said, recalling that Tolya told him: “I could do nothing. I have children. I want to live.”

His other closest lieutenant, known only as Mars, is squatting these days in the nearly finished suburban compound for TAN bigwigs. Clearly frightened himself, Mars said he thought Shashurin’s “roof had flown off”--that he was crazy.

Shashurin’s backers are convinced there was a command from Moscow to keep him in jail. That order may long be forgotten in the Kremlin, they believe, but provincial Kazan is still fulfilling it.

Not that Kazan officials do so without sympathy for their hometown boy. A top prison official opined: “To fall from the top to the bottom is a serious thing. . . . He explodes, and that will destroy him.”

Shashurin’s fate is unclear. He could conceivably be let off and leap back into the economic arena, or he could spend years in prison, missing this unique wild post-Soviet period and the chance to become a solidly based billionaire.

He vowed dramatically from his courtroom cage that no matter what the system does to him, it will not break him, and he has sworn to tell all he knows about corruption. But when the Sevodnya newspaper asked him what he will do if he gets out of prison, the answer was prosaic.

“I’ll probably work,” he said. “What else?”