Ethics Cash Out as Russia’s Campaign Coffers Rake It In

The vault opened, a banker removed a bundle of $100 bills, and the man from Russia’s Democratic Choice loaded the secret $500,000 contribution to his party’s campaign into a briefcase.

Before the vault closed, the politician noticed several equally large bundles inside. “Who are those for?” he asked, according to a Russian who got a firsthand account of the payoff at a major Moscow bank.

“Try to figure it out,” the banker replied coyly. “This one is yours. But remember, we need friends in many political blocs.”

Parliamentary elections in Russia are a week away, and capitalists who depend on a cozy relationship with officialdom are surveying the widest spectrum of candidates since the demise of one-party Soviet rule.

Many are carefully spreading their bets.

And concealing them.

According to candidates, entrepreneurs and election monitors, much of the campaign is running on chorny nal, Russian slang for “black cash” passed under the table. It helps wealthy donors hide their alliances, dodge taxes and avoid racketeers, while allowing politicians to exceed legal spending limits.

Russia’s new capitalist wealth has enormous corrupting influence on its new democratic politics. Critics of the emerging electoral system say it only reinforces that clout and deepens the cynicism of an electorate already disillusioned by falling standards of living.

“The entire system is built on money and works in a way that encourages breaking the law,” said Irina Khakamada, a widely respected parliament member running for reelection. “It’s impossible to run honestly. . . . A politician becomes like a prostitute. You get into this business and you sell yourself to the end.”

Next Sunday’s elections are viewed, in economic terms, as an ideological clash of opposing interests. Oil companies and other exporters favor advancing Russian President Boris N. Yeltsin’s free-market reforms to tie Russia more closely to the world economy; Communists and nationalists, backed by the military-industrial complex and other domestic producers in need of protection, advocate a rollback to statism.

But with more than 8,000 candidates from 43 parties vying for 450 seats in the Duma, the lower house of parliament, the whole exercise more often resembles a bazaar that, in microcosm, captures the wildness, criminality and opportunism of Russian-style capitalism, in which illicit cash flows easily across political lines.

A law requiring each party to produce signatures of 200,000 supporters was meant to discourage such a crowded field. Instead, it spawned a “signature farming” industry in which collectors paid voters as much as $1 per signature and sold them to parties for a markup.

Any party winning more than 5% of the nationwide vote is, by law, assured Duma seats for at least 11 candidates on its slate. To fill their war chests, many parties sold places on their slates.

Several parties almost certain to reach the 5% threshold demanded up to $250,000 from each candidate, said Vladimir A. Lepyokhin, a Duma member who writes about lobbying practices, and other knowledgeable sources. Parties with outside chances, they said, charged as much as $100,000.

In one triumph of money over ideas, a self-styled “green” party known as Cedar lost its only prominent environmentalist when Sergei Zaligin dropped off the party slate to protest the fact that wealthy businessmen had paid their way on.

Dozens of mafiosi and swindlers also bought their way onto the ballot, hoping to elude prison behind a law that makes Duma members immune from prosecution. Vladimir V. Zhirinovsky’s neo-fascist Liberal Democratic Party, reputed to be the most promiscuous in accepting such money, put 20 ex-cons and indicted defendants on its slate, the Central Election Commission reported.

Unreported cash gets put to illicit use, such as bribes to secure favorable news coverage and prime-time placement for a political party’s paid television ads. The small but well-organized Beer Lovers Party reported a $1-million offer, which it rejected, to drop out of the race and throw its support to a rival.

Aiming to check the flow of such illegal cash, the election commission adopted a Western-style law on campaign spending and pushed it through the departing Duma. The limits are modest by Western standards: Each party may receive no more than $285 from any individual, $19,000 from any company and $2.4 million from all sources. All contributions must be channeled through official accounts in a government bank that the commission monitors.

But unofficial estimates indicate that several major parties--including Prime Minister Viktor S. Chernomyrdin’s Our Home Is Russia party, Zhirinovsky’s neo-fascists and the nationalist Congress of Russian Communities--are spending about double the limit.

Tamara Petronavichus, who monitors campaign spending at the election commission, figures “maybe 20” of the 43 parties are complying with the law. “I can’t prove it,” she said. “I have only 17 people trying to track all this. In the United States, your election commission has more than 200.”

All candidates and donors interviewed by The Times declined to discuss their own financial stake in the campaign. Perhaps because illegal sums are so pervasive, most were unwilling to talk about violations by others except in the most general terms.

“Nobody can prevent parties from paying for everything in cash, without declaring any of it,” said Vladimir Boxer, campaign manager for Russia’s Democratic Choice, a leading reformist party. “And everyone understands that’s the way it will be.”

Campaign spending rules are broken in the West too. But the weight of rich donors is not diluted here, as it is in the United States, by millions of middle-class contributors. The only broad-based, U.S.-style party in Russia, which gets significant money from grass-roots backers, is the resurgent Communist Party.

Worried that Communists are gaining, reformers slipping, the electorate fragmented and the outcome unpredictable, part of Russia’s export business elite lobbied, without success, to have the election postponed. Once the vote looked inevitable, many began buying what they call “risk insurance” for their investments.

“They’re sponsoring two, three, four, five, 10 parties,” said Kakha Bendukidze, an oil millionaire and industrialist who views the election as a “strange and stupid” exercise that can only destabilize the economy. “Some businesses are sponsoring the whole spectrum, including the Communists.

“Other financial groups understand that it’s cheaper to wait and buy off the winners,” he said. “Most of these parties have no real ideology, so their deputies in parliament can change from one idea to another without any psychological problem. . . . You could buy the whole Duma for $100 million.”

The departing Duma, where lawmakers earned $300 a month and fraternized with millionaires, was notorious for selling votes to the range of moneyed interests. And parliament is just one institution in a government with huge leverage to make or break private fortunes by awarding tax breaks, contracts, banking licenses, export permits and import privileges.

Just one leading candidate, the nationalist retired Gen. Alexander I. Lebed, has raised the issue of corruption with voters. In a television advertisement for his Congress of Russian Communities, a prison door slams and a disembodied voice intones: “Bureaucrats, don’t take bribes!” Then Lebed appears on screen in uniform and warns in his famous gravelly baritone: “I really advise you not to.”

The theme is provocative among Russians, who consistently tell pollsters that official graft is among the country’s biggest problems. According to one survey, conducted before the campaign by the Washington-based International Foundation for Electoral Systems, 55% of Russian voters believe Duma candidates should not be allowed to accept any private contributions.

Many who bankroll the campaign not only disagree but flout the existing limits. “It’s the same as prohibiting people to vote,” said Mikhail Z. Yuriyev, a wealthy businessman and candidate of the reformist Yabloko party. “When they make their donation, they vote with their money. I wouldn’t call [a candidate] corrupt because he got more money than is permitted. . . . It’s a silly regulation.”

Whether money can buy votes is another matter. In Russia’s first big-money campaign, the parliamentary elections two years ago, free-marketeers outspent everyone and finished second behind Zhirinovsky’s neo-fascists. Communists and their rural allies in the Agrarian Party spent little and finished strong. Neither bloc dominated the Duma.

Even if voters give a clear mandate this time to the free-marketeers or the statists, Russian political analysts say the Duma’s new majority could be watered down by payoffs from the losing side.

“The question arises: Who will win this election, the voters or the lobbyists?” said Andrei A. Blokhin, an economist at the independent Fund for the Development of Parliamentarism in Russia. “I think voters realize that the real promises of most candidates are distributed not from TV screens but in the offices of people who make a lot of money.”