Prosecutor in Russia Orders Graft Probe

Challenging President Boris N. Yeltsin to make good on his vow to crack down on crime and corruption, the Moscow prosecutor’s office launched a criminal probe Wednesday into allegations that the former state privatization czar misused his office for personal gain.

The case against Alfred Kokh, who quit in August after being accused of favoritism in selling off state assets, was prompted by the disclosure that Kokh was paid $100,000 by investors connected to those who won the controversial sell-offs.

In keeping with the age-old traditions of intrigue and skulduggery in the Kremlin, it was not immediately clear which forces were behind the prosecutor’s action.

The move might have been inspired by the reform team around Yeltsin in an effort to provide a scapegoat amid growing accusations of official corruption, including harsh warnings this week from the upper house of parliament and a prestigious U.S. think tank that crime has become a major national security threat to Russia.

But the involvement of the Moscow prosecutor’s office, instead of its federal counterpart, suggested the targeting of Kokh might have been engineered by the politically ambitious mayor of Moscow, Yuri M. Luzhkov, or some of the powerful bankers angered by recent Kremlin efforts to impose more equitable rules for privatization.

Kokh, who denies any wrongdoing, remains in good standing with the powers in the Kremlin, as was made clear by First Deputy Prime Minister Anatoly B. Chubais’ swift defense of a longtime ally.

“I have known Kokh for 10 years and know that he is a man of integrity,” Chubais told journalists after the probe was announced.

Chubais appeared to be accusing the disgruntled bankers who lost out in recent privatization deals in attributing the investigation to a smear campaign by print and broadcast media in the hands of the angry magnates.

“Lavishly paid lies are reprinted from one newspaper owned by one banker by a newspaper owned by another, from a TV channel owned by one of them to a TV channel owned by another,” Chubais said.

Financiers Vladimir Gusinsky and Boris A. Berezovsky protested vehemently after rival industrialist Vladimir O. Potanin of Uneximbank last summer won coveted shares in a state-owned telecommunications giant, Svyazinvest, and the world’s biggest nickel producer, Norilsk Nickel.

Gusinsky and Berezovsky also control media empires and used those outlets to vent their rage against what they saw as Kokh’s favoritism toward Potanin.

Kokh resigned Aug. 13 but steadfastly denied improprieties in awarding the Svyazinvest and Norilsk Nickel sell-offs to the highest bidder--consortia headed by his friend Potanin’s Uneximbank.

Those asset sales triggered what has become known as the “bankers’ war,” as influential businesspeople who bankrolled Yeltsin’s uphill reelection drive last year have been upset by the Kremlin’s attempts to boost competition in sales of attractive state assets.

A 1995 loans-for-shares scheme parceled out valuable state property to the country’s seven richest financiers--including Potanin, Gusinsky and Berezovsky--in return for cash the government needed to pay its bills while Yeltsin was running for reelection.

The $100,000 paid to Kokh and duly reported on his income tax declaration was described as payment for copyright of a book that has yet to materialize. The money came from a little-known Swiss company, Servina Trading, whose then-director now works for a Potanin subsidiary.

“It’s not just Kokh, it is the kind of system that exists,” said Alexander Minkin, a crusading journalist who broke the story of Kokh’s acceptance of the $100,000.

Pressure has been mounting on Yeltsin to root out corruption now that the economy appears to be stabilizing, with inflation down to 12% annually and falling and a seven-year production slump finally halted.