Moscow Says Flashy Diamond Merchant Stole $180 Million
Andrei Kozlenok, the highflying Russian diamond merchant who set up shop in San Francisco and bought a jet, yachts and Lake Tahoe condominiums, was charged Friday with stealing $180 million in gold and gems from the Russian government.
Kozlenok, who has predicted that he will be killed in prison because of what he knows about high-ranking Russian officials, was extradited to Moscow on Wednesday from Athens, where he was arrested in January.
Four counts of fraud, illegal currency transactions, arms possession and forgery were filed against Kozlenok, former majority owner of Golden ADA Inc.
Kozlenok, 38, has repeatedly proclaimed his innocence.
“I am being charged with something that I have practically never ever done,” he said in a jailhouse interview published in Friday’s edition of Izvestia.
The bizarre case began in 1992--just after the collapse of the Soviet Union--when Golden ADA was set up as a way of exporting diamonds to the West.
The business was apparently part of an effort to circumvent Russia’s contract with De Beers Consolidated Mines, the worldwide syndicate that controls the supply and price of diamonds.
But in the economic chaos of post-Soviet Russia, the enterprise instead became the way for a handful of well-connected Russians to enrich themselves, authorities charge.
The company received shipments of diamonds and gold worth at least $180 million from Russia and quickly sold them, using the money to go on a massive shopping spree.
Kozlenok and his associates paid $10.6 million for a building near downtown San Francisco where they built a state-of-the-art, high-security diamond-cutting facility. The building had been valued at $6 million.
In a three-day period in the fall of 1993, they bought three luxury yachts for more than $1.2 million. Soon after, they paid $3.8 million for three homes in Orinda and Lafayette, east of San Francisco. Then they bought more boats, five Lake Tahoe condos, a helicopter for $1.7 million, a Rolls-Royce and two Aston Martins for more than $1 million and a Gulfstream jet for $20 million.
Kozlenok recently explained in a written statement to the Moscow Times that the purchases were needed to project a “solid financial image.” They also were to be used to provide vacations for miners working in the difficult conditions of Russia’s Far North, he said.
In 1996, the Russian government settled a lawsuit with Golden ADA giving it control of the company’s remaining assets.
By then, however, all but $50 million of the goods and money had disappeared, authorities said.
Kozlenok relocated to Belgium, where he lived without fear of arrest because Russia and Belgium have no extradition treaty.
But after ascertaining that he was not on Interpol’s wanted list and there was no international warrant for his arrest, Kozlenok decided to fly to Greece. While he was in the air, Moscow asked that he be arrested, and he was seized at the Athens airport.
Some speculate that the diamond deal could not have taken place without the approval of high-level government officials. The scandal forced President Boris N. Yeltsin to fire his old friend, Yevgeny M. Bychkov, head of the Russian Committee on Precious Metals and Gems. The agency was the source of the diamonds and gold shipped to Golden ADA. Bychkov was later charged with abusing his official position and violating hard currency laws but was pardoned under a general amnesty.
Questions have also been raised about then-Finance Minister Boris Fedorov, who signed one document allowing diamonds to be exported. Fedorov, recently appointed by Yeltsin to head the State Tax Service, said he asked for an investigation of the export program at the time, but it never occurred.
In February, Sergei Dovbysh, Kozlenok’s longtime Moscow business partner, died in police custody as he was awaiting a verdict in another case involving Golden ADA. Kozlenok cited Dovbysh’s death when he argued unsuccessfully in Athens that his life would be in grave danger if he was extradited to Russia.
“I am more than sure that, given this last incident, I shall not have more than two or three days to live if I am extradited to Russia,” he wrote to the Moscow Times. “There is a strong effort to silence all innocent individuals who, not having other ways to protect themselves, at one point are forced to make public all the information they possess.”
Kozlenok told Izvestia before his return to Moscow that he had gone to Greece in the hope of doing business there, noting that it was a desirable place to live and that it has no diamond industry. He also denied that he was living in Belgium to escape the law and asserted that he had been cooperating with Belgian police.
“Everyone knows that I was not trying to flee anywhere,” he said. “I was helping to investigate the scam.”
