A New Breed of Gangster Is Globalizing Russian Crime

To Swiss authorities, Sergei Mikhailov is a dangerous man who heads one of Russia’s largest crime groups from the isolation of his Geneva jail cell. He has been locked up without trial since October 1996 and going to occasional court appearances in an armored Mercedes with a SWAT team escort.

Police arrested one of his Swiss lawyers, accusing him of smuggling Mikhailov’s letters out of jail and passing them to an accomplice who faxed them to Moscow. And, fearing Mikhailov’s long reach, the Swiss government took the extraordinary step of granting asylum to the main witness against him--a Russian police inspector.

But to Mikhailov and his defenders, the 40-year-old prisoner is a legitimate businessman who has been unfairly imprisoned simply because he is Russian. He is a dealer in the export of gas and oil, they say, a generous man who buys bells for churches in Russia and donates money to an orphanage.

“I haven’t done anything illegal,” Mikhailov protested to a panel of judges during a recent court hearing. “I am an honest person. If I did something wrong, show me concrete proof. Where is this alleged criminal organization?”

The answer, police say, is: all over the world. Although Mikhailov’s accusers have been slow to bring their evidence to court, authorities allege that he is the boss of the notorious Solntsevo gang--reputed to be the largest Russian crime syndicate. If what they say is true, that would make him one of the most feared and powerful criminals anywhere.

Since the collapse of the Soviet Union, the operations of ruthless, well-financed Russian crime groups have spread internationally with lightning speed. From Moscow to Geneva to Los Angeles, law enforcement officials say the Russian mob has become one of the world’s biggest crime threats over the past six years, rivaling the Italian Mafia and the Colombian drug cartels in scope and power.

“I look at the 1990s as the decade of the Russians,” said Larry Langberg, who heads the FBI’s Russian organized crime task force in Los Angeles. “We do have a big problem. This is a very active group.”

Billions Smuggled From Homeland

Western countries that once worried about the Soviets’ military might are now trying to combat the invasion of the brutal and disciplined Russian mafia. With the collapse of the Iron Curtain, Russian gangs have smuggled as much as $50 billion out of Russia and into other parts of Europe, Asia and the Americas, Interpol estimates.

Much of this newfound wealth has been laundered through banks in Switzerland, as well as Cyprus, the Caribbean and other offshore banking havens, officials say. Billions of dollars have gone to finance criminal operations ranging from prostitution and car theft rings to extortion and contract murder. Billions more have been used to buy into legitimate businesses and purchase real estate in locations from the Mediterranean to Manhattan.

Cunning survivors of one of the harshest regimes in history, Russian criminals have easily moved their operations into more than 50 countries, according to the FBI. In the process, they have struck up cooperative relations with powerful international mafia clans and drug cartels.

“What was once organized crime has become transnational crime,” said Stephen Handelman, author of the book “Comrade Criminal” and an expert on the Russian mafia. “The Russians were better prepared than other crime groups to take part in the global economy. They have now emerged as a full-blown network, passing huge amounts of money around the world.”

Russian gangs have roots deep in the Soviet past. Despite the Communists’ efforts to destroy them, they formed a close-knit brotherhood with strict rules of behavior. Their training grounds were Soviet prison camps, and their operations were often run from behind bars by senior bosses.

During the final years of Soviet rule, the mafia grew increasingly stronger, forging alliances with corrupt Communist officials. The black market became one of the principal distributors of goods throughout the country--helping to keep the economy running and the Soviets in power.

When the Communist state collapsed at the end of 1991, the crime syndicates were in a perfect position to take advantage of privatization. Cooperating with corrupt officials, they took over government enterprises and factories and won a controlling stake in the country’s economy. Then they stripped wealth from their homeland, shipped it abroad and went into business in the West.

Russian gangs have proved themselves to be a new breed, bringing together crime overlords, entrepreneurs, former KGB operatives and government bureaucrats and engaging in diversified activities on both sides of the law.

“As a former superpower, with intelligence links all over the world, they could take advantage of the channels of information for greed and profit,” Handelman said. “Because of the global economy, you have transnational groups now doing legitimate and illegitimate business. It’s hard to draw the line between what is illegal and what is legal.”

Officials estimate that there are more than 6,000 mafia groups in Russia, many with international ties. More than 200 operate in the United States, according to the FBI.

Russian crime groups, having evolved in a totalitarian state, typically impose rigid discipline on their members and display a callous disregard for anyone outside their circle. While cruelty and contract murders are commonplace methods of doing business, the gangsters are also willing to negotiate profit-sharing agreements with potential rivals.

And in the day-to-day fight between law enforcement and organized crime, it appears that the Russian syndicates are winning. Authorities say crime groups are often better organized and better financed than police agencies. Their operations cross so many international boundaries that intergovernmental collaboration to curtail them can be awkward.

“They cooperate with each other much better than we do,” said Gwen McClure, who heads Interpol’s organized crime section at its headquarters in Lyons, France. “Unfortunately, organized crime groups have fewer laws, less bureaucracy. They share intelligence much better. They have much more money than we have. They can afford to get the best technology.”

FBI Task Forces in Major U.S. Cities

In the United States, the Russian mafia found ready victims and a good base of operations in the communities of Russian Jews who immigrated during the Soviet era. Recognizing the mounting Russian crime threat in 1994, the FBI formed task forces in Los Angeles, San Francisco, Chicago and New York to deal solely with the Russian mafia.

In 1996, the U.S. government scored its biggest success with the New York extortion conviction of Vyacheslav Ivankov, the top Russian crime boss in the U.S. and an alleged associate of Mikhailov.

In Los Angeles, the FBI says, the Russian mafia is involved in protection rackets within the Russian community and in frauds such as staged auto accidents and phony medical insurance claims. Russian criminals also engage in scams such as stealing credit card numbers or “phone cloning,” in which they illegally obtain cellular telephone numbers from the airwaves and sell them.

Outside their homeland, Russian criminals are most active in the United States, Switzerland, Cyprus, Canada, the Caribbean and Israel, authorities say. In major European cities, Russian syndicates have built a thriving prostitution business, bringing in women from the former Soviet states as virtual slaves.

Money laundering is central to Russian criminals’ operations as they try to legitimize their earnings. Russian syndicates have bought as many as two dozen banks, mainly in Cyprus and the Caribbean, to hide illegal money, according to Interpol. In Berlin, Russian mobsters launder money through more than 200 gambling parlors they own or control, police say.

In Israel, where Russians make up one-sixth of the population, the Russian mafia has brutally shoved aside Israeli criminals and taken over prostitution, gambling, money laundering and racketeering operations.

In one prominent Israeli case, Russian mobster Gregory Lerner pleaded guilty in March to defrauding banks of $48 million and trying to bribe officials, including members of parliament and Shimon Peres when he was prime minister. Lerner is serving eight years in prison and has become something of a cult figure. He placed fourth in a “most popular immigrant” poll conducted by a Russian-language newspaper.

Notorious Killer Slain in Greece

One of Russia’s most notorious gangsters, Alexander Solonik, was found strangled last year in an Athens suburb. Solonik murdered four Russian police officers in 1995 and then escaped from prison. Police say he was dealing in arms and running a prostitution ring in Greece. The week he died, he was reportedly due to carry out a murder in Italy, where police say he kept an apartment stocked with weapons.

In Geneva, the case of Mikhailov has demonstrated the difficulty of prosecuting an alleged mafia chief who has conducted his activities around the globe.

A waiter in Moscow during Soviet times, Mikhailov was first schooled in the world of crime when he was 26 and spent six months in jail for falsely reporting his motorcycle stolen to claim the insurance. After his release, he allegedly began organizing the Solntsevo gang, named after a district in southwest Moscow. The gang grew to dominate much of the city after winning a series of bloody turf battles with rival gangs.

In 1989, he was arrested on extortion charges but released after the main witness refused to testify. In 1993, he was detained in the killing of a casino operator, but the case fell apart for lack of evidence. At one point, he had one ID saying he was a CNN correspondent and another saying he was a member of the Kremlin security detail, according to “Who’s Who in the Russian Criminal World” by Alexander Maximov.

Mikhailov, also known as Mikhas, moved to Israel in 1994 and was granted automatic citizenship because of his marriage to a Jewish woman. Last May, seven Israelis--including former employees of the Israeli Interior Ministry--were convicted of helping Mikhailov and other Russian mafia figures obtain citizenship by forging documents and arranging fictitious marriages.

While the nature of his business activities is unclear, Mikhailov has built a far-flung empire with dealings in the United States, South America, Israel, Austria, Belgium, Hungary and other parts of Europe. His attorneys say he was involved in negotiating gas and oil deals with Russia. Press reports say he was building a five-star hotel in the Hungarian capital, Budapest, and exporting bananas from Costa Rica. Authorities say he was involved in arms dealing, drug trafficking, blackmail and money laundering.

He moved to the village of Borex outside Geneva, where he traveled around in a blue Rolls-Royce. He allegedly bought a villa there through a Swiss intermediary.

Costa Rica made him an honorary consul and gave him a diplomatic passport--although Russia refused to recognize his appointment. He was carrying the Costa Rican passport--along with Russian and Israeli passports--when the Swiss police arrested him on his arrival at the Geneva airport in 1996.

Mikhailov is charged with being a member of a criminal organization, laundering money, falsifying evidence and buying real estate illegally. The police froze $4 million in his Swiss bank accounts.

“This is not preventive detention,” said Swiss Atty. Gen. Carla del Ponte, who has been personally involved in the case. “He is kept in jail so he doesn’t flee and so he doesn’t tamper with evidence.”

But Mikhailov’s Swiss defense team protests that the government has kept him behind bars for nearly two years without enough evidence to go to trial.

“I have to emphasize that Mikhailov did not commit any crimes on Swiss soil,” attorney Alec Reymond said. “In Russia, he is not accused of anything either. I think the prosecution doesn’t know what to do with him, and that’s why they are keeping him in jail for so long.”

During Mikhailov’s recent court hearing, armed guards were posted throughout the courtroom, and police officers with machine guns stood watch outside. Mikhailov seemed frustrated and weary from his long detention.

“If Russian authorities have concrete proof, let them show it,” he told the court. “I haven’t been to Russia in four years. All the evidence the Swiss supposedly have is false. Why does Switzerland treat an innocent man this way? I don’t feel guilty.”

Times staff writers Rebecca Trounson in Jerusalem and Richard Boudreaux in Rome, Times researcher Christian Retzlaff in Berlin and special correspondent Maria Petrakis in Athens contributed to this report.

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About This Series

In this four-part series, The Times examines Russia’s post-Soviet convalescence.

* Sunday: It is becoming clearer by the day that epidemic corruption is not a fleeting ailment. More and more, it is looking like an enduring framework for doing business.

* Monday: Theft has emerged as an integral part of Russia’s “privatization” of property once owned by the state. For millions of Russians, stealing is a normal part of life.

* Tuesday: Meet Volodya. He killed a man when he was 10. He belongs to Russia’s young and angry underclass, with no way of surviving except through crime and violence.

* Today: Western countries that once worried about the Soviets’ military might are now trying to combat an invasion by the brutal and disciplined Russian mafia.