According to Borodin, when his daughter became ill he called Putin for help getting her treatment at an elite hospital.24 So Putin was by no means unknown to Borodin or to officials in the Kremlin. And his position in the PPMD, in charge of foreign property, was perfect for him.
When the Soviet Union collapsed and the CPSU was banned, President Yel’tsin seized the property of the Communist Party for the Russian state. And just as under the old nomenklatura system, the PPMD took control of distributing the perks of loyalty. So, as Anders Åslund writes, “a Minister might earn about $200 a month, while he or she could obtain an apartment from the Kremlin property management worth up to $1 million. . . . About 2,000 such apartments were being distributed on personal fiat each year.”25 Under a 1996 presidential order, the rights of this office had been expanded. In August 1995 Yel’tsin issued a decree, which was amended and entered into force on December 11, 1996,26 stating that all USSR and CPSU foreign property would be registered and controlled from this office, putting billions of dollars’ worth of real estate (715 properties in seventy-eight different countries, totaling a reported 550,000 square meters—about 6 million square feet) under its control.27 Putin brought with him as his deputy a long-standing friend with whom he had been a coworker and neighbor in Dresden, Sergey Chemezov.28 In 1999 Chemezov became head of the state company Promeksport and then, beginning in 2004, oversaw all Russian military exports as head of Rosoboroneksport.
The PPMD became involved in high Kremlin politics when it was revealed that members of Yel’tsin’s circle were being investigated for embezzling $62.5 million for refurbishments in the Kremlin that the PPMD was in charge of. The scandal involved the payment of kickbacks for the provision of contracts to the Swiss-based company Mabetex, and Borodin was personally charged by Swiss authorities.29 By then Yel’tsin was losing control, and corruption was creeping up to the very top reaches of power. After Yel’tsin’s 1996 election he still had a rather broad circle of advisors; only in the late 1990s would this circle shrink as more and more elites defected to opposition positions. They became alarmed at Yel’tsin’s heavy drinking bouts, his loss of physical and mental ability as his heart condition worsened, and the growth of influence of a few top advisors, family members, and confidants, which would collectively eventually be called “the Family.” At its innermost core, this group consisted of his daughter Tat’yana D’yachenko; the oligarch Boris Berezovskiy; two successive chiefs of the Presidential Administration, Valentin Yumashev and Aleksandr Voloshin; and ultimately Putin as their instrument. Yumashev became an advisor to Yel’tsin in 1996 and then succeeded Chubays as head of the Presidential Administration in 1997. Evidently during this period, Borodin introduced Putin to Yumashev, and he was slowly drawn into the inner circle. Moskovskiy Komsomolets quoted “a Kremlin courtier” recalling, “Whenever I went to Yumashev, Tat’yana and Putin were sure to be sitting there.”30 Voloshin rose from Yumashev’s assistant to head of the Presidential Administration in 1999 and stayed on after Putin became president.
Felipe TuroverII was the person who allegedly provided over four thousand pages of evidence, divided into forty-nine sets of documents, to Swiss courts and Russian procurators in 1998 about Kremlin corruption involving Mabetex. He was a junior official of the Banca del Gottardo, where, the Swiss alleged, accounts had been opened in 1995 in the names of Yel’tsin, Borodin, and some of their family members. The Swiss shared this information with and requested assistance in their prosecutions from Yuriy Skuratov, the Russian procurator general. Skuratov confirmed that Turover’s documents were legitimate: “Turover is a great archivist. He gathered some very serious documents and filed them in the greatest detail. His archive is something unique.” Skuratov also confirmed that the documents covered not only Yel’tsin’s activities but also the corrupt activities of many members of the political elite, including Putin.31 In September 1998 Skuratov flew to Switzerland for a meeting with the Swiss prosecutor general Carla Del Ponte, who was pursuing her own prosecution of corruption in the Russian elite based on Turover’s documents.32 On October 8, 1998, Skuratov initiated criminal proceedings against Borodin as chief of the PPMD on charges of corruption.33 Not surprisingly, therefore, from this moment on, priority number one for the Kremlin was to dismiss Skuratov and find Turover.
When interviewed in 2000, Turover had quite a lot to say about Putin’s role in the PPMD, but he did not believe Putin was a central member of the Family: “Most likely Putin willingly or unwillingly provides cover for the activities of the band that is called the ‘Family,’ probably out of a false sense of gratitude to those who made him president. You understand that I know him and I think that sooner or later Putin will have to choose between Voloshin, [Mikhayl] Kas’yanov [members of the Yel’tsin regime whom Putin put in his first government] and Russia. . . . But he should know that [the amounts stolen] run to tens of billions of dollars. We need to understand that the ‘Family’ is a formidable system . . . which continues to operate.”34 The following comments on Putin, in an interview Turover gave to Novaya gazeta’s Oleg Lur’ye in December 1999, shortly before Turover went into hiding, indicate that he was afraid if he traveled to Russia there would be a “probable assassination attempt right at the airport:”III
Lur’ye: Can you name the high-ranking Russians implicated in corruption whose names feature in your archive which is at the Procurator General’s Office?
Turover: Chernomyrdin, Stepashin, Shokhin, Luzhkov, Abramovich, Shantsev, Fedorov,IV Orekhov, Golovatyy, Berezovskiy, Ilyushenko, Silayev, Yaroshenko.
Lur’ye: Putin?
Turover: Volodya Putin is a separate long story. I have run up against him, but that is not the point. The point is that for the eight months of his work at the President’s Administration of Affairs in 1996–1997, Putin was responsible for Soviet property abroad. Let me explain. In addition to debts, Russia also inherited from the former USSR property abroad worth many billions, including property that belonged to the CPSU. Various organizations laid claim to it in 1995–1996—the Foreign Ministry, the Ministry of the Maritime Fleet, and many others. But in late 1996 Yel’tsin issued an edict ordering that all USSR and CPSU property abroad be transferred not to the Ministry for the Management of State Property but for some reason to the President’s Administration of Affairs. And Mr. Putin immediately got his paws on it. On orders from above, of course. When he embarked on the so-called classification of former USSR and CPSU property abroad in 1997, all sorts of front companies, joint-stock companies, and limited companies were immediately set up. Much of the most expensive property and other assets abroad was registered in the name of these structures. Thus property abroad was very thoroughly plucked before the state got its hands on it. And it was the current premier [Putin] who did the plucking. He gained his first experience of theft during his time in Germany. Back then Putin, together with Shokhin and Poltoranin,V contrived to “steal” the huge building of the Russian cultural center in Germany. They leased it out for a purely symbolic sum for 50 years to a German firm with a tiny incorporation capital. Of course, this firm immediately sublet the building, but for very substantial sums at normal German prices. Where did the difference end up? I think there is no need to explain.
Lur’ye: Was this information about Putin also in your archive that is now in the hands of the Procurator General’s Office?
Turover: For the present I am not going to answer that question. I think both you and I want to live a while longer on this earth.37
Putin was already prime minister when the Swiss issued the arrest warrant for Borodin. Swiss officials indicated that two more arrest warrants would be issued. Putin had quietly dismissed Borodin from the PPMD weeks before the warrant was issued, underlining that he most likely had been following the matter closely and was acting to control damage from these investigations not only to the Yel’tsin Family but to himself.38 A twelve-page document leaked by the Swiss in September 2000 specifically named Borodin as having transferred funds in four
installments between March 1997 and August 1998—in other words, after Putin had left the office.39 The U.S. government arrested Borodin on a Swiss warrant as he entered the country in 2001 and in the process of extraditing him provided details of the Swiss charges: Borodin was charged with extracting $30 million in kickbacks from Swiss companies for the reconstruction of parts of the Kremlin.40 Despite what the Swiss believed was clear evidence of corruption, Russian authorities refused to be pressured or coaxed to deliver any of their state officials.
Twenty-six months after the case was opened, it was closed by Russian investigators in December 2000 for “lack of evidence”—with nineteen thousand pages of documents consigned to the Kremlin’s secret archives.41 Shortly thereafter the Russians issued an international arrest warrant for Turover on suspicion of stealing a $16,000 watch, failing to pay $8,000 in rent for his Moscow apartment, and accepting a $3,000 bribe. Russian journalists concluded that all this was an effort to ensure that he did not testify against Borodin in the latter’s trial in Switzerland.42 But Turover warned that he could testify against Putin in any such trial: “If they want to turn the Yel’tsin-gate into Putin-gate, one can do that.”43 But he did not expand on this remark; later he quietly sought witness protection in Switzerland and disappeared from view.44
When Putin left the PPMD, he was replaced as head of the External Economic Relations Department by his deputy, Sergey Chemezov.45 As was Putin’s practice, he took Igor Sechin with him to the GKU, where he was listed as working in the Administrative Directorate under Putin.46
The Main Control Directorate, March 1997–May 1998
Putin has not disclosed his reasons for leaving the PPMD, although the brewing storm over Borodin clearly had the potential to expose him personally and politically. In March 1997 he once again relied on the political clout of Aleksey Kudrin, who was leaving the Main Control Directorate to become first deputy finance minister. Putin took over as chief of the GKU and simultaneously became deputy head of the Presidential Administration.
The GKU, equivalent to the Inspector General’s Office in the United States, was responsible for overseeing the implementation of federal laws, executive orders, and presidential instructions.47 Under Kudrin, the GKU had become what journalist Andrey Kolesnikov called “a formidable structure”—using the Russian word groznaya, which can also mean “terrifying.”48 On November 6, 1996, another presidential ukaz increased the power of the GKU even further, extending its authority to strengthen fiscal and budgetary discipline and to monitor the work of all federal regions and officials.49 Putin claimed to find the work boring, saying in First Person that he had even thought about leaving the Presidential Administration and setting up in private practice as a lawyer because the work at the GKU “was not very creative work. It was important, it was necessary, and I understood all that. But it simply wasn’t interesting to me.”50
That is not to say that he did not have, once more, a valuable time, again involving himself in covering up various scandals. Before Kudrin, the head of the GKU was another Petersburger, Yuriy Boldyrev, who had uncovered “significant violations” in his own investigation of the Sal’ye Commission’s allegations against Putin51 and had recommended that Putin not be given any further authority until the case of corrupt use of budget funds was solved.52 Now Putin was in charge not only of this office but also of all the files against him that had been collected by Sal’ye and Boldyrev, which some charged had “disappeared.” Boldyrev, while not confirming or denying that they may no longer be available, stated in 2004 that when he was at the GKU, all the archives were in perfect order and that the documents should still be available.53, VI After Putin became chief of the GKU, there were no more investigations of the Sal’ye affair, and in 2012, after Sal’ye died and Radio Free Europe sought to discover whether her documents were in the presidential archives, they received a written reply that “the documents are no longer stored in the archives.”55
The most significant effort Putin made during this period was in securing Sobchak’s escape abroad, and in so doing saving not only Sobchak but also himself from possible criminal charges. As stated previously, when Sobchak lost the 1996 mayoral elections, not only did this put Putin and Sobchak, and others, out of a job, but it left them open to prosecutions for alleged illegal activity during the 1991–96 period. Both worked all their connections to try to get beyond the reach of the law, but Putin was more successful than Sobchak, who was called for questioning in connection with the illegal acquisition of an apartment on Vasil’yevskiy Island. In the summer of 1997 the investigation accelerated, and three of Sobchak’s staff were arrested: the head of the Planning and Economic Department of St. Petersburg, B. Lubin; the head of the Committee for City Planning and Architecture, Oleg Kharchenko; and Sobchak’s chief of staff, V. Kruchinin. The noose was tightening.56
Sobchak was evidently so concerned that he appealed to U.S. President Bill Clinton and the mayor of Paris Jacques Chirac during their trips to St. Petersburg to put in a good word on his behalf with Yel’tsin; he also asked Chirac to help him move to Paris.57 On October 3, 1997, while Sobchak was being questioned by Moscow procurators, he complained of “heart problems” and was taken to the hospital, where he stayed for a month. The head of the investigation became so suspicious that he asked for a medical team in Moscow to come to St. Petersburg to determine whether Sobchak was fit to give evidence. But before they could arrive, Sobchak was transferred on November 3 to the St. Petersburg Military Academy Hospital, where he was put under the care of the hospital’s chief, Yuriy Shevchenko, a friend of Putin’s, who would become minister of health in 1999.
Four days later, during the November Revolution Day holidays, Sobchak was taken by ambulance onto the tarmac of Pulkovo Airport, where eyewitnesses reported that he “literally jumped out, accompanied by his wife Lyudmila Narusova and almost jogged up the stairs into a small private aircraft owned by the Finnish company ‘Jetflite OY.’ ” The flight to Paris was apparently ordered by “an unnamed person from Moscow” at a cost of $25,000 to $30,000.58 Putin, who by this time was chief of the GKU, was alleged to have arranged all the medical paperwork, obtained travel documents, and secured the aircraft, reportedly without consulting Yel’tsin.59 In his autobiography Putin conceded that he had been in St. Petersburg and had gone to visit Sobchak in the hospital but denied that the escape was his operation, saying only that “[Sobchak’s] friends” had sent him a medevac plane. He also denied that Sobchak had been “whisked out, without even going through customs. That’s not true; he passed through customs and passport control at the border. Everything was as it was supposed to be. They put stamps in his passport. They put him on the airplane.” Of course, VIPs the world over can have border officials come onto a departing plane to handle these matters, so there is no real inconsistency between these accounts. Putin’s pride in the operation’s success was evident when he said, “Since it was November 7—a national holiday—his [Sobchak’s] absence from St. Petersburg was not noticed until November 10.”60 Sobchak’s wife, Lyudmila Narusova, who had been elected to the Duma on the Our Home Is Russia ticket in 1995 and who became a member of the Federation Council after 2002, later confirmed Putin’s involvement in making all the arrangements:61 “Vladimir Vladimirovich had helped me organize the plane. . . . He told me how to do it. . . . He risked everything.”62
While Sobchak was in Paris, he was out of the reach of the law, but he was still actively being investigated, including by journalists. An exposé in Izvestiya in April 1998 targeted not only Sobchak and Narusova for illegally taking over an apartmentVII and using force to move the residents of a communal apartment next door so that he could expand his space, but also obtaining two other apartments illegally in Petersburg for relatives.63 The article also referred to Izvestiya’s possession of a tape recording of someone “whose voice sounds like the voice of Narusova,” who at that time was a Duma representative. In the tape, whose authenticity Novaya gazeta also believed in, a woman is tal
king to Mikhayl Mirilashvili, known in the criminal underworld as Misha Kutaisi. They are talking about the latest charges of corruption in the mayor’s office, announced by Yuriy Shutov on a radio program in St. Petersburg. Shutov had been Sobchak’s assistant in 1990 and was one of the first to write and speak openly about corruption there. His first book, published in 1991, was extremely dismissive of the “democratic credentials” of both Sobchak and his wife.64 In the tape, alleged to have been made in May 1995, while Sobchak was still mayor, Narusova urges, even orders Mirilashvili to “act through Kumarin” to “shut Shutov up.” Novaya gazeta printed the following transcript, justifying doing so because it was Narusova herself who had been leading the campaign criticizing the “gestapo methods” being used to investigate her husband:
Narusova: I’m listening.
Mirilashvili: Well, can you wait?
Narusova: So I can’t say anything right now. At ten, I told you . . . Mikhayl Mikhaylovich! Again today on the radio there was a live broadcast. Shutov (former assistant of Sobchak.—Ed.) again went on about corruption, about apartments (or cashiers? Inaudible.—Ed.).XVIII You know, we must act through Kumarin (Kumarin, according to law enforcement authorities is one of the leaders of the Tambov criminal group.—Ed.). With him, everything is possible. . . . He simply has to be shut up.IX
Mirilashvili: Well, you know, it’s necessary to talk this out.
Narusova (interrupting): There I go, I’m sorry, I’m acting like a gangster.X
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