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Date: Mon, 12 May 1997 17:47:47 -0700
Sender: Forum on Labor in the Global Economy <LABOR-L@YORKU.CA>
From: D Shniad <shniad@SFU.CA>
Subject: Crime in Russia

Banditry Threatens the New Russia

By David Hoffman, The Washington Post, 12 May 1997, p. A01

Law Enforcement Collapse Erodes Democracy, Free-Market Economy

MOSCOW -- Vasily Naumov, head of a notorious Moscow gang, stopped his BMW 525 sedan with tinted windows near the Moscow police headquarters in the early evening of January 23. Two bodyguards waited in a small Russian Zhiguli car just behind him.

Naumov answered his mobile phone. Suddenly, another car pulled up alongside him, an automatic rifle pumped 18 bullets through the side window and Naumov died behind the wheel, within yards of the police building.

The brazen killing underscored the seeming helplessness of the poorly paid, outnumbered Russian police. But Naumov's slaying was followed by an even more startling disclosure. According to police investigators, the bodyguards who were supposed to be protecting the gangster were themselves policemen, members of an elite paramilitary unit known as Saturn. They were special troops trained for suppressing prison riots, and they were guarding Naumov under a contract signed by their bosses for extra cash.

The episode is just one small glimpse of a deepening and corrosive threat to Russia's young democracy and free-market economy: the breakdown of law enforcement and the proliferation of private armies and protection rackets prone to ruthless gangland tactics.

"In Russia, everyone acknowledges there are four powers -- the executive, legislative, judicial and the mass media. But they don't speak of the fifth power," said Sergei Goncharov, head of a group of former elite KGB troops that now protects Russian businesses. "The fifth power is the power of bandits. And I would never put the power of the bandits in fifth place. In Russia, it seems the power of bandits is somewhere close to first, second and third."

The tide of thuggery stems from a larger failure to establish the rule of law in Russia's great leap from totalitarianism to democracy and capitalism. The collapse of the Soviet Union in 1991 put immense riches up for grabs -- vast deposits of natural resources, sprawling factories and lucrative businesses, ranging from airlines to television networks that the state had owned for decades.

But the massive transfer of property to private hands, a necessary step to create a free-market economy, has turned into a vicious struggle for wealth in which the rule of law has never been established. Former Soviet bureaucrats, factory directors, aggressive businessmen and criminal organizations have all made a grab for the bounty through insider deals, bribery and simple brute force.

Russia's economy has taken on an oligarchic structure, in which large business conglomerates, often allied with groups of powerful politicians, compete for grand fortunes -- and sometimes resort to violence.

Many leading Russian business tycoons say they want to put behind them this period of lawlessness, especially as they reach out to Western investors and foreign stock markets. They insist they are striving against huge odds to be real entrepreneurs and legitimate industrialists.

Yet, faced with Russia's current chaos, they are taking matters into their own hands. They are building their own private armies of security agents, bodyguards and commercial spies. They have often simply bought the people and weapons of the old Soviet police state -- or even those of the current Russian police, as did Naumov, the slain gangster.

"There's a frightening war taking place," said Alexander Minkin, a muckraking journalist for the weekly newspaper Novaya Gazeta. "The private power structures have privatized everything. They've taken our industry, our land, and they've taken our security for themselves. If the security is protecting someone like Naumov, they have neither the time nor money to protect me."

Goncharov, a 15-year-veteran of the KGB's once secret Alpha unit, said Russian businessmen have little choice but to recruit their own private security forces. "They do not trust the state," he said. "If they relied on the state, then you wouldn't see them riding around Moscow in a convoy. I laugh when I see five businessmen; they usually have 25 bodyguards."

Russia's capitalists have spent millions of dollars for protection. They have bought armor-plated cars, bomb sensors, hidden cameras, bulletproof vests, anti-wiretapping gear and thousands of weapons. They have recruited bull- necked veterans of the Afghan and Chechen wars as their bodyguards.

But money has not bought them peace. Street crime is not the issue -- it is contract killings, such as the gunning down of an American businessman, Paul Tatum, at a Moscow subway entrance last year. Tatum was involved in a dispute over a hotel partially owned by the city of Moscow. His assassin has never been found.

Murder for hire also has stalked Russian bankers. In the last four years, said Vitaly Sidorov, executive director of the Association of Russian Banks, 116 attempts have been made on the lives of Russian bankers and their workers, or one every few weeks. Seventy-nine of them were killed. He said the assassins and their clients have not been apprehended "in 80 to 90 percent of the cases."

As legitimate Russian businesses and foreign firms are forced to confront the underside of Russian capitalism, they often turn to the murky world of the Russian institution known as the krysha [pronounced "kree-sha"], which literally means "roof." As a slang word, krysha refers to a criminal protection racket, such as a gang that extorts money from a store owner.

But in Russia's wild post-Soviet capitalism, the concept of krysha has taken on yet another, much broader meaning.

Almost every business in Russia -- from curbside vendors to huge oil and gas companies, American and foreign firms, even mayors and regional bosses - - pays for the protection service of some kind of krysha, according to security experts here.

Olga Kryshtanovskaya, head of the department of elite studies at the Institute of Sociology, said that a krysha or, more broadly, as she put it, a "private power structure" is now an essential feature of large Russian corporate oligarchies. Each oligarchy is like a pyramid, with a political figure at the apex backed by a financial or industrial group. But at the base of the oligarchy there must be a krysha.

Businessmen say they need the krysha because the laws and court system that regulate economic activity in other countries are not functioning in Russia. Post-Soviet civil and criminal codes have been approved but are often ignored. The cutthroat battles over property and capital are often carried out in a twilight zone where there is no clear line between legal and illegal.

Legitimate businessmen say the only way they can enforce a contract is to turn to a krysha. Many firms call their krysha a "security department" and use it primarily to protect themselves from criminal extortion rackets. But experts say some firms use their security forces to thrive in a lawless marketplace -- using kryshas to intimidate competitors, enforce contracts, collect debts or take over new markets.

The biggest and wealthiest companies have created their own protection forces, including paramilitary teams to protect factories and private espionage networks to spy on competitors and stanch leaks of secret business information. The largest companies often have several kryshas, including one up front to ward off competitors and guard property and another secret agency for the most sensitive business intelligence, security experts said.

At the same time, for many smaller businesses a krysha is an unwelcome and dangerous protection racket run by organized crime syndicates, who use extortion and threats to extract payments.

It is also becoming increasingly common for Russian businesses to turn to the "red krysha," which refers to the police, who double as a paid protection racket. The bodyguards protecting Naumov were a "red krysha."

The killing of Naumov triggered an angry letter sent to three Moscow newspapers in which officers of the elite Saturn unit claimed their superiors had not told them they were guarding a gangster. They said they were outraged not by their assignment but by their low pay.

"The rank-and-file officers were getting just kopecks for risking their lives, while the leadership was literally grabbing millions," they wrote. "We will not be surprised if again we will be sent to guard mafia for such contracts, while our leaders will be getting millions without even leaving their warm rooms."

How the Krysha Works

It was 4 a.m. when the masked men climbed up a ladder to the balcony outside the apartment of Minkin, the muckraking journalist, early last year. The goons went after Minkin, swinging lead pipes. He recalled that, luckily, one of the pipes grazed the ceiling -- and narrowly missed crashing into him.

Minkin fled, but he said he had no doubt the krysha had come after him in retaliation for a scathing article he had written about a powerful Russian minister. The attack was illustrative of how almost any Russian can suddenly find himself the target of a krysha, with almost no possibility of defense or redress. The masked men wore no uniforms; they were part of no discernible force. No one called the police when they put ladders up against Minkin's building.

After the attack, Minkin filed a complaint with the police, but nothing happened. "I asked the prosecutor, 'Did you trace the ladder?' No. 'Did you get fingerprints?' No. They didn't do anything." Minkin said the police were afraid to find out who was behind the attack.

"If you don't have a krysha, there are risks," said a Russian private detective with extensive experience in security matters. "No matter how big a company is, it's in danger.

"One fine day, two or three young men show up at your office and say they represent a private security firm," he added, explaining how a criminal krysha tries to pressure an unprotected firm.

"They give you only their first names and pager numbers. They tell a long story about organized crime groups and the dangers of being without a krysha. They say they have good contacts with political and organized crime groups. And by using their connections, they will help the firm avoid the risks of extortion." But, he added, there is only one way to survive -- to hire your own, stronger krysha. Officially, there are now 10,000 private guard services registered in Russia, but experts say there may be three times that number.

"The rules of the game are, you are expected to have security, and by the rules you have to show it," the detective said. "You have to let the rest of the world know."

Gerry Williams, marketing manager for O'Gara Security International Inc., which advises large companies on security, said the Russian style of protection is to frighten. Guards are trained to look menacing rather than discreet. "Some are just gorillas with their knuckles scraping the floor," he said. "We call them bullet-catchers."

Many of these guards are recruited from the former KGB and other military and police agencies. "The top officers of the KGB turned up on the market, and bankers were happy to take them into their banks," said Minkin, the journalist. "They are doing intelligence and counterintelligence. The big commercial structures thought, 'Why should I pay gangsters to protect me when I can create my own service so not a single bandit will approach me?' "

American firms here also build their own security services, or hire others to protect them. The protection is expensive. Several experts said such security can cost anywhere from 15 percent to 30 percent of a company's overhead.

The risk of a krysha is that there are no rules. Kryshas fall in a shadowy area between business, the police and criminals. The private detective recalled how a big Western company in Moscow was approached by a prominent mafia group demanding a levy. "The firm turned to the police," he recalled, and "a few high-ranking police officials demanded $200,000 for law enforcement. The Westerners had no choice but to do business with the police."

According to sociologist Kryshtanovskaya, complex layers of protection are required for the largest Russian businesses. For example, she said, it is often necessary for banks and tycoons to buy a political krysha, a "roof" in government or law enforcement who is able to protect the firm's own krysha in times of trouble.

Kryshtanovskaya said the "private power structures" are also finding ingenious new ways to infiltrate the businesses they protect. The latest trend, she said, is that leaders of a krysha often demand payment in stock, rather than cash. It makes it harder to fire them.

Contract Killings Every Day

Valera, a tall, strapping policeman, has been an officer for nearly 20 years. He came home late in the evening to the cramped one-room apartment that he shares with his wife and daughter. He routinely works 12-hour shifts, but his pay is low, about $262 a month.

Sitting at his kitchen table, he found it difficult to describe the work of a Russian beat policeman. "Contract killings used to be individual cases," he said, cautiously. "But now it seems like every day." He added, "The police are just not ready for this."

His wife interjected. If an officer performs his duty correctly and investigates a killing, he takes enormous risks, she said. "If an officer solves his case, it means he's going to his death."

"In principle, there is rule of law," Valera said. "But in practice, it's hard to find."

In practice, there is a growing sense that Russian police have all but given up trying to protect property and capital. In a recent interview, a police school instructor was asked about the unsolved slayings of prominent bankers. He grew indignant, pushed his chair away from the table and declared, "If a banker gets killed, it's because he did not have a strong enough security service."

Kryshtanovskaya said there is a growing sentiment among the authorities to let the capitalists cope with their own security. "The state thinks that private capital should be defended by those who have it," she said. "I would say it's a completely conscious policy of the law enforcement authorities to remove themselves from defending private capital." Or, she added, they want "to take money for it."

Sidorov, the former banking association executive, said bankers recently signed an agreement with the Internal Affairs Ministry to try to improve security. But when asked if the bankers will rely on the government for protection, he replied with a Russian proverb: "Trust in God, but rely on yourself."