How I survived grenades, bullets and gangsters to make billions in Putin’s wild west Russia
By ex-KGB colonel turned banker and British newspaper investor ALEXANDER LEBEDEV
APARTICULAR deposit made at the bank I owned in Moscow one August night in 1996 was unexpected, unwelcome and life-threatening.
It was a hand grenade, which smashed through the window and exploded, seriously injuring one of the security guards. Plastic explosive was also discovered laid at the corner of the building.
Then I arrived at my office one day to find a hole in the window, a spent bullet on the floor and a mark where it had struck the wall — at the level my head would have been if I had been sitting at my desk.
Someone — a gangster or a fraudster or someone put up to it by the authorities — was obviously trying to intimidate me, though who and precisely why was unclear.
The police went through the formalities, made cursory investigations and even tried to falsely implicate our own security guards before, surprise, surprise, walking away from the case. I’d get no protection from them.
This was what it was like being a banker and a businessman in the Wild West chaos of Russia after the collapse of the Soviet Union and the frenetic jostling for riches and power.
Swindles, bribery, corruption and theft on a grand scale helped make a handful of men hugely wealthy. Many were high-ranking officials, ministers and governors who ran businesses on the side and exploited their official positions to rip off money from the state.
A governor would issue building permits to his own construction firm; a federal health minister purchased medicines from a pharmaceutical company he just happened to own. Billions of roubles were soon rolling into their private pockets, stolen from the state.
I admit I myself did well and prospered in this same era, but I tried to do so without breaking the law. The bank I bought and ran, National Reserve Bank, made serious money on the foreign exchange markets, but I insisted we acted with integrity — and that made me enemies, not least among other rapacious Russian oligarchs when I challenged their dishonesty.
For years, there was no let-up in the harassment I faced in their attempts to bring me down or make me toe the line. My life came to resemble a cross between a crime novel and a western.
Increasingly, I found myself at odds not just with the oligarchs’ lack of morality and their criminal ways but with their grasping attitude to wealth, their insatiable lust for more.
GROWING up with my parents and brother in a two-room Moscow apartment, it took me three weeks to save the seven kopeks needed for an ice cream, and for years I darned my one and only pair of jeans.
Twice a week I went to the food shop to stand in five or six queues. Often the shop would run out of eggs or milk, cheese or sausage.
At home I would cut the crust off a mouldy 13-kopek loaf, pour water over it and put it in the oven. I would retrieve half a month-old pack of dumplings from the freezer and douse them with mayonnaise. Spongy, sprouting potatoes, eggs, frozen pollock or cod — such was pretty much my diet for 20 years or so.
And, looking back, I was far happier then than when I got rich. Even making it on to the Forbes Magazine list of billionaires in the Noughties was no big deal for me.
Why? Because I came to see that money warms only a shallow soul. It shrivels the heart, gives no peace, and problems proliferate. You are at risk of acquiring bad habits.
If you have enough money to cover the everyday necessities, then anything above that does not make life appreciably better, and may well make it worse.
The average billionaire has at least one business jet, six mansions and a yacht or two. Yet the more they have, the more toxic their personality tends to be.
I do not like yachts, villas and private jets, whose purpose is to demonstrate an ostentatious superiority over the ‘suckers’. Behind the whole Dolce Vita sham is cynicism and envy, loathing and fear.
Freeing myself from the burdens of wealth, I have gone back to trying
to achieve things in life for myself, rather than just in order to make money. That’s why, though I once pursued riches, I am now proud to call myself an ex-oligarch. BORN IN 1959 to parents who were both academics, I came of age as the Soviet Union was on its last legs.
I read the works of dissidents such as Solzhenitsyn and shunned all involvement with the Communist Party. Despite this, I was recruited by the KGB, mainly because I spoke English.
I was soon sent to the Soviet embassy in London where my job was seeking out financial and economic information. I made useful unofficial contacts in the City, meeting senior managers of banks.
Back home in the Soviet Union (as it still was then), a new class of entrepreneurs was emerging as communism gave way to capitalism.
Comrades making their first easy money would visit London, and it was my job to look after them. I remember one flaunting a wad of £50 notes way beyond the imaginings of a humble Soviet official like me.
Recalled to Moscow in 1992 and offered a promotion from colonel to general, I decided I’d rather leave the KGB and branch out on my own. At the time all I possessed was £500, a 1977 Volvo and a rosetinted belief that I could succeed in business.
Moscow had by now turned into one big flea market and, with a friend, I set up a trading company. We made mistakes, once buying a wagonload of women’s shoes from South Korea only to find they were all size 3 and for the same foot.
Still, we managed to turn a modest $40,000 profit in our first year, and spent it all on renovating an office in the basement of a half-ruined mansion.
But when we moved in, tattooed gangsters turned up and said: ‘The cops have sent us round to get you out.’ The deputy interior minister personally supervised our eviction.
It was a harsh lesson in the realities of the dog-eat-dog world of business, politics and power, and I felt like giving up, but we struggled on until Lady Luck smiled on us.
We were working for a bank as consultants and I proposed they should invest in ‘Brady bonds’, named after the U.S. Treasury secretary, Nicholas Brady, covering the national debts of Mexico, Venezuela, Nigeria and Poland.
ON MY recommendation, the bank bought $7 million worth of these securities and in six months made a $3 million profit on them. We received a fee of about half a million, an unbelievable amount.
Some went on a trip to Greece, but the bulk was used to buy a tiny bank. It had the imposing name of National Reserve Bank, although it had no assets or liabilities.
It mystifies many people how this shell was transformed over two years into one of the leading banks of the Russian Federation. They keep looking for ‘Communist Party gold’ and ‘KGB money’ to explain its rapid rise.
In fact, there was, and is, no
mystery: everything is completely transparent. Seeing an opportunity, I organised a consortium of banks to buy up the billions of dollars of debts western companies owed to Russia at a 50 per cent discount, making a profit when we eventually reclaimed the debt from them.
I then managed to do something similar with the debts Ukraine owed the state-owned energy company Gazprom for gas it had supplied.
I was hailed as a ‘financial Mozart’, and National Reserve Bank was on its way. Very quickly we were one of the top ten banks in Russia. And that made us a target.
A swindler named Igor Fyodorov made off with $7 million, fled to the U.S. and when I tried to get it back he invoked the help of his friends in high places in Russia.
Which was when that bullet crashed through the window of my office in Moscow, grenades bombarded the bank building, and the police did next to nothing about it.
Instead, we found ourselves the subject of an unexpected tax audit. We were cleared of any
serious irregularities but it was a sign of the harassment to come from the authorities, at the instigation, we learned, of the office of the Prosecutor General, taking sides with Fyodorov against us. A torrent of mud-slinging was also unleashed in the media, with a series of articles purporting to ‘expose’ me for fraud and impugning my character. The hunt was clearly on to get me.
Out of the blue, I was invited to the Lubyanka, sinister headquarters of the Russian security service, the FSB, the successor to the KGB. There, a general spun me a story of how his men had discovered a plot by a criminal gang to ‘whack’ me. His strong recommendation was that, for my own safety, I should get out of Russia. I did not believe a word he said. But the campaign against us didn’t let up. One day, a whole brigade of tax officials descended on the bank, dumped all our documents in a van and departed. This was followed by criminal accusations of fraud and non-payment of taxes. Any excuse was taken to get at me; my hair turned grey.
Meanwhile, I remained in the dark as to who exactly was commissioning this onslaught against us and what their aim was. Unlike others who’d got rich in Russia, I had not prised any titbits off the Soviet economy.
At NRB, we were playing a different game entirely, making money in financial markets, mostly foreign, devising schemes that were complex but legal.
But everything fell into place when I met a corrupt high-up official who told me — as he inserted a cigarette into a long, diamondstudded Cartier cigarette holder — that the person behind all my vicissitudes was the Prosecutor General Yury Skuratov, an ambitious man with his eye on the presidency of Russia.
Apparently, I was queering the pitch for the business interests of his friends. I was invited to ‘get out of the way’ and cease our work with foreign debt.
If we didn’t comply, he threatened: ‘We jail who we please, and release who we please.’
Some time later I learned that Skuratov had promised to ‘jail this Lebedev’. He had every confidence he was going to win the game of Hunt the Banker.
He didn’t get his wish, but he did get his comeuppance. His bid for the presidency ended when a video of him having sex with two prostitutes was shown on national TV. He was dismissed and faced criminal charges. Not long after, the case against me for fraud was dropped.
By then, Russia had plunged into financial chaos and a number of banks defaulted as the value of the rouble dropped. National Reserve proved to be one of the few private banks to survive the debacle, though we had to resort to extraordinary measures to remain solvent, selling personal property and giving up our salaries.
Eventually, the bank managed to overcome its liquidity crisis — unlike many others who chose to spirit away assets and declare themselves bankrupt, leaving those to whom they owed money to take the hit.
There was also at last an end to my long-running battle with the swindler Fyodorov. In 1999, he finally admitted he had helped himself to my money and that the Prosecutor General had been bribed with access to prostitutes to back his case against mine. AS THE 21st century got underway, then, things were looking pretty good for me. I had assets worth $1billion and had resolved all my legal and business problems.
I could have lived a life of luxury in the south of France, but my whole attitude to money changed when I took a trip to the Crimea.
I was staying with friends in an old boarding house that was rusty and musty, with broken windows and no hot water. Standing on the balcony, I felt a phenomenal charge of energy from that area’s particular mix of cold mountain and sea air. I asked myself: why not try making something out of this rundown place? So I embarked on many years of building projects and hotel construction there. Back in Russia I switched some of my wealth to investments in practical projects such as aircraft, mortgages and affordable housing.
BUT even now I was a target for crooks. I discovered that the director of my projects in Ukraine doubled my spend on the actual cost of building my hotels and used the difference to build the same again for himself.
Everyone, it seemed, was trying to find a way to transfer my money into their own pockets.
Worse still, I again found myself being hounded by the authorities. In 2010, my bank was asked by the Ministry of Finance to help bail out another bank, Russian Capital, which had gone bankrupt. We agreed to help, using our own money.
The bank’s operations were unfrozen, deposits were returned and accounts were serviced. In other words, our bank was used to pay off another bank’s debts — a rescue operation that lost us around $40 million.
It soon became apparent to us that Russian Capital’s bankruptcy had resulted directly from the theft of clients’ money by its former owners. But when I sent the information we had obtained to the law enforcement agencies, I found the spotlight was turned on me. We were forced to give up our stake in
Russian Capital, and when I went to court to try to recover the money we’d lost, the cops turned up to snatch our documents. When I challenged the legality of the search, I discovered it had been ordered by the FSB.
One of its generals came to see me. He announced that a criminal charge of embezzlement was being laid against me — which could be made to go away in return for $1 million! I showed him the door.
The result was yet another raid, this time by a delegation from the Russian Central Bank. When questioned why, the official leading it informed us instructions to ‘bury NRB’ came from ‘the Boss’. At which point, he nodded in the direction of the office portrait of Vladimir Putin, the Russian president.
I suspect they were simply exploiting his name to eliminate a business rival but they used the same mythical ‘order’ from him to persuade a number of clients to close their accounts with us.
Big clients began pulling out of deals. Deposits amounting to £233 million were withdrawn in an attempt to force us into insolvency.
There were also numerous attempts at entrapment, where some scruffy-looking punter would urge the bank to engage in illegal money-laundering transactions. Meanwhile, staff and their relatives were subjected to intimidation.
Even though an investigation by the Central Bank — the Russian equivalent of the Bank of England — ruled there had been no illegal activity on our part, the damage to us was huge.
Still the harassment continued. We were hit with another tax inspection, no fewer than 130 inspectors turning up this time, more than in any other raid in Russian banking history.
What interested them were documents relating to the financing of humanitarian and media projects, such as the Independent and Evening Standard newspapers in the UK and the Elton John Aids Foundation.
They found nothing untoward. This inspection was accompanied by leaks of confidential information about the accounts of VIP clients, making us look bad. Simultaneously, a massive disinformation attack on the internet implied that the bank was about to close and that I would be sent to jail.
Most nonsensical of all was when I was charged by the authorities with ‘hooliganism’ after physically defending myself from an opponent who lunged at me during a debate broadcast on television.
Yet despite the constant barrage against me on so many fronts and over so many years — the grenades, the bullets, the raids and the intimidation — I am still here. I may be an ex-oligarch — but I am still a banker, and I have survived to tell the tale.
ADAPTED FROM HUNT THE BANKER: THE CONFESSIONS OF A RUSSIAN EX-OLIGARCH by Alexander lebedev, published by Quiller on september 12 at £20. © Alexander lebedev 2019. to order a copy for £16 (offer valid to 30/9/19, p&p free), call 01603 648155 or go to www.mailshop.co.uk.