Yet as Earl spent the summer investigating Kiritchenko, Lazarenko, safely outside U.S. jurisdiction, remained in the background. That changed, however, when an obscure company called Dugsbery Incorporated closed a deal with Marin County real estate agent Nan Allen to purchase a $6.75 million Novato estate once occupied by comedian Eddie Murphy. Rumor had the buyers as Russians.
dugsbery-Earl had seen the word scrawled on a Post-it note in Kiritchenko's trash. From the public record, he'd discovered it was a shell company owned by Kiritchenko with a single account at WestAmerica Bank. Kiritchenko was already building his Shangri-la. Why would he need an even bigger mansion, with twenty rooms, five swimming pools, two helicopter landing pads, a full-sized ballroom, gold-plated doorknobs, and a master bedroom larger than entire Nob Hill apartments?
The answer was in the news. Back in Ukraine, the godfather was in a fight for his life. Now he had a hideout, just in case.
Earl was eager to explore the Ukrainian connection himself. In December 1998, he boarded a commercial flight to Kiev with Martha Boersch, an assistant U.S. attorney with the San Francisco Organized Crime Strike Force, who had been assigned to work with him just days earlier. Like Earl, Boersch was well suited to the case, and a lot less green. A graduate of Berkeley's Boalt law school, she had been a government prosecutor for six years, had already won a number of complex fraud cases, and was lead attorney on Lushtak's Ponzi-scheme prosecution. She also spoke Russian.
On the flight, Earl updated Boersch. A month earlier his findings had been included in an FBI memo requesting help from Swiss authorities who were investigating Lazarenko's and Kiritchenko's numbered Swiss bank accounts. It was titled simply "Re: Peter Kiritchenko, Russian Organized Crime" and laid out the FBI's ideas: While living in Warsaw, Kiritchenko had been "involved in myriad criminal schemes," including moving millions in "stolen Ukrainian government funds." He disguised the money as trade in ferrous metals, wheat, and sunflower seeds. He was also suspected of selling prefabricated houses made in Elk Grove, California, to the Ukrainian government at almost a 200 percent markup using falsified invoices.
Earl's most intriguing find, however, came from a discarded FedEx envelope from European Federal Credit Bank. The offshore bank based in Antigua had been cofounded by someone Earl and Boersch knew well, Ponzi schemer Alexander Lushtak. It was now chaired by Alex Liverant, a Ukrainian Jew who had immigrated to San Francisco in 1979. When EuroFed needed capital, Earl had learned, Kiritchenko became its primary investor and was now sharing a business address with Liverant. Under Kiritchenko's watch, EuroFed began opening U.S. dollar correspondent and investment accounts in San Francisco financial institutions big and smalclass="underline" Merrill Lynch, Bank Boston Robertson Stephens, Hambrecht and Quist, Pacific Bank, and Commercial Bank of San Francisco. The memo concluded that
"millions of dollars have been obtained illegally" and that Kiritchenko was using EuroFed to "minimize his tax exposure in the U.S."
It was a classic money-laundering case, Boersch thought- moving the proceeds of certain illegal activities through U.S. financial institutions with the intent to conceal their origins. But there was one huge twist: the money wasn't the proceeds of crimes committed here. The alleged frauds all had taken place in Ukraine.
That didn't matter, Boersch argued. Read liberally, the criminal code implied that anyone in the world who committed fraud or extorted money could be charged with money laundering if they ever brought that money here. This was a daring approach-so daring it had never been tried in U.S. courts.
Armed with their novel legal theory, Boersch and Earl arrived jet-lagged at the Kiev airport for what they thought would be a low-profile trip to meet with Ukraine's government investigators and confirm their ideas about Kiritchenko. They were greeted by a crowd of people waving signs and chanting, "Free Lazarenko!"
Boersch and Earl were stunned when their hosts explained that while they had been in the air, the Swiss investigators tracking Lazarenko's assets had charged the presidential challenger with money laundering in Switzerland. Since Lazarenko had left office the previous year under a haze of allegations, the Swiss and a team of about fifty Ukrainian investigators had dogged him even as his opposition party won a bloc of seats in Parliament. The Swiss were expected in Kiev any moment.
The turn of events transformed the fact-finding trip into a multinational swap meet, with the Swiss, Ukrainian, and American investigators exchanging leads in their overlapping investigations. Boersch and Earl spent their days bundled in winter clothes in an unheated interrogation room interviewing potential witnesses. The witnesses explained how Lazarenko used his political power to direct government contracts for housing to Kiritchenko. From the
Swiss, the pair soon learned that before Kiritchenko had invested close to $100 million in EuroFed, Lazarenko had asked for $96 million in cash from his Swiss accounts before settling on withdrawing two $48 million bearer checks.
Earl is a family man through and through, and he missed his kids-he'd just had his second-during his trip. But he was picking up Russian and also enforcing criminal law in an exotic foreign locale, which he loved. "It was snowy and there were beautiful parks, big trees," he says. "In Dnepropetrovsk I'd go run in the mornings, freezing cold. My Ukrainian people thought I was crazy." On the drive back from the provincial capital to Kiev, he says, "everybody was out ice fishing, and we'd stop by these little markets and look at all these big fish. It was an experience."
At night, the Ukrainians hosted elaborate six-hour banquets to celebrate the historic cooperation. For a country whose criminal corruption makes it "the epicenter for global badness," in the words of a former State Department official, teaming up with the FBI was a sign of acceptance. The vodka toasts continued to midnight, and Earl, who doesn't smoke or drink, was obliged to attend. His fascination with two things Russian began to wane. "It's a game-let's see who can outdrink who-but I don't think they enjoy it," he says. "And the pickled food! It's their history, how they preserved stuff. But it's horrible."
Soon after Earl returned home, he found his investigation turned on its head. Lazarenko's wife, Tamara; son, Oleksandr; and twin daughters, Katya and Lessia, had moved into the Novato mansion. With the Ukrainians' legal vise closing in, the oligarch was feathering his nest. Earl put Lazarenko's name on an FBI watch list that would alert him the moment the former prime minister stepped on a plane to the United States.
The call came just a month later. As Kuchma's "anticorruption" campaign came to fruition, Ukraine's parliament voted to revoke Lazarenko's immunity from prosecution. The politician fled to Athens and on February 19, 1999, boarded a plane bound for JFK
International Airport. Earl knew he was coming before Lazarenko had fastened his seat belt.
Suddenly the routine police request had exploded into the biggest case in the Eurasian Organized Crime Squad's history and one of the highest-profile cases within the FBI.
When INS agents briefed by Earl greeted Lazarenko at the arrival gate, the imperious Ukrainian immediately requested political asylum. He would take his chances on America's legal system rather than Ukraine's or Switzerland's.
On the face of it, Lazarenko's application for political asylum had some validity. He had been running for president as a reformer against a brutal autocrat who wanted him in jail or dead. Some Ukrainians suspected Lazarenko's only crimes were failing to share his "profits" with Kuchma, and then having the audacity to use that money to run against him for president. In audiotapes secretly recorded by a bodyguard of the president and first released in November 2000, Kuchma can be heard mentioning Lazarenko as an oligarch whose demise might conveniently satisfy the American government, which was pushing him to do something about the country's rampant corruption. "Who from the oligarchs?" an aide asks. "Who embarrasses you most of all? Whom can I give to the American intelligence?" (The same tapes revealed Kuchma authorizing the sale of stealth radar to Saddam Hussein and allegedly ordering the death of a top Ukrainian journalist-the cofounder of Olena Prytula's publication-who was later found beheaded in a forest outside Kiev.) Lazarenko was no saint, but some observers wondered if the United States had been conned into doing Kuchma's dirty work.