07MOSCOW103, RUSSIAN SUSPECT BEHIND CENTRAL BANKER’S MURDER

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Reference ID Created Released Classification Origin
07MOSCOW103 2007-01-12 15:04 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXYZ0001
PP RUEHWEB

DE RUEHMO #0103/01 0121504
ZNY CCCCC ZZH
P 121504Z JAN 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 6344
INFO RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

C O N F I D E N T I A L MOSCOW 000103 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EUR/RUS, EB/ESC/TFS 
USDOC FOR 4231/IEP/EUR/JBROUGHER 
TREASURY BAKER AND GAERTNER 
NSC FOR GRAHAM AND MCKIBBEN 
 
E.O. 12958: DECL: 01/12/2017 
TAGS: KTFN EFIN ECON RS
SUBJECT: RUSSIAN SUSPECT BEHIND CENTRAL BANKER'S MURDER 
ARRESTED 
 
REF: (06) MOSCOW 10603 
 
Classified By: ECON M/C Quanrud, Reasons 1.4 (b/d). 
 
Summary 
------- 
 
1. (SBU) Russia's Prosecutor General Yury Chaika announced on 
January 11 the arrest of a Russian citizen believed to be the 
mastermind behind Central Bank First Deputy Chairman Andrey 
Kozlov's murder in September 2006.  Chaika's statement did 
not mention Aleksey Frenkel by name, but Frenkel's attorney 
contacted a number of news outlets to report that his client 
and another person had been arrested in connection with the 
charge.  Frenkel, 35, had been the CEO of Sodbiznesbank, 
whose license revocation on suspicion of money laundering in 
May 2004 sparked a short-lived controversy over the Central 
Bank's authority.  Frenkel had also been the CEO of VIP-Bank, 
whose license was revoked in June 2006.  Initial reaction to 
the arrest has been low-key and mixed, ranging from disbelief 
that Frenkel could have orchestrated the murder to optimism 
that the arrest of a Russian citizen indicates a genuine 
commitment to clean up corruption.  End Summary. 
 
Eight Now Arrested in Kozlov Case 
--------------------------------- 
 
2.  (SBU) In December 2006, Chaika announced without 
elaboration that the murder of Central Bank of Russia (CBR) 
First Deputy Chairman Andrey Kozlov had been solved.  Media 
reports and comments by financial sector observers dismissed 
the claim since only Ukrainian suspects had been known to be 
detained for the killing.  Critics relegated these arrests, 
along with the apparent bust-up of a Georgian 
money-laundering ring in October 2006, to the category of 
convenient ethnic scapegoats.  On January 11, however, Chaika 
reported, without revealing any names, that the mastermind 
behind Kozlov's September 2006 murder had been arrested.  The 
suspect's attorney, however, began contacting media outlets 
such as The Moscow Times and business daily Vedomosti to 
explain that his client, Aleksey Frenkel, and another unnamed 
individual had been arrested in connection with the Kozlov 
case. 
 
Frenkel's Banking Background 
---------------------------- 
 
3.  (SBU) Frenkel served as CEO of both Sodbiznesbank and 
VIP-Bank.  Sodbiznesbank lost its banking license in May 2004 
when the bank failed to address CBR concerns about money 
laundering issues, which were the primary target of Kozlov's 
reform efforts.  The license revocation came at a time when 
the CBR was evaluating banks for participation in the deposit 
insurance program.  Sodbiznesbank's violations and refusal to 
take corrective action ultimately put the bank out of 
business with some depositors not receiving the full value of 
their accounts upon liquidation.  VIP-Bank, which SmartMoney 
magazine once considered part of "Frenkel's empire," lost its 
license in June 2006.  Evroprominvest, which later took on 
many of VIP-Bank's clients and operations, lost its license 
in November 2006 "for laundering proceeds in excess of RUB 38 
billion (USD 1.4 billion)." 
 
Mixed Reaction on the Arrest 
---------------------------- 
 
4.  (SBU) Many financial sector players and observers were 
pessimistic that law enforcement officials would find and 
successfully prosecute those responsible for Kozlov's 
assassination (reftel).  On the news of Frenkel's arrest, 
Duma Deputy Pavel Medvedev expressed doubt that Frenkel, a 
former student of Medvedev's, was capable of orchestrating 
the murder.  Association of Regional Banks President, and 
Duma Deputy, Anatoly Aksakov echoed Chaika's statement that 
more suspects may be arrested in connection with this case. 
Aksakov suggested that investigators would probably take a 
closer look at Frenkel's associates and the heads of other 
banks. 
 
5.  (C) The Frenkel arrest seems to indicate that finding 
those responsible for Kozlov's murder was a priority for the 
Prosecutor General's office.  United Financial Group Chief 
Economist Yaroslav Lissovolik shared his views on the 
significance of this development:  "This is the first time 
that authorities went after not just the ones who committed 
 
the crime, but the ones who ordered it and paid for it. 
Importantly, it is also the first time that a Russian, not a 
Ukrainian or a Georgian, was found responsible.  It sends a 
forceful signal that such horrible crimes will not be 
tolerated.  This also might be a sign that Putin's 
anti-corruption campaign and pledge to clean up the banking 
sector is not just words." 
 
Comment 
------- 
 
6.  (C) Kozlov's assassination stands as the only murder of a 
senior federal government official in the post-Soviet era. 
Arresting the head of banks that were closed as a result of 
Kozlov's efforts seems an obvious step for law enforcement 
officials.  Since the number of suspects has reached an 
apparent critical mass, and because the name of the suspected 
mast
ermind is now in the public domain, the focus will soon 
shift to the quality of the evidence Chaika and his team have 
gathered in the four months since Kozlov's death. 
RUSSELL

Wikileaks

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