Taylor wields congressional influence to reap profits in Russia

While sworn to represent the interests of his constituents and those of the United States, Rep. Charles Taylor (R-NC) agressively pursued his own financial interest, purchasing a Russian bank with a former KGB operative, former General Boris Bolshakov.

The only American to own a Russian bank, Bank of Ivanovo, Taylor also owns an investment company, Columbus, that does business exclusively in Russia. In addition, Taylor profits from many and varied business interests in and around Ivanovo, a former manufacturing city 200 miles east of Moscow.

In 2000, he sponsored legislation that would have channeled money to banks like Bolshakov's former bank, SBS-Agro, and the Bank of Ivanovo (which Taylor purchased in 2003). When Taylor sponsored the home mortgage legislation, he had been doing business with Bolshakov for years.
Those Russian business dealings were secret until revealed in 2000 through an FBI investigation of his Asheville, NC bank, Blue Ridge Savings.

Bolshakov's resume includes working at the organization that replaced the KGB, for the Russian Economics Ministry, and as a senior officer at SBS-Agro, a bank that was implicated in a multibillion dollar international money-laundering scheme, and has since collapsed.

Citizens for Responsibility and Ethics in Washington, known as CREW, cited Taylor's Russian business dealings when naming him in an October, 2005 report titled "Beyond DeLay: The 13 Most Corrupt Members of Congress."

When Taylor won an award from American-Russian Chamber of Commerce and Industry at a ceremony at the Russian embassy, CREW was critical. Taylor was one of 10 recipients, which included a U.S. think tank, the New York Stock Exchange, Citigroup Corp. and six Russian businessmen and companies. CREW’s Executive Director Melanie Sloan said it's embarrassing for Taylor to get an award for business activity that violates House ethics rules even if they are going unenforced.

Sloan told the Hendersonville Times-News last year:

He uses his position as a member of Congress to enhance his financial position as a bank owner>

To avoid any appearance of conflict of interest, many congressmen and judges put their investments in blind trusts. In a blind trust, an official

avoids possible conflict of interest by relegating his or her financial affairs to a fiduciary who has sole discretion as to their management. The person choosing the trust also gives up the right to information regarding the status of the assets.

Not only has Taylor declined to divest his holdings to be handled in that way; since becoming Congressman, he has expanded his business dealings to at least one foreign country, Russia.

Taylor has been quoted repeatedly that he keeps his private business separate from his public legislative work, but when Bolshakov visited the U.S. in 1995, Taylor took him to Washington, D.C. and introduced him to the “Republican congressional leadership.” As well, Bolshakov admitted to introducing Taylor to Russian leaders.

The Asheville Citizen Times reported in December, 2005:

Taylor visited Russia seven times — at a cost of at least $25,000 in taxpayer dollars — since the end of 1999, official travel reports say. That’s of the 12 trips he’s made totaling nearly $65,000. . . .

Taylor had made four legislative trips to Russia since 1997 and had already made at least a half-dozen personal trips since 1995, the News and Observer reported in 2000.

The House Ethics Manual describes conflict of interest in chapter 3:

Although the term “conflict of interest” may be subject to various interpretations in general usage, under Federal law and regulation, this term “is limited in meaning; it denotes a situation in which an official's conduct of his office conflicts with his private economic affairs.”

Footnote 10 makes it clearer:

As noted in the debate preceding the adoption of the rule, an individual violates this standard if he uses “his political influence, the influence of his position . . . to make pecuniary gains.”

Taylor told the Raleigh paper he has been careful not to represent himself as a U.S. lawmaker in his Russian commercial relationships. They quoted him in 2000:

I wasn't an American congressman. I didn't come as a congressman. I came as a tourist.

However, those that do business with the congressman say the opposite. The Asheville Citizen Times reported that:

Taylor’s private business venture, the Bank of Ivanovo, points out in bank information that he is a congressman, repeatedly calling him “Congressman Charles Taylor.”

And, according to the Raleigh News and Observer: a borrower, Sergei Zvonov, “said he knew of Taylor's status from the time Bolshakov introduced them in 1995.”

I know that he is a congressman. I know that he is a man who conducts business and politics at the same time.

Svonov started a construction company in 1992. The Raleigh paper obtained loan agreements from the lawyer of a man accused of fraud in the case of Taylor’s Asheville bank, Blue Ridge Savings and Loan.

The initial loan agreement with Zvonov, signed by Taylor on Sept. 1, 1995, was on the letterhead of Financial Guaranty Corp. of Asheville, the holding company for many of Taylor's businesses. It was signed by "Charles H. Taylor, Board of Directors."

According to the agreement, the initial loan of $100,000 was to be repaid in one year. It carried an interest rate of 60 percent, plus a $10,000 fee. In the contract, Taylor agreed to consider lending an additional $100,000 six months later, and he said he subsequently provided at least that much money as Zvonov paid down the first loan, bringing the total to $200,000 or more.

The Asheville Citizen Times also pointed out that:

It would be unheard of for an American with no special ties to buy a private Russian bank, which Taylor was the first to do.

“You couldn’t walk into Russia as a regular, unconnected person and buy a bank,” said Juliet Johnson, author of “A Fistful of Rubles: The Rise and Fall of the Russian Banking System” and associate director of graduate studies at Montreal’s McGill University. “It wouldn’t happen.”

However, it is the concern that his private interests influence his public legislation that concerns most who are aware that he does business with foreign officials. In 2000, Taylor sponsored a bill to create a home-mortgage program in Russia.

Their bill that failed in committee, states that "the United States has spent billions of dollars to aid Russia through the provision of funds to the International Monetary Fund and other financial institutions," but that "many of these funds have been siphoned off by corrupt institutions."

The legislation also says the United States should "deny corrupt Moscow-based financial institutions access to Western resources." One institution fitting that description, according to U.S. authorities, is SBS-Agro Bank which, at the time, employed Taylor's friend, Boris Bolshakov.

It’s extremely hard to figure out how Taylor draws the dividing line between his Russian business interests and public life as a well-paid legislator. Asheville Citizen Times reported:

Taylor is extensively involved in private and government-sponsored U.S.-Russian exchange programs, from working as a congressman to form a Russian mortgaging program and organizing visits by top Russian officials to privately bringing in Russians to work as interns at Blue Ridge Savings Bank.

He hosted a meeting in 2000 between Russian banking officials and top American financial experts, three years before he bought the Russian bank, which offers mortgages to Russian citizens. A 1997 intern is now on the legal staff of the Bank of Ivanovo.

A year later, Taylor asked during a congressional hearing that the United States waive visa requirements for Russian tourists and businessmen.

. . .

Today, a 1997 Russian intern at Blue Ridge Savings, Igor Ioffe, is the assistant chairman on legal affairs at the Bank of Ivanovo.

Ioffe said Taylor brought Russian students to the United States every six months to “gain experience from the work of the (Blue Ridge Savings) bank and the work of the American political system.”

Taylor did not respond to questions about whether Russian interns work at his congressional office, something he is not required to do.

According to Dennis Thompson, director of the Ethics Center at Harvard University and author of the book, "Ethics in Congress:"

Most members of Congress would be a little more careful about drawing a sharper line between their private business dealings and their public responsibilities. It's certainly worth raising questions about. When serious questions can be raised by reasonable people, that should give a member of Congress pause.

An added concern, Thompson said, is that Taylor has not told his constituents much about his public or private ventures in Russia.

It's a good principle for a congressman to not mix public and private business in ways that create conflicts or create the appearances of conflict," Thompson said. "Whether he's actually done anything wrong or not, it certainly would make me as a constituent wonder. He at least owes his constituents an account of what he's been doing.

Even after his Russian dealings were published in a Raleigh paper in 2000, Taylor has told his constituents little about his activities in Russia. In 77 reports and letters he has sent to constituents at public expense between December 1996 and June 2000, he said nothing about his Russian endeavors, nor are they mentioned on his congressional Web site.

Until the Moscow Times article the only reporting done on Russian business dealings in the largest circulation papers in the district were press events Taylor sponsored in 2004 during a tough reelection battle. The news failed to mention much about the history of Taylor’s Russian business dealings, his introducing Bolshakov to American Republican leaders, the introduction to him of Russian leaders by Bolshakov. The articles focused on touting a trade scheme between Ivanovo and Western North Carolina:

ASHEVILLE -- From apples and hardwood to textiles and technology, nearly $2.5 million in local products could soon be destined for Russia if a local bank-based trade plan materializes.

On Wednesday, leaders of the Asheville-based Financial Guaranty Corp. revealed the plan to regional elected officials and financial, business and education leaders who gathered at UNC Asheville.

. . .

"Internationalism, developing international trade, developing international contacts is really the key to the health of this region . . . [said Western Carolina University Chancellor Bardo.

But as the Moscow Times reported”

Whatever the plan, the trade bridge between Ivanovo and North Carolina evidently failed due to lack of interest. Andrei Fedotov, chairman of the board of the Commercial Bank of Ivanovo, said he was unaware of any trade deal facilitated by either bank.

Fedotov said his bank had practically no relations with Blue Ridge and instead has focused on developing its own business. The bank's loan portfolio tripled after Taylor took over, he said, and last year the bank turned a profit of about 8 million rubles ($287,000).

But Taylor's business dealings remain, for the most part, unreported. Even the Moscow Times, which ran the longest article with the most information since the Raleigh paper covered Taylor’s Russian business dealings in 2000, could barely get him to comment:

Taylor's spokeswoman agreed to answer some questions in writing but did not respond to others. Weeks of repeated calls and e-mails requesting further comment or information about his activities in Russia went unanswered.

Newspaper editorials in North Carolina also have criticized him for not better explaining his dealings in Russia. "The litany of recent implications and complaints against Representative Charles Taylor warrant a swift and thorough accounting," wrote the Asheville Citizen-Times during the 2000 congressional race. Taylor "hasn't told his constituents much about his personal interests in Russia," opined the Raleigh News & Observer.

The only news that’s been written since was the Moscow Times article in 2004. and the two puff pieces in the Asheville paper.

Another ethics expert quoted in the Raleigh News and Observer explained that Americans have always been reluctant to trust officials with foreign ties.

Charles Tiefer, a former deputy general counsel to the House who now teaches law at the University of Baltimore, said that concern is reflected in the Constitution, which prohibits elected officials' receiving "any present, emolument, office, or title, of any kind whatever, from any king, prince, or foreign state."

"The Constitution reflects the longstanding American fear that foreign interests would take advantage of our open congressional system by buying favors from congressmen," Tiefer said.

The concern surfaces relatively often, Tiefer said, citing as an example the allegations of Chinese influence-buying in the 1996 presidential campaign.

The Moscow Times reported these details:

In September 2003, Taylor bought an 80 percent stake in the Ivanovo bank for an undisclosed sum, while his partners -- a former Federal Security Service general and his wife -- bought the remaining stake. Taylor's partners said the three paid roughly $1 million total for the bank, with each paying in proportion to their ownership stakes.

He then went on to found a Russian investment company called Columbus, which makes investments in the Ivanovo region. The existence of Columbus has not been previously reported.

The president of the American Chamber of Commerce in Russia, Andrew Somers, said he had met the congressman and remembered Taylor's role in pushing the U.S. Congress to support a Western-style mortgage program in Russia. But Somers said he had heard nothing about Taylor's interests in either the Ivanovo bank or Columbus.

In addition to owning the bank of Ivanovo and the Columbus investment company, Taylor has had many business dealings in and around Ivanovo. Among others, he helped to finance small stores in several towns, helped finance construction of an apartment building, a potato warehouse and a chain of convenience stores, and he loaned money for a home purchase to a Russian who worked as an intern in his congressional office.

From the Moscow Times:

Bolshakov also served for a year and a half as head of economic security for SBS-Agro, the bank started by Alexander Smolensky, one of the original oligarchs. Bolshakov, who said he had never met Smolensky personally, started working for the bank shortly after the August 1998 devaluation and default, when SBS-Agro collapsed spectacularly along with the rest of the Russian banking sector.

SBS-Agro had about $6 billion in debts as of July 1998, but an unrepentent Smolensky later told The Wall Street Journal that his foreign investors deserved nothing but "dead donkey ears." The bank was eventually taken over by the government's Agency for Restructuring Credit Organizations. Its assets were liquidated and the Central Bank annulled its license in January 2003.

From the Raleigh News and Observer:

Bolshakov headed the economic protection service of SBS-Agro Bank, among the first post-communism private retail banks. SBS-Agro was founded by Alexander Smolensky, one of the new tycoons who control large chunks of the Russian economy. The bank collapsed in 1998, leaving tens of thousands of account-holders penniless.

Early this year, SBS-Agro was closely linked by federal prosecutors in New York to an alleged scheme in which $7 billion was moved illegally out of Russia and transferred through the Bank of New York in a network of front-company accounts. From there, the money went to accounts in other countries.

Keith Henderson, a scholar with the Transnational Crime and Corruption Center at American University in Washington, said big money-laundering schemes fit into a broader pattern of corruption in Russia.

"A number of bankers in Russia and executives connected to the oil and gas and timber industries are being investigated for various criminal and corrupt activities that occurred during the 1990s," Henderson said. "It is my understanding that Bolshakov is closely associated with a number of people under investigation."

Bolshakov moved into several senior Russian government posts after the breakup of the Soviet Union in 1991. He served three years as a deputy in the Duma, the lower house of Russia's legislature, and then became a general in the agency that succeeded the KGB. Most recently, he led the timber industry department of the Russian Economics Ministry. .

Bibliography

Taylor’s 2003 financial asset disclosure form

American Lawmaker Banks On Ivanovo
Moscow Times

The businessman and congressman: Taylor’s interest puts Russian town on political map amid praise, criticism
August 28, 2005 Asheville Citizen-Times

Rep. Taylor accepts award for investments
December 09. 2005 Hendersonville Times-News

Democrats put Taylor in crosshairs for 2006 election
July 20, 2005 Smoky Mountain News

Newspaper details Taylor’s Russian business ventures

August 28, 2005

TAYLOR AMENDS HIS FINANCIAL RECORD
SAYS VALUE OF HIS RUSSIAN BANK STOCK IS BETWEEN $1 MILLION AND $5 MILLION

August 28, 2005
WHITE HOUSE AND GOP HAVE SYSTEMATICALLY DISMANTLED PUBLIC TRUST IN GOVERNMENT
December 20, 2005

Cases surrounding Taylor's financial dealings, associates deserve more scrutiny
August 5, 2004

BANK TO HELP WNC BUSINESSES EXPORT GOODS TO RUSSIA
February 14, 2004

RUSSIAN TRADE MAY JOLT WNC ECONOMY
February 19, 2004

Hendersonville paper archives:

Neill blasts Taylor's Russia ties
8/24/00