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Attention Co-op & Condo Boards: The Money Laundry Is Closed!

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Co-op and condo boards love it. Developers hate it. It’s the new regulation issued by the U.S. Treasury Department that cracks down on anonymous owners of Limited Liability Companies (LLC) – also known as shell companies – who pay for pricey Manhattan apartments with cash.Aimed at preventing money laundering by foreign buyers, the new regulation requires…
posted 5m ago via habitatmag.com
In a typical condo sale, once a unit goes into contract, the seller sends a letter to the board with the details of the deal, requesting that the board waive its “right of first refusal” — i.e., the building’s right, stated in bylaws, to buy the apartment for the same price agreed in the contract. Bylaws typically require the waiver to be issued within…
posted 6m ago via brickunderground.com
Criminals like Bernard Madoff and other so-called “white collar” lawbreakers have made headlines recently with their financial double-dealings, but unfortunately, fiscal mismanagement and fraud also happen in co-op and condo communities. The scale is much different obviously, but an apartment is a major investment, and residents of a building…
posted 6m ago via cooperatornews.com
SKIP ADVERTISEMENTBy Ralph Blumenthal With Celestine BohlenCredit…The New York Times ArchivesSee the article in its original context from June 4, 1989, Section 1, Page 1Buy ReprintsTimesMachine is an exclusive benefit for home delivery and digital subscribers.This is a digitized version of an article from The Times’s print archive, before the start…
posted 15m ago via nytimes.com
Jewish Tribal Review DRUGS AND DRUG MONEY LAUNDERING WITHIN JEWISH NETWORKS: THE ‘RUSSIAN MAFIA,’  ‘ULTRA-ORTHODOX’ CORRUPTION, AND OTHER CRIMINALS   Jews in America have been prominent in the narcotics underworld since the early twentieth century. As Rich Cohen notes:  “The first major American drug dealer was probably Arnold Rothstein … [COHEN,…
posted 16m ago via insanityrules.org
“What lingers for Trump may be what deals—on what terms—he did after the financial crisis of 2008 to borrow Russian money when others in the west apparently would not lend to him.” —Sir Richard Dearlove, former head of Britain’s MI61 “To keep kompromat on enemies is a pleasure. To keep kompromat on friends is a must.” —Yulia Latynina, Russian writer…
posted 16m ago via americanprogress.org
Two Bank of New York employees have been suspended while investigators try to determine if they played a role in the plot, a source said. Russian mobsters may have funneled as much as $10 billion through accounts at the Bank of New York in a massive money-laundering scheme, a source close to a federal investigation into the scam said yesterday….
posted 21m ago via nypost.com
THE Russian mafia is developing into a many-armed criminal enterprise that operates with surprising sophistication in world capitals tens of thousands of miles from the onion-domed spires of Moscow.From the old outposts of the Soviet empire to the United States and Western Europe, Russian mafiosi are becoming more than a curious irritant to law-enforcement…
posted 25m ago via csmonitor.com
SKIP ADVERTISEMENTCredit…The New York Times ArchivesSee the article in its original context from August 23, 1994, Section A, Page 1Buy ReprintsTimesMachine is an exclusive benefit for home delivery and digital subscribers.This is a digitized version of an article from The Times’s print archive, before the start of online publication in 1996. To preserve…
posted 28m ago via nytimes.com
In the 1980s, a now-famous federal prosecutor dusted off a seldom-used legal theory to pursue mobsters, bankers and other criminals. That theory was the Racketeer Influenced and Corrupt Organizations Act, known by its acronym RICO. The prosecutor was Rudy Giuliani. Due in large part to his successful deployment of the act, Giuliani made himself and…
posted 3h ago via nbcnews.com
The Washington Post reported on Friday that Fulton County, Georgia District Attorney Fani Willis is considering indicting former President Donald Trump for violating her state’s “Racketeer Influenced Criminal Organization” statute, or RICO. Less discussed, while the “indictment watch” continues in Special Counsel Jack Smith’s classified documents case…
posted 3h ago via thehill.com
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Credit…The New York Times Archives
See the article in its original context from
August 23, 1994, Section A, Page 1Buy Reprints
TimesMachine is an exclusive benefit for home delivery and digital subscribers.
This is a digitized version of an article from The Times’s print archive, before the start of online publication in 1996. To preserve these articles as they originally appeared, The Times does not alter, edit or update them.
Occasionally the digitization process introduces transcription errors or other problems; we are continuing to work to improve these archived versions.

As a Brighton Beach subway train thundered overhead, a hit man pumped one fatal bullet into the back of Oleg Korataev’s head. It took four rounds in the face and chest to finish off another suspected gangster, Yanik Magasayev. Alexandre Graber died thousands of miles away in a hail of automatic gunfire.

Near the Brighton Beach boardwalk, a gunman ambushed Naum Raichel, severely wounding him with three bullets in his chest and stomach. That same day in Germany, Mr. Raichel’s brother, Simeon, was beaten into unconsciousness and suffered a brain concussion.

Although the five murder and assault cases occurred this year in New York, Moscow and Berlin, Federal and New York City law-enforcement officials say the crimes have a common root cause. According to the officials, a new wave of callous Russian organized-crime figures, with ties to Brighton Beach and the former republics of the Soviet Union, is responsible for the outburst of violence.

The Brighton Beach and Sheepshead Bay sections of Brooklyn have been headquarters for a smattering of emigre Russian crime gangs since the 1970’s, when the Soviet Union permitted the first of about 300,000 people to emigrate to the United States. But the disintegration of the Soviet Union in 1991 spawned thousands of powerful crime gangs — collectively known as the Russian mafia — and some of these groups, officials warn, are establishing bases among emigre communities in the United States, particularly in South Brooklyn.

“The ones coming in now are more violent and better organized than the old-timers,” says Jim E. Moody, chief of the Federal Bureau of Investigation’s organized-crime section. “They are maintaining links to gangs in Moscow and other places in the old Soviet Union with money flowing back and forth.”

To combat the latest organized-crime threat, the Justice Department in January elevated the Russian mafia to the highest investigative priority, the same level as the American and Sicilian Mafias, Asian organized-crime groups and Colombian cocaine cartels. Because of the magnitude of the problem in the New York area, the F.B.I. created a Russian squad in its New York office in May, the first F.B.I. unit in the country to deal exclusively with Russian criminals.

“We didn’t establish the squad on a whim,” said William A. Gavin, the head of the F.B.I. office in New York. “They are dangerous, and our aim is not to allow them to gain a foothold as the Italian-American families did.”

A disturbing sign of the Russian mafia’s emergence in America, officials acknowledged, is the arrival of Vyacheslav Kirillovich Ivankov, whom Russian police identify as a Vor v Zakone — Russian for a “thief-in-law” — the top criminal category in the old Soviet Union. Law-enforcement officials said they feared that Mr. Ivankov’s mission is to oversee and enlarge operations involving emigre racketeers here and gangsters in Russia. ‘The First Team’ Extends Its Influence

In the 1970’s and early 1980’s, a wave of Russian-born criminals arrived in New York and lived mainly in South Brooklyn, where they concentrated largely on white-collar crimes, especially frauds involving gasoline taxes, Medicare payments and counterfeit credit cards. Because of the cold war and travel bans, this group had little contact with criminals in the Soviet Union.

The newcomers who have arrived in America in the last three years are labeled “the first team” by detectives and Federal agents. Investigators say they have not only taken over the white-collar crimes established by their predecessors but have expanded into other rackets, including narcotics trafficking, money laundering, extortion of emigre merchants and prostitution.

And Drug Enforcement Administration agents say they have uncovered concrete evidence showing that a Russian gang from Brooklyn imported heroin and for the first time sold it to mobsters working for traditional American Mafia families. Previously, veteran American mobsters imported drugs through their own networks or bought it from non-Russian suppliers.

While many Federal law-enforcement officials portray the Russian groups as a significant problem, some state prosecutors and investigators are dubious about their overall importance in the underworld.

“We don’t see any coordination from Russia or the other republics,” said Eric Seidel, the chief of the organized-crime bureau in the Brooklyn District Attorney’s office. “There is no evidence of large-scale violence or that the Russians are dominant in any specific racket.”

Peter Grinenko, an investigator in the Brooklyn District Attorney’s office who speaks Russian and has been working on Russian crime cases in the New York area for 13 years, said the emigre racketeers in America have no defined organizational structures like those of the Mafia.

“As individuals, they are into scams and shakedowns to lay their hands on money any way they can,” Mr. Grinenko said. “But as organized crime groups go in America, they are a flea on a horse.” Feeling Secure In Brighton Beach

In the last 20 years, about 200,000 immigrants from the former Soviet Union have settled in the city, Long Island, Westchester County and in New Jersey, with more than 50,000 living in Brooklyn, principally in the Brighton Beach area.

Since 1991, the easing of overseas travel restrictions in Russia and the other 14 former Soviet republics has led more than 140,000 visitors a year to come to America, the United States Customs Service reports. Investigators say that scores of Russian mobsters, often using fake identities, have illegally obtained visitors’ visas to enter the United States.

Mr. Moody of the F.B.I. estimated that only a small fraction of Russian immigrants — about 2,000 — are hard-core criminals. But, of some 5,000 gangs that sprang up after the collapse of the Soviet regime, members of 29 gangs have been seen recently in America, he noted.

Investigators say that Russian criminals gravitate to Brighton Beach and nearby neighborhoods because they feel secure there and can hatch plots with little danger of being compromised by informers.

“Almost every case involving Russians is somehow linked to Brighton Beach,” said Detective Dan Mackey of the 60th Precinct, which covers the neighborhood. “It’s the first spot they go to when they arrive in the country.”

Favorite meeting places for the Russian mobsters is the row of restaurants on Brighton Beach Avenue, a cacophonous, crowded rialto in the shadow of an elevated subway line. They also favor more sunny cafes on or near the boardwalk. F.B.I. Finds Emigres Reluctant to Inform

The F.B.I. will not disclose the size of its Russian Squad in the city, but Raymond C. Kerr, the head of the unit, said it includes Russian-speaking agents who formerly worked on counterintelligence units. The bureau periodically advertises in Novoye Russkoye Slovo, an American Russian-language newspaper, asking for “all facts and gossip about organized crime rackets, murders, frauds, illegal incomes, narcotics, counterfeiting and all kinds of criminal activities in the United States and abroad.”

Alexandre Grant, an editor at the Russian newspaper who reports on organized-crime matters, said Russian emigres are unlikely to inform or to testify at trials, even if they are placed in the Federal Witness Protection Program. Under that program, participants and their families are given new identities and relocated.

“It won’t work because most Russians cannot survive unless they are in a Russian community,” Mr. Grant said. “They won’t cooperate because even if they feel safe in the U.S. They fear someone will retaliate against their relatives in Russia.”

Language and cultural barriers, the authorities concede, have blocked quick solutions to the recent gangland-style murders and shootings linked to Brighton Beach mobsters.

Fictitious Addresses, Faulty Memories

The first victim this year was Oleg Korataev, a former boxer who was convicted in the Soviet Union of robbery and assault and who was identified by Russian authorities as belonging to an organized-crime gang known as the Valiulins. In 1992, Mr. Korataev entered the country on a visitor’s visa, married and settled in Trump Village in Brooklyn.

On Jan. 12, Mr. Korataev, 44, was attending a private Russian New Year’s Eve party in the Cafe Arbat on Brighton Beach Avenue. At 3 A.M., he stepped outside with another man, who pulled out a .38-caliber pistol and shot Mr. Korataev fatally in the head.

Several passers-by told the police that the killer returned to the restaurant and a few minutes later left with a woman. About 100 people at the party were questioned that night, but none provided a clue to the gunman’s identity or motive. Most of the partygoers gave names and addresses in the Boston area that were fictitious, Detective Mackey said.

“Everyone had amnesia,” the detective added. “Oleg had a reputation of being a brutal enforcer — a collector of debts — and he had connections to gangs in Russia and in Toronto.”

On March 23, the body of Yanik Magasayev, 22, who had been shot four times, was dumped under a mound of plastic garbage bags in a wooded area on Bay 52d Street near Shore Parkway. Detectives said that Mr. Magasayev had been arrested on a burglary charge last year and that he was under investigation for suspected extortions of emigre merchants in Brooklyn and Queens. Gunned Down On a Moscow Street

On June 16, Alexandre Graber and two other men were gunned down on a Moscow sidewalk by two killers who roared off in waiting cars. Mr. Graber, 38, had lived for the last year in the Brighton Beach area, and detectives said he was a secret partner in a Russian nightclub in Brighton Beach.

A Moscow newspaper called Today reported in June that Russian police officials said that Mr. Graber had been associated with several organized-crime groups and that he frequently visited Russia to resolve conflicts among gangsters. F.B.I. agents said that Mr. Graber’s murder appeared to be related to his activities in this country.

Shortly before twilight on July 11, Naum Raichel left the Winter Garden Restaurant, which he is constructing on the boardwalk at Brighton Sixth Street. Two men blocked his way and one of them shot him three times in the chest, the police said.

Mr. Raichel was convicted in 1987 in Federal District Court in Brooklyn of extorting $20,000 from two insurance salesmen as protection payoffs. He served four years in prison and was on probation at the time of the shooting.

The same day Mr. Raichel was wounded, his brother, Simeon, who lives in Brooklyn, was severely beaten in Berlin. “We doubt that those two attacks were mere coincidence,” said a detective, who spoke on condition of anonymity.

Investigators cite the case of Boris Nayfeld, 46, as an example of the evolution of Russian emigre criminals from local to international status. He immigrated to the country in the late 1970’s as a religious refugee. In 1980, Mr. Nayfeld was arrested in Nassau County on a grand larceny charge, pleaded guilty to petty larceny and was placed on probation.

He again attracted attention in May 1985 when Evsei Agron was fatally shot in the vestibule of his Kensington apartment building. The police identified Mr. Agron as the leader of a gang of emigre extortionists and Mr. Nayfeld as his bodyguard and chauffeur. Mr. Nayfeld, detectives said, later worked as a bodyguard for Marat Balagula, a Russian immigrant who was convicted in 1991 of a $360,000 credit card fraud.

Mr. Nayfeld was arrested in January by narcotics agents as he was about to be driven from his $450,000 home in Egbertville, S.I., to Kennedy International Airport for a flight to Brussels.

A Federal indictment in Manhattan accused him of heading a ring that smuggled hundreds of pounds of heroin from Thailand through Poland into New York. He has pleaded not guilty to narcotics trafficking charges and is to be tried in October.

Louis Cardinali and Joseph Massima, Drug Enforcement Administration agents who worked on the case, said in an interview that Mr. Nayfeld’s group sold the heroin to three men linked to Mafia crime families in New York. They declined to identify the families.

“The Russians are into narcotics for the long haul,” Mr. Massima said. “They don’t just have a foot in the door; they are in the house.”

Mr. Moody of the F.B.I. conceded that few Russian mobsters had been convicted. “We are still trying to get a handle on them,” he added. “And we will before long.”

A correction was made on : A picture caption yesterday with an article about Russian organized-crime activity in Brooklyn described incorrectly the shooting of Naum Raichel, which law-enforcement officials said was linked to organized crime. Mr. Raichel was wounded in the attack; he was not killed.

How we handle corrections

A version of this article appears in print on  , Section A, Page 1 of the National edition with the headline: Influx of Russian Gangsters Troubles F.B.I. in Brooklyn. 

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THE Russian mafia is developing into a many-armed criminal enterprise that operates with surprising sophistication in world capitals tens of thousands of miles from the onion-domed spires of Moscow.

From the old outposts of the Soviet empire to the United States and Western Europe, Russian mafiosi are becoming more than a curious irritant to law-enforcement officials accustomed to more traditional forms of organized crime. Germany is a “magnet” for Russian gangs, according to authorities in Bonn; in the Czech Republic, mafiosi are alleged to dominate Prague’s taxis.

Russians apparently control large sections of the prostitution business in Romania. Increasingly, Russian organized criminals are laundering their ill-gotten receipts through financial institutions and dummy corporations in the US, according to law-enforcement officials.

“A lot of money is coming in from overseas and being pushed through United States banks,” says Raymond Kerr, head of special squad set up in New York City by the Federal Bureau of Investigation last year to investigate Russian organized crime. “They run it through various banks and businesses here, and then send it back over there, and it comes back … [looking like] legitimate money.”

The FBI has seen tens of millions of dollars in specific transfers sent to the US and then repatriated to Russia, Mr. Kerr says. Yet because the money launderers are so successful in evading detection, US law-enforcement officials acknowledge they have no realistic estimate of the total involved.

Criminals from all over the world have long used the US financial system to transform illegally earned proceeds into “clean” money. But experts say the former Soviet Union’s white-collar criminals are far more sophisticated in their approaches to financial sleight-of-hand than, say, a typical South or Central American drug dealer.

Formally schooled in the way of Marx and Lenin, Russian mafiosi picked up their street smarts in the USSR’s economy of scarcity, where breaking of rules was often necessary for survival. These “criminals have had a long history and training in engaging in fraudulent activities,” says Ronald Goldstock, director of New York State’s Organized Crime Task Force, in White Plains.

According to an estimate made public last year by FBI Director Louis Freeh, at least 100,000 Russians are now members of Mafia-style organized criminal gangs. Some of them are thought to have ties to Colombian drug cartels and the Sicilian Mafia. Their reach is such that the FBI opened the agency’s first office in Moscow last fall, in an effort to coordinate defensive strategy with Russian law-enforcement counterparts.

Russia is still the country that suffers the most from mafiosi activities. To hard-pressed Russian citizens it sometimes seems that gangs are threatening to take over the nation’s economy even as it struggles to rebuild itself. Bombings, contract killings, and gangland-style daylight robberies are common occurrences in Moscow, where the average monthly salary is equal to what one gang member can spend at restaurants in a single day.

Yeltsin takes action

Last June, Russian President Boris Yeltsin granted his police – who are perceived as largely corrupt by the public – sweeping powers to deal with the massive problem. Thanks to the decree, Russian police can now detain organized crime suspects for 30 days without cause, search offices and homes without a warrant, and examine the finances of suspects and their relatives. Uncorroborated testimony is allowed in court, and witnesses who refuse to testify can be punished.

These expanded police powers have been widely criticized by human rights activists. Ironically, they appear to have done little to stem organized crime’s growth. Estimates of the amount of capital siphoned abroad from Russia continue to be staggering, and the mafiosi’s BMWs and Mercedes continue to choke the streets alongside clunky domestically produced Zhiguli and Niva cars.

President Yeltsin has increasingly placed the blame for the burgeoning mafia on people from the country’s Caucasus region, particularly the breakaway territory of Chechnya. He has attempted to justify his disastrous attempt to pacify the region by saying that the Chechen people pose a “security threat” to Russia, via involvement in terrorism, hijackings, and counterfeiting.

Russian gangs are also well-represented in the environs of the former Soviet empire and neighbor nations. Organized criminal activity from Poland to Bulgaria can often be traced to mafiosi or their allies.

Controlling Russian gangs in Central Europe is next to impossible, given that law enforcement authorities can, in many cases, be bought. The economic hardship brought on by the transition from communism to market economics has made it easier for organized criminals to bribe their way out of just about any situation.

Russian criminals may have even managed to profit from the chaos brought on by the Balkans war. For one thing, they are thought to be a prime source of the women who work as prostitutes in the former Yugoslavia. “The brothels in Zagreb and Belgrade are filled with women from the former Soviet Union,” says a UN official familiar with Russia. “There are lots of Moldavians and Ukrainians.”

Germany, however, may be the Russian mafia’s true home-away-from-home. Straddling the divide between the struggling East and prosperous West, Germany has become a magnet for Russian gangs, authorities say. Eastern Germany, especially Berlin, has become a major Russian mafiosi base of operations.

Several factors made Germany attractive for the Russian mafia. First, the former Soviet Union, followed by Russia, maintained a military garrison in eastern Germany from the end of World War II until August 1994. The military’s presence presented Russian gangs with unique opportunities to engage in arms smuggling and other activities. And even though the Russian army has now departed, the mafia has had enough time to establish a nearly unassailable beachhead in Berlin.

Second, some German officials believe lenient prison-sentencing practices have encouraged Russian organized criminals to set up shop in Germany. They know that if they are caught in Germany, they will not spend long behind bars.

However, Matthias Weckerling, an official at the German Justice Ministry, says that handing out stiffer sentences wouldn’t solve the Russian mafia scourge. “The question of draconian sentences preventing organized crime is something that we really don’t believe,” Mr. Weckerling says. “The debate should not be on sentences, but on surveillance.”

German law currently prohibits law-enforcement officers from using wiretaps and other methods of covert surveillance. That makes it harder for German officials to detect and arrest Russian gang members.

Without quick action, the Russian mafia may quickly expand their operations in the West. Eckart Werthebach, chief of the office for the Protection of the Federal (German) Constitution, warns that Russian intelligence agents are teaming with Russian organized criminals to engage in industrial espionage and other economically detrimental action.

“The number of legal-resident people we have identified [as spies] must be massively reduced,” Mr. Werthebach said in an interview with Focus, a German weekly.

Money-laundering scams

For the United States, the major Russian mafia problem centers not so much on their physical presence as on their money. A typical case goes like this: First, a Russian mafioso illegally sells some precious commodity, such as gold or irreplaceable icons, in Europe. Then, instead of directly pocketing ill-gotten German marks or US dollars, the criminal funnels the funds through a US bank or dummy corporation.

Another common scam is for a Russian official to purchase, say, half a million dollars in goods from abroad, but have a friendly company invoice him for a million. With this paperwork, he can now pass off the goods as worth more than they are, and pump a half- million dollars in ill-gotten money through his firm, laundering it into legitimate-appearing proceeds. Bribes often lubricate the system.

Just who are the criminals? In the US, those who collaborate in the money laundering are both Russian nationals and Soviet emigres with American citizenship. Typically, they work together for particular projects and then disband, rather than obeying one boss for a lifetime, as in the Italian Mafia, according to Mr. Goldstock of New York’s Crime Task Force.

Together, these groups have assembled what the FBI calls a “surprising number” of sham companies. In one recent case, Russian organized criminals cheated the US government of $14.6 million between October 1991 and December 1992 by setting up a series of dummy companies to sell gasoline without paying taxes. Invoices purportedly made out by one of the sham companies showed taxes had been paid, when they had not. The address of the “company” was that of a Russian emigre living in a boarding house.

Complicating the difficulty of law enforcement is that, in many instances, businesses in Russia are send money abroad legally under loopholes that lessen taxes, say financial experts. “It can actually be true that you have to pay more than 100 percent taxes on profit” in Russia, said Gerhard Pohl, manager of the World Bank’s Russian and Eastern European finance department in Washington.

One popular legal haven is Cyprus, which has a dual- taxation treaty with Russia but a considerably lower tax rate. Some of this legal money is often transferred to the US, partly because of solid investment opportunities.

But the resulting mix of legal and illegal Russian funds makes it all the more difficult for US law enforcement agencies to weed out the dirty money.

“We are doing every measure right now in order to establish controls of this money out of our country,” says Sergei Dimitriyev, an official at the Russian Embassy’s trade representation office in Washington. But he adds that Russia must also improve the overall investment atmosphere to give Russian businesses an incentive to keep their money at home. 

Money laundering is the biggest ongoing crime, second only to drug trafficking.� … a plan by the Calabrian Mafia to buy heavily into the former USSR.
Gafni was involved in international arms dealing, cocaine smuggling into Mexico and the U.S., counterfeit U.S. dollars, and illegally transporting computers … 

 

The News And Times Information Network – Blogs By Michael Novakhov – thenewsandtimes.blogspot.com

Cash-Buyers_og_image.jpg

Co-op and condo boards love it. Developers hate it. It’s the new regulation issued by the U.S. Treasury Department that cracks down on anonymous owners of Limited Liability Companies (LLC) – also known as shell companies – who pay for pricey Manhattan apartments with cash.

Aimed at preventing money laundering by foreign buyers, the new regulation requires title companies to divulge the names of individual buyers paying cash for condos and co-ops valued at $3 million and more.

These foreign owners in New York have been spiking. The Real Deal reports that in 2014 foreign-born owners acquired 54 percent of all properties in Manhattan worth $3 million or more.

Leni Morrison Cummins, a New York-based attorney and partner at Cozen O’Conner, says the regulation plays out differently for new construction as opposed to established condos and co-ops.

“If you’re on the sponsor side and your goal is to sell out, you hate this rule,” Cummins says. But Cummins has been telling established co-op and condo boards, “You’ll love this rule because it provides another opportunity for the board to have control and knowledge of who the owners of units are.”

In the past, anonymous ownership could be a thorn for condos and co-ops. If the unidentified owner was organizing raucous parties or renting their units on Airbnb to strangers, boards didn’t know “whom to go after to hold someone accountable,” Cummins says. If the board knows who the owner is, she adds, “it holds the key to the castle and can go after the owner, in addition to chasing after the LLC.”

Attorney David Berkey, a managing partner at Gallet Dreyer & Berkey, notes that the new regulation pertains to acquiring $3 million properties in cash, money order or traveler’s checks – not personal or bank checks. “The Treasury was concerned about money laundering, even though it’s only a small percentage of sales that might be used to launder money,” Berkey says. “It’s a way of taking money gained in ill-gotten ways. Once the property is sold, they have good money.”

When an LLC tries to acquire an apartment in a building other than new construction, Berkey advises the co-op board to “obtain information regarding the finances of the LLC principals. They must guarantee the financial obligations of the LLC.” Condo boards have less leverage and don’t have to power to reject a buyer just because it’s an LLC, he adds.

Esen Edip, president of Titles of New York, a title insurance company, says the U.S. Treasury has targeted title insurers to identify foreign buyers because these companies “are licensed and trained to do a thorough review of corporate (documents) and follow the chain of title. Title agencies are drafting transfer tax documents, which contain the authorized members’ information.”

Penalties for title companies that violate these laws are severe, including criminal penalties of up to five years in prison and $250,000 in fines, and civil violations of up to $100,000 and loss of the value of transaction.

In hundreds of deals that Edip has supplied title insurance for, she can recall only two where she suspected the buyer might be involved in shady activities. One buyer turned out to be legitimate. Most buyers seek privacy and “prefer the LLC to keep it private,” she says. “They don’t need paparazzi outside of their residence.”

But the regulation’s effectiveness at reducing money laundering is probably not a big concern for most co-op and condo boards. Ultimately, Cummins says, this new regulation gives boards the tools to “get information to identify owners of units. That’s the takeaway.” And it’s not a small thing.

In a typical condo sale, once a unit goes into contract, the seller sends a letter to the board with the details of the deal, requesting that the board waive its “right of first refusal” — i.e., the building’s right, stated in bylaws, to buy the apartment for the same price agreed in the contract. Bylaws typically require the waiver to be issued within 20 to 30 days, or the right of refusal is automatically deemed to be waived.

“Normally boards feel compelled to issue the waiver, even in a situation where they might not want to,” says Ian Brandt, a co-op and condo attorney with Wagner Berkow LLP. “Still, in these cases, my advice is not to issue the waiver, even though it goes against conventional wisdom.”

Brandt explains that there is a way for boards not to issue the waiver without automatically giving up their rights when the prescribed 20 or 30 day time period elapses.

“When a board receives that request for the waiver, the question becomes, what can they do if they think the transaction is a sham,” says Brandt. “The answer is that in every bylaw provision I’ve ever seen, there’s a sentence that says something to the effect of that the board can make a ‘reasonable request’ for information to determine whether the transaction is bona fide. You can interpret that to mean that the board can look to make sure it’s a legitimate transaction.”

If your board suspects something fishy, it can ask for a full financial disclosure.

“For instance, if a prospective buyer is a Chinese civil servant who makes the equivalent of $50,000/year, and has $3 million that just landed in their bank in the last couple of months, we’d say we want the purchaser to provide all of their bank statements for the past 12 months,” says Brandt.

Specifically, Brandt recommends writing a letter explaining the board’s concerns, and citing the bylaw provision (Article 7) that gives the board authority to request this information from the buyer. A key detail here: according to most Article 7 bylaw provisions, the board only has to issue the waiver within that 20 or 30 day period after all “reasonably requested” information has been provided.

“So the 20-day clock only starts after the board has been provided all the information,” says Brandt. This way, you don’t run the risk of your right to first refusal automatically being waived because a certain amount of time has passed.

Note that some degree of conflict with the seller is pretty much guaranteed.

“You get a lot of blowback,” says Brandt. “The unit owner goes, ‘How dare you, this isn’t a co-op, you’re going to kill my deal.’ To that I say, ‘According to the information provided, this person makes $50,000/year, but just got $3 million—we need to know the source of the income, that’s reasonable,'” says Brandt.

And while many boards are nervous about being sued in this situation, this shouldn’t be an especially big cause for concern.

“If it’s a sham, they’re never going to sue you—criminals don’t start lawsuits,” says Brandt. And as for the unit owner, they’re likely more interested in selling their apartment (and if necessary, finding a new buyer) than getting entangled in a legal dispute.

“In every case we’ve done with this, you get a lot of grumbling, but the purchaser walks away,” says Brandt. “What I tell clients if that if they’re pretty confident the purchase is a sham, or someone trying to funnel money through your building, you don’t have to do it.”

Ian Brandt is a partner at the New York City real estate firm Wagner, Berkow & Brandt. To submit a question for this column, click here. To arrange a free 15-minute telephone consultation, send Ian an email or call 646-780-7272.

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What are the most common lies told by real estate agents?

What disclosures and clauses should go into the contract when you’re buying an apartment in NYC?

Got a toxic board member in your building? Here’s how to handle it

How do I buy a co-op or condo under an LLC?

How to tell if your property manager is taking kickbacks—and what to do about it

How to keep your co-op and condo neighbors from renting out their apartments on Airbnb

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How to run for—and win—a co-op board election

Fraud Detection for Co-ops and Condos

Criminals like Bernard Madoff and other so-called “white collar” lawbreakers have made headlines recently with their financial double-dealings, but unfortunately, fiscal mismanagement and fraud also happen in co-op and condo communities. The scale is much different obviously, but an apartment is a major investment, and residents of a building trust their board members and managing agents to uphold their fiduciary responsibilities and be good custodians of that investment.

It’s vital, therefore, for building administrators to have a sound system of checks and balances in place to keep things transparent and above board in their co-op or condo community’s operations. Such a system will alert board members, managing agents and other concerned parties to the possibility that something odd is happening with—or off of—the building’s books. But it’s not always the obvious financial frauds that might be uncovered; dealings of various kinds might be found.

“Fraud” doesn’t always take a form that board members or others might suspect, which is part of the reason why there are many potential weak spots that can make a building vulnerable to theft and mismanagement. As part of their fiduciary responsibility, board members also must guard against shady practices that aren’t exactly fraud but which are undesirable and not helpful to the building.

One such shady area involves quid pro quo situations. In return for sending business their way, a person involved with a building’s operations might get something like cash or services from a contractor as a kickback. Such a scheme might involve a property manager overpaying a contractor with building funds, then being given cash by the contractor in exchange for the inflated payment, or having a new deck put on their house in repayment.

“The biggest schemes you encounter are when someone is in cahoots with contractors and getting kickbacks,” says Gerald Marsden, a partner with Manhattan-based accounting firm Eisner and Lubin LLP. “The other [scheme] is when someone is writing ‘play’ checks to themselves.”

Who’s minding the paychecks, and what the checks and balances are, could be the two most important factors that make one building more vulnerable to fraud than another. Fraud might be perpetrated on a building by a manager or a director or directors on the building’s board. In cases of fraud committed by board members, the deed could happen if one or two board members were signatories of the building’s reserve account and ended up pilfering it.

When considering ways to thwart fraud in a residential community, the overwhelming opinion among industry professionals is that the more administrators (such as property managers and board members) are involved in watching the community’s financial movements, the safer the community’s assets will be.

At a minimum, a co-op or condo community should have two board members with joint signatory responsibility for borrowing for the community or for accessing the cash reserve account, says Jeff Heidings, president of Siren Management in Manhattan.

“A board should never allow one board member to be the only signatory on an account, because that leaves the account vulnerable,” Heidings says, adding that the board also should be insured in the event of fraudulent dealings by those working for the building. “The odds are a lot less likely of two people being dishonest and conspiring.”

Being out of the loop regarding their community’s financial affairs could cost board members money, because their aloof stance could be enabling criminals. The easiest communities to steal from are those whose boards have a hands-off governing style, says Stephen Beer of the Manhattan-based accounting firm Czarnowski & Beer. Some of the most vulnerable buildings rely heavily on their property managers to handle all of the details of running the community’s operations, he adds.

“Oversight by the board is the best protection,” Beer says.

With such board supervision, questionable practices such as hiring contractors who are paid in cash can be caught—or better still, avoided before they even start. Even smaller but potentially problematic control issues might be detected, such as when a building examined by Czarnowski & Beer was found to have given a credit card to the superintendent for expenses. That’s a no-no that can lead to many “oh no’s” from the board if an unscrupulous superintendent abuses the credit card.

“Frauds tend to start small and grow over time,” Beer says.

As with so many other crimes, fraud is a crime of opportunity. An unscrupulous person sees an opportunity to defraud in the process of doing their job. For example, the superintendent might accidentally use the building expenses credit card to gas up his own car one time. When he realizes that no one notices, he does it again. After a while, the theft becomes a habit with the superintendent regularly buying other personal items on the credit card. Over time, the petty thefts add up to thousands in losses to the building.

Ensuring that your community’s assets are secure can sometimes involve nipping in the bud any unnecessarily increasing expenses. Again, the community’s financial bottom line must be closely scrutinized to find these increases. Under such evaluation, theft of building materials from a construction job in the building, or the regular pinching of building cleaning supplies by staff will be caught before those actions become patterns and result in higher maintenance fees for residents.

Even mundane aspects of a building’s operations, such as contracts and supply ordering, are areas of co-op/condo buildings that often are vulnerable to cheating and fraud. Because of a lack of controls in many buildings, often property managers can commit fraud quite easily, Heidings says. Again, he advises boards to make sure all checks are countersigned by at least one board member to prevent manager fraud..

A warning sign that could lead a board member or manager to suspect that the building’s finances are being mishandled or misappropriated might be that a particular cleaning solvent or another building supply suddenly costs much more than it once did. If the $20 solvent suddenly costs $50, a kickback scheme could be happening.

Some financial controls can be put in place to avoid misdealing as well. The board of directors can put a cap on the amount for which checks paid by the building can be written. Or, the board might instruct the bank that any amount over a certain set number not be removed from its account without a letter from the board approving the withdrawal.

A board’s members can expect some help in protecting the community’s assets from its professionals, including the building’s accountant, its attorney and its other professional advisors. Because much of the burden of protecting the community’s assets is in the hands of accountants, these days, auditors must do risk-based auditing. That approach focuses on recorded and unrecorded risks, by evaluating the payment of bills, the building’s internal controls, and whether the building’s system of balances can be relied upon. Through the process, an accountant can identify cases of fraud.

“It’s really looking at controls,” says Carl Cesarano, co-owner of Cesarano & Khan, an accounting firm based in Manhattan, echoing other money managers’ sentiments. “You also need to have a board member who can do monthly reviews of the building’s financial reports. Some boards keep the reserve fund out of the hands of the property manager. The more people on the board looking at the financial statements, the less likely you are to have a problem.”

A board and management team can help themselves to avoid being taken by actually comparing the building’s financial statements from month-to-month or year-to-year. Those closer examinations could reveal discrepancies in spending for different items and services.

“You’re looking for variations, and you’re looking for blips,” Cesarano says. “We know certain expenses reoccur. You should look at utilities and see if anything strange is going on there. Whenever you have a third party such as a property manager watching your building, you have to watch what they’re doing.”

Scrutiny of a building’s operations is a team approach, with board members, the managing agent and the accountant all having roles to play in the process. Board members should regularly check online to see what payments are being made for the building’s expenses. At the very least, the board’s treasurer should regularly review those payments.

Every co-op and condo community must have a yearly audit. That audit should help boards to pick up on duplicate payments being made, or illusory vendors receiving funds, Heidings says.

However, audits often do not look at 100 percent of all of a building’s bills, so they cannot be viewed as definitive. They are a sampling of financial activity that sometimes can miss inconsistencies which point to mishandling or misappropriating of a building’s finances.

But it’s not simply a building’s professionals, such as property managers, or a building’s staff members, like the superintendent, who need some over-the-shoulder scrutiny. Outside contractors also must be thoroughly vetted to avoid “sweetheart deals” in which the property manger and contractor are in collusion.

“The board has to be fully aware of who its vendors are. When a new vendor comes along, board members might want to question it, to make sure there’s no hanky-panky going on,” Heidings says.

Where shareholders, board members and the property manager go if they suspect or believe their building is being defrauded depends upon the individuals. Still, experts say they should first tell the building’s lawyer.

While the penalties for fraud in a co-op/condo setting can be severe, in many cases they are state crimes. In some cases, the fraud is perpetrated by someone close to the board, whom the board chooses not to prosecute. Or the wrongdoing could be viewed by board members as so small as to not be worth prosecuting. The community’s leaders also might feel foolish that they were deceived and choose to fire the offender, rather than pressing charges and have the situation become public.

Often, Marsden says, communities do nothing about such wrongdoing, because the person who committed the crime is the board’s friend or neighbor. “They look to get some type of restitution. They don’t want the publicity,” he says.

Heidings suggests that administrators of buildings that are defrauded do otherwise. “Go to your attorney, and find out if [the wrongdoing] is actionable, and file charges, if possible,” he says.

Jonathan Barnes is a freelance writer, reporter and a frequent contributor to The Cooperator and other publications.

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By Ralph Blumenthal With Celestine Bohlen

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A criminal underworld of Soviet emigres, some of them skilled in white-collar crime and hardened by Soviet prison and labor camps, is reaching beyond its base in Brooklyn, using extortion and violence in its own neighborhoods and engaging in multimillion-dollar racketeering schemes on an international scale.

The network of Russian-speaking criminals is small and loosely grouped compared with the hierarchies of traditional American organized crime. But camouflaged within the country’s growing Soviet immigrant communities, the network is fast outstripping the ability of local and Federal agencies to curb its illegal schemes, some of which are linked to Mafia crime families, officials of the Federal Bureau of Investigation and other agencies say.

Intelligence reports trace the network to black marketeers and other professional gangsters, many of whom plied their criminal trade in the Soviet Union before winning exit visas – or being planted – in the wave of Jewish emigration.

One mob boss who was said to have spent 10 years in Soviet prisons before turning up in Brooklyn was known to enforce his threats with an electric cattle prod he kept in his car. Investigators say he once extorted $15,000 from another immigrant by threatening to kill the man’s daughter on her wedding day. Another crime kingpin, convicted of credit card fraud and now facing extradition from West Germany, is reputed to have amassed a fortune of more than $600 million from bootlegged gasoline in less than a decade after he arrived from Odessa.

As Soviet emigration policies loosen up, greater numbers of Jews, Armenians and ethnic Germans have been given permission to leave. Since 1975, some 150,000 have come to the United States. About 50,000 have settled in the New York area; another 15,000 are expected to settle here this year.

Law-enforcement officials say that, while the network comprises no more than a few hundred active criminals out of all those who arrived, some of these are highly skilled mob enforcers, forgers and confidence men.

Their criminal activities range from old-fashioned jewelry swindles on 47th Street to multimillion-dollar schemes involving fake credit cards and bootlegged gasoline. They have also counterfeited millions of dollars in currency and bank and corporate checks. In New York City, the Secret Service is planning to announce soon that it has smashed a Soviet emigre crime ring charged with counterfeiting $20 million and fleecing American Express of millions more in bogus travelers checks.

These criminals have also forged antiques, passing some off as products of Faberge, the famous jewelers of czarist Russia; engineered insurance frauds; trafficked in illegal drugs, and resorted to assault, torture and murder where they have found resistance.

Investigators say the crimes typically involve get-rich-quick schemes, often executed with a contempt for an American criminal justice system that seems benign compared to the brutalities of life in Soviet labor camps and prisons. Law-enforcement officials say that the transplanted criminals, reared in a system where goods are scarce and corruption is a cost of doing business, can exploit opportunities in the American system – taking advantage of the credit system and other commercial relationships based on trust. Hardened Criminals After Soviet Jails, Little Daunts Them

”They feel we are pussycats,” said one New York detective monitoring the network, ”and the United States is one big candy store.”

”The Russians just don’t care -they’re not afraid of the consequences,” said John Good, a retired F.B.I. agent who ran the Abscam case. He now works for a private security concern, Business Risks International, which has been hired by victims of some of the schemes.

Despite the obstacles, law-enforcement agencies have made some progress against the emigre underworld. Besides the Secret Service counterfeiting investigation, a grand jury in Brooklyn has been hearing evidence in an extensive anti-racketeering inquiry into Soviet immigrant criminals.

In one unpublicized case under F.B.I. investigation, a Soviet emigre crime ring infiltrated one of the nation’s largest jewelry manufacturers and methodically stole gold and gems valued at $54 million from the Manhattan company, Jardinay Inc. In another case, in March, the police in Frankfurt, West Germany, arrested Marat Balagula (pronounced bala-GOOL-a), a 45-year old Soviet emigre and suspected gasoline bootlegger who fled the United States in November 1986, while awaiting sentencing for a major charge-card fraud, and led Interpol on a five-continent chase. Execution-Style Murders

The police in Brooklyn also report a wave of violent crime in the Russian-speaking communities – including murders with all the characteristics of organized crime executions. One shootout with automatic weapons, which took place outside a Brooklyn gasoline wholesale company in 1986, leaving one dead, and two wounded, involved associates of Mr. Balagula – including three co-conspirators in the credit card scheme. In November 1987, Boris Rubinov, a 30-year-old immigrant, was shot to death in Brooklyn, two months after he was arrested while loading more than two dozen rifles and other guns into the back of a car.

The growing economic clout of the emigre crime network is particularly troublesome, said Laura Brevetti, a Federal prosecutor in Brooklyn who heads a joint strike force tracking far-flung gasoline tax evasion schemes. ”Money is power and the fact that they are making so much money illegally makes them powerful,” she said.

”The Russians add a zero to anything that anyone else thinks of,” said Michael Flanagan, the assistant special agent in charge of the criminal division of the F.B.I. in New York.

Some relocation officials, though, challenge the specter of a spreading Russian Mafia as painted by law-enforcement agencies.

”It is a quantum leap to jump to a statement that there is an organized Mafia,” said Mark Handelman, executive vice president of the New York Association for New Americans, a Government-supported Jewish resettlement agency in Manhattan. Since 1972, he said, the agency had been contacted by the law-enforcement authorities no more than three or four times about suspected criminals. Soviet Compliance I.N.S. Is Unable To Screen Felons

Although most of the new arrivals and many of the criminals are Jewish, investigators say, some of those who arrived as Jews in fact forged their identity papers in order to leave the Soviet Union. Also, investigators said, some are undoubtedly K.G.B. agents smuggled into the United States among legitimate immigrants. They also believe that the Soviet Union has deliberately rid its prisons of some troublemakers by sending them here.

Federal agents say the Immigration and Naturalization Service, in the absence of cooperation from the Soviet authorities, is in no position to weed out those with forged documents and criminal pasts among the thousands of immigrants passing through transit camps outside Rome.

The crime network has centered in the bustling Brighton Beach neighborhood with its Old World shops and restaurants, but police reports show that criminal offshoots have also surfaced in Los Angeles, San Francisco, Seattle, Phoenix, Chicago, Cleveland, Minneapolis, Milwaukee, Dallas, Miami, Wilmington, Baltimore, Philadelphia, Boston, and Providence. Canada has been investigating a Soviet emigre crime network in Toronto with links to Italian organized crime.

Groups are often organized by city of origin – Odessa, Kiev, Leningrad, Moscow – giving some structure to the otherwise loose-knit network that appears not to be based on turf. Police say the network is usually subordinate to the deal of the moment.

In many ways, the Soviets follow the pattern of other ethnic organized-crime groups in America, preying first on their own and then, when they feel strong enough to evade the law, spreading out. said James Fox, director of the F.B.I.’s New York office. Educated, Technically Skilled

But, unlike other immigrant criminal groups, the Soviets generally arrive well-educated and highly skilled technically, said Lydia Rosner, a Russian-speaking assistant professor of sociology at New York City’s John Jay College of Criminal Justice who wrote a 1986 book, ”The Soviet Way of Crime.”

”They are often more skilled than Americans themselves at exploiting the weaknesses in American society,” she said. For example, she said, the official Soviet passion for identity documents has long nurtured a forgery underground that enables criminals, once here, to assume many identities, thwarting police efforts to keep track of them. Some also use false documents to collect welfare benefits and build up credit ratings.

”To them,” Mrs. Rosner said, ”our police are Mickey Mouse.”

Although United States law bars the deportation of immigrants who can show they face persecution in their native country, the Immigration and Naturalization Service says that since 1980 it has returned 101 emigres with criminal records to the Soviet Union. Early Swindles Bags of Gold Rubles Turn Into Potatoes

A recent report circulated among law-enforcement agencies dates criminal activities back 15 years to Brighton Beach’s ”Potato Bag Gang,” a group of confidence artists from Odessa who, posing as merchant seamen, picked out other immigrant ”marks” and offered to sell them antique gold rubles cheap. A sample coin was authentic, but when the victims paid thousands of dollars for sackfuls of them, the bags turned out to be full of potatoes.

In a similar swindle involving a supposedly antique necklace, a Long Island hardware store owner, who took pity on a couple posing as newly arrived immigrants, was bilked of his life savings of $70,000.

Considerable information on the network’s leaders was provided by an anonymous informant who in 1983 sent Kenneth P. Walton, then a deputy F.B.I. director in New York, a manuscript in Russian entitled ”All About Russian Mafia.” Much of the information was subsequently corroborated. Bosses Develop Extortionist Toting A Cattle Prod

At the time, the informant said, the head of the network was Evsei Agron, a 51-year-old Leningrad-born immigrant, killer, extortionist and thief. With his bodyguards, his cattle prod and the aura of his Soviet prison time, Mr. Agron was a fearsome figure as he made his rounds of Brooklyn, with a weekly visit to the Russian baths in the East Village.

In January 1984, Mr. Agron was shot in the neck outside his apartment house at 100 Ocean Parkway in Park Slope. He survived, telling a Russian-speaking detective he would ”take care” of the attacker himself. During his recuperation, doctors removed old bullets from previous shootings. Three sources told the police that the shooting was linked to a disputed drug deal.

In May 1985, Mr. Agron was shot to death as he came out of his apartment en route to the baths. His bodyguard and driver, Boris Nayfeld, who had been waiting downstairs, left mysteriously after the shooting. Conflicting Explanations

Informants later told the police that Mr. Agron had been killed for seeking a cut of criminal profits while withdrawing from active leadership. But other reports said he had been murdered by the Mafia for poaching on its activities.

Mr. Agron was listed as vice president of a Brooklyn fitness club that had been the scene of a drug murder in 1982 and that also had distant links to members of Italian organized crime, including John (Sonny) Franzese, then listed as the underboss of the Colombo family. Mr. Franzese also joined forces with Soviet emigres in concocting a highly profitable gasoline tax evasion scheme exposed by Ms. Brevetti’s task force. One of the conspirators, Michael Markowitz, who assisted the authorities, was shot to death in his Rolls-Royce in Brooklyn in March.

No sooner was Mr. Agron out of the picture than his bodyguard, Boris Nayfeld, turned up in the employ of Mr. Balagula, who investigators believe succeeded to Mr. Agron’s authority.

Born in Odessa on Sept. 8, 1943, Mr. Balagula worked in the Soviet Union as a storekeeper on passenger ships in the Black Sea, according to sources within the emigre community. He came to the United States on Jan. 13, 1977, with his parents and became a citizen in 1984.

Informants cited in intelligence reports say he may have connections to Soviet intelligence, but Mr. Balagula, in an unusual sworn statement to the Federal Bureau of Investigation, flatly denied any contacts with Soviet secret services. He said he emigrated ”because of anti-Semitism” and in order to raise his children ”in a free society.”

Intelligence files say Mr. Balagula was an owner of one or more restaurants in Brighton Beach. When he fled the country in 1986, Mr. Balagula had been convicted, along with several other Soviet immigrants – including Boris Nayfeld and his brother, Benjamin – in a scheme that fabricated charge cards with names and real account numbers of Merrill Lynch customers. The cards were used to run up fictitious sales with the complicity of several merchants. No goods changed hands, but Merrill Lynch ended up liable for up to $300,000 in losses. Balagula ‘The Power Broker’

Wiretaps showed Mr. Balagula to be ”the power broker at the center,”said Assistant United States Attorney John P. Pucci of the Eastern District of Pennsylvania.

During the trial in Philadelphia, the bald, paunchy Mr. Balagula rented a suite at the Hershey Hotel and came to court every day in a stretch limousine.

”You hear all kinds of stories about Mr. Balagula,” said Ms. Brevetti. One has Mr. Balagula purchasing an island off South Africa, or land in Senegal. Another has him masterminding a fleet of supertankers docking all around the world. Before his arrest in West Germany, he was sighted in Atlantic City and California, Paraguay, South Africa and Hong Kong.

Hans-Hermann Eckert, a court spokesman in Frankfurt, West Germany, where extradition proceedings were nearly complete, said rumors had circulated of a large bribe about to be paid to free Mr. Balagula. Targets Get Bigger Jewelry Industry Proves Vulnerable

The Soviet emigre network’s criminal schemes have also focused on the jewelry industry, court records and investigators say. One of the largest thefts victimized the workshops and offices of Jardinay, a manufacturer of watches and gold jewelry at 155 Avenue of the Americas at Spring Street.

Founded as a small watch-making company some 20 years ago by a Hungarian family, the company has grown into a $100 million-a-year business with its own designer line called Helen Z, which is sold to Bloomingdale’s, Saks, Fortunoff, J. C. Penney, and other retailing giants.

By 1986, investigators said, some 25 emigres had infiltrated the 300 employees and brazenly diverted or stolen nearly $54 million in gold and diamonds before the scheme was discovered in an inventory the next year. Only $2 million worth was ever recovered.

”The place was filled with Russians,” said one astounded investigator. ”They were taking out finished product and raw materials and stocking their own jewelry stores in Staten Island, Long Island and California.”

The jewelry business – where merchants traditionally entrust each other with millions of dollars in gold and gems on a handshake – is particularly vulnerable to fraud. In some cases, emigre swindlers have set up phony jewelry exchanges, where they ostentatiously lock their customers’ valuables in a safe. Once the customer leaves, the safe is emptied through a hidden door at the back. Sophisticated Forgeries Bogus Cash, Faberge Eggs

In addition to jewelry, the criminal schemes also include counterfeiting of currency and bank and corporate checks, Federal agents say.

In its investigation of what it calls a $20 million counterfeiting ring, the Secret Service is preparing to announce the arrests of up to 20 suspects, said Richard Ward, the special agent in charge in New York. Almost all of the money has been recovered, along with many bogus bank checks and nearly $4.5 million in counterfeit American Express checks that had been cashed around the world, he said.

The emigre network’s members also fabricated bank checks of Manufacturer’s Hanover Trust and Citibank.

Art forgery is also prevalent, investigators and jewelers say. Delicately bejeweled eggs, made by emigre craftsmen in workshops in Astoria, Queens, have been passed off as original Faberges and sold to a major auction house, investigators say.

In May 1987, Itsik Ben-Eli, an emigre who was being sought for questioning in a homicide in Brighton Beach the month before, was arrested at Kennedy airport with a woman who had 700 grams of heroin – about 1 1/2 pounds -taped to her body. Mr. Ben-Eli’s fingerprints were later found on the tape. He was also carrying two freshly minted counterfeit $100 bills. At his sentencing in Federal court in Brooklyn, a man claiming to represent an Israeli organization urged the court to let Mr. Ben-Eli serve his sentence in Israel. The judge sentenced him to five years in Federal prison. Growing Violence Desperate Victim Shoots Loan Shark

Much of the violent crime inside Soviet emigre communities can be traced to protection and loan sharking rackets seen among other immigrant groups. Often, it is only when these transactions turn violent that they become known to the authorities. People familiar with the Russian-speaking community say transplanted ”People’s Courts” exist, where men of influence settle disputes, some of them brought over from the old country.

One emigre, Valery Zlotnikov, was repeatedly hounded over a debt by another emigre, Felix Furman, a convicted killer who had managed not only to escape prison in Colorado but also to jump bail on a gun charge in New York. Mr. Furman furthermore was acquitted of attempted extortion, even though an exchange of money took place under the eyes of the police. Last December, in despair, Mr. Zlotnikov shot Mr. Furman dead on the street in Brighton Beach and turned himself in.

In another convoluted case, a grocer named Vyacheslav Lyubarsky was strung up from a ceiling light in his store when he failed to repay $40,000 he lost in a card game. He later shot one of his tormentors and, with two reputed Mafia members, went on to stage a faked jewelry robbery in Chicago, in an abortive attempt to collect a $750,000 insurance claim. ”They even beat up a woman to add credibility,” said Detective Peter Grinenko, a Russian-speaking investigator assigned to Brooklyn District Attorney’s squad.

American law-enforcement officials acknowledge they are ill-equipped to deal with the cultural and language complexities of the Soviet emigre crime problem. While the F.B.I. has a task force that often deals with these crimes, their Russian-speaking agents are generally reserved for counterintelligence work. In New York City, the Police Department’s leading intelligence analyst for Soviet emigre crime, Joel Campanella, retired this month, and associates are ncncerned that his expertise has been lost.

Two years ago, the police intelligence section lost another expert, a Russian-speaking police officer who could answer a police hot line number circulated in Brighton Beach for tips on criminal activity. One day recently, when a distraught Russian-speaking woman called twice, offering information, there was no one at the police desk who could understand her.

A version of this article appears in print on  , Section 1, Page 1 of the National edition with the headline: Soviet Emigre Mob Outgrows Brooklyn, and Fear Spreads. Order Reprints | Today’s Paper | Subscribe

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