CAPITALISM'S ACHILLES HEEL Dirty Money and How to

Dirty Money at Work 155
In her excellent book, Sale of the Century: Russia’s Wild Ride From Communism
to Capitalism, Chrystia Freeland reports later remarks by Chubais:
“They steal and steal and steal. They are stealing absolutely everything and it
is impossible to stop them. But let them steal and take their property.” 215
Chubais was committed to privatization no matter the cost.
Another Russian architect of the transition to a market economy, who
had advised Gorbechev and went on to become a frequent counselor to
Yeltsin, lamented to me: “Never could I imagine we would pay such an
enormous price. Some sacrifices were inescapable. But the cynicism and rapaciousness
of some of our people was unimaginable. The price was not
worth it.” 216
Another eyewitness to the drama laid part of the responsibility on foreign
economists who were offering assorted remedies: “Western advisors
were clueless as to what people could be up to, how corrupt they could be.
They were caught up in their own mindset, unable to see the corruption as
serious and pervasive as it was.” 217
Take Vladimir Kadannikov, for example, the Red Director of one of
Russia’s largest works, and couple him with Boris Berezovsky, a mathematically
astute, cunning manipulator. Kadannikov’s empire was Avtovaz, producer
of the Lada automobile. Berezovsky allegedly approached Kadannikov
with a scheme to set up a separate selling arrangement for Lada cars, to be
known as Logovaz. This was nothing more than a means of transfer pricing.
Logovaz bought cheap from Avtovaz and sold dear to the Russian public
and, for hard currency, into the export market. Avtovaz teetered toward
bankruptcy, yet was always bailed out by the Russian government, while Logovaz
reaped hundreds of millions in profits. 218
If you can get away with it once, why not twice? Berezovsky lifted his
eyes higher, toward Aeroflot, the state-owned airline. The idea was not to
buy the creaky, capital-intensive business but instead to grab hold of its
cash flows. Using a Swiss company, Andava, which was making money out
of the Avtovaz/Logovaz rip-off, he brought in William Ferrero, former
head of Volvo Group Finance-Europe, as manager. 219 Berezovsky then installed
one of his partners into Aeroflot’s management, and, voilà, Aeroflot
began transferring 80 percent of its revenues to Andava for proper cash
management. What about those bothersome presidential decrees and central
bank regulations requiring that a portion of foreign exchange earnings