Wed, November 5, 2003

Russian crime figure arrested
By KARL PETER KIRK

BUDAPEST (CP) - A task force made up of FBI agents and Hungarian police has arrested a leading Russian organized crime figure who was involved in the YBM Magnex fraud in Canada and the U.S., officials said Wednesday.

The FBI said the unnamed suspect's arrest is a major blow to the crime organization allegedly run by Semion Mogilevich, a Ukrainian-born man wanted for fraud in the YBM case. The suspect was arrested in a raid Oct. 30, said Maj. Tibor Gyori, head of a Hungarian police unit that specializes in fighting international crime.

The suspect holds Ukrainian, Israeli and Greek citizenship, Gyori said.

"We wanted to target the leadership of the organization to significantly disrupt or dismantle that organization," said Robin Gazawi, an agent with a special FBI unit set up to fight organized crime in Russia and Central Asia.

The arrested man was charged with extortion after police received complaints from Russian traders at a Budapest market.

Police say the suspect's group demanded between $1,000 and $3,500 US to ensure safe delivery of textiles sent by traders to Moscow by truck or train from Hungary.

Those who refused to pay were beaten up or driven out of business, police said. In one case, the group allegedly planted hard drugs and explosives in a trader's vehicle and reported the vehicle to customs officials before it reached the border.

Gyori said the suspect is a high-ranking member of the Solntsevskaya mafia group - named after the Moscow suburb where it was founded - and a close associate of Mogilevich.

He "is in direct contact with Semion Mogilevich, one of the leaders of the Russian mafia," Gyori said.

The FBI issued a crime alert and international arrest warrant for Mogilevich in April after he was indicted by a district court in Pennsylvania for defrauding investors in a company with headquarters in Philadelphia and registered on the Toronto stock market.

According to the indictment, investors in the magnet company - YBM Magnex - lost $150 million US through Mogilevich's scheme, which involved inflating stock values, false accounting and laundering money.

The suspect arrested in Budapest "was also one of the players in that case," said Col. Gyorgy Zsambok, referring to YBM.

Mogilevich ran the scheme from his base in Budapest but left Hungary for Moscow in 1999 after a special FBI task force was set up in Budapest.

In just four years, YBM Magnex saw its stock soar from 10 cents a share to around $14 a share on the Toronto stock market before officials halted trading in 1998.

In 1999, a U.S. judge fined the company $3 million and ordered it to repay more than $77 million to defrauded investors. YBM, as a corporation, pleaded guilty to fraud and agreed to sell its $6.3-million headquarters to settle its debt.

Nine YBM officers and board members - including former Ontario premier David Peterson - along with National Bank and investment dealer Griffiths McBurney, faced allegations of failing to disclose all material facts about YBM in a 1997 prospectus.

Earlier this year five YBM directors - but not Peterson - were variously ordered to repay the Ontario Securities Commission's investigation and hearing costs, ranging from $75,000 to $250,000 Cdn, or barred from sitting on boards for a period of three years to life, or both.

The OSC argued that YBM officials knew of allegations that company founders had ties to the Russian mob for months before investors were told. The respondents said there was no solid evidence of criminal activity.