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Senate Report on Russian Organized Crime S. Hrg. 104-604 RUSSIAN ORGANIZED CRIME IN THE UNITED STATES Y 4, G 74/9: S, HRG. 104-604 Russian Organized Crine in the Unit... HEARING BEFORE THE PERMANENT SUBCOMMITTEE ON INVESTIGATIONS OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE ONE HUNDRED FOURTH CONGRESS SECOND SESSION MAY 15, 1996 Printed for the use of the Committee on Governmental Affairs ^'i '^ to?<^m U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 1996 For sale by the U.S. Government Printing Office Superintendent of Documents, Congressional Sales Office, Washington. DC 20402 ISBN 0-16-053632-4 S. Hrg. 104-604 0^ RUSSIAN ORGANIZED CRIME IN THE UNITED STATES / 4. G 74/9; S, HRG, 104-604 Russian Organized Crine in the Unit... HEARING BEFORE THE PERMANENT SUBCOMMITTEE ON IN\^STIGATIONS OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE ONE HUNDRED FOURTH CONGRESS SECOND SESSION MAY 15, 1996 Printed for the use of the Committee on Governmental Affairs U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 1996 For sale by the U.S. Government Printing Office Superintendent of Documents, Congressional Sales Office, Washington, DC 20402 ISBN 0-16-053632-4 COMMITTEE ON GOVERNMENTAL AFFAIRS TED STEVENS, Alaska, Chairman WILLIAM V. ROTH, Jr., Delaware JOHN GLENN, Ohio WILLIAM S. COHEN, Maine SAM NUNN, Georgia FRED THOMPSON, Tennessee CARL LEVIN, Michigan THAD COCHRAN, Mississippi DAVID PRYOR, Arkansas JOHN MCCAIN, Arizona JOSEPH I. LIEBERMAN, Connecticut BOB SMITH, New Hampshire DANIEL K. AKAKA, Hawaii HANK BROWN, Colorado BYRON L. DORGAN, North Dakota Albert L. McDermott, Staff Director Leonard Weiss, Minority Staff Director Michal Sue Prosser, Chief Clerk PERMANENT SUBCOMMITTEE ON INVESTIGATIONS WILLIAM V. ROTH, Jr., Delaware, Chairman TED STEVENS, Alaska SAM NUNN, Georgia WILLIAM S. COHEN, Maine JOHN GLENN, Ohio FRED THOMPSON, Tennessee CARL LEVIN, Michigan THAD COCHRAN, Mississippi DAVID PRYOR, Arkansas JOHN MCCAIN, Arizona JOSEPH I. LIEBERMAN, Connecticut BOB SMITH, New Hampshire DANIEL K. AKAKA, Hawaii HANK BROWN, Colorado BYRON L. DORGAN, North Dakota Harold Damelin, Chief Counsel and Staff Director Daniel S. Gelber, Chief Counsel to the Minority Carla J. Martin, Chief Clerk (II) CONTENTS Opening statements: Page Senator Roth 1 Senator Lieberman 6 Senator Cohen 6 Senator Nunn 62 WITNESSES Wednesday, May 15, 1996 George J. Weise, Commissioner, U.S. Customs Service 10 James E. Moody, Deputy Assistant Director, Criminal Investigative Division, Federal Bureau of Investigation 15 Edward L. Federico, Jr., Director, National Operations Division, Criminal Investigation, Internal Revenue Service 17 Igor Nikolayevich Kozhevnikov, Deputy Minister of Interior, Russian Ministry of Interior Affairs 22 Michael Franzese, Former Capo, Colombo Organized Crime Family 36 Anthony Casso, Former Underboss, Lucchese Organized Crime Family, ac- companied by Matthew Brief, Law Firm of Brief, Kesselman, Knapp and Schulman 43 An Anonymous Russian Criminal 49 Daniel Mackey and Ralph Cefarello, Detectives, New York City Police Depart- ment 54 William Pollard, Detective, Organized Crime Intelligence Division, Los Ange- les Police Department 56 An Anonymous Witness, Undercover Police Officer from Another City 59 Alphabetical List of Witnesses Anonymous Russian Criminal: Testimony 49 Prepared Statement 172 Anonymous Witness: Testimony 59 Prepared Statement 197 Casso, Anthony: Testimony 43 Prepared Statement 170 Cefarello, Ralph: Testimony 54 Prepared Statement 179 Federico, Edward L. Jr.: Testimony 17 Prepared Statement 140 Franzese, Michael: Testimony 36 Prepared Statement 162 Kozhevnikov, Igor Nikolayevich: Testimony 22 Prepared Statement 156 Mackey, Daniel : Testimony 54 Prepared Statement 179 (III) IV Page Moody, James E.: Testimony 15 Prepared Statement 120 Pollard, William: Testimony 56 Prepared Statement 182 Weise, George J.: Testimony 10 Prepared Statement 100 APPENDIX Exhibits 1. Chart, Heroin Smuggling Organizations in New York: Associated with FSU Criminal Network in Northeast U.S., prepared by the U.S. Customs Service 73 2. Chart, Money Laundering, prepared by the U.S. Customs Service 74 3. Chart, Russian/Eurasian Organized Crime: Present Day Challenge, pre- pared by the U.S. Customs Service 75 4. Chart, How the Money Flows, prepared by the U.S. Customs Service 76 5. Charts, U.S. Customs Assistance to Former Soviet Union and Central and Eastern Europe, prepared by the U.S. Customs Service 77 6. States with Significant Ethnic Russian/Eurasian Population, prepared by the Federal Bureau of Investigation 84 7. Field Offices with Active Investigations on Eurasian Organized Crime Groups, prepared by the Federal Bureau of Investigation 85 8. Eurasian Organized Crime Groups Operating in the United States, pre- pared by the Federal Bureau of Investigation 86 9. Eurasian Organized Crime Groups Active in the United States, prepared by the Federal Bureau of Investigation 88 10. Chart, Structure of Daisy Chain Participants, prepared by the Internal Revenue Service 89 11. Chart, Pennsylvania Department of Revenue, Bureau of Motor Fuel Taxes, Reported Taxable Diesel Gallons, prepared by the Internal Reve- nue Service 90 12. Chart, Motor Fuel Tax Fraud Indictments, prepared by the Internal Revenue Service 91 13. Letter from Mark W. Distaso, Commander, Special Investigations Bu- reau; Sergeant Matt Wojnarowski, Supervisor, Intelligence/Organized Crime Unit; and Agent Gerald Uebel, Lead Investigator, Intelligence/ Organized Crime Unit, City of Glendale California Police Department, to Michael Bopp, Subcommittee Counsel, Permanent Subcommittee on Investigations, dated May 10, 1996 92 14. Letter from Gloria Bryant, Director, Office of Congressional Affairs, to Stephen Levin, Counsel, Permanent Subcommittee on Investigations, dated August 19, 1996 97 RUSSIAN ORGANIZED CRIME IN THE UNITED STATES WEDNESDAY, MAY 15, 1996 U.S. Senate, Permanent Subcommittee on Investigations, OF THE Committee on Governmental Affairs, Washington, DC. The Subcommittee met, pursuant to notice, at 9:40 a.m., in room SD-342, Dirksen Senate Office Building, Hon. William V. Roth, Jr., Chairman of the Subcommittee, presiding. Present: Senators Roth, Cohen, Nunn, Lieberman and Dorgan. Staff Present: Harold Damelin, Chief Counsel and Staff Director; Daniel S. Gelber, Minority Chief Counsel; Eric Thorson, Chief In- vestigator; Stephen H. Levin, Senior Counsel; Michael Bopp, Coun- sel; Carla J. Martin, Chief Clerk; Ariadne Allan, Investigator; Sal- lie B. Cribbs, Executive Assistant; Jack Cobb, Counsel; Deborah McMahon, Investigator; Susanne Routhier, Librarian; Mary Ailes, Staff Assistant; Alan Edelman, Counsel to the Minority; Rick Keen- an, Detailee; Ian Brzezinski (Senator Roth); Susie Cohen (Senator Roth); Verna Hensley (Senator Roth); Rick Valentine (Senator Smith); Jeremy Bates (Senator Dorgan); Sandra Bruce (Senator Levin); Nina Bang-Jensen (Senator Lieberman); and Helen Albert (Senator Cohen). OPENING STATEMENT OF SENATOR ROTH Senator ROTH. The Subcommittee will please come to order. This morning, the Permanent Subcommittee on Investigations continues to fulfill its mandate of presenting to Congress and to the American people the changing face of organized crime in the Unit- ed States. Today we will examine the currently emerging threat posed by Russian organized crime here in America. Over its long history, this Subcommittee has been at the fore- front of exposing the dangers posed by organized crime groups op- erating within our borders, including Colombian and Asian crimi- nal organizations. We found that the spotlight of exposure and the glare of public scrutiny are among our most effective weapons against these resourceful and resilient groups, which operate most effectively in the netherworld of secrecy, fear and intimidation. We can be particularly effective if we can expose an organized group in its early stages, and that is why we are here today. Through experience, we know how hard it is to dislodge any crimi- nal group once it has become entrenched in legitimate businesses and its members assimilated into American communities. (1) It may be useful to begin with a short geography lesson. When we used the term "Russian organized crime" in the course of this hearing, we are referring to organized crime from all the republics of the former Soviet Union, not only from the Republic of Russia. We realize the limitations of this definition but have chosen to use this phrase because of its widespread recognition and acceptance. I also want to make clear that the vast majority of former Soviet citizens currently residing in America are law-abiding, hard-work- ing and extremely productive members of our society. In fact, these are the people who are most often the victims of this criminal ac- tivity. Like most other international organized crime groups, those from the former Soviet Union start out by preying primarily on their own ethnic communities in the United States. The fact that former Soviet emigres to this country suffer dis- proportionately at the hands of criminals who are their former countrymen leads, unfortunately, to an often unspoken but never- theless widely held point of view, namely, that because former So- viet citizens are most often the victims of these crimes, the rest of us need not concern ourselves with this problem. I categorically reject that view. First, all residents of our Nation are entitled to protection no matter what their backgrounds. Sec- ond, if we have learned anything from our previous investigations, it is that all organized criminals, whatever their ethnic origin, eventually
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