Bank of New York senior VP Natasha Gurfinkel Kagalovsky, who spearheaded the bank’s expansion effort into Russia, is one of the executives suspended in the money-laundering flap. Her husband? Konstantin Kagalovsky, who in the early '90s was Russia’s representative to –- guess what? the IMF. It gets better. The other suspended executive, Lucy Edwards, is married to a shady businessman named Peter Berlin, who authorities have linked, through his company Benex Worldwide, to reputed Russian mobster/arms dealer Semion Mogilevitch. All this makes the Bank of New York look either complicit or stupid and the IMF look just plain stupid, at least in the eyes of its congressional critics, who have been carping about profligate lending since the Asian crisis began. But TIME senior economics reporter Bernard Baumohl points out that the IMF’s Russian loans "are just as much political decisions as financial or economic ones an unstable Russia is deemed too dangerous to abandon, and the loans help keep up ties with Washington." And just think –- some of that cash is flowing right back into the U.S. economy.
Everybody knew that at least some of the IMF’s billions of Russian bailout money would get flushed down the toilet of corruption. Few figured the cesspool –- or, more accurately, the sewage treatment plant –- could end up in Manhattan. According to the Wall Street Journal, authorities are investigating whether some $200 million allegedly laundered through the Bank of New York was siphoned off IMF funds loaned to Russia to stave off its financial collapse. It’s happened before in 1996, Russia’s own central bank (their Fed!) funneled $1.2 billion in IMF money to an offshore holding company, never to return and if it’s happening again, the clues are everywhere.