Igor Shuvalov, Russian leader Vladimir Putin's aide, before a government meeting on April 5, 2012
When Vladimir Putin, Russia's Prime Minister and President-elect, wants to make nice with Western investors, he usually sends out his most telegenic aide, Igor Shuvalov, the one with the Ivy League manner and Hollywood smile. This is partly due to a shortage of other options. In Putin's government, the top brass who speak fluent English (and there aren't very many) usually learned it in the KGB, which tends to spook the typical London boardroom. The pinstripe suits and deadpan stares worn by Putin's other associates tend to have the same effect. So Shuvalov's charm, combined with his efficiency, has made him a valued asset for Putin over the years. And that is partly what makes Russia's latest corruption scandal seem so shocking. It is not one of Putin's gray cardinals stuck in the middle of it. It is Putin's squeaky-clean salesman Shuvalov.
On March 28, two of the world's leading business dailies, the Wall Street Journal and the Financial Times, both published articles claiming that Shuvalov earned tens of millions of dollars through deals with Russian oligarchs while serving in senior government posts. (The U.S. financial weekly Barron's published a similar report on Dec. 3, but it was drowned out by news of the Russian parliamentary elections that took place the following day.) None of the reports claimed that Shuvalov broke Russia's porous laws against corruption, but they did raise concerns over whether Shuvalov's fortune had been raised through graft or insider trading. Even though Kremlin officials have faced claims of corruption before, no allegation has ever reached this deep into Putin's inner circle.
In recent weeks, Shuvalov has issued numerous denials, one of which stated that he "unswervingly followed the rules and principles regarding conflicts of interest." But the financial documents cited in the newspaper reports have continued spreading through the media — TIME obtained a set of copies last month — and in the conspiracy-ridden world of Kremlinology, the leak has caused a panic. Many officials have started wondering what other dirt could be exposed, while Russia's leading business newspaper, Vedomosti, alleged in an editorial that Kremlin hawks were trying to push Shuvalov and his fellow liberals out of the government. "The severity of this standoff has reached the point where office walls cannot contain their intrigue," the paper wrote on March 30.
But through interviews with Shuvalov's friends, enemies and sources close to his office, the scandal starts to look a lot more personal than political. It appears to come down to a series of betrayals, which date back to the mother of all scandals in the Putin era — the so-called Yukos affair that started in 2003, when Shuvalov was serving as Putin's aide.
At the time, one of Shuvalov's closest friends was a lawyer named Pavel Ivlev, who is now widely believed to be the source of the leaked documents. The two of them grew close when they were classmates at Russia's most prestigious law school, and after graduating in 1992, they both went to work at a powerful Moscow law firm during Russia's chaotic transition to capitalism. At the turn of the millennium, when Putin first became Russia's President, both men were climbing fast up the social hierarchy. Shuvalov was serving as the government's chief of staff, while Ivlev worked as a senior lawyer for Russia's biggest oil company, Yukos. Their paths in life split, however, like much of Russia's political elite, when Putin's government began its attack against Yukos in 2003.
That was a turning point for the country, when its main political clans effectively went to war. Putin, backed by the clique of former KGB men and technocrats he had brought to the Kremlin from his hometown of St. Petersburg, decided to take down the head of the Yukos oil empire, Mikhail Khodorkovsky, who had challenged him in politics. Although Khodorkovsky was Russia's wealthiest and most influential oligarch, with a fortune of more than $15 billion, he could offer little resistance to the justice system under Putin's control. So on Oct. 25, 2003, he was arrested at gunpoint on the tarmac of a Siberian airport. His closest associates were soon forced to make a choice: either join him in prison or testify against him.
Ivlev says this offer was presented to him in November 2004. "Actually, it wasn't so much an offer," Ivlev tells TIME in a phone interview, recalling his meeting with the detectives investigating his company. "They basically came to me with a billy club and said, 'Either we shove this up your a-- or you say what we need you to say about Khodorkovsky.'" He says he avoided their questions and decided to seek help from his friend. By that point, Shuvalov was one of Putin's most trusted aides, and Ivlev thought he was just close enough to Putin to make a difference. "But I realized he was either unable or unwilling to help," Ivlev says. "He was plugged into the system."
Reached by TIME, Shuvalov declined to comment on his relationship with Ivlev. But a source who was inside their business circle at the time says Shuvalov badly wanted to help. "The question was whether Ivlev could help himself," the source says. "There were people who did give testimony, and they are free and well today. They had to admit that there were illegal things going on at Yukos. Some people call that betrayal, but in America that would be called acting in good faith."
In any case, Ivlev refused to testify, and on the night of his interrogation, he went straight to the airport and flew out of the country without even packing a suitcase. He settled the following year in the U.S., and in 2010 he was granted U.S. citizenship. (The U.S. Department of Immigration did not seem to mind that Ivlev is on an international wanted list for Russian allegations of embezzlement at Yukos, which he denies.) Back in Moscow, Khodorkovsky was sentenced in 2005 to nine years in prison, while a small group of his associates were living with the hardest choice of all. They had stayed in Russia to fight the Yukos battle in the courts.
One of them was Vasily Aleksanyan, the head of the Yukos legal team, who had also been a friend and classmate at law school of both Ivlev and Shuvalov. In April 2006, while defending the company, he was arrested and charged with tax evasion and money laundering. The state held him in pretrial detention for almost three years, during which he developed full-blown AIDS, malignant liver cancer, blindness and tuberculosis, in part due to inadequate treatment in prison. In exchange for medicine, he claimed, investigators tried to force him to bear false witness against Khodorkovsky, but he refused. Only after the European Court of Human Rights demanded Aleksanyan's release was he let out on bail in early 2009. But about three years later, on Oct. 3, 2011, he died in Moscow due to complications from AIDS at the age of 39.
The day after Aleksanyan's death, Shuvalov attended a business conference in Chicago, where he delivered the rote sales pitch that he often gives American investors. The room was full of them, well caffeinated and eager to network with the influential guest. But to Shuvalov's surprise, his old friend Ivlev was in the hall that day. "Igor, I'm glad to see you here," Ivlev said into the microphone after Shuvalov had finished his speech. It was the first time they had seen each other in years. "Sad news came today that our friend Vasily Aleksanyan died," Ivlev said, according to a transcript of the conference. "You know who he was, what he did and why he died. My question is what you personally are going to do ... to fight pandemic corruption, which has spread over our country."
In response, Shuvalov made clear where his loyalties continue to lie. "Yesterday, when I was watching TV, I learned that Vasily Aleksanyan died of AIDS or something," Shuvalov said of his former classmate. "It's sad that he died, but [Yukos is] not a clean company." He went on to defend its demise as a step toward purging Russia of the oligarchs, who had taken control of the political system in the 1990s. "Yukos people are very much corrupt and I know that for sure because I had those people in my office," Shuvalov said from the podium. He added, "It was chosen to start with. Anybody could have been chosen."
Many people in the room were struck by the harshness of Shuvalov's reply, especially considering that the body of his friend Aleksanyan had not even been buried yet. But a source close to the Russian government, who spoke on condition of anonymity, says it was typical of Shuvalov's style. "That's why in Putin's office they call him the icebreaker," the source says. "When he is in a tough situation, he can respond in a tough way. That was the case in Chicago." When the conference was over, Ivlev went up to Shuvalov's room at the Swissôtel, where the conference was held, and informed his friend that he was joining the opposition to Putin's regime. "I let him know that I had made my choice," Ivlev tells TIME. "Maybe he felt some threat there, but I never threatened him."
Two months later, Shuvalov found himself in the middle of a massive corruption scandal. Citing his family's financial documents, Barron's reported he had earned a fortune of $119 million through questionable loans and stock trades, including deals he had made with some of Russia's richest oligarchs while he was serving in senior government posts. Shuvalov denied the allegations, but the Wall Street Journal and the Financial Times published similar reports on March 28 apparently citing the same documents.
The same day, his former law firm blamed Ivlev for leaking the documents to the Western press. "Ivlev is trying to damage the interests of the Shuvalov family, purposely distorting the facts," said the statement from ALM Feldman, the firm where both men worked as lawyers in the 1990s. Officials soon began to fear a far more extensive leak, which could tar the reputations of various government insiders. As the law firm pointed out in its statement that "many documents related to clients who worked with P. Ivlev disappeared from our firm after he left Russia in 2004."
Ivlev, who spoke to TIME from his home in Sparta, N.J., will neither confirm nor deny that he is the source of the leak. But the death of Aleksanyan, he says, was a personal breaking point. "It was a tragedy to me," he says, and Shuvalov's response to his question in Chicago did not make things any easier. "I understood his position. But his position is wrong. It's not fair." Soon after, Ivlev decided to do everything in his power to unseat Putin's government.
His strategy has two fronts. In New York City, Ivlev has teamed up with Khodorkovsky's son, Pavel, to lobby and campaign against Russian corruption. In Moscow, Ivlev has built a relationship with the leader of the anti-Putin movement, Alexei Navalny, whom TIME profiled in January. A lawyer by training, Navalny has since agreed to work as Ivlev's attorney in Russia, and on March 30, he posted the Shuvalov family documents on his blog, which has a monthly readership of roughly a million people. He called on this army of followers to "declare a holy war" against Shuvalov for alleged corruption.
This week, Navalny says he will formally request that the U.S. Department of Justice open an investigation, which would be based on the fact that at least one U.S. citizen is implicated in the Shuvalov documents. He also plans to raise the issue with the U.S. ambassador in Moscow. (The embassy declined to comment on the case.) "This is the most effective campaign," Navalny tells TIME. "These crooks couldn't care less about complaints to the Russian prosecutors, but they are terrified of being banned from traveling to the West."
That would seem to go double for Shuvalov, whose job is to travel to the world's financial capitals, convincing people that Russia is a safe place to invest. But even according to his harshest critics, this job is well deserved, which is perhaps the greatest irony of this scandal. Of all the officials in Putin's government, Shuvalov is known to be one of the most upright and transparent. Unlike many of his colleagues, he has openly declared his family's income and real estate, including a home in Austria and an apartment in London, despite the scrutiny that such openness invites. "So the bigger question is, Why attack Shuvalov?" says the source close to the Russian government. "What kind of signal does this send to other officials? It tells them, Go ahead, declare your assets and you will get whacked on the head. This signal will only make everyone go underground."
Ivlev sees it differently. For him, the aim is to prove that "there are no nice guys in Putin's command, no exceptions to the rule," he says. But there is still one question that seems to bother him about this scandal, and that is the question of betrayal. Despite the history of the Yukos affair, Ivlev still considers Shuvalov his friend. "Personally, this is all hard for me," he says, "because I see his face, I see [his wife] Olga's face, and I understand how painful this is. But the fact remains that he is part of [Putin's] team. So friendship is beside the point."