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Cleaning House 

To work against terrorism, new money-laundering laws will have to be enforced in the world headquarters of cash-washing: the U.S. of A.

Wednesday, Oct 10 2001
Elizabeth Shwiff, principal of the accounting firm Shwiff, Levy & Polo, is a real go-getter. She started her business in 1989 by knocking on doors, talking her way in, and making her pitch, according to a glowing profile published this February in the San Francisco Business Times. "Most people don't have the assertiveness I have," the story quoted her as saying. "I have no shame."

Shwiff is active in her community, too, working with pedestrian activists to prevent cars from parking on the sidewalk near her home. "I've cleared a six-block area in the Marina," she told me last week.

Shwiff says she and her husband, Howard Shwiff, who handles the real estate investment side of their business, have managed to make their 13-person firm thrive during difficult economic times by sticking to basics. They work hard, avoid flighty high-tech trends, and focus on a core business: helping wealthy Third World clients invest their money in the United States.

"The banks are safer here," Shwiff explains. "When you go to the Third World, the whole system is corrupt."

Potential clients might be found in Indonesia, China, or Israel, Shwiff says, but the most fertile terrain is found in countries that once composed the former Soviet Union. Wealthy residents of the erstwhile S.S.R.s "are continuously looking for contacts in America to work with, and we send them e-mails. If they are going to be using U.S. banks, they need to go somewhere, now that the Bank of New York went down." (In 1999, the Bank of New York made news when it was found to have handled some $7 billion in illicit Russian money, subjecting bank officials to criminal prosecution and the bank to shareholder lawsuits.)

Among other clients, Elizabeth Shwiff has served the interests of Pavel Lazarenko, former prime minister of the Ukraine, who stands accused of embezzling $800 million while in office and laundering $114 million of it through San Francisco banks, San Francisco-area shell companies, San Francisco real estate investments, and San Francisco brokerage firms.

The Lazarenko case file in San Francisco federal court includes a letter from Shwiff to banking officials in Antigua, written after the FBI began investigating Lazarenko and pleading for the release of as much as $90 million frozen under that country's anti-money-laundering laws. "I don't think you should write about that," says Shwiff. "I will be out on the street without a job, because it's a very sensitive case."

Right now, I should probably emphasize that neither Shwiff nor her firm appears to be a target of the federal government's money-laundering probe. That she and her husband make a business of helping to invest Third World flight capital does not, in itself, mean that Shwiff clients besides Lazarenko have done anything illegal. It's commonplace for Third World magnates to place legitimately accumulated fortunes in U.S. investments.

Just the same, this is a particularly appropriate time to take a look at the case of accused embezzler Pavel "Pavlo" Ivanovich Lazarenko and the Marina District pedestrian activist who helped handle his money.

During the past two weeks there's been much noise about U.S. plans to crack down on the international traffic in laundered money that officials have been busy of late denouncing as the lifeblood of terrorism. The Senate is expected to vote this week on a new package of strict money-laundering measures, with the House to consider a similar package soon. Last week the world's major industrial powers pledged to work together to track terrorist money laundered through the global financial system. Treasury Secretary Paul O'Neill has said the U.S. will "confiscate money wherever it is and shut these people down."

But it's doubtful that efforts to stanch the global flow of laundered money are really, truly serious. Stopping money laundering would be bad for business -- especially business in the United States. The U.S. is the world's money-laundering capital, the dollar the world's preferred money-laundering currency. Halting the flow of money laundering would involve probing myriad nooks and crannies of the U.S. business world that touch the lives of ordinary people -- and some business executives who are a lot more powerful than ordinary people.

"More money laundering is done in the U.S. than in any other country in the world, and I have no doubt much of it is done knowingly and willingly," says David Marchant, editor of Offshore Business News & Research, an investigative newsletter that covers money-laundering issues. "It's all about money, after all. Banks and insurance companies make a fortune [from money laundering]. A lot of banks make a lot of money, because they couldn't care [less] who they do business with."

This is also true of a lot of stockbrokers, real estate brokers, attorneys, and other professionals.

"Many of the professionals involved in the work that was done vis-à-vis Lazarenko, some of these professionals were extremely well paid," says William Hake, an attorney with the San Francisco firm Prindle, Decker & Amaro, which is assisting the Ukrainian government in its lawsuit to strip Lazarenko of his allegedly embezzled millions. "In the case of Lazarenko, you have a public servant of a foreign government who is transferring tens and hundreds of millions of dollars. Our system sometimes allows for -- and some people within our system provide -- the services sufficient to move the money in a way that's both secretive and "tax protected.'"

A striking aspect of the Lazarenko criminal case, which fills 13 file folders (and a dozen-volume civil litigation file that parallels it), is the extent to which San Francisco firms and individuals were involved in helping the former prime minister place his assets. Lazarenko bought millions of dollars' worth of San Francisco and Marin County real estate using Sausalito shell companies. Lazarenko's attorneys, and the attorneys for his associates, and the attorneys for his shell companies, work for San Francisco firms. Lazarenko is charged with laundering millions of dollars through San Francisco financial intermediaries, which include Bank of America, Commercial Bank of San Francisco, Pacific Bank, WestAmerica Bank, and securities firms such as Fleet Boston Robertson & Stephens, Hambrecht & Quist, and Merrill Lynch. These firms established what are called "correspondent" accounts with banks in other countries -- specifically, in this case, the offshore banking haven of Antigua -- allowing the San Francisco firms to move funds, exchange currencies, and carry out other financial transactions.

About The Author

Matt Smith


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