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Poisoned at the Source

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Walking away from Zeltser, however, did not turn out to be that easy. A financial scandal on the scale of the Russian-money-laundering probe quickly becomes an industry, with journalists and lawyers competing fiercely for information. And with O'Brien's help -- he was the only named source in the Times stories -- Zeltser quickly built himself a powerful franchise, a clearinghouse for gossip and documents on the Bank of New York scandal.

"I had created this Frankenstein monster by quoting this guy," O'Brien says now. "I gave him credibility, and then everybody thought he was the key to breaking the Bank of New York story."

When O'Brien realized what had happened, he tried to undo it, even taking two near-heretical steps: making himself a subject of one his own stories and exposing a source in the pages of the New York Times. But when he set out to unmask Zeltser, Zeltser attempted to expose O'Brien in return, eventually enlisting the New York Post's "Page Six" and even the New York City Police Department.

"The Wall Street Journal, USA Today,the London Times, CNN, Bridge News -- I was working with a lot of reporters," Emanuel Zeltser says when I first meet him in his office. "I was friendly with everyone."

Zeltser provided excellent service to the reporters. He was in his office until all hours of the night -- he sticks around, he says, for calls from Eastern Europe -- and he's happy to entertain them. So heavy was the foot traffic at the height of the case that journalists frequently ran into each other there. Sometimes they went out to have drinks with the women who were always milling around Zeltser's office -- freelance journalists or employees of his American Russian Law Institute -- while competing reporters met with him.

Zeltser also became a fixture on the phone lists of attorneys working for Mel Weiss, the flamboyant lawyer known for shareholder lawsuits, who filed suit against the Bank of New York's directors soon after O'Brien's first story appeared. Zeltser himself teamed up with Harold Hoffman, a local lawyer, to file suit against the Bank of New York on behalf of Inkombank depositors, alleging that it abetted Inkombank's graft and subsequent bankruptcy. Zeltser told reporters that he expected to seek more than $1 billion in damages, redoubling his incentive to see both banks disparaged in the press.

"Of course I have an interest!" Zeltser tells me. "Of course I am not an objective source. There is no question that I am suing the Bank of New York, I sued Inkombank; clearly those guys are not my friends. If something appears in the paper saying that they are no good, well, yeah, at least emotionally it is good for me. That is why a reporter needs to make a decision what to print and what not to."

I was at the Journal at the same time as O'Brien, and I knew him professionally, though not well. He revels in the profane banter and competitiveness of the newsroom, calling colleagues "dude" or "chief," while often bringing a crusading fervor to his job. Some reporters use a seduction strategy, ingratiating themselves with their sources, but O'Brien is not one of those. He's aggressive -- maybe even hotheaded -- attacking stories head-on, making phone call after phone call until he gets the information he's looking for.

Though he and Zeltser traded calls in the weeks after his first stories appeared, O'Brien didn't spend a lot of time thinking about Zeltser until he picked up the phone on a Monday late in October. "Tim, did you see the World Bank story in the Journal on Friday?" Zeltser said. "You know, I have a lot of documents relating to that and to Natasha."

O'Brien had read the story. It had reported that the World Bank was investigating one of its Russian representatives for working with Inkombank to trade on inside information. The Journal quoted a memo from an executive named Leonid Grigoriev, the alleged leaker, telling Inkombank's chairman about the World Bank's plans. (When the Journal contacted Grigoriev, he first seemed to recognize the memo, but later he denied writing it.)

O'Brien insists that the World Bank story didn't really register with him. "That wasn't my story to cover -- I couldn't care less," O'Brien says. "We had clear goals in our investigation, and I didn't think the World Bank was a direct part of it."

Zeltser's call, however, piqued his interest. "Suddenly, a lightbulb went off in my head," O'Brien says. Though Zeltser hadn't said so, O'Brien thought the Journal's reporters might have relied on his information. And at the very least, O'Brien wanted to know what Zeltser had to say about Natasha Kagalovsky. "I'll come up and take a look," O'Brien says he told Zeltser. He also warned him: "If any of it is garbage, your anonymity is out the window."


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