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Poisoned at the Source

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"Fine, fine," Zeltser replied.

Back in his smoky office, Zeltser bragged right away that he was the source behind the Journal's story, and handed over the memo from Grigoriev.

To O'Brien, the whole thing seemed fishy. He hadn't met Grigoriev, but he had heard of him as a mild-mannered professor of economics from the Gorbachev era. Then there was the memo itself. Across the top was printed, "ATTENTION: The very fact of our participation in this transaction must remain a secret," which struck O'Brien as somewhat counterproductive. Its author recounted past windfalls from insider trading: "You realized the profit of $4,308,000 or 43% of your initial investment," he wrote, adding parenthetically, "Minus my modest commission of 10%." Hokey, O'Brien thought.

Zeltser presented a number of documents that seemed to corroborate the scheme -- a record of some Russian bond trades, a letter from a Washington, D.C., law firm to Inkombank that mentioned Grigoriev as an Inkombank agent in the U.S. But there were some documents he wouldn't let O'Brien take with him, and others with pages missing.

"I am thinking, This stuff is fake, and this guy is just starting to smear people," O'Brien says. "I'm not trying to sound like Saint Tim, but I think that isn't right."

Back in the newsroom, O'Brien called Andrei Bugrov, Grigoriev's former boss at the World Bank, whose fax machine had sent the memo. Bugrov said it seemed phony to him, too. What's more, he said he had told the Journal that. Still, the World Bank had hired outside lawyers to investigate. Then O'Brien did some more research -- he found Zeltser widely cited since the Times had quoted him, and several stories seemed to draw on the same dubious materials Zeltser had shown O'Brien.

"Frankly, my first reaction was, let the Journal keep using this guy if they want. He's a dead end. But when I saw the stuff he was disseminating, I thought, there is a different issue here. This guy had become an important player in what is arguably the biggest financial story of the decade, just because he is skilled at orchestrating this stuff and the media isn't more skeptical."

O'Brien told his editor, Stephen Engelberg, what he had learned about the unofficial money-laundering lending-library Zeltser had opened for journalists in his office, and Engelberg told him it was worth looking into -- it might be a story. Two days later, O'Brien called Zeltser. "We are interested in doing a story on you now, Emanuel," O'Brien says he told him. "A lot of this stuff is problematic, and you have bragged to me that you are a source for too many legs of this story."

Zeltser sounded wounded but insisted that he could clear everything up the next time O'Brien came to his office. The two arranged to meet the following day.

Zeltser had become a figure of considerable power in New York's Russian world even before the Bank of New York scandal. The Russian immigrants around him come from a world like the one James Ellroy depicted in L.A. Confidential. Corruption is rampant, shady businessmen seem to be printing money, bribery is common at every level, and journalists are as likely as anyone to be on the take. The Russian immigrants I spoke with accused me alternately of working for O'Brien and working for Zeltser. In their world, American assumptions, that criminals tend to get caught or that journalists try to be impartial, are naïve. Someone like Zeltser -- a rich man, a lawyer who says he can get things done -- can be a valuable ally.

Zeltser's background and career are varied and picaresque. He says he grew up in the Russian town of Kishinev, in what is now Moldova. He studied piano, he says, as well as "international" and "Anglo-American law" at an experimental Soviet school. Unfortunately, he says, the Russian mob destroyed any record of his attendance there. He also sometimes says he trained to be a professional race-car driver during that same time.

Zeltser immigrated to the U.S. as a political refugee in 1974, ending up in Dallas, where he cleaned tables at a Taco Inn and a Burger King. Soon, he found a way to take advantage of his musical skills. He landed a job playing piano at a strip club. "It was one of the fanciest German cabarets in Dallas, Texas. There were a group of 26 girls -- they undressed, but not completely. There were also 110 kinds of German sausage, and I was a lot thinner before I worked there. I do not see anything wrong with that," Zeltser says. "When you come to this country, you do whatever you have to do."

A year later, he came to New York, where he and his wife, Anna Zeltser, studied performance at the Juilliard School for a year. After that, Zeltser drove a cab and moved through a series of jobs -- selling textbooks, investing in a Russian-language radio station, and translating English television shows over the air -- before hanging up his shingle as an independent business consultant.


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