On 21 September 1999 Richard L. Palmer, President of Cachet International, Inc. testified on “the infiltration of the Western financial system by elements of Russian organized crime before the House Committee on Banking and Financial Services….” His full testimony can be read at the Web site for the Committee on Financial Services – Democrats. Palmer’s testimony, like that of many experts, has never been placed in proper context.
Palmer warned the House Committee of “serious threats to Western nations.” He had worked as an Army intelligence officer in Europe, and served 20 years in the Operations Directorate of the CIA. His final assignment was as Chief of Station in the former Soviet Union from 1992 to 1994. For several years he monitored criminal activities related to the Russian mafia. Palmer told the Committee he had direct experience working with former Soviet security and police services, “as well as members of Russian banking, business, Organized Crime and corrupt officials.”
According to Palmer, Russia’s “market mechanism” was being suppressed by organized crime. But this was no ordinary organized crime. It was, in fact, a hybrid of totalitarian officialdom and criminal networks aligned with security and police agencies. Anyone who has debriefed former Soviet police or special services officials knows the story. A KGB colonel may be asked to join a “business”; a GRU general is given an “opportunity”; a Communist Party official is instructed to start a corporation with Party money – all done on orders from the top, from the Central Committee of the Communist Party Soviet Union. “[M]ost informed observers agree that the criminal Mafiya groups account for only about 10 to 15 percent of the makeup of [Russian] Organized Crime,” noted Palmer, “with Russian officials, former officials and their ‘newly created entrepreneurs’ accounting for the other 85 to 90 percent.”
In other words, 85 to 90 percent of Russian organized crime is the work of former Communist officials. Palmer spoke of the possibility, if proven true, that Russian bank officials may have been involved in Western bank scandals. “I would like to note,” said Palmer, “that while examining eleven cases of US and other Western firms defrauded by Russian Organized Crime (ROC) elements, I was able to identify nine cases where US/Western executives clearly had been suborned by ROC groups to assist in looting their employers.”
Palmer went on to say that “Russia is not governed by the ‘rule of law’ but functions under the rule of understandings.” In other words, property rights – and all other rights recognized by law – are not the basis of the Russian system. It would appear that post-Communist Russia operates according to Proudhon’s dictum that “property is theft.” All that occurred with the fall of Communism was a transition from one system of plunder to another. The Communists did not become capitalists, in fact, because they were incapable of embracing the fundamental moral, political and legal concepts underpinning capitalism.
The Communist Party leadership knew what was coming in the 1980s. In preparation for the coming changes in Russia, plans for moving Communist Party money to the West, said Palmer, “were first discussed in 1984 by specific sections of the Soviet Politburo, the top officials of the Communist government.” By 1986 an informal planning committee had acquired the “services of two KGB First Chief Directorate (FCD – foreign espionage) officers who were experienced in moving funds overseas both for the Party Central Committee” and for operational purposes. The Communists took pains to hide any paper trail related to their planning. According to Palmer, “No written records existed of their meetings or proceedings, except one copy to the Chairman of the KGB and one copy to the Central Committee official responsible for the Administrative Organs of the Politburo: Viktor Chebrikov. The Chairman of this planning group was CC [Central Committee] Treasurer Nikolai Kruchina.”
If you study Palmer’s statements in detail – especially where he writes about “the creation of … apparently private, commercial firms” by the KGB – you may miss the forest for the trees. Palmer appears to believe, like most analysts, that he is describing some kind of organic, spontaneous change in the Soviet system which the elite wisely foresaw. Even when he says this change was initiated from the top, and orchestrated by “an informal planning committee,” he avoids any mention of a larger Soviet strategy to deceive the West. But changes initiated from the top, by the Politburo, are anything but organic. Such changes must be understood as implemented in accordance with Soviet strategy.
Of course, writing about Soviet strategy is like wearing a tin foil hat. Western officials and strategists have always denied Soviet deception. The highest level Soviet Bloc official to defect, Jan Sejna, wrote about the West’s denial in the following terms: “One of the basic problems of the West is its frequent failure to recognize the existence of any Soviet ‘grand design’ at all.” When another defector, KGB Major Anatoliy Golitsyn, wrote about the Soviet long-range plan in a book titled New Lies for Old, he was roundly dismissed by almost everyone. Yet evidence of a plan abounds on every side, from Russia’s continuing support for Communist fronts and parties abroad, to the ongoing modernization of Russia’s Strategic Rocket Forces.
Richard Palmer believed there was a threat. He fretted about “the return of totalitarian regimes which may not necessarily be Communist.” Of course, labels don’t matter. Criminals are criminals, and a country without rule of law is invariably run by criminals. What we saw in the twentieth century, with the Soviet Union and Hitler’s Germany, was an explosion of political crime. In the twenty-first century the political criminal has become, also, a financial criminal. Here empires are made and unmade. In this context, ask yourself the following question: Was it wise to allow Russia (and China) access to America’s financial system?
Come now, the answer should be obvious.
Originally published on April 9, 2012, at FinancialSense.com.
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