The eXile, #22, November 20 - December 3, 1997.

CHUBAIS: Our Media Darling

By Matt Taibbi

Last week's events marked one of the last chapters of a Frankensteinian horror story, about how the West created a monster to which it had become too emotionally attached to let go of when it ran amok.

That monster's name is Anatoly Chubais, and the dark castle he escaped from was a giant bloc of DipCorps buildings located primarily on Kutuzovsky prospect, the home base of much of the Western news media.

Here's the deal on the Chubais story. Virtually everyone, including most of the reporters who covered the story, agreed that the only reason he was not fired by Boris Yeltsin was due to his influence in securing the cooperation and backing of the Western financial community. Various apocalyptic scenarios were drawn in Western media reports whereby Chubais's dismissal would cause mass capital flight out of Russia, the end of economic reform, or, more immediately, a delay in the delivery of the next tranch of a $10 billion loan by the IMF. Obviously, Chubais stayed in office because Russia was afraid of a negative Western reaction to his firing. And who's responsible for the West's reaction? The West. Who kept Anatoly Chubais in office? We did. We held Russians hostage by communicating to them, in a thousand different ways, that we'll disinvest from their country if they don't keep their corrupt, thieving minister at the highest echelons of power.

What follows is our analysis of how the Western press duped the world in a game of high-tech bait and switch, substituting personality for policy in a desperate attempt to save the man its governments had spent so much money nudging into power. It's about how people were bullied into accepting the idea that it was the cause of market economics, not the career of one abjectly corrupt individual, that was at stake in the scandal last week.

Before we get talk about individual reporters and how specifically their reporting on the Chubais story was unethical, let's start with the elements of the near-firing story which were of immediate relevance to Western readers but which were not covered by a single western reporter.

To recap the news: Chubais, first Deputy Prime Minister and Finance Minister, admitted last week that he and four of his associates had received $90,000 apiece as an advance on a book they were writing about privatization. The book was published by Segodnya publishers, which is controlled by Oneximbank, a bank which had profited enormously from a series of auctions over the past two years that Chubais played a key part in. Chubais admitted to receiving his advance, all but conceding that he had been caught in a blatant conflict of interest. Yeltsin fired the three associates which were still in government-Maxim Boiko (the original "Harvard-educated economist"), Pyotr Mostovoi, and Alexander Kazakov- but kept Chubais on.

Most (but not all) Western reporters reported the above elements of the story, adding, in the lead, that the near dismissal of Chubais, the "architect of privatization," would strike a blow against economic reform. In their coverage, however, there are a few elements which they all, to the last man, left out. Those are:

1. Anatoly Chubais was the absolute symbol of the Western reform effort, a person who had received hundreds of millions of dollars, if not billions of dollars (if one includes World Bank funding for his programs), in official backing from the governments of the West.

Not a single Western reporter bothered to remind his readers that the official who was caught in this book advance scandal had been, in the earlier part of this decade, at the forefront of the international aid effort, and had received hundreds of millions of dollars in political support from USAID alone. Even USAID official Thomas Dine, when interviewed by American academic Janine Wedel, remarked, when asked if USAID had propelled Chubais to power, "As an observer, I would say yes."

Chubais had been the head of the State Property Committee during the privatization effort, which was heavily funded by USAID. He chaired dozens of committees which had USAID or World Bank backing. A huge amount of western taxpayer money which had been distributed to Russia flowed through the hands of Chubais. Given that he has now been publicly connected to financial improprieties, Chubais's past role as a coordinator of Western aid money would seem to be of vital interest to voters overseas-possibly even more important than the effect his dismissal might have on business. But not a single Western reporter bothered to include that angle in his story.

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2. This is not the first time Chubais has admitted to, or been demonstratively linked to, corruption.

Not one single Western reporter mentioned in his coverage of last week's events that Chubais admitted this summer to receiving a $3 million interest-free loan from Stolichny Bank, apparently in exchange for Stolichny's victory in the auction of AgPromBank; no one mentioned the fact that Chubais had been caught failing to pay taxes last year; no one mentioned that the income he did later report was due to investments through a shady investment company called Montes Auri which was raided the same day Kazakov was fired; no one reported that Chubais had been caught on audiotape in fall 1996, in a story that was reported by Moskovsky Komsomolets, discussing how best to suppress the criminal investigation into the activities of his associates Vladimir Yevstafiyev and Sergei Lisofsky; and lastly, no one reported that Chubais was questioned as to his possible involvement in improper campaign practices as a result of an incident in which the former Lisofsky and Yevstafiyev were caught hauling a half million dollars in cash out of the White House in the middle of the night.

In short, Chubais is a man who has admitted to numerous conflicts of interest and tax evasion, been caught working to suppress criminal investigations, and has been under suspicion for improper campaign practices; in fact, it has already been reported that President Yeltsin's re-election campaign, which Chubais ran, far exceeded the legal spending limits.

None of this was reported anywhere last week. Here's a typical account, in fact, by Inga Saffron of the Philadelphia Inquirer, who reported this past Tuesday:

"Anatoly B. Chubais isn't just the idea man behind Russia's economic reforms, he's the tough-as-nails enforcer who made them happen... Once considered a squeaky clean free marketeer, Chubais was revealed last week to be as unprincipled as the average Russian bureaucrat."

Was revealed last week to be as unprincipled as the average Russian bureaucrat? Where has Saffron been the last four years? Journalism school? Only a blind, deaf mute could have lived in this city and believed that Chubais was clean until "last week."

And yet the only thing close to an accurate description of the breadth of improprieties Chubais has been firmly connected to was in a tame editorial by Moscow Times editor Geoff Winestock, who at least used the plural tense in citing Chubais "peccadilloes."

Incidentally, this leaves out the fact that Chubais masterminded the "loans-for-shares" auctions, which have been demonstratively proven to have been rigged tenders in which Chubais associates were given direct handouts of huge chunks of state property. But we'll get back to that later.

3. Although numerous reports argued that Russia needed to keep Chubais in office because the IMF would not proceed with the next round of a $10 billion loan to Russia otherwise, no one bothered to check with the IMF to see if that was true.

It was left to the eXile to make a point that should have been obvious to every reporter in the city: bodies like the IMF, USAID and the European Union should distribute aid and loans according to policy, not according to personality. Whether or not they do that is a different matter, but publicly, at least, they should be held to that standard. The eXile will do it here. I called IMF spokeswoman Kathleen White in Moscow and asked the following question: if Anatoly Chubais is fired for non-policy reasons, will that affect the IMF's decision on whether or not to give out the next tranch of its $10 million loan?

"We deal with whoever is in power," White said. "We work on the basis of policy only."

Catherine Sylvester, a spokeswoman for the U.S. embassy, answered similarly when asked: if Anatoly Chubais is fired for non-ideological decisions, would that affect USAID's decision to grant or not to grant aid to the Russian Federation in the future?

"We deal with governments, not people," said Sylvester.

Reporters are letting Chubais, USAID, and the IMF off the hook when they assume, without putting anybody on the record to confirm their assumption, that governments and tax-funded organizations will not act the way they are supposed to act when put to the test.

Anyway, now the IMF is on the record-and they can't, without contradicting themselves, ever say they held up a loan because Chubais has been fired. It's amazing that we had to do that first, a full week after the story happened.

Now let's turn to individual reporters, and the way they botched this story and coverage of Chubais in general.

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Let's assume, to begin with, that, in every news story, there is a minimum standard that every reporter should be held to if he wants to argue that his reporting is balanced, and a maximum standard which he should aspire to. There are a few reporters and agencies who failed to meet even the minimum standard. The first is Reuters, which failed to report even the most basic elements of the near-firing story.

The book advance story was about bribery. It was not a story about unreported income or inflated literary fees. Reuters left the bribery angle out. In the most misleading story it released over the weekend, correspondent Adam Tanner, an old co-worker of mine from the Moscow Times, cast the story in a light that implied that Chubais was in trouble simply for making a lot of money:

"Boiko and Mostovoi, both close allies of Chubais, the father of Russia's privatization program, lost their jobs for splitting a $450,000 book advance from a Russian publisher with Chubais and three other associates.

"The issue is a delicate one because Yeltsin himself has written two volumes of memoirs, the most recent of which was written during his first term and came out in 1994.

"Yeltsin earned $280,000 in royalties in 1994 and 1995 for his second memoir, he said during the presidential campaign last year. In an income declaration earlier this year, Yeltsin said he was still earning bank interest on the book earnings."

Yelstin's royalties came from a book that actually sold well enough to earn $280,000. Chubais took an advance-not royalties-from a company that directly benefitted from his policies for a book that even under a once-in-a-millennium convergence of favorable planets would not sell more than $10,000 in copies. The comparison to Yeltsin was absolutely preposterous and totally misleading. Reading it, you wonder why he wrote it that way, until you get to the end: "Economics Minister Yakov Urinson said Chubais must be retained as he was essential to keep economic reforms going.

"'I'm completely sure that he is needed today in the Russian government and by the Russian people, not just for investment but to resolve all the questions before us,'" Urinson told Reuters.

"Chubais conceded Friday that he and his allies received excessive fees for the proposed book on Russia's privatization campaign. But he said the bulk of the advances were given to a charity promoting small businesses."

The Urinson quote-which left out the critical addition "a close Chubais ally"-capped a rhetorical flourish which ended in another misleading sentence. After all, when you end by saying "he said the bulk of the advances were given to a charity promoting small businesses," and don't challenge it, the reader is likely to accept it as true.

The minimum standard here would have required that Tanner point out that no one had been able to find that "charity," that Yegor Gaidar, who was supposed to be heading the charity, changed his story about that charity the next day, and that the money had not, after all, even been paid to this same nonexistent charity!

The maximum standard, which we were obviously never in danger of approaching, would have required here that he point out that the alleged "charity," the "Fund for the Defense of Private Property," bore the same name as the fictional organization through which Chubais had processed his $3 million interest-free loan from Stolichny Bank. But then, no Western reporter got that right-not one. Only the Russians brought that up.

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But by far the most shocking thing about the Reuters piece was that it did not so much as imply anywhere that Chubais was in trouble for influence-peddling. I called Gloria Cooper, the managing editor of the Columbia Journalism Review, America's leading press watchdog publication, and told her that some Western outlets had published the corruption story without including the link to the bank which had benefitted from Chubais's policies.

She couldn't believe it.

"I'm shocked," she said. "That would seem to be a key omission."

I called Tanner myself to find out what had happened. We chatted for a minute, then I abruptly told him I was interviewing him. Why, I asked, hadn't he included Oneximbank in his story?

He was silent for about ten seconds, taking in the fact that I was actually putting him on the record. Finally he said, "Well, it's impossible to explain everything..."

I insisted that the bank link was central to the story, and that there was no point in explaining anything until you explained that.

"Well, the story is there," he said. "I think the main question is whether or not there was influence-peddling, or a conflict of interest."

"Right," I said quickly. "So why wasn't that in your story?" Tanner at this point pawned me off on his superior, chief correspondent Martin Nesisky, who called me back a few minutes later and gave an amazing and revealing interview.

A quick note about interviewing reporters. From experience I know that journalists in private complain constantly about the way various public figures refuse to answer questions posed by the press, about the lame denials they make, the total lack of openness in their speech, and, more importantly, their hostility to reporters.

But the funny thing is that if you call up any reporter and put him on the other side of the deal, when he's suddenly the one being interviewed, he'll inevitably transform into the kind of evasive, hostile, doublespeaking twit even the p.r department of Exxon would be glad to hire.

I asked Nesisky why Oneximbank had been left out of the story.

"Too much detail," he said confidently. "Our work stands for itself. We try to tell each story as objectively and as simply as possible, taking into account what would be of interest to our readers. Believe me, nothing was consciously left out. There was just so much information..."

"But," I said, "I just spoke with Adam Tanner, and he said the real issue was whether or not there was influence-peddling-"

"Whatever Adam told you is not relevant," he barked, interrupting me. "You can't quote Adam."

"What are you talking about?" I said. "Of course I can. I talked to him."

"No you can't. I'm the one responsible for this story," he said.

"Yes, I can," I said. "I identified myself, I told him I was working on a story, and he never indicated to me that he didn't want to be quoted for the record."

"He indicated to me that he didn't want to be quoted for the record," Nesisky said firmly. "And I'm telling you that you can't quote him."

Was Nesisky next going to send me to bed without dessert? And was it really possible that a (I'm making quotation marks with my fingers here) chief correspondent (I'm dropping them) was trying to tell me that I couldn't quote his subordinate because the subordinate told him that he didn't want to be quoted? If only Richard Nixon had had the same employer privilege with John Dean...

He went on:

"There is no conspiracy here...That that aspect of the story was not in the piece does not have any other meaning...We're just trying to tell the story simply and objectively. Also, and this is something you're probably not aware of, we're dealing with a legal minefield here. If someone wants to proceed against our news organization, then I need not remind you that the UK libel laws are among the most stringent in the world."

What was he talking about? I said nothing, deciding to let him run with the line for a while. After a brief silence he said:

"Of course," he added, speaking up, "that has nothing to do with our coverage of the Chubais story."

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Then why bring it up?

"Look," he said. "If in the heat of the moment, details were left out of a story, that absolutely does not mean that the story was intended to favor anybody...The story we were trying to tell was that Chubais was kept on not because any scandal was being swept under the rug, but because it was economically and politically expedient. Look, whether you like it or not-" note the "you" here, which he emphasized, signifying a shift in tone where Nesisky was now, rhetorically, addressing me personally- "whether you like it or not, Chubais is a well known figure in the West, a person without whom Russia would have a terrible time dealing with the IMF...It would be nothing short of suicidal for Russia to remove him."

I said nothing again. He was swimming in deeper waters by now.

"Of course," he quickly broke in, recovering himself, "this is not my personal opinion, but the opinion of various named sources which were quoted in the article."

Here Nesisky reiterated his commitment to objectivity, called me "pathetic" for continuing to "hammer away" at this issue, and finally, saying that we were going "round and round in circles," tried to conclude:

"Look, all I can say is, if you are going to mention Reuters in your article, you must quote me as saying that if this aspect of the story was left out of our coverage, it was either due to an oversight or to the sheer volume of information-"

"Wait," I said, trying to follow him. "Now it's an oversight?"

That sent us flying into another heated exchange. Afterward, he clarified the quote:

"That is, if you think that information should have been in the story, it was an oversight."

So if I think it was an oversight, it was an oversight, but since he doesn't think it was an oversight, it wasn't an oversight. For the record, I think it was an oversight.

Nesisky, Tanner and co. weren't alone in failing to report the Oneximbank link accurately. No less an authority than the Washington Post, in the person of correspondent David Hoffman, carefully avoided the implication that Chubais had been involved in influence-peddling. The lead from the piece sets the tone appropriately:

"President Boris Yeltsin fired two more top aides to Deputy Prime Minister Anatoly Chubais Saturday but refused to accept Chubais's resignation, leaving Russia's leading economic reformer still in office but dealing a major setback to the prospects for further liberalization of the economy."

Obviously this was going to be an "isn't this scandal a shame" story. He comes closest to actually telling the story when he writes:

"But the uproar grew more intense because the source of payments appears to be one of the most influential and wealthy of the tycoons who have been feuding with each other and with Chubais in recent months."

No mention of the fact that the payment came from someone who benefitted from Chubais's actions as Vice-Premier. It just came from some guys who were feuding. That omission, plus the key omission of the history of Chubais's other improprieties, allowed Hoffman to include the following quote without making it seem ludicrous:

"'The different political forces involved in the attacks on Chubais understood that this is a team which is preventing stealing public money, and stops unfair rules of the game,' said Leonid Gozman, a Moscow State University political psychology professor who has been close to Chubais and Gaidar.'"

Chubais, the architect of loans-for-shares, heading the team which stops unfair rules of the game? When I called Hoffman to ask him how he had let that through, he snapped at me:

"I'm not going to get into the business of defending my story line by line," he said. "I've covered Svyazinvest in previous stories. My readers know I've reported this stuff."

Now, reporters can be sued for libel or defamation of character on the basis of one article. The obligation to give balanced and not misleading coverage exists in every story independently. You can't be wrong once and make up for it by having been right a week before. When I pointed that out to Hoffman, he repeated that he was not going to enter into a dialogue with me:

"I know what you're trying to do, and you know what you're trying to do," he said. "Obviously you haven't read my pieces on this."

It didn't occur to me at the time, but I had. In fact, in our press review, we pointed out that Hoffman was one of the first western journalists to coin the phrase "relatively fair auction" in regard to Svyazinvest. As Abram Kalashnikov argued, an auction can't be "relatively fair" any more than a woman can be "relatively pregnant." It either is, or it isn't. So Hoffman was actually a groundbreaker in the realm of misleading coverage. Nonetheless, I asked him to send me his pieces by fax.

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A quick note on Chubais. Because he pushed through loans-for-shares, and because he brokered the "group of seven" deal for banker support of Yeltsin prior to the 1996 election, a deal which left the bankers immensely powerful following the election, he can easily be said to have created, almost singlehandedly, the Russian tycoon class. You can't separate Chubais and the tycoons; they have each been equally responsible for the other's rise to wealth and prominence.

Given that, two of the four additional pieces Hoffman sent me can be classified as hogwash on the basis of the headlines alone: "Yeltsin Aides Take On the Moguls" (Sep. 26), and "Kremlin Reformers Take on the Money Magnates," (Sep. 9). A third, "Yeltsin Seeks Halt in Attacks on Reformers," gave the same Chubais vs. Tycoons line in the body of the piece:

"Chubais had also publicly taken on some of the new oligarchs, saying the government would not be pushed around by them."

Not only did Chubais create the oligarchical class, he was, even through last week, right up to the time he was nearly fired, still working actively to enrich one of the tycoons-Vladimir Potanin! Just a few weeks ago, Chubais was in London, meeting with British Petroleum which-surprise!-announced a deal to buy a stake in Potanin-controlled Sidanko oil company as soon as Chubais returned.

Chubais never took on all of the tycoons. He took on all of them except one. That makes him virtually indistinguishable from a tycoon himself. Leaving that out, casting him as a crusader against monied interests, is nothing short of extreme spin control in Chubais's favor.

Hoffman's only solid piece of reporting on Svyazinvest came in a lengthy Oct. 26 piece, which at least partially described Chubais's true role in the proceedings. By then, the Alfred Kokh story, which demonstrated to every reporter with a pulse in the city that Svyazinvest was probably a faked auction, was over two months old. In the meantime, Hoffman had whiffed three times in three separate pieces.

Including this new piece, that means Hoffman blew 4 out of 5 stories on Chubais in the last two months. That's a batting average of .200-what baseball players call the Mendoza line. In baseball, you can't even stay in the big leagues as a good-fielding shortstop with a .200 batting average. But in journalism, apparently, you can write for the Washington Post.

Hoffman, Tanner, Nesisky et al wouldn't have had to work very hard to get us off their case. Peter Ford of the Christian Science Monitor achieved the "impossible" in two sentences:

"Though Mr. Chubais has clung to his job so far, his three co-authors of a book about privatization were fired from senior government posts over the weekend, when it was revealed they split $450,000 in royalties.

"They accepted the money from a publishing house owned by Oneximbank, a major financial institution that has profited hugely from the privatization of state property."

How hard is that? Not that hard. But Ford was one of the few reporters in the city to get that at least mostly right.

Reuters and the Washington Post weren't alone in blowing their Chubais/Svyazinvest coverage. Patricia Kranz of Business Week, in a swooning profile of Potanin published a few weeks ago, offered the following nugget of wisdom high up in her story:

"Potanin had angered his rivals by refusing to play by normal Moscow rules, where state assets would be divvied up among tycoons at private sessions. Instead, he had insisted on a competitive auction for Svyazinvest and had paid a princely sum, breaking the game wide open."

This was after Alfred Kokh had already been fired for, as Yeltsin said, "favoring one side too much"! Even Hoffman's "relatively fair" was better reporting than that. When I called Kranz about that story, she made a smarter move than her colleagues at Reuters and the Washington Post: she freaked out off the record, then called me back with a prepared on-the-record statement, which was:

"I've done a lot of reporting, and the story reflects my conclusions. I spoke with one of the losers in the auction, Mikhail Freedman of Alfa-Bank, and he told me that he believed that the actual auction was fair, and that the bidder that made the highest bid won. His only quarrel was that Oneximbank had had more government accounts to work with, and therefore had more cash with which to bid."

"Okay," I said. "So why didn't you put that in the story?"

"I don't have to tell you why I put anything in my story!" she snapped, then hung up.

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Fred Coleman of USA Today interviews Chubais after Berezovsky is fired and when Chubais says, "I think Yeltsin has the historical right to name his successor," Coleman doesn't even ask him what he means. Loans-for-shares happens, and no one (with the conspicuous exception of the then-Marc Champion-run Moscow Times) in the Western press criticizes Chubais for his role in the phony auctions until years after the fact, and even then only mildly.

All throughout his career, Anatoly Chubais has demonstrated that he is not only anti-democratic (does anyone remember his loud pronouncements about a so-called "ChK", a "Chrezvuichainiy Komitet," which was supposed to act as a sort of vanguard of the proletariat for the cause of tax collection and economic reform?), but anti-fair play, anti-clean business, totally contemptous toward the concept of law-based society, and not, in any way, anti-oligarchical.

And yet, for some reason, the Western press corps still insists, after years of examining his multitudinous Machiavellian warts under a microscope, on making him out, in its coverage, to be the champion of democratic, anti-oligarchical, free-and-fair business reform.

Why? It's useless asking a Western person. The Russians have a better perspective.

"You know, it's funny," said Vladimir Chernets, a press spokesman for the Yabloko Duma fraction. "For years now, we've been talking about how Chubais's reform program is going to lead to catastrophe. And here in Russia, where the press is virtually controlled by Chubais, that message still occasionally gets through. But in the Western press, which is not controlled by Chubais, you almost never see it. I don't know how that could be."

"It's very simple," said Alexander Khinshtein of Moskovsky Komsomolets, the reporter who broke the "Golosui Ili" story involving the tape of Chubais planning the suppression of criminal investigations. "Anatoly Chubais is a Western-oriented politician. His entire policy is geared toward making Russia not merely a part of Western society, but a partner of reduced status. He is not even a Russian politician in the classic sense. He thinks about the West and Western business first, then thinks about Russia.

"The West," Khinshtein continued, "naturally wants a weak Russia. And Chubais's policies are pushing Russia in that direction. So when the Western press covers Chubais, they are unable to part with their dogma. They support him blindly because doing so supports their own interests, not ours."

The story behind Khinshtein's "Golosui Ili" article, which created a sensation in Russia, was virtually unreported in the Western press. Did that bother him?

"No," he said. "I knew they weren't going to pick it up. I wasn't disappointed."

One Western reporter, a writer for a prominent bureau who asked not to be identified, admitted that the Western press corps goes easy on Chubais.

"They treat him with kid gloves," the reporter said. "Probably because he's not as sleazy as Berezovsky. But there's still sleaze there."

That Chubais's policies, which squeeze out small businesses, strip ordinary Russians of nearly all social services, and favor nearly total deregulation of industry, would be viewed as far right-wing and rejected by the majority of voters in most Western countries, is never taken into account by most of our colleagues in journalism, who continue to describe Chubais as a "liberal." Most Westerners would be horrified by his indifferent attitude toward law, democracy, and proper business practice. But the Western press still paints him as our guy. Why?

Why? Why did the Moscow Times, in its November 18 issue alone, remind readers that Chubais is "indispensible", "pioneering," "important," "useful," and accurately described by exactly one dozen other positive modifiers? Because he allows powerful Western businessmen to make money in his country. That's it. And because he carries a laptop.

Well... now that you think about it, those are pretty damned good reasons. Ones worth lying in print for. I think we can all agree to that.

Available online at: FEATURE STORY, The eXile, #22, November 20 - December 3, 1997

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© , Janine Wedel