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A Personal Perspective on Democratization

16.04.2002 10:20
Johnson’s Russia List #6187, April 16, 2002

I have been following the debate on democratization of Russia with great interest and would like to offer a personal perspective. I think that JRL readers may find it useful.

I emigrated to the US from Russia at the age of 21, graduated from Columbia and earned an M.A. at Yale. In 1990, I proposed a scheme of voucher privatization (quite different from the one that was eventually implemented) and in 1992 came back to Russia to become an Expert with the Russian Ministry of Economics. Since I was hired by the Russians and not by the HIID or USAID, my salary was $26 per month. I served one and a half years.

In 1994, I got a short-term USAID contract to write an orientation brochure for arriving western consultants. I wrote the brochure, and it was put on the shelf. But then there was an article stating that the USAID`s Chief of Mission had overspent on the remodeling of his apartment. As the US Senate’s fact-finding mission was about to arrive, my brochure, called Understanding Russia, was published in forty eight hours, and spread on tables, still wet with paint, for the inspectors to see. So, that was how Russia was understood: very fast. And since Russia was now understood (a total cost of my contract was $7K), several million dollars of questionable expenditures were immediately forgiven.

Some may call USAID’s practices wasteful and self-serving, but it was exactly these practices that launched my career as a published writer. I am proud to have covered USAID’s behind with my work and, by the way, am ready to do so again: I have just finished another book.

After the Senators left, USAID decided to read the book it had just published. There, it found a discussion of cultural differences between the Russians and Americans as well as the use of the word “corruption” in relation to the Yeltsin’s government. USAID then bought up the book in stores and shred it, giving me back the copyright. I applaud this courageous action: indeed, how can USAID be promoting democracy and diversity of opinion unless it knows what it feels like to shred a book?

I reprinted Understanding Russia without a USAID logo, and it was favorably reviewed by several newspapers. The Globe and Mail called it “perhaps the best guide to [Russia`s] psychology” and a major Danish newspaper, Berlingske Tidende, wrote that the book was “an outstanding insight” that “enjoys a cult status in the Moscow English speaking community.”

Several employees of the US Embassy in Moscow invited me to their homes to tell me they had learned my book virtually by heart. But they talked to me in whispers, shook my hand furtively, and never came out in my support when I found myself in a life-threatening emergency. This I also applaud: how can you promote democracy unless you are full of fear and operate under an ideological press? As a naturalized American citizen who bought the America thing lock, stock, and barrel, I did not know Americans could whisper. Now I know they can.

From June 1996 to August 1999, I worked for the Defense Enterprise Fund (”DEF”).

DEF was established and funded by the U.S. Congress with a mission to create profitable joint ventures with the former Soviet producers of weapons of mass destruction. DEF’s stated goal was to convert these producers in order to prevent rogue states and terrorist organizations from getting their hands on the advanced Russian military technology. In his last State of the Union Address, President Bush referred to DEF’s mission eight times; apparently, it is important.

In July 1999, after my repeated attempts to convince DEF’s top management to improve the way the Fund was being run were all rebuffed, I wrote a confidential letter of concern to Ambassador Taylor, Coordinator of U.S. Assistance to the N.I.S. (All documents I mention are available on my website http://www.matthew-maly.ru/index-eng.htm). I alleged that about $20M of DEF’s money were grossly mismanaged.

Ambassador Taylor ordered an investigation of my allegations to be conducted by a partner of a lawyer that represented DEF Board. The “investigation” lasted four months and found absolutely nothing.

In August 2000, Department of Defense published its Audit of DEF. In it, DEF’s management and oversight were seen as “poor” and several million dollars of very questionable losses were described. However, this Audit failed to investigate or even mention my allegations.

In April 2001, the Moscow Times, published a 10,000 word Special Report about DEF, Investing, Pentagon-Style. This Report went through my allegations and essentially confirmed them.

In December 31, 2001, the second Department of Defense Audit of DEF was published. Again, it made no mention of my allegations. It said that DEF had invested about $30M, and the present value of this investment portfolio was estimated at $11M. DEF had just $4M in cash remaining in the $67M program. DEF spent $35M on itself, or 53% of its money, whereas, as the Audit noted, usually venture capital firms spend just “one to two percent” on administration. The Audit also found $2.2M of “unallowable” expenses, such as golf club memberships.

After my letter of concern, the company that managed DEF at the time was fired by DEF Board and another company was found to manage DEF. The new contract calls for $2M yearly management fee and is to run for five years. As present value of DEF investment portfolio was estimated at $11M, a contract to manage this portfolio for a fee totaling $10M seems generous.

The new DEF management company rehired only three people from the former management company, my former employer:

  1. a person who, I alleged, deserves most of the blame for DEF’s demise. Even though my letter of concern put most of the blame on him, this person was promoted to serve as DEF President (the former DEF President resigned immediately following my letter of concern);
  2. a person who, I alleged, was passing bribes to the former Russian Vice Prime Minister;
  3. a person who, immediately after my letter of concern was received by DEF Board, called a staff meeting to describe my letter as “slanderous”.

The Audit noted that the new DEF management company was “destroying documents”: it certainly has on its staff the three people best able to do that. As DEF’s new management contract leaves no money at all for conversion, I would call it “clean” as it cleans everything up rather neatly and takes to the cleaner’s both the Russian scientists and the American taxpayers.

So far, there has been four newspaper articles (two in the Moscow Times and two in Defense Week) and four investigations of DEF (an internal investigation, two Department of Defense audits, and an investigation by the Defense Criminal Investigative Service that is still continuing). Almost three years later, DEF (or whatever remains of it) is still managed by the same person.

I live in Russia and Ukraine and want to find a position having to do with U.S. assistance to the N.I.S. Since I wrote the letter of concern almost three years ago I have not been able to find such a position even though I have filed more than 200 applications. My wife is Ukrainian, and I cannot go back to the States because this would mean a long separation: we have two small children. As a result, my family was financially ruined: we lost our apartment and at times were having trouble feeding our children.

But I was not idle during these three years:

  • I pressed the US Government to investigate DEF, even though it was extremely reluctant to do so.
  • I claimed that blacklisting a whistleblower whose confidential allegations proved to be correct is wrong and counterproductive.
  • I wrote a book called How to Make Russia a Normal Country. This is a democracy primer and an interactive internet project. I published it in 2000 and gave away the entire printing run of 800 copies to Russian democratic politicians. My website, dedicated to the discussion of this book has had 5000 visits, even though for almost a year I had no money to maintain it. It goes without saying that I failed to get a single cent of funding for this project from any source.
  • I translated How to Make Russia a Normal Country into English, and adapted the text to Western readership. It will probably be called Russia: Where Lose/Lose Wins Out.
  • I wrote several televised speeches for Russia and Ukrainian politicians, where I promoted the idea of Win/Win as being better than a Lose/Lose. Those who know the NIS countries will understand that in this part of the world this idea amounts to a psychological and technological leap.
  • I wrote letters to USAID, and they claimed to have lost my e-mails.
  • I wrote to the US Embassy in Moscow complaining that my family was literally starving because of my inability to get a job - and they offered me a pauper’s ticket out, an offer that I did not take.

Here is my conclusion. I am an American citizen, and I have a lifelong commitment to democratization of Russia. This commitment does not depend on USAID funding. I want to participate in turning Russia into a peaceful, democratic, and prosperous state, a true friend and ally of the United States. In a war between Lose/Lose and Win/Win, I want Russia to be on the side of the Win/Win. My experiences over the last ten years have taught me that this was not a clear cut, Us vs. Them, kind of process. Some of the people involved in this process from the American side have not been the highest caliber. But this is natural. I am certain that JRL readers believe in true American values (as I still do, to my amazement) and are committed to bringing Russia and America closer together.

Мой Мир

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