DATE: Sunday, April 13, 1997                TAG: 9704100701

SECTION: COMMENTARY              PAGE: J1   EDITION: FINAL 

TYPE: Opinion

SOURCE: DAVE ADDIS

                                            LENGTH:  102 lines

FRIGHTENING JOURNEY TO THE BOTTOM OF A FOREIGN-AID RATHOLE

There was a dismal report in The New York Times the other day about how Ukraine, the third-largest recipient of U.S. foreign aid, at $250 million a year, is so hopelessly corrupt that western investors, large and small, are tripping over each other to get out with what's left of their shirts.

I know how they feel. I barely got out of Ukraine with my own shirt a couple of years ago, but I made out better than my business partner, Sergei, who came within a couple of days of getting whacked by the Bulgarian mafia over a perfectly innocent commodities deal.

I'm not going to use Sergei's last name in telling this tale because he still lives in Ukraine, and for all we know there are still some leather-jacketed Bulgarian thugs out there whose sense of greed remains stronger than their sense of humor.

If Sergei had gotten whacked, that would have wiped out half the management structure of the Norfolk-based Crimean-American Investment Corp., which, to be precise, was based at my dining room table in Ocean View.

It's hard to believe now, reading those reports of total, hopeless corruption, that we could have been so naive. Our whole business plan had been cooked up during a lazy, vodka-fueled, 24-hour train trip from Moscow, where I was living at the time, to Sergei's home in Sevastopol, the navy town on the Crimean Peninsula at the southern end of Ukraine.

It was to work like this: I would form a U.S. corporation, all legal and proper, and supply Sergei with corporate documentation, business cards, stationery, a bank account and a couple of thousand dollars of seed money - all the cachet of a legitimate American connection. Sergei would do the deals, hook up with Ukrainian business and political interests, slice out a nice piece of the post-Soviet economic boom that was just about to blossom.

Hey, it was 1993, just after the revolution, and everything was coming up roses. How could we miss? Sergei quit his newspaper job for the full-time life of the biznesmeni.

We were at a distinct disadvantage from the beginning: Sergei is an honest man. As a businessman in Ukraine, he'd have been farther ahead if he'd simply had leprosy.

Our first idea, which to this day I swear was a good one, was to build a radio station to serve the Black Sea beach-resort region east of of Sevastopol. (Imagine Virginia Beach in 1935. Then imagine that you held the only broadcast license there.)

We pitched this idea to the owner of Sevastopol's only television station, who had access to a broadcast tower on a peak in the foothills of the Crimean Mountains. He liked it. He liked it so well that, despite a written agreement, he stole it.

There being no tradition of contract law in Ukraine, we chalked it up to experience and went on to other deals. I moved back to the States, but Sergei kept plugging. He wanted to open a casino in Sevastopol, which I advised against. Just asking around about that got him ``dissuaded'' by the city's mafia. Secretly, I was relieved.

Sergei and a partner - a former chef from a Soviet nuclear submarine - opened a group of small shops and snack bars in Sevastopol, but some conflict that I never quite understood led to a breakup. He tried brokering Crimean wines, but the stuff was swill and the prices were high. He tried to buy a forest in the Urals and sell it to a Chinese businessman in Moscow, but that deal went bust from both ends.

He even tried grass-roots stuff, at my urging: A sister-city relationship with Chesapeake, and a plan to organize a Kiwanis chapter in Sevastopol. Sergei understood the fundamentals of building from the bottom up, but every time he talked to the local politicos, he said, all they wanted to know was how much cash they could wring out of his American contacts, or whether they could at least get free trips to the States.

By the fall of '95, when he came to Norfolk to visit, he'd been reduced to long, sleepless back-road forays into the Balkans and Turkey in a clapped-out, Soviet-built Lada. He and a partner would load the hatchback with cheap Asian goods that they would try to sell to the dwindling number of people back in Sevastopol who had any money to spend. Sergei hated it.

But he was making a little money - enough, he said, that he could repay about $1,500 of my initial investment. Keep it, I told him, put it back in the business. He said thanks, that it might help with a little deal he was putting together back home, something to do with buying honey in Bulgaria that he planned to broker in the Ukraine. A clean, simple deal, he said, with a modest profit at the other end.

But the honey drew wasps. When Sergei got home he found that the Bulgarian mafia was looking for him, demanding $10,000, and making noise that somebody would get hurt if they didn't get paid. Sergei had an elderly mother, a pregnant wife, and nowhere near $10,000. Panicked, he went to his local Sevastopol mafia for help. Their solution: Pay us $5,000 and we'll get the Bulgarians off your back.

Well, that's business in the Ukraine. He scraped together whatever money he had, borrowed whatever he could, and bought peace.

I don't hear much from Sergei anymore. Mutual friends tell me he's back at his original job, as a journalist. I doubt it's much safer for him, though, because a while ago his good friend Vladimir Ivanov, the editor of Slava Sevastopolya, was blown to pieces by a remote-detonator bomb that had been packed into a trash can outside his door. A mafia hit. No witnesses. No arrests.

Last week, a congressional subcommittee held hearings on U.S. aid to Central Europe and the ex-Soviet states. The Clinton administration, according to The Times, was expecting some ``pointed questions'' about our aid to Ukraine.

I doubt they heard any questions as pointed as Sergei might have asked. Congress, which has a strong pro-Ukraine lobby, tends not to hear his sort of story when they get down to handing out the cookies. But I sure wish somebody would. MEMO: Dave Addis is the editor of Commentary. Reach him at 446-2726, or

addis(AT)worldnet.att.net.

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