Technology of Deceit

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Science News or Technology of Deceit

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Vladimir Puzankin

A few years ago The Institute of Applied Science Inс. (hereinafter referred to as IAS) was founded in the United States. The exact date of this Institute's emergence is somewhat vague according to various sources. The Institute's founders claim that it was incorporated on December 15, 1997. Nobody knows in which of the applied scientific fields the organization operates – or, maybe, in all of them at once. Its incorporation documents define the main line of activities as “Fostering the commercialization of Russian science with an emphasis on fields formerly associated with the creation of weapons of mass destruction”. It does not sound very clear and it is rather hard to understand to which applied scientific field such activities belong.

Every newly established organization, a scientific one in particular, tries to make itself known in the field in which it is going to operate. Its first mission should be to assert itself in the scientific circles, to acquire fame, good name, image. This difficult objective can be mainly achieved in two ways. The first way is to start research in the preferred field and, having attained some positive results, become widely known and famous. It is a long way as a rule, taking years and even decades. The other method is to declare its programs in a popular sphere of activities and thus attract attention to itself directly. This is the way IAS has chosen. After singling out the “Initiatives for Proliferation Prevention Program” (IPP) originated by the authoritative US Government agency – Department of Energy – IAS announced its own program, the Eurasian Software. At this, the Institute claims that its program is a component of IPP. The Institute's founders allege that IAS is a member of numerous various international organizations. The IAS Board of Directors includes quite influential scientists and politicians from both countries:

 John W. WOOD, Chairman – Founder and Chairman of Trilateral Group Limited, London; Chairman of MEC International Limited London, Chairman of Segal Quince Wicksteed Limited, Cambridge; Director of Oxford Analytica Limited, Oxford; Member of the Board of the Institute of United States Studies; Director of The Association of Management Consulting Firms; Chairman of Republicans Abroad International; former Chairman of Saint Petersburg Development Corporation; Founding Fellow of the Atlantic Council; Member of the Royal Institute of International Affairs, and of the International Institute for Strategic Studies.

William CURRAN – International Banker; Founding US Executive Director of the European Bank for Reconstruction and Development, appointed by President Bush; Former Chairman of First Chicago Investment Bank Limited, and Director of numerous joint venture subsidiaries; Former Member of the Council and Chairman of the European Working Party of FIMBRA (The British Securities Regulatory Authority) and Special Advisor to the Economic and Social Committee to the European Communities, dealing with the Banking, Investment Services, and Capital Adequacy Directives. As Chairman of First Chicago, he assisted in the negotiation of Ten Comecon Syndication's, and brought numerous first time Russian and Eastern European borrowers tot he Euro Market; as Senior Executive of New York Investment Bank, Delafield and Delafield launched the first Euro Equity issue for a European corporation, author of Banking and the Global System, published in 1979.

Dr. Phillip A. PETERSEN – Director of Russian Programs for The Potomac Foundation; President of the Long Distance Learning Corporation; former strategic analyst for the Federal Research Division of the Library of Congress, the Defense Intelligence Agency, and the Office of the Secretary of Defense; former Research Fellow at the National Defense University; Member of the International Institute for Strategic Studies and the American Association for the Advancement of Slavic Studies.

Dr. Nikolai PLATE – Specialist in polymer chemistry; Director of the Topchiev Institute of Petrochemical Synthesis; Secretary General of the Russian Academy of Sciences; recipient of Scientific State Award in Chemistry in 1985.

Dr. Lev SANDAKHCHEEV – Specialist in cell biochemistry; Director of the State Research Center of Virology and Biotechnology Research and Production Association “VECTOR”, member of the Russian Academy of Sciences, recipient of State Award in 1985.

Elizabeth SUMMERS – International Lawyer; Expert on the application of Western Commercial Law to the Russian and CIS Legal Systems; Executive of the Center of Institutional Reform and the Informal Sector Center (IRIS) at the University of Maryland, College Park, Maryland; Manger of Programs in Russia and the CIS; Formerly Managing Lawyer for the Almaty, Kazakhstan, office of the American Law Firm, Pepper Hamilton and Sheetz.

Dr. Evgeny VELIKHOV – Nuclear physicist; former Vice President of the Soviet Academy of Sciences; President of the Russian Research Center “Kurchatov Institute” (established in 1991 on the basis of the Kurchatov Institute of Atomic Energy founded in 1943); Chairman of Rosshelf Company (created for the purpose of exploiting the hydro-carbon resources of the Russian Arctic Shelf) and Member of the Russian President's Defense Council with Portfolios on Defense Conversion and Science Policy; recipient of State Awards in 1977, 1984, and 1985.

I would like to dwell here in somewhat more detail on the Russian members of the Institute Board of Directors.

I am sure that the name of Evgeny Pavlovich Velikhov, President of the Russian Kurchatov Institute Research Center, Academician of the Russian Academy of Sciences, Professor, Hero of Socialist Labor, winner of the Lenin and State Prizes is known to a large number of Russian readers.

Academician Nikolai Alfredovich Plate, Director of the A.V.Topchiev Institute of Petrochemical Synthesis of the Russian Academy of Sciences awarded the Labor Red Banner Order.

Lev Stepanovich Sandakhchiev, General Director of GNTs VB Vector, doctor of Biology, Professor, winner of the State Prize, winner of the Russian Federation Government Prize, Academician of the Russian Academy of Sciences. The nature of GNTs VB Vector's work makes it a restricted facility. According to the Director himself, the Institute is enclosed by a high triple fence and to enter there one needs a permission at almost the Governmental level.

In its letters to various organizations IAS refers to its cooperation with many Russian institutions such as the Kurchatov Institute, the Nuclear Energy Ministry, the Sate Duma, etc. One can see from the letterheads used by IAS for its letters and from cards of the Institute bosses and their assistants that IAS has it headquarters in the United States, in Virginia, as well as branches in London, Moscow and Kazan.

A few words about the Eurasian Software Program. The application sphere for the Program is not the whole Eurasian continent but only the part of it called the post-Soviet area and this mainly means Russia. The aim of the Program is defined as assistance to the cities and towns in Russia closed to outside access for security reasons. At this, IAS representatives often refer to arrangements with the Russian Government. In general, IAS interest in restricted subjects just can't fail to catch one's eye. The assistance to such restricted cities and towns in this case means training young specialists in methods accepted in the US.

Any old way, but the image for the Institute has been created. Now next on the agenda is to turn it into money. IAS prefers the following way of doing it. It is well known that as recently as a couple of years ago the US experienced a serious shortage of programmers. IAS offers programmers from Russia to American companies in the IT field, but presenting them as young scientists. In future, it promises establishment of an off-shore programming zone which is to operate in Moscow.

Digital Motorworks Inc. (DMI) from Austin, Texas, become an IAS client. The contract subject is very simple. IAS shall bring several programmers from Russia to work for DMI. But the contract terms and conditions are really monstrous. DMI should pay all expenses for sourcing the programmers, their trip, accommodations, etc. But the main thing is that DMI should pay $US58 per hour for each programmer's work. Not a single penny of that money finds its way to the programmers themselves. It is easily calculated that ten such programmers would provide over a million dollars in annual income for IAS.

It is difficult to comprehend what has made DMI sign such contract. Though there is one small hint. The contract was signed for and on behalf of them by one Wally Kulesza a DMI employee clearly feeling more than friendly towards IAS. Subsequently Wally Kulesza was sacked for “using the company for personal gain” but he found work in another company – the new victim of IAS.

The alliance of DMI and IAS soon fell apart. The Russian programmers were hired by DMI on a regular basis with obtaining work visas for them. But IAS was not going to surrendered its hard-won positions easily. Court actions were brought against DMI and the programmers. Damages for up to $US100,000 were claimed against the programmers and for much larger amounts – against DMI. Next came a determined psychological attack on DMI. A stream of letters arrived from IAS to DMI. Their contents were always the same. They began by elaborating on the importance of IAS international programs mentioning names of well-known organizations as well as the Russian and American Governments. Then terrible consequences awaiting DMI were painted. In some letters it was claimed that the DMI action caused grave concerns of the American and Russian Governments and was investigated jointly by FBI and the Russian Federal Security Service. They usually concluded by citing the amount of the so-called DMI's debt to the Institute and these amounts mushroomed from letter to letter. For instance, IAS at first estimated its expenses for furniture removal from the apartments provided to the programmers at $US20,000. Later this sum grew to $US60,000. Overall, the threats became more and more harsh and material claims in time reached millions of dollars. According to Mr. John Wood, the European Bank for Reconstruction and Development has allocated $US6 million for his programs. Blaming DMI for frustration of these programs Mr. Wood hints that the money should be reimbursed by DMI and, of course, not to the Bank but to IAS.

It is high time at last to explain what is IAS all about which implements such major international programs supported by leading scientists, public and political figures, Governments of both countries. IAS is registered in Delaware as a private non-profit organization. The staff of this major research institution numbers two employees who are also its founders. The President is John Wood, born in 1941. He is a participant in various programs and foundations. The Vice-president is Philip Petersen, born in 1946, who also participates in a number of foundations. In general, judging by the records of both IAS bosses, they have been busy establishing various programs and funds all their lives. Mr. Petersen claims that the two have been working together for over 20 years. Thus, this quite mature alliance has accumulated a lot of experience in forming such organizations. The are several assistants at IAS. The basis for their work is unclear, since they are not on the Institute staff. The IAS Headquarters is in Reston, Virginia. But their phone there is an answering machine. Data obtained via Internet show the address and the phone number as belonging to The Petersen Academic Group. By the way, there are some indications that this firm is headed by Mr. Petersen's wife. The address given for London is also of another company - MEC International Ltd, though this company's site does mention, by just a few lines, Mr. Wood and IAS. Unfortunately there are no traces to be found of the IAS presence in Moscow and Kazan. No Moscow address or phone number are mentioned on the calling cards and the phone number in Kazan, provided on the card of Mr. Petersen's assistant, Ms. Anna Tsiporkina, reaches a private apartment.

The work of the two IAS staff members is divided something like this. Mr. Philip Petersen mainly operates in the Russian territory and visits the country quite often. To tell the truth, a few times he took part in some conferences and even presented his papers at them. But such appearances clearly do not constitute his main interests in Russia. Mr. John Wood operates in the US. It is he who orchestrates the pressure on DMI. In addition, he signs more important letters to various American and Russian organizations. For instance, the invitation for the Russian programmers sent to the US Embassy and signed by him contained, as it has become clear subsequently, very little authentic information. It should be noted in passing that lies are the main operating method for these men.

At the very start of the software and programmer business they encountered one very significant barrier. The process of obtaining visas for Russian candidates turned out to be very long with nothing guaranteed. Later they had an interesting idea: using the same technique of mentioning famous names and important international initiatives they managed to get support of the US Department of Energy and thus facilitate the process of getting visas. The same device was used in bringing the action against the programmers. The half of the suit papers was taken up by absolutely unconfirmed information about the IAS international activities which had nothing to do with the programmers. But such information, in the opinion of the IAS bosses – and they were correct in this, should surely influence the court's ruling.

Sourcing programmers in Russia was done privately, by placing offers in Internet, naturally, without any participation by the Russian Government or any official bodies. This is just another lie of IAS.

There are grounds to think that the IAS financial operations conflict with laws. Thus, salaries for the programmers were transferred to their accounts from various cities and salaries for several of the programmers could be at once transferred to the account of just one of them. No originators of the fund transfers were indicated.

It is well-known that the American laws bans foreigners from working in the US territory without obtaining work visas. But getting such visas is a long and expensive process. In addition, with the work visa one has to pay the employee no less than the salary set by the Department of Labor for the occupation, and the taxes have to be paid as well. IAS presents such work as practical training, the salaries – by the way, much lower than the average ones – as accommodation reimbursements, let alone taxes which are not paid at all due to the non-profit status of the Institute.

The reason for this article is to attract attention of the public and relevant official organizations to such shady “cooperation” between our two countries. In my view, it causes a lot of harm to opportunities of developing proper good neighborly relations. In this case the significant material damages were inflicted on the American Digital Motorworks company. It has been operating for many months in intolerably nervous situation.

Having acquired such a painful “cooperation” experience it will hardly ever deal with Russia any more. Our specialists caught in the IAS programs have simply wasted a number of years in their careers since the IAS projects based on deceit have no future. But IAS is unlikely to have pursued any other interests and objectives but the desire to stuff their own pockets.

There are, in my opinion, clear violations of both countries' law in the IAS activities. First of, it is illegal operations in the territory of Russia. IAS actually acted in the Russian territory as an employment agency. It sourced specialists to work for other companies. It published ads, conducted interviews. This kind of activities requires licensing. IAS has never registered its representative office in Russia and acquired no license. As stated earlier, IAS paid excessive attention to our restricted fields and facilities.

As concerns American laws, this is a violation of the US immigration laws and performing dubious financial transactions allowing to avoid payment of taxes. Providing its clients with incomplete or patently false information about its operations, IAS misled them in order to conclude the contracts lucrative to itself. I call on the relevant organizations of both countries to investigate all this and give a legal assessment of the IAS activities. It should be only proper since the court actions have not been heard yet and the whole affair is not over.

I want to cast no aspersions on the honorable people whose names are mentioned in this article as well as on the authoritative organizations and institutions I referred to. It was done simply to illustrate the methods IAS uses in its operations. I have no idea if they have actually concluded any agreements with IAS but if such agreements were in fact concluded, I am sure, it was done due to the Institute presenting wrong, incomplete or false information about its activities.