INSIDE THE CARTELS THAT BUILT EMPIRES AND DESTROYED SPECIES.

BY SIMON COOPER Originally published in Seed Magazine

Like nearly every other luxury in the world, caviar is tinged with hues of danger. It has the reek of gangsters and the taste of a dying species. Now, with exclusive access to multiple federal investigations, Simon Cooper reveals just how far greed will take those who seek Russia’s black gold.

If you would abolish avarice, you must abolish its mother, luxury.—Cicero

In a crackdown on smuggling and poaching in the Caspian region, border guards seized 1.6 tons of contraband black caviar in the first quarter of the year. Guards intercepted 1,232 pounds en route to the United Arab Emirates. Fake bills accompanying the cargo suggested that local customs officials were involved. —The London Observer Service

EARLY FALL 1998—CASPIAN SEA

In a small fishing camp tucked behind the reeds guarding the shores of the Caspian Sea, a poacher prepares to process his catch. In the gunnels of his boat is a thick, writhing carpet of sturgeon, living dinosaurs that have swum the waters of the great blue earth for more than 250 million years. The poacher selects a fat female. She is about four feet long and swollen with eggs. He hits her hard with a plank of wood—not hard enough to kill, but enough to stun. Blood trickles from her eyeballs, mouth, and gills. Quickly, the poacher rolls her over, slits open her belly, reaches inside, and carefully extracts a plump, gray-black sac about the size of a pillow. He puts the egg sac into a large plastic bucket and throws the eviscerated fish on the ground, where she flaps and thrashes, her abdomen gaping, until she succumbs and dies. Later he will butcher her for meat.

The poacher works quickly, as the eggs must be processed before they spoil. Once he has finished extracting the egg sacs he pushes them through a fine sieve, gently massaging them to avoid breaking the eggs as they separate from the surrounding membrane. Once they’re sieved, he washes them in salty water to remove blood and stubborn bits of egg sac. The clean eggs are then mixed with dry salt—enough to equal around 4 or 5 percent of the total volume of the eggs. Voila! Caviar.

The poacher takes his illicit product to the dealers, where he earns perhaps $20 a kilo. He hands over some of his money to the local mafia, payment for the protection he is “offered,” which keeps the border patrol and his fellow poachers away from his fishing grounds and camp.

A few months later, that same caviar will go on sale in New York for $2,500 a kilo.

The caviar mafia are thought to have been behind a terrorist bomb attack in the town of Kaspiysk that killed 67 people, including 21 children, and destroyed a nine-story apartment building. Most of the victims were Russian border guards and their families. The guards, who patrol Russia’s new boundaries, had begun to produce results in regulating illegal traffic and, in doing so, made dangerous enemies. More than 100 people lived in the bombed building, including the commander of the locally based border guards unit, Lt. Col. Valery Morozov. Morozov reportedly had told a Russian newspaper, Rossiysky Vesti, that he had been threatened by the “sturgeon pirates.”—The London Observer Service

MAY 2, 2003—US FEDERAL COURT, BROOKLYN, NEW YORK

“My point is, Judge, and let me just say this: Mr. Panchernikov is not some kind of serial caviar criminal. He is not. He was conducting a lawful business and made mistakes in judgment that were criminal in nature. He did that. He accepts responsibility.”

Gerald Shargel stood before the Honorable Charles B. Sifton delivering an impassioned mitigation on behalf of his client, Arkady Panchernikov—president of Caspian Star Caviar, then the largest importer and exporter of caviar in the US. Panchernikov was in court that day for sentencing after pleading guilty to illegally selling and shipping various types of caviar.

The case against Panchernikov was the culmination of a series of investigations, resulting in the jailing of around 70 percent of the United State’s major caviar importers for trafficking, smuggling, and poaching offenses. Over those five years, Special Agents and inspectors of the US Fish and Wildlife Service (FWS), state conservation officers, and federal prosecutors unraveled and exposed an illegal trade in endangered sturgeon eggs that has left some species on the verge of extinction.

It had taken three years for investigators and prosecutors to get to this day in court, with Panchernikov and his lawyers fighting them every inch of the way. And the sentencing hearing, held on a mild Friday morning on the second day of May, proved to be no different.

In court, attorney Gerald Shargel is known as an energetic advocate, emphasizing important points with finger wagging or expansive hand gesticulations. His mitigation for Panchernikov was exacting. He and the prosecutor, Assistant US Attorney Cynthia Monaco, clashed repeatedly over precise meanings and legalistic nuances, as well as Panchernikov’s continued wriggling about the extent of his guilt. Key to Panchernikov’s mitigation was testimony regarding his good character. Panchernikov was, Shargel stated, “a good and decent man, a good and decent father, a good and decent husband, a good and decent businessman who made mistakes, made judgment errors, thought that he was perhaps dealing with bureaucracy, like he had experienced earlier in his life in another country, and self-help was the order of the day.”

The Ukraine, under the old Soviet Union, is where Arkady Panchernikov was born in 1949, the son of a supermarket clerk and a gymnastics coach. His childhood, he stated, was one of considerable hardship. Until he was nine, his family lived in a one-room house adjoining a horse stable. At age 27, Panchernikov gave up his Soviet citizenship and left the Ukraine, first for Rome and then for America. By his own account, he had just $90 in his pocket when he first stepped onto US soil.

He settled near Washington, DC, finding work as a technician at a Maryland factory. Slowly at first, Panchernikov began transporting small quantities of caviar from New York and selling it in and around DC. In 1987 Panchernikov secured enough backing to start his company, Caspian Star, and begin importing beluga, sevruga, and oscetra caviar. Initially he sold his product mainly to domestic clients—particularly to fellow Russian immigrants, who had brought with them to the US their taste for sturgeon eggs. By its second anniversary, Panchernikov’s Caspian Star was grossing $1 million per year.

Soon Panchernikov set his sights on a bigger market—the cruise-line industry. Traditionally large consumers of caviar, cruise companies tended to acquire their supplies in Europe. Panchernikov worked to change that and was phenomenally successful: He soon became the largest supplier of caviar to such major cruise lines as Cunard, Princess, and Holland America.

However, the caviar market changed dramatically in the early 1990s with the breakup of the USSR. The tight regulations that had been imposed on caviar exports by the Soviet government went the way of the Iron Curtain—not just pulled down but stomped all over. Blackmarket caviar began to flood out of the former Soviet Republics, posing a major threat to Panchernikov and Caspian Star. With his wholesale market being eroded by cheaper underground imports, Panchernikov shifted his focus from wholesale to retail, aggressively pursuing and winning top New York clients such as Zabars, Balducci’s, and the Russian Tea Room.

On June 19, 1997, Panchernikov took his business to a new level by opening Caviar Russe, a bar, restaurant, and retail shop on Madison at 54th Street in New York City. Caviar Russe boasted crystal chandeliers and a simple menu planned around imported Russian caviar.

By the time Panchernikov landed in court, he was, by most standards, rich. He’d created a life for his family that was the exact opposite of his own upbringing. Now that he was about to lose the life he had sought out and worked so hard to enjoy, his family and friends rallied behind him. Filed with the court was a 39-page sentencing memorandum containing more than 40 character references from Panchernikov’s family, colleagues, and clients.

The memorandum also contained more vociferous protestations from Gerald Shargel of his client’s good background. The memorandum noted that since the investigation into Panchernikov had begun, his “…business records and practices have been viewed under a microscope by law enforcement, and his business integrity has, consequently, been impugned.”

Anyone dropping in to Courtroom 2 that day would have been forgiven for believing Panchernikov to be a victim rather than a criminal who, according to the presiding judge, was motivated by nothing more complicated than greed.

A Russian naval inspector who fiercely fought poachers involved in the illegal harvest of caviar in the Caspian Sea was killed in southern Russia, a spokesman for a regional Russian border-guard unit said.

The body of Vyacheslav Lomakin, an inspector in the Russian autonomous republic of Kalmykia on the western shores of the Caspian, was found with three bullet holes in a car in the coastal city of Lagan.

Lt. Col. Sergei Livantsov of the North Caucasus branch of the Border Guards said, “Lomakin had worked for only a year but fiercely fought against the poachers. It could be an act of revenge.”—Associated Press

JANUARY 17, 1998—ST. JOHN’S UNIVERSITY, QUEENS, NEW YORK

The caviar trade is an incestuously small world. Everyone knows everyone, knows everyone else’s business. If you work in the caviar trade you will undoubtedly have worked with, sold to, or bought from everyone else in the trade within a few years. You compete with a rival one minute, cooperate the next; undercut today, supply with caviar at a reasonable price tomorrow. One minute you will be partners, the next suing each other over some egg deal or another that has gone south for the winter.

Like the “brotherhood of the reeds,” that common calling binding together the poachers of the Caspian, the dealers form a loose but exclusive clique, rather like those who control the world’s other great cartels of luxury and excess—gold, diamonds, and drugs.

Some 40-odd caviar dealers, shop owners, and store reps made their way out to St. John’s for a Fish and Wildlife Service–sponsored meeting that would introduce a radical change to their world. They arrived, signed in at the door, and took their seats in the auditorium. Panchernikov was there, as was Eugeniusz Koczuk, owner of Connecticut-based Gino International, a caviar importing and wholesale business.

The attendees were told that sturgeon as about to be included on a list of endangered species policed by the Convention on International Trade in Endangered Species of Wild Fauna and Flora—or CITES for short. Indiscriminate overfishing and poaching of the three major caviar sturgeon—beluga, oscetra, and sevruga—had depleted Caspian Sea stocks by some 70 to 80 percent, to a level so low that beluga could be wiped out altogether. In an attempt to clamp down on the caviar trade, the US and Germany had successfully lobbied for the species’ inclusion on the CITES list.

As of April 1, 1998, all species of sturgeon would be added to Appendix II of the list. In order to trade in products derived from Appendix II animals, going forward, dealers would need a CITES certificate issued by the government of the country where the product had been obtained, stating that the product had been legally acquired and that the trade represented no threat to the continued survival of the animal.

The rules were spelled out: For every caviar shipment, the importer would need a CITES permit. Each CITES permit would be unique to that shipment and could be used only once. After the shipment was received, the permit would expire. If a dealer wanted to reexport what had just been received, a new permit would be required. The same went for importing another shipment.

It appears now that much of what was said that day fell on deaf or disinterested ears. But no one who attended could say they didn’t know the new rules; and the FWS had the sign-in sheet at the door to prove it.

OCTOBER 1998—WARSAW

Eugeniusz Koczuk liked Warsaw. It was his home city, and he was something of a player in its flourishing caviar-export business. He was on top of his world, a millionaire—and best of all, there seemed to be no end to the flow of Russian caviar entering his country.

Poland has no sturgeon fisheries of its own, yet it is one of the world’s most notorious caviar hubs. Poached blackmarket caviar arrives from Russia, where it is collected by middlemen who work for one of the many mafia groups there. The caviar is then “laundered” through Poland, which as a CITES member is allowed to issue reexport permits for the eggs. Technically the Polish CITES authorities can only issue reexport certificates if the shipment was accompanied by a valid import certificate when it came in from Russia. But for the right amount of cash, technicalities can be, and often are, overlooked.

Koczuk was working hand in hand with a Polish exporting company called Munnix, which, according to evidence collected by various law-enforcement agencies, is one of the world’s principal laundering points for poached caviar.

Koczuk was an old hand at smuggling—as was his “marketing director” Wieslaw Rozbicki. Both Koczuk and Rozbicki had previously been caught smuggling caviar into the US. In December 1994, on a trip from Poland, Koczuk tried to smuggle 27 pounds of caviar in his suitcase. Though caught red-handed, he petitioned to get his caviar back, telling customs agents, “This is my first customs offence.… I will not do this again.” Just two years later, Rozbicki was caught with 30 pounds of caviar, also in his luggage, after arriving in the US from Poland. Rozbicki, too, applied to be spared forfeiture. His words had a familiar ring: “This is the first time that I made this mistake. I used poor judgment. I promisse[sic] that this will not happen again.”

With CITES restrictions inhibiting the market, the price of caviar was skyrocketing. Suddenly the little black eggs were valued more like little black dots of gold. Smuggling went from being a way to cheat on customs duty to being a virtual license to print your own money.

In late October 1998, Koczuk met with his two chief smugglers, the husband-and-wife team Andrzej and Katarzyna Lepkowski. Andrzej was currently deputy police chief of Warsaw, Katarzyna an air hostess for the Polish national carrier, LOT. Together they were responsible for recruiting “mules” to smuggle Koczuk’s caviar into the US. Katarzyna had just returned from a smuggling trip to the US with Rozbicki and a mule, known only as “Majko.”

Rozbicki and Katarzyna had smuggled 136 kilos of oscetra between them; Majko had brought in 50 kilos of beluga. The retail value of the smuggled caviar was more than $300,000.

Within two days the eggs were sold to reputable retailers, including the Park Avenue restaurant Caviarteria and the exclusive food shop Urbani Truffles. Their customers had no idea the delicacy they were paying up to $100 an ounce for, and that was supposed to have been kept at a constant 26 degrees Fahrenheit, was an illicit purchase that had spent at least a day sweating and stewing inside the unrefrigerated suitcase of a smuggler.

Rozbicki remained in the States, ready to greet Lepkowski and receive Koczuk’s next wave of smuggled sturgeon roe at JFK International Airport.

As much as 465 kilograms of caviar and over 102 tons of sea products have been confiscated from poachers, TASS learned on Thursday from the press service of the North Caucasian agency of the Russian Federal Border Service.

However, this does not stop poachers. 300 meters of nets for catches of sturgeon were spotted and confiscated by border guards as a result of a surveying flight by a Mi-8 helicopter. Firearms have also been confiscated from poachers.—ITAR-TASS News Agency

The bucket on the floor of the warehouse was clearly labeled with a sticker that read “Salmon Eggs—Bait. Not for Human Consumption.” This was bad: The warehouse belonged to a specialist food company that sold thousands of pounds of salmon eggs annually to US stores.

Inspectors of New York’s Department of Environmental Conservation (DEC) found the bucket in the warehouse of Gold Star Smoked Fish, a company Panchernikov and a business partner owned along with Caspian Star Caviar. The DEC had discovered that Gold Star was the major client of a company called Tempotech Industries, which had just been shut down as part of a wide-ranging investigation into allegations that contaminated salmon eggs were being sold illegally as food. The eggs had been harvested from salmon fished in Lake Ontario, a body of water so polluted with toxic chemicals that the State of New York banned the sale of salmon from it.

A few years after the ban, Tempotech, run by George Jackson and Robert Gehl, obtained a contract to harvest salmon and salmon eggs from Lake Michigan, where, because the waters were considered relatively uncontaminated, salmon (and its roe) was deemed fit for human consumption. Tempotech maintained two egg-processing facilities—one at its headquarters in Hart, Michigan, and one in Pulaski, New York.

However, Jackson and Gehl decided to use the Michigan contract as a cover to launder Lake Ontario salmon eggs, which could only be legally sold as fisherman’s bait. Tempotech’s own analysis of the eggs showed high levels of polychlorinated biphenols (PCBs) and mirex—a banned pesticide linked to cancer, stillbirths, and reproductive disorders—but still Jackson and Gehl sold nearly one million pounds of the contaminated eggs, most of them to Gold Star. The eggs would have an eventual market value of $16 million.

The salmon eggs processed at the Pulaski plant were packed into 45-pound buckets clearly labeled with the warning stickers. But once in Michigan, the eggs were repacked, this time without the “bait” label, and then shipped to Gold Star, where they were resold directly to the public for consumption as caviar. Caspian Star’s records indicate that each bucket was referred to as a “piece” of caviar. A typical shipment contained ten pieces—450 pounds. A Tempotech manager confirmed to DEC investigators that “all Pulaski caviar went to Gold Star.”

DEC tests performed on Gold Star’s salmon eggs confirmed high levels of mirex. One investigator noted that Jackson had personally delivered the contaminated caviar to Gold Star.

Panchernikov paid for the shipments with shopping bags and attache cases full of cash—payments which totaled, according to court papers, “cumulatively many millions of dollars.” As a result of the DEC’s investigation, Gehl and Jackson were convicted in February 1995. Gehl was sentenced to 87 months in prison and fined $250,000, and Jackson was sentenced to 70 months. Tempotech itself was fined and forced to forfeit funds totaling nearly $1,500,000.

While no criminal charges were filed at the time against Gold Star or Panchernikov personally, the company was identified as an “unindicted coconspirator” in the Jackson and Gehl case, and the DEC instead pursued a civil action against Gold Star. The company admitted violating New York State’s Environmental Conservation Law by improperly harvesting and selling contaminated salmon eggs, and got off the hook with a $230,000 fine.

Koczuk may have been on the top of his world for many years, but climbing to the top always pisses off someone. By October 28, 1998, he had clearly pissed off somebody very close to the heart of his organization.

The tip-off call came in to a US customs office in Frankfurt. The anonymous caller gave specific information: the airport, the flight, the date of arrival, the names of all the smugglers, and what they would be carrying.

The customs agent dialed his counterparts at JFK, who in turn placed a call to their colleagues at the US Fish and Wildlife Service. The call was answered by FWS Special Agent Ed Grace, member of an elite investigative core at the heart of the FWS that trains alongside the FBI. Many Special Agents are biologists, and all are armed. One of their jobs is to take down smugglers of endangered species. Grace wrote down the smugglers’ flight arrival time and looked at his watch.

There were only two hours to go.

“Look, how are we supposed to fight corruption when a police lieutenant doesn’t make enough to feed his family?” one lieutenant colonel in the Astrakhan fisheries police says bitterly. “I have served 25 years and earn less than $300.” But despite the police’s professed economic woes, nearly half of the cars in the parking lot of the dusty fisheries police building were BMWs or Volkswagens. When asked whose cars they were, the department’s senior officers claimed they belonged to “visitors.” The cars were in the same parking spaces three days in a row.

Although 1,400 people were caught for poaching last year in the Astrakhan region, police admit that not one of them received a prison term, which could be up to three years for a convicted poacher. Most were instead fined between $40 and $2,500, the maximum penalty.—The Moscow Times

OCTOBER 28, 1998—WARSAW

Just before their trip, Koczuk and the Lepkowskis met to go over the final details of the smuggling operation. Katarzyna brought detailed lists of what caviar was being smuggled by whom, and scribbled down notes and prices, logging the amounts of caviar against the names of the mules. They were going to be traveling with 16 suitcases in all, packed with as many tins of caviar as would fit.

Andrzej Lepkowski left Koczuk and set out for Warsaw Okecie airport to meet his smuggling team, which for that trip was composed of one of Andrzej’s fellow police officers and his wife, Koczuk’s cousin, and three of Katarzyna’s LOT air-stewardess colleagues. The mules and Lepkowski rendezvoused. Lepkowski gave each mule an airline ticket, obtained for free by Katarzyna from her airline contacts. Lepkowski walked the mules and the luggage through customs, having already used his contacts to ensure they would pass through unmolested. His job was then to babysit the mules until they delivered their cargo at the other end. Once in New York, the mules would be met at JFK by Koczuk’s “marketing director” Rozbicki and given $500 cash, a hotel room, and a day to sightsee before boarding the flight home.

After the long trans-Atlantic, Lepkowski and the others stepped off Flight 003. They filed through the lines at immigration, collected their heavy baggage from the carousel, and headed for the customs checkpoint just inside the arrivalsarea doors. Lepkowski approached the checkpoint carrying three suitcases; the mules held the remaining 13 among them.

Thanks to the tip-off, Ed Grace and a phalanx of federal customs and FWS Special Agents were waiting at JFK for the shipment to arrive. As Lepkowski and the mules handed over their declaration forms and passports, the agents pulled them aside and asked them to open their luggage. As the suitcases were unzipped and opened one by one, the size of the shipment became clear: 499 tins—almost 1,000 pounds of caviar, mostly beluga—were jammed inside. And that’s all the luggage contained: There was not a scrap of clothing, not a single toothbrush or a pair of shoes. Just tin after tin of caviar—almost $2,000,000 worth. The tins were marked “Russian Caviar,” the lids decorated with jaunty pictures of a sturgeon apparently leaping for joy. The entire haul was without any kind of refrigeration, and some of the tins were weeping salty brown fluid from the warm eggs inside.

Just a few feet away, in the arrivals area, Rozbicki and Koczuk’s wife, Helena, waited, their impatience turning gradually to nervousness. Inside Rozbicki’s denim jacket pocket were envelopes containing thousands of dollars in cash—payoffs for the mules. Helena’s handbag contained a similar stash. Eventually, Lepkowski and two mules walked through the arrivals-area doors. Rozbicki approached them, shooting a relieved glance at their bulging suitcases. They chatted for a few minutes in Polish.

“Where are the others?” asked Rozbicki.

“They’re still back there,” Lepkowski replied, pointing back through to the customs hall. Rozbicki nodded towards the elevator. “The van’s up there. Go and wait in it, and I’ll be along when the others come out.”

Rozbicki had no idea that Lepkowski had been busted or that, in turn, he had agreed to cooperate with the FWS’s investigation. Standing next to him, posing as a mule, was a Polish-born undercover customs agent; and in the milling crowd around Rozbicki were undercover FWS Special Agents. Rozbicki and Helena Koczuk, along with the mules, were arrested and taken away for questioning. The mules quickly gave up their story and were deported. All except Lepkowski, who Grace correctly believed was part of the senior leadership of the smuggling operation.

Koczuk was still in Poland but learned of the disaster the next day from Rozbicki. Evidently in a panic, Koczuk immediately dashed off a fax to a legitimate US shipping broker he had previously worked with. “URGENT URGENT URGENT URGENT,” it read across the top. The fax asked the broker to help him out by pretending the shipment was legal and that there had only been a paperwork mix-up. “Let’s say it was Polish company mistake that the docs were not faxed to you [sic],” wrote Koczuk. The broker refused to help.

Following the JFK seizures, the FWS searched Koczuk’s home, which also served as headquarters for Gino International. Right there in his garage, next to the household detritus, were numerous refrigerators and freezers in which FWS and customs agents found another 1,000 pounds of illicit caviar, most of it stored inside a large, walk-in commercial refrigerator. Dozens of other tins were jammed into another freezer, and there were still more in the Koczuk’s home refrigerators, stuffed haphazardly among packs of steak and cans of beer.

Next to the fridges and freezers was a rough wooden bench that served as Koczuk’s packing “factory”—hardly what could be called hygienic.

The agents recovered dozens of documents detailing the suitcase-smuggling scheme masterminded by Koczuk. Grace, who led the FWS’s investigation into Koczuk, spent the next few weeks piecing together the puzzle. What he was able to deduce was astounding. Koczuk had, in just under a year, sold at least 28,000 pounds of illicit caviar—more than Gino International had ever declared to the FWS. Between April 1, 1998—the date CITES had come into effect—and November 3, 1998, Koczuk had made 36 trips to JFK to pick up mules. Those trips accounted for 19,000 pounds of the year’s 28,000-pound total. Yet he’d declared just 88 pounds to the FWS and customs.

In November 1999, almost a year after being charged, Koczuk and Rozbicki were convicted of six counts of smuggling and conspiracy to smuggle endangered wildlife products. The case was prosecuted by Assistant US Attorney Cynthia Monaco, who would later try Panchernikov. One of the key pieces of evidence against the pair was Lepkowski’s testimony, which revealed the extent of the conspiracy starting in Poland and ending all those thousands of miles away in Connecticut. Koczuk was sentenced to 20 months in jail. Rozbicki got five months.

Panchernikov’s instinct for the caviar business was remarkable, and he had worked tirelessly for his success. Despite the flood of cheap black-market caviar threatening his wholesale business, and the extra costs and difficulties posed by the CITES regulations, his business continued to grow; Caspian Star eventually posted gross sales of around $12.5 million annually, making Panchernikov the largest importer and exporter of caviar in the US. He continued to expand his business despite being investigated by the FWS. At the height of his success, he managed average sales of 30,000 kilos of caviar a year; in 2001, he took delivery of the entire Kazakhstani annual caviar yield—some 26.5 metric tons, the largest single shipment of caviar ever made to the US.

He rejected suitcase smuggling as a distasteful and altogether too risky means to get his hands on his precious caviar. Besides, there were other ways of staying under the radar of the FWS—methods far less risky and where, if things went wrong, there would always be someone else to blame.

Following the arrest and indictment of Koczuk, Rozbicki, and Lepkowski in November 1998, a gaping hole was left in the supply of caviar to the US market—and Panchernikov was eager to fill it. He and Munnix agreed to an exclusive supply arrangement. Munnix would supply Panchernikov, and only Panchernikov, with caviar in the US. Over the next year, Panchernikov took delivery of 13 (declared) shipments from Poland to his warehouse at JFK.

DECEMBER 4, 1999—KOCZUK’S WAREHOUSE, BROOKLYN, NEW YORK

Koczuk had been convicted just a month earlier, almost a year to the day after his arrest. He had been remanded to home detention while he waited to begin his sentence. In the meantime, the judge had given him permission to leave his home on “legitimate” caviar business on condition he inform Special Agent Grace every time he did so and that he submit receipts to Grace for every tin or jar of caviar he sold. Koczuk was soon sending Grace receipts for hundreds of pounds of caviar he’d bought and sold.

But there was a problem: Virtually all of Koczuk’s caviar had been seized after his arrest, and he had not imported a single ounce since. Grace eventually tracked Koczuk to the source of the caviar, in a warehouse in Brooklyn, and confronted him: “I need to know where that caviar came from, Eugene.”

Koczuk tripped over himself to prove the caviar he had there was not illegal. “Here,” Koczuk said, indicating a pile of invoices. “I got it from Panchernikov.”

Panchernikov and the FWS were not exactly strangers to one another. Four times in 1998 alone, Panchernikov had forfeited caviar shipments totaling 764 kilos for various import violations. Just a week or so before Grace’s December 1999 confrontation with Koczuk, the FWS had seized a massive 500-kilo shipment of sevruga caviar—the lowest grade of Caspian Sea caviar—that Panchernikov had been desperate to get into the US in time for the millennium celebrations.

The shipping documents Koczuk handed Grace indicated the caviar had come to New York via the United Arab Emirates and Turkey; like Poland, wellknown laundering points for illegal caviar. The FWS flagged the shipment for closer inspection and began opening the caviar tins. They discovered that under a thin top layer of cheap sevruga, the tins of Panchernikov’s shipment were actually filled with the more expensive oscetra. This, according to the FWS, is one of the oldest caviar-smuggling methods in the book. It also gives the importer an excuse if caught: Blame everything on the overseas supplier.

By foisting the blame onto the supplier, the smuggler effectively ties the hands of investigators. To make a case, the investigators would need to show what was actually paid for the shipment, which requires the original shipping document from the overseas supplier— something often impossible to acquire. Of course, it is hard to believe a supplier would ship expensive high-grade oscetra if he is really being paid for cheaper low-grade sevruga. But without an expensive, and often futile, international investigation, the investigators have no proof that the buyer—in this case Panchernikov—actually paid for oscetra knowing it would be imported as sevruga. So the FWS takes the only available option—confiscation.

After blaming the overseas shipper,Panchernikov nevertheless petitioned to have the caviar released and provided a Turkish CITES permit. The FWS refused the request and kept the shipment confiscated. Later, DNA testing would verify the presence of eggs from another critically endangered caviar sturgeon, the Ships sturgeon.

But a key question still lingered for Grace—how many times before had illegal shipments of caviar come in from Turkey undetected?

Eight months before Koczuk’s caviar stash was discovered in Brooklyn by Grace, Panchernikov discovered that a Miami dealer named Victor Tsimbal was getting his caviar from Munnix, in violation of Panchernikov’s exclusive agreement. Furious, Panchernikov confronted Munnix. He had just taken delivery of his fourteenth Munnix shipment—declared and imported on CITES certificates—comprising 400 kilos of beluga, 500 kilos of oscetra, and 300 kilos of sevruga, and worth about $2 million on the retail market.

The shipment arrived in the US and was awaiting distribution from Caspian Star’s warehouse at JFK. During a telephone confrontation, Panchernikov told Munnix they could take back their caviar. He said he had other suppliers he could count on… those in Turkey, for instance.

Munnix contacted Koczuk and asked him to intervene. Koczuk offered to go one better. He would take the caviar himself, he said, as it provided him with caviar stock to sell without involving CITES or the FWS. Panchernikov agreed to let Koczuk buy the shipment from him on one condition: Because of Koczuk’s recent conviction, he didn’t want Koczuk’s name on any of the documentation connecting him to the shipment. So Koczuk arranged for a friend, a carpenter named Witali Mienko, to stand in for him as Munnix’s “representative” in the US. Mienko rented a truck and drove it down to JFK from Connecticut, with Koczuk following closely in another vehicle. Mienko met with Panchernikov and signed the Munnix agreement authorizing him to take custody of the caviar. Then, both Mienko and Panchernikov counted the tins. Together they loaded up the truck while Koczuk waited outside. Once the transfer was over, Mienko and Koczuk drove the caviar to the warehouse in Brooklyn. Later Koczuk would start to move the caviar back, bit by bit, to his home in Connecticut.

But the shipment handed over to Koczuk was missing one important component—the original CITES permits it had been imported under.

Koczuk supported his claims to Grace that the caviar in his warehouse was legal by showing him the Munnix document, namely the agreement that had been faxed from Poland authorizing transfer of the caviar to Mienko. Grace went back to Koczuk’s home and discovered a portion of what appeared to be that shipment stored in the fridges and freezers he had previously raided.

Satisfied Koczuk was telling the truth, Grace began to wonder why on earth Panchernikov would enter into such a deal with someone as unappealing as Koczuk. Why not just send the shipment back and be done with it?

Russian border officials chased down and detained three boats in the Caspian Sea carrying about one ton of stolen caviar-producing sturgeon. The three boats, carrying 11 poachers, were stopped by a Russian border-guard vessel on Saturday off the Caspian’s northwest coast. Poaching of sturgeon in the Caspian has skyrocketed since the 1991 Soviet collapse. The poaching, following decades of pollution and overfishing, means the sturgeon that produce the best caviar face extinction.—Associated Press Worldstream

DECEMBER 13, 1999—CASPIAN STAR HEADQUARTERS, BROOKLYN, NEW YORK

One thing Special Agent Ed Grace wasn’t expecting to find in Panchernikov’s office was a gun. Grace led a raid of Caspian Star’s headquarters at JFK, on a warrant to search for evidence that Panchernikov might be involved in smuggling. During the initial search, an unlicensed .25 mm Beretta pistol was found in Panchernikov’s desk. He was arrested immediately and taken away by Port Authority Police. Later he pled guilty to disorderly conduct and was sentenced to one year conditional discharge and a $100 fine.

After finding the gun, Grace and a team of FWS agents and inspectors searched Caspian Star, looking for evidence of illegal caviar dealing. They found it in records indicating Panchernikov had reexported the contents of the disputed Munnix shipment. But this seemed impossible, as many of the tins in Koczuk’s fridges matched those declared on the CITES permits they had been brought in on by Panchernikov.

This created a big puzzle—whose caviar matched the Munnix shipment? Grace went back over Koczuk’s records and became convinced the caviar at Gino International was the real Munnix shipment.

Which meant Panchernikov’s “Polish” caviar had actually come from somewhere else. Grace located a second set of books and records, which revealed that Panchernikov had imported far more caviar from Turkey than he had officially documented—an illegal practice known as “topping off,” whereby an importer declares tins weighing, say, 1.8 kilos, which in fact weigh more. This is significant because the undeclared kilos of caviar enter the country free of any tax and out of CITIES oversight.

At that point, the puzzle became clear: The real reason Panchernikov had agreed to Koczuk’s proposal was to get his hands on the CITES import certificates accompanying the Munnix shipment, which would then enable him to falsely claim that those certificates matched his undeclared Turkish caviar. This in turn would allow him to obtain the necessary reexport permits he needed from FWS to ship the illicit eggs to his clients.

Evidence began to accumulate that Panchernikov’s import-export managers, Ella Spivak and Lillya Margus, had been directed by him to “provide false documentation to the FWS and other government agencies which allowed caviar to be illegally exported from the United States” to his overseas clients, which included the airline Lan Chile.

In addition, the FWS discovered that Panchernikov had exported the roe of the protected American paddlefish by claiming it was lumpfish roe, which was unprotected, and that “fraudulent health certificates were manufactured and signed… to avoid detection during the exportation process.” Indeed, FWS agents found blank health certificates that Panchernikov’s employees were counterfeiting to accompany shipments. In addition, it was revealed that Panchernikov had falsely labeled tins of oscetra caviar as the more expensive beluga.

MAY 4, 2003—US FEDERAL COURT,BROOKLYN, NEW YORK

Overall, 120,000 pages of evidence were collected during the Panchernikov investigation, creating a pile of evidence seven feet high that resided in the FWS’s JFK office.

Panchernikov was initially charged with six counts connected to illegally exporting caviar in violation of CITES treaties and falsely obtaining export permits by using the Koczuk CITES certificates. He was also charged with two counts relating to false labeling, as well as two counts of shipping caviar obtained from protected American paddlefish.

Over the next three years Panchernikov vigorously protested his innocence, but eventually, when he was told the US Attorney planned to file additional charges against him in connection with other shipments, he agreed to plead guilty to the original six charges. He was sentenced to 21 months in prison on May 4, 2003, and fined $400,000. Panchernikov was also stripped of his FWS import-export license. Today, he’s an inmate at the Otisville Federal Detention Center. Because he was convicted in Federal Court, he will serve at least 85 percent of his sentence before becoming eligible for parole.

Since April 1, 1998, when all sturgeon were entered on the CITES list of endangered species, most of the major smugglers and dealers in illicit caviar in the US have been caught and successfully prosecuted.

Eugeniusz Koczuk and Wieslaw Rozbicki had their sentences increased to 48 months and 20 months, respectively, after the US Attorney for the Eastern District of New York appealed the leniency of the original sentence.

Victor Tsimbal, the Miami-based caviar importer who’d inadvertently sparked Panchernikov’s dispute with Munnix in the first place, was sentenced in November 2002 to 41 months in prison after being found guilty of smuggling. In 1999 alone, Tsimbal smuggled more illegally poached beluga caviar into the US than makes up the entire legal Russian beluga harvest.

Alfred Yazback, president of New York–based importer Connoisseur Brands, was jailed for two years in January 2002. Yazback not only bought “suitcase caviar” from Koczuk but also controlled a gang of poachers who plundered US rivers for paddlefish. Yazback would then sell the paddlefish roe as sevruga. He and Connoisseur Brands were fined nearly $200,000.

Grigori Oudovenko and Vladisalv Tartakovsky pled guilty to smuggling thousands of pounds of caviar into the US inside shipments of dried fish. Oudovenko is currently in jail, Tartakovsky is waiting to be sentenced.

Hossein Lolavar, president of US Caviar & Caviar in Maryland, was jailed for 41 months and his company fined a record $10.4 million for smuggling more than 32,000 pounds of caviar worth $24 million. Lolavar and his brother-in-law Ken Noroozi bribed CITES officials in the United Arab Emirates with prostitutes and cash to provide export permits for caviar smuggled out of Russia.

LATE AUGUST 2003—FWS OFFICES, BROOKLYN, NEW YORK The skeleton looks like that of a child. Its small, delicate white bones are hunched slightly forward, the hands hanging loose, the naked sockets of its naked skull looking down from the shelf where it stands. The skeleton turns out to be that of a young chimpanzee. Next to it is a severed elephant’s foot someone tried to make into a footstool. There are several freezedried Hawksbill turtles, delicate, birdlike, with black-glass button eyes, as well as numerous stuffed jungle cats.

There are ordinary looking office cabinets, but instead of being filled with stationery or files or paper for the photocopier, they contain animal pelts—a snow leopard’s skin worth $25,000; cheetah, jaguar, panther pelts. Dozens of them. There are drawers full of alligator, crocodile, and cayman skins. Under counters there are evidence bags full of belts, shoes and handbags made of the hides of endangered animals.

FWS Special Agent Robert Rothe carefully places a box on a bench inside the room where the chimp skeleton stands guard. Inside the box is approximately 20 kilos of Panchernikov’s oscetra caviar, worth around $40,000. Rothe pries the box open and lifts out a fat blue tin. There is a thick, orangey-red rubber seal, but it slips off with little difficulty. Rothe opens the tin to reveal glistening, tightly packed eggs that wink under the lights of the room like little gunmetal-gray diamonds. They have a salty, almost metallic smell that rises from the tin. It is the smell of the sea, one of those smells that immediately transports you to the beach, to a rocky outcrop, to the last time you stood facing the water and took in a big breath of briny, ozone-charged air.

Rothe takes the tin, walks over to a sink set against the wall, and turns on the faucet. Half a kilo of caviar slips down the plughole, the little blackened eggs sliding out of the tin, the salt they are preserved in turning the water milky. The eggs float and bob around and then are slowly sucked into the vortex. Twelve hundred dollars worth of caviar goes down the drain in a matter of seconds. The air is full of their aroma.

Rothe opens another tin and slops more caviar down the drain. “This is where it ends,” he says. “This is where ends. Right here.”

Special Agent Ed Grace has been standing in the doorway, watching. “What a waste,” Grace says and walks out of the room.

TODAY—CASPIAN SEA

Somewhere in one of the five countries surrounding the Caspian Sea—Russia, Kazakhstan, Azerbaijan, Turkmenistan, and Iran—poachers are hauling sturgeon from the water.

A few weeks or months from now, a customer in a caviar bar in New York will sink his little spoon into a mound of beluga or oscetra or sevruga and enjoy a lingering mouthful. As the caviar slips down his throat, he’ll most likely have no idea of the provenance of his amuse bouche. He’ll not know of the agony of the harvest, or the threat of extinction, or the game wardens and policemen murdered by mobsters protecting the poachers. He’ll know nothing of forged permits or fake health certificates. He will not know if the caviar was shipped leaking and hot in the unrefrigerated suitcase of a mule, or if what he is eating is really Russian caviar or the poached caviar of the endangered American paddlefish.

Sturgeon have been on earth for 250 million years. In our ignorance, we may well make this century their last.

SEPTEMBER 4, 2003

From: Edward Grace

To: Simon Cooper

Subject: re: The End

“… what the caviar consumer does not see is the violence, greed, corruption, and death associated with the illegal caviar trade, which resembles the early ’80s, when cocaine was flowing into the United States from South America. You have organized groups in and around the Caspian Sea controlling the caviar harvest, trade, and international distribution by whatever means is required.

I understand that courts and prosecutors in the US need to devote their limited resources to more substantial crimes. Therefore prison time for caviar trafficking may not be as long and fines may not be as severe—but prosecutors have been fighting for prison time, and the courts have been handing down sentences with prison time. And any prison time can serve as a deterrent.

Am I trying to argue that the caviar trade is as bad as drugs and therefore should be punished like drug offenses? No, but I am trying to point out that this is not a victimless crime. Families are being destroyed, and a species that has been around since the age of the dinosaurs could vanish because of nothing more than simple greed.”

The head of the district maritime inspectorate had his car doused with gasoline and set on fire. The perpetrators have yet to be found. Local prosecutors believe it was an act of intimidation. Last year, border guards seized 190 tons of fish and approximately 300 kilograms of black caviar from poachers. The latter, in an effort to continue their illegal business, increasingly move from threat to action. At least 20 tons of poached Azov sturgeon and 500 kilograms of black caviar are sold monthly on just one of the Moscow markets. The price ranges from $10 to $250 per kilogram. Marine products are delivered with forged paperwork. In the past four years, the number of sturgeon in the Sea of Azov has declined from 15 million virtually to zero.—Moscow News

In 2000 American Federal Authorities made one of the largest crack downs on Caviar Smuggling.

New York Times Article (Click Here): "Vast Caviar Smuggling Case Brings Guilty Pleas"