Initially, the PSB's functions were determined by an unpublished Presidential decree. Then the Duma granted it the right to put certain persons under surveillance, and in May 1996 its statute was issued by the Duma. The code granted the service virtually unlimited powers, including among other things the right to combat foreign intelligence, fight crime, and design weapons systems, though the Duma cut out a clause that would have allowed it to engage in commercial activity. Over time the PSB evolved from a government organization into one which was loyal only to its own commander, serving Korzhakov's personal political interests. Korzhakov had been Yeltsin's bodyguard since 1987, and in August 1991, he stood next to his boss on top of a tank during Yeltsin's historic speech.
Korzhakov was frequently accused of meddling in governmental affairs, as the Service gathered evidence on high government officials engaged in corruption, bribe-taking, and squandering money. Korzhakov's people studied the origin of capital at the National Sports Fund and in the end placed at the head of that purely commercial structure a staff member of the Presidential Security Service. The service engaged in the suppression of smuggling, as when on 29 February 1996 the Presidential Security Service completed an operation which confiscated a batch of jewels worth a total of $3 million delivered from London to Moscow at Sheremetevo-2. Reportedly the PSB acquired documents which implicated Anatoly Chubais in illegal financial machinations during the privatization period, in which his banker associates Gusinsky, Berezovsky, and Vladimir Potanin, In December 1994 Korzhakov organized an armed raid on the Moscow headquarters of Most Bank headed by Vladimir Gusinskii. Gusinskii is allied with Moscow Mayor Yuri Luzhkov, a potential rival to Yeltsin in the 1996 presidential elections. Soon after the raid, Luzhkov denied he had any desire to run for president, and Gusinskii has not surfaced in Russia since January 1995, when he moved his family to London. General of the Army F.D. Bobkov -- inspirer and creator of the Fifth Department, later first deputy chairman of the USSR KGB, serves as head of the analysis service of the Most financial group.
1996 began with skepticism that President Boris Yeltsin would allow elections to take place, and on 05 May 1996 Korzhakov explicitly called for postponing the elections. But Yeltsin finished first in the 16 June 1996 initial round of the Presidential elections with about 35% of the vote, and was scheduled to compete with Zyuganov in the runoff slated for 03 July 1996. On the evening of 19 June 1996 Sergei Lisovsky and Arkady Yevstafyev, who were allegedly carrying a case containing $500,000, were arrested while leaving the White House of Russia. After being questioned for 11 hours by Presidential Security Service, Lisovsky [a wealthy advertising and showbusiness magnate] and Yevstafyev [ a close aide to former first deputy prime minister Anatoly Chubais] were released. Tipped off by Chubais, television networks broadcast updates on the unfolding scandal through the night, portraying the arrests as an attempted coup by Korzhakov.
Instigated by First Deputy Prime Minister Oleg Soskovets [who supervised the defense industry], Federal Security Service (FSB) director Mikhail Barsukov, and Aleksandr Korzhakov [Barsukov's son is married to Korzhakov's daughter, and Korzhakov reportedly helped his in-law obtain the position of counterintelligence chief], the arrests were apparently part of a plan to discredit Yeltsin's re-election campaign.
However, on 20 June the trio was abruptly fired by Yeltsin at the urging of Chubais. The three were hard-liners opposed to market reform, strong backers of the war in Chechnya, and opposed to holding the presidential election. Duma Speaker Gennadii Seleznev said that Korzhakov and Barsukov were fired because they "encroached on the holy of holies--the secret financing of the Yeltsin campaign." According to one view the firings of Korzhakov, Barsukov, and Soskovets were the result of a battle between factions within the President's inner circle between a group that wanted to take power by force and a group that wanted to win the election "legitimately." Others saw the events in the context of an ongoing struggle between three groups: the former heads of the power ministries, representatives of the energy complex, and representatives from financial circles.Consequently the PSB no longer exists in the form it had under Alexander Korzhakov. The interference of the PSB in politics ended 20 June 1996 when Korzhakov was dismissed from his post. He was replaced by Anatoli Kuznetsov, a professional without political ambitions or interests, who first became a PSB officer when Ryzhkov was prime minister. Following Korzhakov's replacement, the FSB was incorporated into the Federal Protective Service (FSO) headed by Yuri Krapivin. Under the law of 06 June 1996, the PSS and FSO were two independent organizations.
Changes in the status of the PSB include:
During the months that followed Korzhakov's dismissal, significant changes were implemented at the PSB. It is now restricted to carrying out its intended functions of protecting the President, and it no longer collects compromising documents on high-ranking officials and politicians. About 15-20 PSB officers were dismissed immediately after Korzhakov's resignation, and another 100 PSB officers submitted their resignations in the following months, with some 850 men remaining on staff [though other accounts report the total FSB staff as about 1,500].