MOSCOW (Reuters) - When reporters from a Kremlin-friendly television channel barged into his office last month asking questions about Western funding, Grigory Melkonyants knew there was trouble ahead.
He and his boss at independent election monitor Golos had already sat for three interviews with the channel, NTV, and made no secret about financing that the group receives from organizations such as the European Union and USAID.
"But that wasn't enough because they needed some kind of scandal," said Melkonyants, Golos' 30-year-old deputy executive director.
Two days before Russia's parliamentary election on December 4, NTV broadcast clips from the interviews in a documentary accusing Golos of using Western money to work against Prime Minister Vladimir Putin and his United Russia party in the poll.
Hours after the documentary was shown, Golos' executive director, Liliya Shibanova, was held by customs officers at a Moscow airport for 12 hours when she flew back to the country and her laptop computer was seized.
"They (the Russian authorities) don't like this little organization that speaks the truth and criticizes," Melkonyants said. "This has nothing to do with journalism. It's an ordered, top-down campaign with the aim of discrediting the organization."
A few days after the election, which cut support for United Russia to only a slim majority in the lower house of parliament, Putin distanced himself from any blame for the worst election setback since he rose to power in 1999.
The ex-KGB spy accused the United States of stirring up protests against his 12-year rule following the poll and said foreign countries were spending hundreds of millions of dollars to influence the outcome of elections in Russia.
Putin's outburst has increased friction between the United States and Russia, despite their "reset" in relations, and Golos has been caught up in the middle of it all.
As one of the few independent vote monitors in Russia, Golos, which means 'voice' in Russian, has been instrumental in reporting allegations of irregularities, in some cases with video clips in support.
Golos' operations span 48 of Russia's regions, more than half the country's total. Its money trail leads from Washington and Brussels to its headquarters in a residential neighborhood in central Moscow. It is easy to follow.
In 2010 Golos received a two-year $2.8 million grant from USAID, which extends funding to non-governmental organizations in foreign countries working in areas from the health sector to political competition.
The money was to pay for the monitoring of two federal elections and three other polls. Russia's presidential poll, in which Putin is expected to return to power, is on March 4.
Other funding, including 100,000 euros ($133,000) from the European Commission and a smaller sum from a British organization, makes up its totally foreign-funded 55 million ruble ($1.74 million) budget for 2011. Melkonyants says all of it is legal and has not compromised the group's independence.
Russian money, he said, simply was not available to them.
Every spring, Melkonyants said, Golos applies for a presidential grant and every year the group loses to other organizations such as Tsentr Aspekta, a group whose work is unknown among most of Russia's civil society.
"We've tried for many years to get funding from the president which is given to non-governmental organizations. Every year we've applied and we've never received anything," he said.
U.S. State Department spokesman Mark Toner said the United States had spent more than $9 million on financial support and technical training for civil society groups before the Russian election and would keep supporting those working to ensure free, fair and transparent electoral processes.
The amount of money USAID allocated to programs in Russia was nearly $55 million, according to a document on the organization's website, including around $3 million allocated to "political competition and consensus building."
Golos said it had never felt that the foreign money meant it had to bow to any Western political leanings.
"I am Russian and this is a Russian organization. I never felt my partners wanted a particular result. I think they're much more interested in objective results," said Melkonyants.
Golos says it is now even thinking about giving up foreign funding altogether. The controversy has raised its profile in Russia and it has started receiving individual donations ranging from $20 to $100.
Putin faces a big challenge to his authority. Tens of thousands of Russians protested in Moscow on Saturday and smaller rallies were held in dozens of other cities across the country calling to press demands for the election to be re-run.
The organizers of the protests laughed off any suggestion that they had received money from the United States or Europe. One prominent opposition leader, Boris Nemtsov, said Putin's accusations showed he was "paranoid."
"The fact of the matter is that receiving financial support from abroad for political activities is illegal, a crime. If anyone received money from abroad they should be in jail," said Nemtsov, who served as a first deputy prime minister under President Boris Yeltsin.
"People went out to demonstrate, not because (U.S. Secretary of State) Hillary Clinton called them out but because they are angry that they have had their votes stolen. These are proud people," he said.
Political parties are forbidden from using money from abroad to campaign; and their balance sheets, though less than transparent, are published on the Central Election Committee website here
The liberal Yabloko party showed 139 million rubles in its electoral fund in 2008. The lion's share -- more than 130 million rubles -- came from institutional donations. The party declined to comment on who those donors were, but said they were all domestic sources.
"We rely totally on domestic financing," said Yabloko spokeswoman Sofia Rusova.
She went on to say that various social activities sponsored by fractions of the party that focus on gender issues and ecological problems in different regions of Russia do receive foreign funding. She declined to say exactly how much and from where the funds came.
United Russia's electoral war chest was 420 million rubles, the equivalent of a little more than $13 million. Its critics point out that United Russia, as the ruling party, has an advantage anyway by holding the levers of power and Putin's tight grip on traditional media.
Opposition groups are wary of discussing their finances but Alexander Averin, a spokesperson for opposition group Other Russia, denied his group had received any money from abroad.
The lawyer for blogger Alexei Navalny, an opposition leader who is serving a 15-day jail sentence for his role in a protest the day after the election, said the idea that Navalny received foreign financial support was ridiculous.
"We don't take any money flows from outside of the country. He (Navalny) is a lawyer by profession and he has his own clients and that is enough for living a modest life," Vadim Kobzev said by telephone.
Russia has often played up accusations of interference by foreign governments in its internal affairs, not least in the "color revolutions" that ushered pro-Western leaders to power in Georgia and Ukraine in 2003-2004.
A law passed in 2006, during Putin's second presidential term, expanded the Russian government's control over non-governmental organizations.
Parts of the law were amended in 2009 by President Dmitry Medvedev, but foreign funding of Russian non-governmental organizations remains a contentious issue.
According to the law, NGOs can receive money from abroad, but it is heavily taxed, in many cases by more than 24 percent, if the cash does not come from international organizations that figure into a list of pre-approved donors.
Access to the list is limited, but lawyers say it contains the names of 12 organizations, such as U.N. bodies.
Despite legal and tax hurdles, accusations of foreign meddling hold power for some Russians, especially those who remember Cold War enmity between the Soviet Union and the West.
"There are suspicions. Putin wouldn't say anything without grounds, so he must know something we don't know," said Lyudmila Mashenko, a small business owner.
But Gleb Pavlovsky, a former Kremlin adviser who now heads the Foundation for Effective Politics think tank, said Putin had simply sought to deflect responsibility for the election setback by deploying the often-used tactic of blaming the United States.
"It's stupid. They were looking for some kind of enemy during the election campaign but they didn't choose the right one," he said. "No one remembers the Cold War. This doesn't work any longer."
Fyodor Lukyanov, editor of the journal Russia in Foreign Affairs, also said the authorities had looked for someone to blame when the results of the election did not go as planned.
"This kind of suspicion and such accusations were absolutely predictable and inevitable. Any election campaign in Russia may be used as a source of controversy that Western organizations, especially NGOs, are operating on foreign money," he said.
$1 = 31.6540 Russian rubles