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Kiev, Ukraine (CNN) -- A perilous face-off intensified Saturday when Russia state news complained that Ukraine had mobilized 15,000 troops in the suburbs of Slavyansk in eastern Ukraine "in order to wipe out the city and its residents." Quoting a Russian Defense Ministry source, RIA Novosti said satellite photos showed the force forming around the city that has become a friction point between the Ukraine military and pro-Russian militants. The Defense Ministry source said the number of Ukraine troops put the pro-Russian militants at a disadvantage because the latter are "armed only with small amount of pistols and shotguns." Many eastern Ukraine residents have Russian roots and sympathize with Moscow. The source said the photos showed about 160 tanks, 230 infantry combat vehicles and armored personnel carriers, mine throwers and multiple-launch rocket systems. Russian President Vladimir Putin has repeatedly criticized Kiev's use of force against Ukrainian civilians. Developments in Ukraine have come at a rapid pace in recent days: . -- Russia, which already had 40,000 troops on its side of the border, started new military drills a few days ago after Ukrainian forces said they killed five pro-Russian militants. Ukraine launched the second stage of an "anti-terrorist operation" against militants in Slavyansk. -- On Friday, a team of European and Ukrainian military observers were seized Friday by pro-Russian separatists in Slavyansk. -- Russian military aircraft "crossed and violated" Ukrainian airspace seven times overnight, Ukrainian Prime Minister Arseniy Yatsenyuk told reporters in Rome on Saturday. The Russian Defense Ministry denied the accusation, according to the state news agency Itar-Tass. -- Yatsenyuk met with Pope Francis while in Rome on Saturday. The meeting has been seen as a sign of support from the Vatican for his government. -- G7 leaders said they would impose new sanctions on Russia over its role in the crisis. The Ukrainian Prime Minister urged Russia to pull back its security forces and not to support pro-Russian militants in eastern and southern Ukraine. "We urge Russia to leave us alone," he said in televised remarks. Ukraine's government has promised constitutional reforms and protections for Russian speakers in a bid to ease the tensions in its eastern regions. Inspectors seized in Slavyansk . On Saturday, the fate of the military inspectors preoccupied world leaders. The inspectors from the Organization for Security and Co-operation in Europe were detained Friday as they entered Slavyansk, along with five Ukrainian military representatives and the driver of their bus, Ukraine's Interior Ministry said. Ukraine's Security Service, the SBU, said the group is being kept under "inhumane conditions" in the basement of a building held by the militants. The self-declared mayor of Slavyansk, Vyacheslav Ponomarev, told reporters that one of the "prisoners" has diabetes, but he has the medicine he needs and will be given his own quarters overnight. Separatist leader Denis Pushilin, self-declared chairman of the so-called "Donetsk People's Republic," told CNN he doesn't believe they are from the OSCE, but that some are NATO spies. The German Foreign Office said it had set up an emergency task force to find out what has happened to the team members, four of whom are German. The others are from Denmark, Poland, Bulgaria and the Czech Republic, Russian state media said. The OSCE mission in Ukraine is tasked with helping to implement an international agreement signed nine days ago in Switzerland, which called for illegal militia groups to disarm and leave occupied buildings, among other provisions. In a phone call with U.S. Secretary of State John Kerry, Russian Foreign Minister Sergey Lavrov asked the United States to use its influence to secure the release of pro-Russian leaders being held in Ukraine. Kerry urged Russia to support efforts of the OSCE and the government of Ukraine to liberate the inspectors and their Ukrainian guides, according to a senior State Department official. Targeted sanctions . Against the backdrop of increasing volatility in Ukraine, leaders of the G7 industrialized nations on Friday announced they would "move swiftly to impose additional sanctions on Russia" over its actions in Ukraine. The statement from the group -- which includes Canada, France, Germany, Italy, Japan, the United Kingdom and the United States -- came hours after U.S. President Barack Obama threatened Russia with new sanctions. CNN's Gul Tuysuz reported from Kiev and Laura Smith-Spark wrote and reported from London. CNN's Andrew Carey and Nick Paton Walsh in Slavyansk and journalist Victoria Butenko in Kiev contributed to this report. CNN's Alex Felton, Bharati Naik, Ben Brumfield and Boriana Milanova also contributed.
Russian state news says 15,000 Ukrainian troops in eastern Ukraine .
Self-declared mayor of Slavyansk says diabetic hostage has the medicine he needs .
Ukraine's Security Service says OSCE team is being held in "inhumane conditions"
U.S. official says planned U.S. sanctions "can have a significant impact" on Russia .

(CNN) -- A most awkward and revealing situation has emerged in the heart of Europe, forcing European governments to choose between their principles and their fears, and drawing an uncomfortable gap between Europe's words and its actions. Last July, a bus carrying tourists about to start their vacation suddenly exploded outside the airport in the Bulgarian city of Burgas. The bombing killed five Israelis -- including a pregnant woman -- and a Bulgarian driver. This week, Bulgaria's foreign minister blamed  Hezbollah, saying an investigation showed the attack was carried out by two members of the Iran-linked Lebanese organization. Hezbollah denied the accusation. But Bulgaria says it discovered strong links, with "data showing the financing and connection between Hezbollah and the two suspects." The news shines a light on a most surprising fact: Hezbollah has been conducting business rather comfortably in much of Europe over the years, openly raising money for its operations. Those operations, according to countless investigations in a growing number of countries, include plotting and attempting to kill tourists, diplomats and others. Washington, which labeled Hezbollah a terrorist organization in 1995 after a series of attacks in Lebanon and elsewhere that killed hundreds of Americans, has been pressuring the European Union to do the same. But the EU has resisted. The "terrorist" designation is more than a symbolic label. The label would allow European authorities to freeze funds, control the travel of Hezbollah operatives, and otherwise do what it can to prevent more loss of life. The new secretary of state, John Kerry, urged the EU to "send an unequivocal message to this terrorist group" now that Hezbollah has been linked to an attack on European soil. American officials have told Europe that their inaction is "making it harder to defend our countries." U.S. officials accuse Iran and Hezbollah not only of conducting attacks against civilians around the world, but also of actively supporting Syrian President Bashar al-Assad's brutal repression at home in a conflict that has already left more than 60,000 dead. Opinion: Why Obama is going to Israel . According to a new report from the Washington Institute for Near East Policy, authorities in various countries have uncovered and disrupted nearly 30 different terror plots by Hezbollah or Iran's Quds Force, an arm of the Iranian Revolutionary Guard Corps, in the last couple of years. But Europe, incredibly, continues to waver. EU foreign policy chief Catherine Ashton reacted to the news from Bulgaria with a clammy statement that there is a "need for reflection." Hezbollah operates in Lebanon as a powerful Shiite political party, social services organization and an intimidating, heavily-armed militia. It has strong support among the country's Shiite population and bitter opposition from Sunnis. EU officials say they fear destabilizing Lebanon, a country perennial teetering on the edge of sectarian violence. They also worry about angering Hezbollah, fearing attacks on European peacekeepers in Lebanon or terrorist attacks on European soil. Judging by recent events, that particular outcome was not prevented by their timid approach. France, in particular, has resisted upsetting Hezbollah. Paris has taken the lead in fighting extremism in Africa, sending troops against militants in Mali and declaring that it is committed to "a relentless struggle against terrorist groups." But it is somewhat less relentless when it comes to Hezbollah. The French take a special interest in protecting their influence in Lebanon, a former colonial holding. A firm Western stance against the group, however, could strengthen Lebanon's struggling pro-Western opposition, which blames Hezbollah for the assassination of many of its members, including former Prime Minister Rafik Hariri. A U.N. tribunal set up to investigate Hariri's 2005 assassination indicted four Hezbollah members. The pattern is well established. Argentinean prosecutors accused Hezbollah of carrying out and Iran of planning and financing the worst terrorist attack in that country, the 1994 bombing of a Jewish Community Center, which killed 85 and injured 300. Western experts generally agree with the assessment of the former U.S. homeland security secretary, who describes Hezbollah as "the most potent terrorist organization in the world." The government of the Netherlands already declared it a terrorist group and Britain named its militant wing a terrorist entity, as if it were separate from the rest of the organization. It is funded by Iran and closely coordinates its moves with Tehran. Over the years, it has been accused of carrying out attacks throughout the world, often in collaboration with Iran. In recent months, as tensions have risen between Iran, on one side, and Israel and the West on the other, Tehran and its Lebanese ally have stepped up their activities to a feverish pace, targeting Israelis diplomats and tourists in India, Cyprus, Thailand and elsewhere. Hezbollah and Iran were linked to a plot to kill the Saudi Ambassador in Washington. Hezbollah's protective ally, Iran, is enduring harsh economic sanctions from the West over its controversial nuclear program, and a number of Iranian nuclear scientists have been assassinated, as have a few key figures in the Hezbollah hierarchy. The circumstances of these assassinations have all been murky, but there is nothing vague about the bombing of buses full of tourists. By any definition of the word it qualifies as terrorism. And clearly, the question is not just symbolic. Europe is letting Hezbollah operate on its soil. By some counts, there are 950 Hezbollah-affiliated individuals in Germany alone. Europe wants to treat Hezbollah as a legitimate political organization, but the group's actions place it squarely outside the realm of legitimacy. As long as Europe closes its eyes to this reality and allows the group to organize, fundraise and hold meetings, it is guilty not only of hypocrisy, but also of passive complicity in Hezbollah's attacks on innocent civilians. The opinions expressed in this commentary are solely those of Frida Ghitis .
Frida Ghitis: Bulgaria blamed Hezbollah in bus attack, yet EU still won't call group terrorists .
She says doing so would let EU freeze group's funds, control its travel, averting attacks .
But EU fears angering group, destabilizing Lebanon; let's Hezbollah raise funds in Europe .
Ghitis: In letting group claim legitimacy, EU passively abetting a terrorist organization .

NEW YORK (CNN)  -- A new lawsuit alleges that convicted swindler Bernie Madoff financed a cocaine-fueled work environment and a "culture of sexual deviance," and he diverted money to his London, England, office when he believed federal authorities were closing in at home. A new lawsuit alleges Bernie Madoff financed a sex-and-drugs workplace with investors' money. The lawsuit, filed Tuesday in New York's State Supreme Court, was brought on behalf of former investors and seeks unspecified punitive damages and compensation. Beyond that, it offers a look at what the plaintiffs' attorneys say was once Madoff's multimillion-dollar empire and what is now his world in a federal prison in North Carolina. Among the allegations in the 264-page lawsuit are that during the mid-1970s, Madoff began sending employees to buy drugs for company use. The complaint alleges that some employees and investors were aware of the drug purchases, and that BMIS [Bernard Madoff Investment Services] was known by insiders as the "North Pole" in reference to the excessive amount of cocaine use in the work place. Attorneys Joseph Cochett and Nancy Fineman filed the complaint based on an investigation, including a four-hour interview with Madoff in prison in July, that they conducted for former investors. They also allege that major financial institutions, including KPMG, the Bank of New York and JP Morgan Chase, were aware that Madoff was transferring stolen funds to his London office for personal purchases. According to the complaint, Madoff transferred funds to London to buy extravagant personal items. "In 2006 Madoff thought the end was near because the [U.S. Securities and Exchange Commission] investigated. He realized he had to change things up so his focus shifted to London," Fineman said. "We know that KPMG were the auditors for the London branch and that money was used to buy yachts and Bentleys, they are supposed to look at related-party transactions. KPMG should have noticed these as a red flag." Officials of KPMG and the Bank of New York did not immediately respond to calls from CNN Wednesday evening for comment on the lawsuit. JP Morgan Chase spokesman Tom Kelly said, "We do not comment on pending litigation." The alleged illicit behavior outlined in the complaint did not stop at drug use and extravagant spending. Company parties consisted of topless entertainers, and some employees had affairs in places such as Madoff's own office, the lawsuit says. Madoff was fond of escorts and masseuses, and used money stolen from investors to pay them, according to the complaint. Madoff was convicted of operating a Ponzi scheme and defrauding thousands of investors. He pleaded guilty in March to 11 counts, including fraud, money laundering and perjury, and was sentenced to 150 years in prison. Prosecutors have said it was the largest investor fraud ever committed by a single person, totaling billions in losses to investors. Before Madoff, 71, was transferred to Federal Butner Correctional Complex outside of Raleigh, North Carolina, he lived a life of luxury. The lawsuit states that he had multimillion dollar residences in Manhattan, Montauk on New York's Long Island; Palm Beach, Florida; and Cap d'Antibe, France. The complaint includes details of Madoff's drastically different life now in prison. He lives in a cell where he sleeps on the bottom bunk while up top sleeps his 21-year-old cellmate, who is serving time for drug crimes, according to the lawsuit. Madoff's recreational activities consist of walking around the prison track at night, and eating pizza cooked by a convicted child molester, the lawsuit says. Madoff now spends his time with infamous inmates, the lawsuit says, including Carmine Persico, a former organized-crime former boss, and Jonathan Pollard, a convicted spy for Israel. Many of his fellow inmates are in prison for drug and sex crimes, according to the lawsuit. Going after large financial institutions that allegedly allowed Madoff's scheme to flourish is the goal of Fineman and her associates. "Our goal of meeting with Madoff during the investigation is to get as much money back from responsible parties and that's why lawsuits are filed and why lawyers do what they do," Fineman said. "Even now, 10 months later, the pain in the victims' voices is still evident. I still hear it when I talk to people who were being defrauded for so long." According to the complaint, Fineman and Cochett are seeking punitive and compensatory damages for their clients with "an amount to be determined at trial, including interest thereon." Fineman said that during the prison interview with Madoff, "He said he was apologetic, but he didn't seem apologetic." "I forgot I was in prison, he was talking to us as if we were in a restaurant -- he has quite an ego, you could see why people would be drawn to him," Fineman said. "He told us things that were self-serving to him," she said. "But he told me he knew he would die in prison."

Lawsuit seeks punitive damages, compensation on behalf of former investors .
Starting in '70s, Madoff sent employees to buy drugs for company use, suit alleges .
Lawsuit: Madoff used money stolen from investors to pay for escorts and masseuses .
Madoff now eating prison pizza cooked by a convicted child molester, lawsuit says .