COMMENT: Attacks on Ukraine’s reformers go unpunished at home, but the US justice system is going after Kolomoisky

COMMENT: Attacks on Ukraine’s reformers go unpunished at home, but the US justice system is going after Kolomoisky
Ukrainian anti-corruption activist Vitally Shabunin had his house burnt down on July 23
By Robert Homans in Los Angeles August 12, 2020

The attempted murder of Ukrainian activist Vitally Shabunin on July 23 by arson is only the latest of numerous attacks against Ukrainian reformers, both at the national level as well as at the oblast or city level throughout Ukraine.

Shabunin is well-known, although a controversial figure, in Ukraine and the Co-Founder and Head of the Board of the Anti-Corruption Action Centre (AnTac), one of the most prominent anti-corruption organizations in the country.

Here is a link to a webinar (in English) held last week under the auspices of the Atlantic Council, where Shabunin and other reformers described their respective experiences from being the objects of physical violence, for no other reason than they’re reformers.

Six days prior to the attempt on Shabunin’s life in Kyiv was the death of Rep. John Lewis, one of the original leaders of the American Civil Rights Movement, along with Martin Luther King, Whitney Young, Roy Wilkins, James Farmer and Philip Randolph, sometimes collectively known as the “Big 6,” or the “Original 6.” Lewis was the last survivor of the “Big 6,” representing the 5th District of Georgia in the US House of Representatives until the day he died.

Leaving aside the issue of Race, both the “Big 6” and the Ukrainian Reformers, including Shabunin and many others were, and are, fighting to end systems that are, and were, extremely corrosive and damaging to their respective societies, often at the risk of great physical harm to themselves. In this respect, the work of Ukrainian reformers should be seen in the same context as the work of the “Big 6.”

In the case of Ukrainian reformers, their goal is the breaking down of what I have called the “Old Rotten System,” the combination of the legacy of Soviet Communism and corruption, enriching a few but impoverishing an entire country.

In the case of the “Big 6” they were seeking to end the system of “Jim Crow,” a series of laws that existed mostly, but by no means exclusively, in Southern states in the US, that prevented African-Americans from enjoying equal rights with Whites under the Law. Jim Crow underpinned Racism in the United States. Jim Crow Laws existed in states well beyond the southern states, and racial segregation also existed in the Federal Government. President Woodrow Wilson segregated the Federal workplace in 1913. The US Armed Forces were not desegregated until 1948, 3 years after the end of WW-II.

The “Big 6” faced numerous physical attacks. In April 1968, Martin Luther King was assassinated. John Lewis had his skull broken, attempting to cross the Edmund Pettis Bridge in Selma, Alabama on March 7, 1965, at the beginning of a planned march from Selma to the Alabama State Capital in Montgomery.

As with the “Big 6,” numerous Ukrainian reformers have been murdered or subjected to physical violence during the course of their work. Almost none of these murders have been properly investigated, let alone the perpetrators brought to justice. In addition to the attempted murder of Shabunin, here are a few examples.

Kateryna Handziuk – Anti-corruption activist in the Kherson Region, in southern Ukraine. She was attacked with sulphuric acid in July 2018, and she died of her injuries the following November.

Valeria Gontareva – The former Governor of the National Bank of Ukraine (NBU) from 2014 until 2017. Under Gontareva’s leadership, the NBU shut down over 80 banks, all of, which were either under-capitalized, conduits for graft, or both. This included PrivatBank co-owned by Igor Kolomoisky, in, which an audit by the American firm Kroll & Associates found that 97% of Privat’s assets – mostly loans to companies under related ownership – were deemed uncollectable. As a result of Gontareva’s actions, her house was burned down, her apartment raided, and a casket containing a mannequin with her face was delivered to the front entrance of the NBU in broad daylight without any intervention from the authorities. After moving to London, Gontareva was hit by a car, in a possible hit & run, in, which she broke both of her legs. Most people blame Kolomoisky, but it could’ve been any of the former owners of banks that NBU shut down during the time Gontareva was Governor.

Daria Kaleniuk – The Co-Founder of AnTac, has been physically attacked numerous times.

Ihor Stakh – Journalist and blogger from Chernihiv, in northern Ukraine, was beaten by 2 individuals last August 29. He arrived in an un-named country last September, seeking political asylum. According to one of the recipients of these emails, who lives in that country, one of Stakh’s colleagues was beaten and later murdered. According to this person, they had both been working on the illegal activities of “a coterie of Ukrainian politicians, businessmen and the corruption prevalent around the northern part of Ukraine near Chernihiv and Pryluky.” Stakh’s original asylum request was denied. With the help of the person I’ve referred to, he’s appealing the denial.

Handziuk and Stakh are both examples of numerous regional and local activists who, because they operate outside of the normal reach of international media based in Kyiv, are often in even more danger. Handziuk only became a subject of international coverage until after her savage attack. The same applied to numerous civil rights activists in the United States, both White and African-American, who were not known nationally, that is until they were beaten or murdered.

In addition to physical attacks, over the past several months the Zelenskiy Administration has removed several well-known anti-corruption activists from jobs in the Government. Subsequent to their removal, many of them have been subjected to criminal prosecution, on charges relating to their work in the Government, with the possible objective of discouraging others from Government service.

Whether it’s the “Big 6” in the United States or anti-corruption activists in Ukraine, struggling to change a corrupt, corrosive system, and thus adversely affecting vested interests, almost by definition opens one up to physical harm. As Assistant Secretary of State George Kent said, during his testimony before the House Intelligence Committee last November,” You can’t promote principled anti-corruption action without pissing off corrupt people. That applies to Igor Kolomoisky and others in Ukraine whose interests have been put in danger from the work of reformers, as much as it did to Sheriff Bull Conner in Birmingham, Alabama, Sheriff Lawrence Rainey in Neshoba County, Mississippi where three White “Freedom Riders” were murdered for helping African-American residents in voter registration, or Governors Orville Faubus in Arkansas and George Wallace in Alabama. They see those desiring to change the system as a threat to their authority.

In addition, changing a system like the Old Rotten System in Ukraine or Jim Crow in many parts of the US, requires profound changes in government, at all levels. In the US, the Federal Government was very slow to react to protect civil rights workers working in States or Counties. In Ukraine, in many cases the Federal Government IS the problem.

Those in the West who have Ukraine’s best interests in mind need to think about the work of Ukrainian anti-corruption activists in the same manner as most think about the work of the “Big 6.” Ukrainian reformers are complemented by strong civil society groups and a free press. In other words, conditions are present for them to prevail but, as was the case in the US, the process can take years and is extremely dangerous to those courageous enough to make the effort.

Kolomoisky Asset Forfeiture

Last week the US Department of Justice issued a civil asset forfeiture petition (the Filing) against Igor Kolomoisky and three of his associates, in connection with acquisitions of commercial property in Louisville, Ky and in Dallas, Tx. The total value is approximately $70mn. Kolomoisky and his associates, under the umbrella of Opima CBD LLC, and other legal entities, own or control a number of other businesses and assets in the United States but not subject to the Filing.

There is also an on-going criminal investigation being undertaken by a Federal Grand Jury in Cleveland, Ohio. Last week representatives of several Federal agencies, including the Federal Bureau of Investigation, raided offices of Optima in Cleveland, likely in connection with the Grand Jury investigation.

If the Cleveland Grand Jury hands down a criminal indictment against Kolomoisky, he will almost certainly leave Ukraine and flee to Israel. As an Israeli citizen, Kolomoisky is protected from extradition to the United States. Kolomoisky going to Israel would also absolve Ukrainian president Volodymyr Zelenskiy from having to make the painful choice of handing over Kolomoisky, the man who bankrolled Zelenskiy’s television career to US authorities or protecting him, and thus jeopardizing his relationship with one of Ukraine’s most important allies and, in addition, risking reaction among ordinary Ukrainians. What is important is that Kolomoisky is out of Ukraine.

Here is a link to the Filing of the US Department of Justice (DOJ) concerning the property in Louisville, Ky. The Filing illustrates in great detail how the funds flowed out of PrivatBank in Ukraine, primarily through Privat branches in Cyprus and Latvia, and into the US financial system. It is this level of detail that is critical in bringing an action of this nature.

There are several points that need to be made, including:

The Origin of the Information in the Filing: Apparently, some of the information in the Filing came from Privat and/or the National Bank of Ukraine (NBU), likely including the result of an audit of Privat conducted by Kroll & Associates soon after it was nationalized by NBU. Some information likely came from exhibits contained in Privat’s lawsuit against Kolomoisky and his co-owner in Privat currently being heard in the Delaware Chancery Court. Most importantly, additional information likely came from Ukraine’s National Anti-Corruption Bureau (NABU) and the Ukraine General Prosecutor’s Office (GPO), during the short period of time when Ruslan Riaboshapka, a genuine reformer appointed by Pres. Zelenskiy, was Prosecutor General.

Importance of the General Prosecutor’s Office: The GPO has the major authority to release information of this nature, including what is contained in the Filing, to international authorities, in this case the DOJ. Prior to Riaboshapka becoming Prosecutor General, his predecessors, including but not limited to Viktor Shokin and Yuriy Lutsenko, consistently refused to share this information. This is the major reason why many of the asset freezes that were originally requested by Ukraine, primarily against members of Yanukovych’s government, have been lifted. I believe that Riaboshapka’s willingness to share information about Privat, and Kolomoisky and his associates, was the primary reason for his removal after only 6+ months in office, perhaps more than his unwillingness to prosecute former President Poroshenko. Riaboshapka was endangering Zelenskiy’s Patron.

Importance of the Structure of Privat’s Branch Network: As mentioned earlier, much of the money that was used to purchase the properties came out of Privat’s branches in Latvia and Cyprus. According to a report by the Organized Crime & Corruption Reporting Project (OCCRP), Privat’s branches were set up as regular branches of PrivatBank, no different from a Privat Branch in Kyiv or Odessa. This structure, likely done with the permission of Cypriot and Latvian regulators, exempted Privat’s branches in Cyprus and Latvia from local banking regulation and oversight, thus making for a seamless transfer of money from Privat in Ukraine into the Western Financial System, including the United States, via Cyprus and Latvia both Member States of the European Union.

Lack of Legal and Forensic Accounting Skills in Ukraine: The attached filing serves to illustrate the level of detail and expertise required to bring a case like this in front of a US Federal judge. Ukraine has very limited forensic accounting expertise of its own. Five years ago I arranged a series of meetings in Kyiv with an American forensic accountant, who was primarily responsible for finding $200mn of money stolen by Charles Taylor, when he was President of Liberia. We met with legal experts, accountants, civil society, the President of a major university and a Member of the Ukrainian Parliament. Nothing came of his visit.

Importance of Forensic Accounting Education:  One of the items discussed in our meetings was setting up a forensic accounting program in Ukraine, likely under the auspices of one of the business schools. The forensic accountant who came to Ukraine offered to help start up the program, and to teach. Unfortunately, those discussions also went nowhere. Expertise in forensic accounting is essential, not just for cases like the one against Kolomoisky but, equally important, smaller schemes such as one in Lviv, involving the recycling of used motor oil, which netted the perpetrators thousands of Dollars.

Allegations of Kolomoisky Breaking of Ukrainian Law: The Filing cites approximately eight Ukrainian criminal statutes that were broken by Kolomoisky and his associates. Ukraine has yet to bring criminal proceedings under any of these statutes. If it does not have in-house expertise to put together a filing similar to the one developed by DOJ, there is nothing to stop Ukraine from hiring the necessary expertise, as the NBU did when it hired Kroll to audit the books of Privat.

Vulnerability of the United States: The Filing illustrates how easy it was for Kolomoisky and his associates to move money from Privat in Ukraine, money that was stolen from Privat’s depositors, into the US banking system, to set up legal entities that were used to acquire the assets that are now targets of DOJ’s filing, and the willingness of US professional services firms, lawyers and accountants, to facilitate the transaction. One of the reasons that Privat is filing a lawsuit against Kolomoisky in the State of Delaware, is the likely use of Delaware corporate structures to facilitate the acquisitions of assets in the US that are now the subjects of this filing. Fortunately, US vulnerability is now beginning to receive the attention it deserves, both in Congress as well as from the work of experts like Sarah Chayes in her new book, ”On Corruption in America & What’s At Stake.”

Most expect a decision on criminal indictments against Kolomoisky to come soon. Over the last several years the US Criminal Justice System has been playing a critical role in neutralizing Ukrainian oligarchs who break US Law, often in situations where Ukraine cannot, or won’t, act, with Kolomoisky being the latest example.

Several years ago former Prime Minister Pavlo Lazarenko spent several years in US Federal prison for money laundering. Currently Dmytro Firtash, currently being represented by US lawyers Joseph DiGenova and Victoria Toensing, with former Giuliani associate Lev Parnas serving as a “translator,” is fighting extradition to the US on similar charges.

New US Ambassador to Ukraine:  Lt. Gen. (Ret.) Keith Dayton is awaiting confirmation as the new US Ambassador to Ukraine. Gen. Dayton retired from the US Army in 2010. He is currently the Senior US Defence Advisor to Ukraine, and he Chairs the Defence Reform Advisory Board for Ukraine, made up of the US Great Britain, Canada, Poland, Germany and Lithuania. Previously Gen. Dayton has served as Defence Attaché at the US Embassy in Moscow.

I think having an Ambassador with the defence and intelligence experience, not to mention existing relationships with Ukraine’s defence establishment, are important attributes at this stage of Ukraine’s relationship with the US

Aivaras Abromavičius, the current Director General of Ukrboronprom, Ukraine’s State-owned weapons manufacturer, along with Moustafa Nayyem, are two of the very few true reformers left in Ukraine’s Government. Hopefully Gen. Dayton can offer them the support they need to continue their reforms of Ukrboronprom.

These relationships, plus his long experience in Ukraine affairs, makes Gen. Dayton a strong choice. Attached is Gen. Dayton’s Opening Statement to the Senate Foreign Relations Committee.

 

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