Page 67 - BNE_magazine_12_2019 dec19

bne December 2019
Opinion 67
Latvia – At a conference I attended in Kyiv, in June 2018, an official from Latvia’s Finance Ministry reported that they had frozen accounts, totaling approximately $19mn, belonging to 2 Yanukovich associates. Over the succeeding 4+ years since the accounts were frozen, Latvia had made repeated requests to the Ukrainian General Prosecutor’s Office to provide Latvia with proof that the money in the accounts was ill-gotten. According to this official, during this 4+ year period Latvia has received no response from Ukraine to its requests.
Great Britain – In a more famous case, in the Spring of 2014, at Ukraine’s request, Great Britain froze an account belonging to Mykola Zlochevsky, the CEO of Burisma.
The freeze was instituted in the Spring of 2014, shortly after Hunter Biden was named a Director of Burisma. In September 2015, in a speech in Odessa Geoffrey Pyatt, former US Ambassador to Ukraine, called out Viktor Shokin, the former General Prosecutor, demanding that Shokin release information Great Britain had requested, that would show that the money in Zlochevsky’s account was ill-gotten. In calling out Viktor Shokin, Amb. Pyatt was making
a virtually identical request to Ukraine’s General Prosecutor that cost his immediate successor, Marie Yovanovitch, her job. Great Britain never received the information they asked for, and they had no choice but to release the freeze on Zlochevsky’s account.
In addition to proactively finding the $15bn of depositors’ money, the IMF should also require Ukraine to comply, on
a timely basis, to requests for information from countries where frozen accounts belonging to Yanukovich’s associates are located. After all, it was Ukraine that originally requested that the asset freezes be put in place. As far as I’m aware,
in the 5+ years since the end of the Revolution of Dignity, Ukraine has not responded to a single request for information, required to keep asset freezes in place or, more importantly, allowing countries to make determinations that the money was ill-gotten, and thereby allowing them to return the money back to Ukraine. Instead, during this same period Great Britain, along with several other countries, had to release freezes on a number of accounts solely due to lack
of response from Ukraine.
The General Prosecutor of Ukraine has the authority to release the information requested by countries that have frozen accounts belonging to Yanukovich and his associates. During much of the period since the Revolution of Dignity the General Prosecutors that possessed this authority were Viktor Shokin and Yuriy Lutsenko. These are the same officials with whom Rudy Giuliani has collaborated on behalf of his client. Pres. Trump said that his concern about corruption in Ukraine was the reason why his administration withheld $400mn in US security assistance to Ukraine. If Pres. If Trump is so concerned about corruption in Ukraine, he needs to look no further than the 2 individuals, Shokin and Lutsenko, with whom his lawyer is collaborating on his behalf.
PrivatBank as a distraction
Much attention has been paid to whether or not President. Zelenskiy will cause PrivatBank to be returned to its former owners, most prominently Igor Kolomoisky. I don’t believe Kolomoisky wants PrivatBank back. Certainly, he wants to void his personal guarantee, and perhaps force Ukraine to compensate him for his equity in PrivatBank, likely zero given the value of PrivatBank’s assets, consisting mostly of loans to related companies owned by Kolomoisky that are considered un-collectable. To Kolomoisky, PrivatBank is most valuable as a distraction, diverting attention from the massive graft he is undertaking in other sectors of Ukraine’s economy where he’s active. Here are a few examples, based on publicly available information as represented by the person who gave the information to me:
• Sale of coal to Centrenergo, a state-owned electricity generator at high prices, and sale of power by Centrenergo to entities owned by Kolomoisky at low prices, giving an effective subsidy to Kolomoisky of UAH550mn since last July.
• Ukrnafta, a company controlled by Kolomoisky, but owned by Ukraine’s State-owned natural gas supplier, Naftogaz (50%+1), has failed to pay rent on production to the
State budget of $1.28bn.
• Ukrnafta paid $800mn to other companies owned by Kolomoisky for oil products that it never purchased.
• Kolomoisky owes money to Ukraine, for the illegal takeover of UkrNafta (based on a decision by a London court)
• Use of transfer pricing in the import/export of manganese that has the effect of moving pre-tax income out of Ukraine at around $360mn/year
PrivatBank, by contrast, has little or no net worth, and
no lender would provide the bank with debt funding that
is necessary to increase leverage and return on equity. If PrivatBank ever was turned back over to Kolomoisky it may cause a bank run. In other words, PrivatBank is now a poor vehicle to perpetuate stealing and Kolomoisky, of all people, knows it.
As a friend pointed out, successful pickpockets create distractions, that allow them to rob their victims. For Kolomoisky, PrivatBank serves as such a distraction.
Corruption as 3-Dimensional Checkers
When I was a kid, my friends and I used to play three- dimensional checkers. The game is played on three boards, each made of clear plastic, placed one above the other with small struts. You could take your opponent’s pieces either horizontally, as in conventional checkers by jumping over the, or vertically, by going over your opponent’s piece located either directly over, or under, one of your pieces. In Ukraine,
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