LONG READ: Yanukovych-era corruption schemes implicate Ukraine’s current elites

LONG READ: Yanukovych-era corruption schemes implicate Ukraine’s current elites
A quarter century of Ukrainian presidents: Viktor Yushchenko (left) sits with Viktor Yanukovych, Leonid Kravchuk and Leonid Kuchma.
By Sergei Kuznetsov in Kyiv March 2, 2017

“A million dollars here or there made little difference to them back then,” Taras Chornovil, a former close associate of Ukraine’s now-fugitive ex-president Viktor Yanukovych, says about under-the-counter cash payments made by the Party of Regions, then headed by the ousted leader.

According to Chornovil, as much as $50mn went to Paul Manafort, Donald Trump’s former election campaign manager, for his campaign work and lobbying for Yanukovych in the years before 2008 - way more than the $12.7mn first said to have been paid to the consultant, who strenuously denies receiving any off-the-books payments.

Chornovil directed Yanukovych’s presidential election campaign during the 2004 re-run, after the previous vote was annulled for reasons of fraud. Viktor Yushchenko won the election, but Chornovil remained in the Party of Regions and even became one of its frontmen during the subsequent parliamentary elections of 2006 and snap elections in 2007.

“Just imagine: they put bags of cash in front of a driver from the party’s Dnipro office. He looks at these bags with wide eyes, throws them in the trunk of his car, gives no receipt, no note, nothing,” the politician adds, recounting the first round of the elections and the first re-run during the 2004 presidential campaign. “That was their attitude towards money at the time.”

In an interview with bne IntelliNews, Chornovil agreed to provide a rare insight into the murky deals of the past, which in many cases connect today’s political and business elites in Kyiv.

Nine months ago, the country’s post-Euromaidan law enforcement system had a unique opportunity to prove its efficiency and determination to fight endemic high-level corruption. The ex-deputy head of the Security Service of Ukraine (SBU), Viktor Trepak, leaked documents of the Party of Regions, subsequently dubbed the “black ledger”, which indicated that $2bn in cash had been used to bribe both former and incumbent top officials. Notably, Trepak provided documents only for 2008-2012, implying that much valuable and potentially explosive content of the ledger remains under wraps.

However, this litmus test of dilligence in anti-corruption was largely failed by the law enforcers. Only one official, the serving chief of the Central Election Commission (CEC) Mykhailo Okhendovsky, was formally accused by the National Anti-Corruption Bureau (NABU) of taking bribes from Yanukovych’s party totalling $161,000. While a court not only refused to suspend Okhendovsky from his duties, he was also able to fight back. His lawyers successfully demanded that NABU be investigated for their “attempt to bring an obviously innocent person to criminal liability”.

Some Kyiv-based experts believe the Ukrainian leadership is interested in burying the anti-corruption investigation as the trail could lead to many high-level politicians in Kyiv. However, in a written response to bne IntelliNews, NABU said that “there are no pressures” on the agency, without elaborating.

Andrei Marusov, chairman of Transparency International in Ukraine, tells bne IntelliNews that the investigation “is going nowhere”. He claims that many of the individuals mentioned in the black ledger have retained their political influence and have been attempting to hamper the investigation from its very beginning.

“This resistance will only grow,” Marusov adds. “The fact is that the members of Ukraine’s political elite are tightly interlinked. And today, many key figures of the Party of Regions have kept their influence in the ruling elite. For them it is vitally important to avoid any kind of ‘domino effect’, in which one of their circle ‘gives up’ the rest and they all subsequently fall.”

Joint-stock party

In late 2006-2007, the Party of Regions created an “ordered single system of financing”, Chornovil says during a meeting with bne IntelliNews in a café in downtown Kyiv. The venue is just a couple of hundred metres from the party’s former headquarters, where its accounting department was situated and where the black ledger was kept locked in a safe.

During the Euromaidan protests three years ago, the building was set ablaze by protesters, as a result of which two civil employees trapped inside were killed, according to information provided by law enforcement agencies controlled by Yanukovych at the time.

“There was no order in the party’s finances before late 2006,” Chornovil underlines. “Some local structures managed to get money for the same event from three different sources,” he says, claiming that the main sponsor of the party at the time was Donbas-born Rinat Akhmetov, Ukraine’s richest oligarch.

The billionaire’s confidant Borys Kolesnikov, a businessman and current member of parliament representing the pro-Russian Opposition Bloc, initiated the introduction of bookkeeping according to the principle that “our own should not cheat”.

“It did not even occur to him that someone sometime would open that black ledger. He was sure that it would be [well hidden] forever,” Chornovil says.

“Accounting books started to be kept after Yanukovych became prime minister under the Viktor Yushchenko presidency in 2006,” he adds. “The party started to construct a system of large financial expenditures – paying for deputies from other parliamentary factions to vote for legislative projects that the party needed. Most of all they made deals with the Our Ukraine party [headed by Yushchenko].”

The politician adds that after some time, in 2007, the Party of Regions started to give out substantial sums of money to pay deputies from other parliamentary factions “for the expansion of their faction”.

Yanukovych’s party was ready to pay up to $3mn to lawmakers from other parliamentary factions to swap their party allegiance. “Hard cash, only US dollars, only $100 bills,” Chornovil says.

However, the Party of Regions was also often making payments to rival lawmakers in a different manner: by providing control over industrial enterprises, issuing business licences for their companies, providing access to government procurement, and so on.

Such deals were very common a decade ago, when some members of the Batkivshchyna (Fatherland) party parliamentary faction, headed by former prime minister Yulia Tymoshenko, changed faction, Yanukovych’s former associate reveals during the interview.

For years, the Party of Regions has also paid monthly off-the-book “salaries” to its own parliamentary deputies, as well as to some “useful” lawmakers from other factions, especially those without their own business. Usually, these “salaries” totalled around $10,000, roughly 20 times the official salary of a Ukrainian member of parliament.

In addition, the party made payments to judges at the Сonstitutional Court and lower courts, local authorities, and members of the Central Election Commission, Chornovil claims.

The politician calls Yanukovych’s party funding system at the time “a joint-stock company”. It had several sponsors, who obtained extensive rights to lobby their own political and business interests, depending on the size of their contribution to the shadow budget.

According to Chornovil, Akhmetov, as the biggest donor, obtained around a third of the places in the party’s electoral list during parliamentary elections. “He put whomever he wanted on the list. For instance, his driver was included at one time,” he says.

When contacted by bne IntelliNews, a spokesperson for Akhmetov declined to comment on any information related to the Party of Region’s secret ledger.

Chornovil is the son of prominent Soviet-era dissident Viacheslav Chornovil, a leader of the country’s nationalist movement in the 1990s. Chornovil Sr. tragically died in 1999 in a car accident during a presidential campaign in which he was an active opposition figure. Many Ukrainian politicians believe that the suspicious death was a political assassination, despite the fact that law enforcement agencies claimed it was an accident.

In late February this year, around 300 Ukrainian lawmakers unexpectedly appealed to Prosecutor General Yury Lutsenko to resume the investigation into his death.

Putin’s man in Kyiv?

Lawmakers were “sold and bought as if in a marketplace”, according to Yanukovych’s former associate. “It was primitive and artless. But back then it involved big money.”

According to him, the mastermind behind the trading was Volodymyr Sivkovych, a former Soviet KGB security service officer and then adviser to Ukraine’s ex-president Leonid Kuchma. After Yanukovych’s victory in the 2010 presidential elections, Sivkovych became a deputy prime minister with responsibilities for the law enforcement agencies and army. Later he was appointed deputy head of the National Security and Defense Council (NSDC).

Chornovil calls him “a former superior” of Russian President Vladimir Putin from the times when Putin served as a KGB intelligence officer in Germany. This statement can hardly be verified using other sources, but Sivkovych’s official biography states that he served with the KGB in Germany in 1990-1992.

During the Kuchma presidency, Sivkovych was arrested by Ukrainian law enforcement agencies for some wrongdoing, but was later rescued by Putin who was then in his first term in the Kremlin. “Putin arrived in Kyiv for a meeting with Kuchma. However, he refused to meet with the Ukrainian president until he had seen Sivkovych, who was under arrest in Crimea," Chornovil says.

After the victory of the Euromaidan uprising, Sivkovych escaped to Russia, according to media reports. Meanwhile, Ukrainian law enforcement agencies are investigating him for possible illegal activities during Yanukovych’s presidency. bne IntelliNews was unable to request comment from Sivkovych due to his unknown whereabouts in Russia.

Tymoshenko: behind the scenes

“[Yulia] Tymoshenko was not one bit better than Yanukovych when it comes to financial cleanliness,” Chornovil claims about the former Ukrainian prime minister who has led the Batkivschyna (Fatherland) party during successive parliamentary election campaigns this millenium. “Two-thirds of her party list in parliament became members for money.”

According to the former Yanukovych ally, those candidates who bought places in the country’s parliament were not really party cohorts, and some of them swapped her faction for the Party of Regions immediately after the elections. 

In many cases, Yanukovych’s party was ready to cover the expenses of those politicians who decided to purchase their places in Batkivschyna’s election lists and then swap alliances after victory.

NABU refused to comment whether possible corruption schemes involving Tymoshenko, who currently leads opinion polls among Ukrainian politicians, are under investigation by the agency, citing secrecy of investigation. Tymoshenko’s media office did not respond to a written request for comment sent by bne IntelliNews.

Andrei Marusov, chairman of Transparency International in Ukraine, tells bne IntelliNews that “the practice of selling places on party election lists became widespread in Ukraine in the second half of the 1990s”.

“The millions of dollars that these parliamentary deputies spend to get onto the lists, they later recouped through lobbying for their interests in the corridors of power, including the tax authorities, customs, the antitrust commission, and the law enforcement organs,” Marusov says. Parliamentary immunity provides an additional stimulus for some, as it guarantees the immunity from criminal prosecution of both the lawmaker and his business enterprises.

According to Marusov, this practice was common during the presidencies of Kuchma and Yuschchenko. “Nevertheless, under Yanukovych’s administration the trading of parliamentary seats became so brazen it was hardly concealed,” he adds. The expert believes that such practices were also in place in the 2014 elections, when President Petro Poroshenko came to power.

The party’s off-the-books funding under the “joint-venture principle” existed until 2010, when Yanukovych became president. At that point the system was dismantled, and every significant business in Ukraine was obliged to fund either the Party of Regions or “Yanukovych personally”, Chornovil says. As a result, former donors of the party, including Akhmetov, lost some of their influence.

In 2008, Chornovil officially left the Party of Regions due to a conflict with some of its leaders, he reveals without providing any names. However, the withdrawal nearly cost him his life - he survived two assassination attempts. “The first time I was shot at, the second time it was an attempt to kill me in a road accident. My father was killed in a similar manner,” he says.

In conversation with bne IntelliNews, Chornovil has unveiled these details for the first time since it happened almost a decade ago. According to him, after the second assassination attempt, he appealed to “a very powerful” person in the party. “The next day, he called me and said that everything is ok, I have no need to be afraid.”

“I believe that my life was saved by Akhmetov,” Chornovil adds.

“At least $50mn” for Manafort

The leak of Yanukovych’s secret ledger was an unpleasant surprise for the current political and business elites in Kyiv, as well as for the election staff of Donald Trump during the 2016 presidential campaign.

In August, NABU revealed that Paul Manafort, US President Donald Trump’s former election campaign chief, was mentioned in the documents. The anti-corruption agency published copies of 19 pages in which Manafort, who previously headed the political campaigns of Yanukovych’s party, was mentioned. A total sum of over $12.7mn was allocated to costs associated with Manafort between November 2007 and October 2012, according to the bureau.

Manafort strongly denied the report, saying in a statement last August that he never received any of those payments, “nor have I ever done work for the governments of Ukraine or Russia”. However, he was forced to step down from his position as Trump’s campaign chairman shortly after the documents were published. Some experts in Kyiv believe that the leak was masterminded by the Ukrainian leadership, who openly supported Hillary Clinton during the campaign.

However, Chornovil says that according to his conversations with Yanukovych's allies at the time, “Manafort received at least $50mn” from the party. The politician refused to name his sources, however.

Meanwhile, according to information obtained by Newsweek in November from Western intelligence in Russia, Putin later met with Yanukovych in secret near the Russian city of Volgograd. Yanukovych allegedly assured Putin there was no paper trail documenting the payments to Manafort, although Putin is said to have told associates he did not believe the Ukrainian president.

Mysterious oil millionaire

Among the second-tier sponsors of the Party of Regions, Chornovil mentions the controversial Nikolay Zlochevskyi, a former member of the Party of Regions and a former ecology minister in the Yanukovych government. The businessman controls Burisma Group, a leading private sector gas company in Ukraine that was founded in 2002.

In early 2015, the country’s law enforcement agencies announced that Zlochevskyi was under suspicion for illicit enrichment and tax evasion, and he was put on the national wanted list. Meanwhile, the UK anti-money laundering authorities seized around $23mn in suspected assets relating to a case concerning Burisma’s owner.

However, the Prosecutor General’s Office in Kyiv failed to send documents to the UK to support the seizure, former US ambassador to Ukraine Geoffrey Pyatt said in September 2015. “Instead, they sent letters to Zlochevskyi’s attorneys attesting that there was no case against him. As a result the money was freed by the UK court and shortly thereafter it was moved to Cyprus,” the diplomat stated at the time.

“We have learned that there have been times when the Prosecutor General’s Office not only failed to support investigations into corruption, but rather undermined prosecutors working on legitimate corruption cases,” the former ambassador said.

The company is one of the largest private sector gas producers in Ukraine, with a 30% market share among independent oil and gas companies. The company became known for its weighty appointments to its board of directors, including former Polish president Aleksander Kwasniewski and the son of the former US Vice President, Hunter Biden.

In February, the company announced that Joseph Cofer Black, the former director of the CIA’s Counterterrorist Center and ambassador-at-large for counter-terrorism, was joining its board of directors.

As well as noting that their assets were duly unfrozen by the UK, Bursima on January 17 also highlighted in a press release the formal closure by Ukrainian authorities in January of the tax evasion case against the company and Zlochevskyi. At the same time, in the aftermath of the investigation, Burisma agreed to pay UAH180mn  ($6.6mn) in tax liabilities to the Ukrainian government. On February 1, the Prosecutor General’s Office in Kyiv confirmed this information.

However, on the following day, the Ukrainian service of Radio Free Europe/Radio Liberty published materials showing that a number of companies controlled by President Poroshenko, who controls the Prosecutor General's Office, and his close associate Ihor Kononeko, were among the clients of Burisma in 2016.

Window on elite dog fight

“Many of these people [mentioned in the black ledger] should not be in parliament. They should be in an absolutely different place,” Oleksiy Haran, a professor of comparative politics at the Kyiv-Mohyla Academy, tells bne IntelliNews. “As a citizen of this country, I want to see that at least somebody is imprisoned.”

However, the investigation has not been able to deliver significant results so far. Meanwhile, suspicions are growing in Kyiv that the black ledger was a tool in the bitter infighting between Ukrainian politicians and oligarchs. Chornovil does not exclude the possibility that the leak was masterminded by Serhiy Lyovochkin, a businessman and former chief of staff under Yanukovych.

“I believe the ledger only appeared thanks to the fact that it contains no names of Lyovochkin’s associates. It could be also some kind of revenge against Akhmetov’s team, against whom Lyovochkin was always fighting,” Chornovil says, adding that Lyovochkin had access to the relevant records.

He adds that the black ledger’s appearance was also a painful blow to Manafort, who “was disliked” by Lyovochkin's associates. According to Chornovil, Manafort’s participation in the promotion of Yanukovych’s party was a “long-standing project” of Akhmetov, which led to “feuds and competition” with Lyovochkin, who wanted to see his allies as foreign policy lobbyists.

Lyovochkin declined to communicate with bne IntelliNews. The media offices of the pro-Russian Opposition Bloc, from which the politician was elected to parliament in 2014, and the New Ukraine think-tank led by him did not respond to a written request for comment.

In November, Yanukovych said that Lyovochkin could have been responsible for the violent dispersal of anti-government protests in Kyiv in November 2013, which triggered the Euromaidan uprising. “Yes, he could have been involved in it. It's possible,” the former president told a court in Kyiv via a televised link-up from Russia’s Rostov-on-Don, adding that he “personally” lacks evidence to support this claim.

The same month, Ukarinian Interior Minister Arsen Avakov publicly seconded this version of events, arguing that Lyovochkin should be stripped of his political immunity as a member of parliament and imprisoned.

Many Ukrainian politicians and experts believe that Lyovochkin was one of the key masterminds behind a clampdown, his aim being to trigger a popular uprising and thereby protect the business interests of oligarch Dmytro Firtash, his close associate, from members of Yanukovych’s entourage. The politician, however, denies any involvement in these events.

With NABU now seemingly stonewalled in its efforts to unravel the tangle of dodgy political pay-offs of the past decade and more, the contents of the black ledger seem largely likely to vanish in the shadows again.

Ukrainian analysts and experts “always knew that the black ledger existed”, and “not only in the Party of Regions”, says the politics professor Haran. “The existence of the documents was not the sensation. The sensation was the fact that such documents were brought to light, as well as the enormous sums of money, in the billions, that were mentioned there.”

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