Graham Stack in Kyiv -

Ukrainian prosecutors have detained businessman and politician Hennady Korban, in a move widely seen as linked to the political activity of the head and founder of the party UKROP.

The arrest comes ahead of a second round of mayoral elections in Ukraine’s third largest city Dnipropetrovsk, where an UKROP candidate could win city hall, and will likely add to a wave of criticism of Ukraine’s prosecutors for political subservience to President Petro Poroshenko.

Ukraine’s Prosecutor General’s Office (PGO) and the Security Service of Ukraine (SBU) announced on October 31 that Hennady Korban, founder of UKROP political party, former deputy head of Dnipropetrovsk state administration, had been detained as part of an investigation into whether he is head of an organised crime group.

His arrest comes two weeks before a run-off mayoral election in Ukraine’s third largest city of Dnipropetrovsk on November 15, where UKROP’s candidate Borys Filatov is favourite to win in the second round of voting, ahead of a candidate seen preferred by the administration of President Poroshenko. UKROP has also successfully challenged a decision not to hold a second round of elections in Dnipropetrovsk region mining town Pavlohrad, after the UKROP candidate was the runner up in the first round.

İn both elections, favourites to win are not members of Poroshenko’s eponymous party, but former allies of ousted ex-president Viktor Yanukovych, which Poroshenko is seen as preferring to UKROP, which is backed by Korban’s longstanding business partner, oligarch Ihor Kolomoisky.

Korban’s last posts on Facebook before his arrest celebrate the Pavlohrad courtroom victory, as well as pointing out how Poroshenko’s chocolate business Roshen has opened numerous new outlets in Russian-owned apartment stores across the country over the last year.

In a statement relayed by allies, Korban called his arrest “clearly a [politically] ordered case”.

Poroshenko commented on November 1 that Korban's arrest wouldn't be the last. "No one will enjoy immunity [in the fight against corruption]... neither the representatives of the new dispensation nor the representatives of the old regime," Poroshenko said in a TV interview, according to AFP.

'Abduction and embezzlement'

Korban was arrested in connection with the creation and activities of a criminal group, embezzlement and illegal abduction, the Prosecutor General said in a statement. “One particularly flagrant episode under investigation involves the embezzlement of UAH40m [$1.7mn] earmarked for volunteer pro-Kyiv fighters against Russian-backed separatists in East Ukraine’s Donbas region,” the statement added. 

The allegation refers to Korban's leading role in funding and organising volunteer batallions of irregular combatants to fight the insurgency in the Donbas region in the east of the country. Kolomoisky, owner of Ukraine's largest bank PrivatBank, and Korban, his longstanding junior partner, became unlikely patriotic heroes in 2014 due to their crucial role in supporting the military effort in East Ukraine after Kolomoisky became governor of Dnipropetrovsk, and Korban his deputy, immediately following the ouster of Yanukovych in late February 2014.

Korban said he was looking forward to the court hearings, when he would describe his "large-scale work in mobilisation of the army and people in the struggle with the Russian aggressor", he said in a statement relayed by allies.

"The PGO's words that the 'Fund for the Defence of the Country' bought valuables and luxury cars are the plain truth: The valuables were night vision devices and sights, sniper rifles and industrial quantities of weapons, radio sets and range finders," he said in the statement. "I myself created the 'Fund for the Defence of the Country' and was its main donor." 

Korban said he is also being investigated in connection with the illegal abduction in 2014 of Yanukovych-linked officials, including head of the state land agency Serhiy Rudik, and secretary of Dnipropetrovsk regional assembly Oleksandr Velichko.

Vitaly Gren, member of the political council of UKROP, said Korban had been arrested without a court order as required by Ukrainian law, and then transferred immediately from Dnipropetrovsk to Kyiv. "The leader of a political party has effectively been abducted in broad daylight by law enforcement organs," Gren, a member of the UKROP political council, told bne IntelliNews.

Political prosecutor?

Relations between Kolomoisky, Korban and Poroshenko broke down in early 2015, in connection with Kolomoisky's control over major state energy companies, as well as alleged Kolomoisky funding and media support for Poroshenko competitors such as the People's Front led by Prime Minister Arseny Yatsenyuk. This resulted in Kolomoisky's dismissal from the post of governor in early March.

At the time, then head of Ukraine's security service Valentyn Nalivaichenko accused "officials in the Dnipropetrovsk state administration" of involvement in smuggling in the theatre of war in the east, and in illegal abduction. But Nalivaichenko, who left the SBU in July, criticised the manner of Korban's arrest as "more about politics than crime", in a post on Facebook on October 31.

The move to arrest Korban comes after civil society activists and Western diplomats increasingly criticised the lack of high-profile prosecutions under Poroshenko, while calls for the resignation of Prosecutor General Viktor Shokin grew louder, and were lent support by US Ambassador Geoffrey Pyatt.

But criticism has focused on Shokin's failure to successfuly prosecute anyone over the massacre of up to 50 opposition demonstrators on February 20, 2014; to build cases against high-level Yanukovych allies placed on a sanctions list by the EU due to expire in coming months; to prosecute ongoing corruption widely regarded as unchanged since the Yanukovych era; and prosecute supporters of Russian-backed separatists in East Ukraine.

A protest car rally drove to Poroshenko's enormous residence near Kyiv on October 31 to demand Shokin's dismissal – just as news filtered through of Korban's arrest. "If this [Korban's arrest] is really not political, why was nothing done before the elctions, why are UKROP offices being searched, where can we see corruptioneers, separatists and Yanukovych accomplices on trial?" Semen Semenchenko, an MP in the People's Front party and former head of the Donbas volunteer batallion supported by Korban, told bne IntelliNews.

MP Ihor Lutsenko, one of the leaders of civil society during anti-corruption protests in the winter of 2013-2014, said Poroshenko was conducting a "crackdown on nationalists and patriots", and that there were now "scores" of political prisoners in Ukraine.

Prominent anti-corruption campaigner and MP Egor Sobolev, a member of Samopomich party headed by Lviv Mayor Andriy Sadoviy, feared that Samopomich could be next to come under pressure, since there were "signs that authorities were searching for compromising information" on the party.

Liberal members of Poroshenko's own party criticised Korban's arrest. "Law enforcement and justice... should not be used for settling scores with political opponents," former journalist-turned-MP Mustafa Naiem, one of the civil society initiators of the protest movement that swept Poroshenko to power in 2014, wrote in a blog on November 1.

Prosecutor General Shokin is widely seen as a loyal lieutenant of President Poroshenko. "He covers for Poroshenko," Daria Kaleniuk, head of NGO Anti-corruption Action Centre, told bne IntelliNews at a demonstration calling for Shokin's dismissal on the same day as Korban's arrest.

Georgian support

One loud voice from the Poroshenko camp spoke in favour of the arrest. Former president of Georgia and now pro-reform governor of Odesa, Mikheil Saakashvili, slammed Kolomoisky and Korban in an emotional statement to a journalist from Kolomoisky's own TV station 1+1. "These people [Kolomoisky and Korban] have been robbing Ukraine, where else do they have their money," he said. "All such thieves should go to prison." 

Kolomoisky previously notoriously referred to Saakashvili as a "snotty junkie" and 1+1 has aired strongly critical reportage of the Georgian firebrand.

Poroshenko on October 31 called on his coalition partners "to bury the hatchet and smoke the pipe of peace" following the regional elections. Deputy head of Bloc Petro Poroshenko, Ihor Kononenko, denied there was any connection to politics behind Korban's arrest.

"The case against Korban is pure politics," Korban's partner in business and politics Kolomoisky told publication Lb.ua. "I am convinced that is connected to the results UKROP got at the local elections," he said, adding that he personally had not experienced any pressure or been offered any deals from the presidential administration.

Kolomoisky's fate directly effects Ukraine's macroeconomic stability, since he owns the country's largest bank, PrivatBank, which holds over 26% of retail deposits. PrivatBank, headquartered in Dnipropetrovsk together with the rest of Kolomoisky's sprawling business empire, in October disclosed related party lending at 45.2% of its regulatory capital, compared with only 3.9% reported for 2014. PrivatBank is in the throes of restructuring a $150mn Eurobond.