Secret court document exposes state looting in Ukraine

Current Ukrainian leader’s ex-financial advisers named as brokers in transactions linked to $1.5bn fraud of predecessor.

A secret Ukrainian court ruling has, for the first time, exposed exactly how former President Viktor Yanukovich stole nearly $1.5bn from the country. It has also revealed that President Petro Poroshenko’s former financial advisers played a role in the fraud, embarrassing the government.

Al Jazeera’s Investigative Unit on Wednesday released the 95-page document, which was declared a state secret last year.

The court order exposed in graphic detail the intricate company network used to steal the money, naming Investment Capital Ukraine (ICU) as brokering bond purchases made by Cypriot companies worth nearly $1.5bn between November and December 2013, just as Ukraine’s EuroMaidan uprising was beginning.

ICU has close links with the current government, having advised billionaire President Poroshenko on the sale of his confectionary company, Roshen.

During the time of the Yanukovich fraud, the finance firm was led by Ukraine’s Central Bank governor, Valeria Gontareva, a close ally of Poroshenko.

A spokesman for the president told Al Jazeera that he “strongly supports efforts to fight corruption in Ukraine”, while Gontareva added that when the transactions were made, she and ICU “saw nothing suspicious”. ICU said its role was limited to that of an agent.

Campaign groups called for a thorough investigation into the role of ICU.

“Al Jazeera’s investigation turns the spotlight again on the thriving international network of money laundering and crime,” said Nienke Palstra, anti-money laundering campaigner at Global Witness, an international NGO.

“Serious questions need to be asked about why the Ukrainian court ruling was made secret in the first place as well as how other countries – such as Cyprus and the UK – are apparently implicated by facilitating corrupt money flows.”

State secret

According to the secret document, released by Al Jazeera on Wednesday, ICU brokered the purchase of dollar-denominated bonds on behalf of eight Cypriot companies.

They were later traced to Yanukovich, who was overthrown in February 2014. 

A military court in Kramatorsk city in east Ukraine quietly handed down the secret ruling in March 2017, listing hundreds of companies, some Cypriot, that were effectively a pipeline for syphoning cash out of the country.

The whole financial network was described as a “criminal enterprise” headed by “Party One”, Yanukovich, who is self-exiled in Russia.

Also named is the entity: the “Secretariat of Sergey Vitalyevich Kurchenko”.

Kurchenko is a businessman who emerged aged 27 with a net worth of $400m and a huge oil and gas business. He was considered Yanukovich’s “chief financial officer”.

The prosecutor general only revealed the $1.5bn asset seizure two months later, announcing that the court papers would not be published under state secrecy laws.

The highly unusual move triggered strong opposition from anti-corruption groups who launched a legal challenge.

Badly needed cash

At the heart of the case is $1.5bn in bonds and cash, deemed to be the proceeds of crimes by the Yanukovich clan.

On paper, the money belongs to a shadowy network of Cypriot offshore companies. Prosecutors declared them as a “front” for Yanukovich and his associates, now in Russia.

Ukraine’s prosecutor general, Yuriy Lutsenko, had to prove that the money was the proceeds of crime.

That posed a unique legal challenge for Ukraine, because the prime suspects had fled the country. Ukraine’s legal system is not designed to deal with cases where those charged are absent, effectively putting them beyond the law.

Without a trial, there could be no finding of guilt. Without a guilty verdict, Ukraine had no lawful way to declare the money the proceeds of crime. Without a court judgement, the money was beyond the reach of the state.

The stolen government bonds continued paying a large dividend, meaning the country’s exiled oligarchs stood to profit, funded by Ukraine’s beleaguered taxpayers.

The secret trial hinged upon a low-profile figure, Arkady Kashkin, who acted as a nominee director for companies belonging to Kurchenko, the man trusted to run Yanukovich’s financial empire.

Kurchenko is in hiding in Moscow, protected by Russian special forces. Kashkin was not so lucky. He cut a deal with the prosecutors, declaring that he was the unlikely mastermind of a vast network of more than 400 companies that laundered hundreds of millions of dollars.

With a guilty plea, the government moved quickly to seize the funds. Ukraine’s economy is suffering as the government funds a war with Russia and props up a state that lost nearly 20 percent of its gross domestic product in 2014. The stolen money was badly needed.

Legal challenge

Anti-corruption groups are deeply worried by the process and are demanding full disclosure of all the court papers. They believe the legal process, behind closed doors and without the representation of the Cypriot companies, is flawed, providing grounds for a legal challenge by the company owners.

That legal battle is already under way, with the Cypriot shell companies filing cases to challenge the secret judgement. Lawyers believe they have a strong case and may yet secure the return of some or all of the nearly $1.5bn.

Ukraine’s government insists it is fully committed to the fight against corruption.

ICU told Al Jazeera that it carefully complies with all legal and regulatory requirements prior to entering into brokerage agreements with any client.

It added that law enforcement bodies and market regulators have “looked deeply” at the bond transactions it was involved in, and found ICU’s role to be “appropriate and above board.

“We have all the required anti-money laundering procedures in place, and, in recent years, along with most market players, have taken regular steps to improve our internal processes.”

Gontareva said that when the transactions were made, she and ICU “saw nothing suspicious”.

The state bank involved, she said, “confirmed receipt of funds and financial monitoring of non-resident companies, therefore, ICU had no suspicions about these companies, as all documents and extracts from accounts with the State Bank fully complied with the requirements of the current legislation”.

The Oligarchs can be viewed on Al Jazeera:

Thursday, January 11 – 20:00 GMT

Friday, January 12 – 12:00 GMT

Saturday, January 13 – 01:00 GMT

Sunday, January 14 – 06:00 GMT

Source: Al Jazeera