Editor’s Note: The following is an investigation by the Organized Crime and Corruption Reporting Project (OCCRP), which is based in Washington, D.C., a Kyiv Post partner. Kyiv Post staff writer Vlad Lavrov coordinates this project. The author, Denys Bigus, is a Kyiv-based journalist and television host for ZIK’s “Nashi Groshi” (Our Money) program.
At the end of March, the Security Service of Ukraine, or
SBU, detained what it described as two key members belonging to the criminal
gang of fugitive young oligarch Serhiy Kurchenko, who is accused of
embezzlement and theft of public money, and causing multibillion-dollar
damages to the state, mostly through tax evasion. Kurchenko, suspected of being a front man for President Viktor Yanukovych, overthrown on Feb. 22 during the EuroMaidan Revolution, remains in hiding.
The two suspects were taken to the SBU’s pre-trial detention
center. One was Arkadiy Kashkin, the director of Gas Ukrainy 2020, a company
that preceded Kurchenko’s energy holding VETEK. The other, Denys Bugai, headed
the supervisory board of BrokBusinessBank, also part of the fugitive’s business
empire.
On April 24, Bugai was set free, but not Kashkin. Yet Bugai
remained a member of the Justice Ministry’s working group on legal reform,
despite the fact that he – president of the Ukrainian Bar Association and
co-owner of Vashchenko, Bugai and Partners, had worked closely with Kurchenko
since 2013. He had overseen business deals for the most controversial oligarch
during Viktor Yanukovych’s presidency. Bugai, in his turn calls the
charges against him “based on unverified information” and a
“premature conclusion of the investigators.”
“As a lawyer, I provided legal assistance to the
business owned by Kurchenko. The hereby mentioned legal assistance, as a rule,
dealt with consulting on the matters of corporate, antimonopoly and media
law,” Bugai said. “My consultations had nothing to do with budget
funds.”
According to shredded documents found in Kurchenko’s office
and restored by the Paper Division project, apart from those seized by the SBU,
Kurchenko had an army of 102 lawyers working for him. Of those, 70 were
employed by the legal department of VETEK and divided into several groups.
At least some of them understood that their role was to
legitimize an illegal business. In particular, one document clearly recorded a
“rehearsal of questioning” with one of the lawyers. According to journalists
and volunteers of Paper Division, these lawyers could become precious witnesses
in untangling the crimes allegedly connected to Kurchenko. But so far,
investigators at the general prosecutor’s office have failed to tap into their
knowledge.
The documents found in VETEK’s legal department were some of
the least damaged, and offer a glimpse into the staffing schedule and job
descriptions of the department’s employees. The monthly budgets of various
legal groups below do not include salaries of group leaders and department
heads.
Bugai’s Department
Staff: 6
Budget: Hr 67,000 per
month
The main tasks of Bugai’s legal department, composed of his
law firm’s employees, was to legally facilitate the deal to buy Ukrainian Media
Holding (UMH), which included Forbes Ukraine. Also, Bugai dealt with issues
related to BrokBusinessBank, where he chaired the supervisory council. In early
June Ukraine’s central bank revoked the bank’s license after discovering major
violations, and subsequently decided that the bank was not worth saving.
In a written response to Kyiv Post, Bugai insisted he didn’t
head a department within Kurchenko’s business structure, as the restored
documents suggest, but was instead a lawyer with his team, working for VETEK,
as for a client. “I have no idea how this was reflected in the company’s
internal reporting,” he said.
Bugai’s detention in March provoked turbulence in the legal
community. Several hundred people picketed the General Prosecutor’s office,
while several dozen lawyers signed an appeal demanding their colleague’s
release. They stressed that Bugai’s job was to support “clean” assets. But this
author’s sources in the SBU, who spoke on the condition of anonymity because
they are not authorized to comment on this issue, said that “white
(legitimate)” deals were done using less savory methods. For example, to get a
loan from a state bank to purchase UMH, worthless securities were used as
collateral.
Bugai denied his involvement in the collateral and
securities aspect of the UMH deal.
Bugai’s department stands separately in the staffing
schedule of VETEK. It’s made up of six members, who are also employed by VB
Partners. His employee, Mykola Melnychuk, was the man responsible for
supervising BrokBusinessBank, as well as borrowing from other Ukrainian banks,
and for negotiations with the central bank. Bugai himself was only responsible
for UMH-related transactions.
Bugai’s department also supervised other media projects,
dealt with the national TV and radio regulator, and defended Kurchenko group’s
reputation in courts. Kurchenko’s personal legal issues were also a part of
this group’s job description.
Bugai’s lawyers handled lawsuits pertaining to land on which
Kurchenko’s house stands in the village of Stovpyagy.
Moreover, the list of cases is code named “VETEK’s Client,”
which stands for the company that belongs to the brother of fugitive ex-Minister
for Taxes and Duties Oleksandr Klymenko, Donetskenergoremont. One of Bugai’s
lawyers was assigned to handle a number of issues at the government’s
anti-trust body after Klymenko’s brother Anton sold his half of the company to
his business partner.
Bugai’s law firm may have received a lucrative retainer with
Kurchenko after performing well on the UMH deal. All of his lawyers were
engaged in August-September of 2013, after the UMH deal was announced in June,
but before it was finalized in November.
Bugai’s department, however, was the smallest and least
well-paid. The issues related to gas and oil, the core of Kurchenko’s business
group, and its restructuring, were taken care of by other people, and much
better paid.
Fainitskiy-Zaitsev
Department
Staff: 40-45 people
Budget: Hr 1.05
million per month
The leaders of Kurchenko’s principal legal department were
Yevhen Fainitskiy and Denys Zaitsev, both of whom had worked for the group
since the beginning of 2012. Fainitskiy was even an official employee at Kurchenko’s
Ukrainian oil and gas company.
In the past, Fainitskiy headed the investigation department
of SBU’s branch in Kharkiv, Kurchenko’s home town. He became famous in 2008
after confiscating documents from the office of Kharkiv city council secretary
(and now mayor) Gennadiy Kernes. He was later dismissed from the SBU and
challenged the legality of his dismissal in court. Fainitskiy could not be
reached for comment. His cell phone remains out of reach.
Zaitsev is more secretive. Very little is known about him
except that he is a licensed lawyer. However, along with Fainitskiy, he handled
some of the most complex tasks for the holding company, including tax
optimization schemes and paperwork for Ukrainian and offshore companies within
the holding. Other jobs described in the shredded documents had cryptic names
like “unregulated wholesale trade,” liquidation procedures, conflicts,
something called “partisan movement,” government relations, and personal issues
of shareholders.
Zaitsev couldn’t be reached for comment.
This group also employed another controversial Kyiv lawyer
called Yaroslav Galetskiy. He was the highest paid member of the group. His
wage was Hr 72,000 per month, and he was in charge of tax optimization, as well
as financial schemes. He also sat on the supervisory commission of Kurchenko’s
Real Bank.
The lawyer with the same last name left the most visible
trace in the case of school teacher Nina Moskalenko, a native of Kyiv who
happened to live in a single-family house in the most prestigious and expensive
area of the capital, Pecherk Hills. There was a raider attack on her home. Her
lawyer, Natalya Tsygankova, told Ukrainska Pravda that the raiders’
lawyer at the beginning was “the unknown laywer Galetskiy.”
He quit the case soon, though, and it was later handled by a
member of Fainitskiy’s department, Vyacheslav Khamlov, according to parliament
member Oleksandr Aronets. Khamlov failed to respond to a request for comment
for this story.
Managing partner of Jurimex law firm Yuriy Krayniak says
that Kurchenko’s lawyers earned much more than the market average. He said
their premium salaries reflected the owner’s desire to secure his business.
“The salaries of our many oligarchs are at the level they
pay for security of their business. A good lawyer has to take care of business
security,” Krayniak says.
Surprisingly, the “dirtiest” parts of the job were given
mainly to young women, aged 25-26, with very little prior legal practice.
According to their profiles in social networks, supervisory board members at
the Odesa Oil Refinery, Anna Sytnik and Liliya Alekseenko, fit this
description.
Sytnik’s job description says she was in charge of Vesti
media holding, which had been set up by former chief editor of Segodnya daily
Igor Guzhva in May 2013. At the time he claimed that he borrowed the money, but
refused to name the lenders.
In May 2014, tax authorities arrested the accounts of the
main company in this media holding, Vesti Mass Media. They said that the money
for the holding came from a legal entity “tied to Serhiy Kurchenko.”
Another young female lawyer, Olga Kuchynska, took care of
Kurchenko’s First Independent Exchange that conducted auctions to sell
liquefied gas, which was purchased by other companies of the same holding.
However, it’s very difficult to take some of the job
descriptions of these lawyers seriously. A job description for lawyer Olena
Kolesnyk reads: “Document turnover, copying, scanning. Member of the
supervisory board of Real Bank.”
Krayniak of Jurimex says that “if a lawyer is selected for
the supervisory council as a professional lawyer, their job description is
unlikely to include secretarial tasks.”
Sedov-Dovbenko Department
Staff: 13
Budget: Hr 582,000 per
month
“As far as the lawyer is concerned whom we recommended, the
Muscovite Leonid Sedov, it will have been a year since his employment by VETEK
soon. I think he’s rather successful.” These were the words of Georgiy
Abdushelishvili, a leading Russian recruiter, according to a September 2013
interview to Forbes Ukraine.
Sedov stands separately in Kurchenko’s documents. While all
group leaders have the status of heads of departments, Sedov is listed as
director for legal support.
Sedov’s department, like Bugai’s lawyers, supervised the
“clean” assets of Kurchenko’s holding. They bought networks of fueling
stations, audited companies, did the legal paperwork for loans, and solved
problems related to the Odesa Oil Refinery, energy and media assets, as well as
Kurchenko’s personal problems.
The department, in particular, did legal services for the
Kharkiv-based network of fueling stations Spika. Previously, it was suggested
in the media that this network in Kharkiv Oblast had been bought by Kurchenko’s
group, but there was no independent confirmation of the deal.
Moreover, group lawyer Igor Kravtsov took charge of the
purchase of two western Ukrainian networks Olas and Avetra. But there is no
information available on whether the deal was ever closed.
Moreover, the corporate secretary of this department, Timur
Prutin, according to the staff schedule, was in charge of 40 out of 70 offshore
companies of the group. Sedov’s department documents indicate that Kurchenko’s
group had offices Mandarin Plaza and Parus in Kyiv, in addition to its
headquarters in Arena City.
Also, part of Sedov’s group worked in Kurchenko’s Moscow
office, shared by Gazneft-Service company. The Moscow lawyers’ priority was
mergers and acquisitions in both Ukraine and Russia.
The Sedov-Dovbenko group failed to respond to requests for
comments sent by email.
