You're reading: Seeking Justice Abroad For Theft At Home

In a nation where even the president admits that corruption is costing citizens billions of dollars a year, redress is in short supply at home.

In a nation where even the president admits that corruption is costing citizens billions of dollars a year, redress is in short supply at home

Instead, Ukrainians take their disputes to foreign courts and judges in hopes of righting wrongs or simply smearing their opponents.

Seven years after a U.S. court convicted former Ukrainian Prime Minister Pavlo Lazarenko on corruption charges, American judges are once again hearing cases in which massive-scale theft is allegedly taking place in Ukraine.

In contrast to the Lazarenko case, initiated by U.S. officials who went on to prove that the leader from 1996-97 laundered illegal proceeds in America, a new wave of allegations is being instigated by rival Ukrainian political groups: President Viktor Yanukovych and his top rival, ex-Prime Minister Yulia Tymoshenko.

In the latest cases, the common denominator is again using foreign courts to pursue justice for alleged theft at home — a sad symbol not only of dirty government in Ukraine but also the chronic lack of confidence in this nation’s courts.


Interfarm dealt with Ukraine’s government since 2000, [including the years when Yanukovych was prime minister.] But this investigation, understandably and for political reasons, concentrates on the years when Tymoshenko was in power.

Serhiy Vlasenko, Tymoshenko’s lawyer

Both sides admit the nation is beset by rampant corruption coming at the expense of the nation’s citizens. But the rivals deny the cheating is coming from within their own camps and frequently shift blame elsewhere — often to each other.

In one small slice of the allegedly sordid dealings, a U.S. federal judge in Oregon on June 8 ruled by default that Oregon-based Olden Group – which failed to show up for the hearing – should repay plaintiff Ukrvaktsina, a state-owned enterprise that buys vaccines, $60 million.

The award is triple the amount that the state firm claimed it was overcharged during vaccine purchases of in 2008-2009.

The civil racketeering lawsuit against Olden Group, whose beneficiaries are hidden behind a web of offshore companies, was initiated by Yanukovych’s government.

Filed by a group of U.S. lawyers, including Mark MacDougall of Washington-based law firm Akin Gump, the complaint is based on allegations by the current government of misspending and abuse that occurred when Tymoshenko was prime minister in 2007-2010.

While Tymoshenko is not herself named as a defendant in the Oregon case, government officials have repeatedly described the lawsuit as an attempt to recover funds siphoned out of Ukraine under her leadership.

Tymoshenko, however, counters that individuals close to her successor, Prime Minister Mykola Azarov, were behind the allegedly overpriced state purchases of vaccines. Like Tymoshenko, Yanukovych and Azarov deny accusations of wrongdoing.

Tymoshenko also fired a legal volley of her own last month: a class-action lawsuit in a New York court accusing Yanukovych and his inner circle of cheating Ukraine out of billions of dollars in the natural gas trade.

While each side in the vaccine case blames the other, few dispute that grand-scale corruption and embezzlement were at play.

It represents another round in her ongoing war with billionaire Dmytro Firtash, the industrial magnate and gas trader that she eliminated from the lucrative Ukrainian-Russian gas trade when she was in power in 2009.

Firtash, in turn, won a June 8, 2010, arbitration ruling in Stockholm, Sweden, that returned the Firtash co-owned RosUkrEnergo 12.1 billion cubic meters of natural gas – worth more than $3 billion — that Tymoshenko had seized a year earlier.

While each side in the vaccine case blames the other, few dispute that grand-scale corruption and embezzlement were at play. Olden Group, however, has denied wrongdoing through a lawyer and could appeal.

Akin Gump, which represents Ukraine in the Oregon case, completed a report commissioned by Ukraine’s government shortly after Yanukovych came to power on Feb. 25, 2010.

The probe was done jointly with Washington colleagues Trout Cacheris and New York-based Kroll, a leading investigative and risk consulting company.

The 176-page analysis that reportedly cost taxpayers around $3 million has been used as a basis for criminal charges against Tymoshenko.

In addition to the vaccine dealings, the report’s authors claim to have uncovered other wrongdoing by Tymoshenko, charges that are being prepared for trial in Ukrainian courts.

Investigators with Prosecutor General Viktor Pshonka have, in recent months, accused Tymoshenko of misspending nearly $300 million in Kyoto Protocol funds and of wrongfully purchasing 1,000 Opel Combo vehicles for use by rural doctors. She calls the allegations bogus.

The investigations into Tymoshenko and arrests of about a dozen members of her government have been criticized in the West as political persecution.

Yet in recent days, Yanukovych’s government pointed to the Oregon court ruling as evidence that even a U.S. court backs their claims against the Tymoshenko government. Her tenure as premier ended in March 2010 after Yanukovych defeated her in the presidential election a month earlier.

Azarov hailed the Oregon court ruling, describing it as a “new step in [Ukraine’s] fight against corruption,” and only the beginning of “great work by the international auditors to return [taxpayers’] money.”

Meanwhile, Covington & Burling, a high-profile law firm hired by Tymoshenko, was expected on June 17 to hold a press conference in Washington, D.C., to reveal findings that investigations against their client are fabricated and politically motivated.

Pointing fingers

Determining who is telling the truth and who stands behind the allegedly corrupt dealings is difficult due to a web of complicated paper companies, mainly registered abroad. But there are obvious signs of dubious dealings across governments.

For example, according to the complaint filed in the Oregon district court by Ukrvaktsina, the state medical procurement company signed contracts with Kyiv-based Interfarm to import vaccines for nearly $40 million.

Produced by France’s Sanofi Pasteur, the medications were supplied to Interfarm, which in turn bought them, allegedly at an inflated price, from Olden Group. According to the Oregon Business Registry, Olden Group is owned by two offshore firms registered in Belize and the island of Niue.

According to Ukrvaktsina’s complaint, had Interfarm bought the vaccines directly from Sanofi, the price paid by Ukraine would have been substantially less.

Nashi Groshi estimates the amount overpaid for the rig to be $150 million. Current Ukrainian government officials deny wrongdoing in connection with such allegations.

“Interfarm and Olden Group conspired to overcharge Ukrvaktsina for millions of dollars in vaccine purchases through acts of fraud, money laundering and other criminal acts,” reads the state company’s complaint to the U.S. court.

“Olden Group and Interfarm carried out their scheme by submitting false invoices and customs declaration forms and entering into sham contracts with each other, all for the purpose of deceiving Ukrvaktsina.”

Ukrvaktsina’s lawyers claim that the manufacturer’s prices for these vaccines are between $3-4 per dose, half of what Interfarm ultimately charged Ukraine. The Kyiv Post was unable to contact Interfarm or Olden Group.

But according to the claim, Ukraine incurred losses of $19 million, funds which were allegedly laundered and routed through a number of U.S. banks before landing in Olden Group’s account in a Latvian bank.

Lawyers representing Ukrvaktsina claim that Olden Group is a fraudulent company. They point to evidence that one of its major shareholders, Niue-based International United Holding, was dissolved by the local authorities back in 2006.

Oregon records indicate that Olden Group had been dissolved days before the U.S. court ruling, on May 27.

While Tymoshenko’s side does not rule out that violations took place, they are quick to point out that neither she, nor any political ally of hers that served in her coalition government, are defendants in the case.

Rather, lawmaker Serhiy Vlasenko, also Tymoshenko’s lawyer, says that some of the contracts in question were signed by Zynoviy Mytnyk. A deputy health minister under Tymoshenko, Mytnyk was promoted to health minister in Azarov’s government, but was fired last December.

Through a spokesperson, Mytnyk – now retired – said he merely signed off on the transactions, but was not involved in the tender committees which de facto approved the vaccine purchases.

Ironically, some of the offshore companies that Trout Cacheris says were used for medical procurement purchases under Tymoshenko are still being used today by the Azarov government.

“Interfarm dealt with Ukraine’s government since 2000, [including the years when Yanukovych was prime minister.] But this investigation, understandably and for political reasons, concentrates on the years when Tymoshenko was in power,” said Vlasenko, adding that Tymoshenko as prime minister repeatedly asked prosecutors to investigate procurement dealings.

“Mytnyk was the only member of Tymoshenko’s government who got to be a minster in the Azarov government. Perhaps, this is out of gratitude for his role in the medicines procurement,” Vlasenko said.

Ironically, some of the offshore companies that Trout Cacheris says were used for medical procurement purchases under Tymoshenko are still being used today by the Azarov government.

According to the Trout Cacheris report, the Ministry of Health and Ukrvaktsina in 2009 actively used a different scheme of intermediaries centering on United Kingdom-registered Eurostate Corporation.

This firm is linked to a group of Irish shell companies that share three directors in common: Latvian nationals Stan Gorin, Juri Vitman and Eric Vanagels. The deal uncovered by Trout Cacheris involved $20 million worth of vaccine purchases, allegedly at inflated prices.

But what the report by Akin Gump, Trouch Cacheris and Kroll failed to point out is that the very same individuals were also involved in controversial deals conducted under Yanukovych’s rule.

An investigation by Nashi Groshi (Our Money), a Ukrainian public procurement watchdog, suggests that shell companies run by the same Latvian individuals were used this year by state-owned hydrocarbon company Chornomornaftogaz to purchase an oil rig.

Nashi Groshi estimates the amount overpaid for the rig to be $150 million. Current Ukrainian government officials deny wrongdoing in connection with such allegations.


Kyiv Post staff writer Vlad Lavrov can be reached at [email protected]

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