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While leading lavish lifestyles, politicians declare almost pauper-like incomes, assets

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June 17, 2010, 9:01 p.m. | Ukraine — by Olga Gnativ

A BMW M6, the type driven by Andriy Yushchenko, son of former President Viktor Yushchenko.
© (Tabloid.com.ua, UNIAN)

On paper, the only thing that ex-Prime Minister Yulia Tymoshenko owns is a 58-square meter apartment in Dnipropetrovsk. She hasn’t got any savings, stocks, bonds, cars or land, according to her official declarations.

Yet Tymoshenko doesn’t wear second-hand clothing or ride a bicycle to work with a packed lunch, given her declared $2,300 monthly income for 2009.

In reality, Louis Vuitton’s reputed preferred customer rides in a bullet-proof, S-class armored Mercedes worth $300,000 from a mansion she occupies in Kyiv’s elite Koncha Zaspa gated community. The car belongs to her Batkivshchyna Party. And the house? Well, Tymoshenko has never gotten her story straight on that despite numerous media inquiries. Her latest explanation was that she rents it from a friend for free.


Ex-Prime Minister Yulia Tymoshenko in Louis Vuitton clothes


“It’s across the spectrum. [High-ranking government officials] never declare the value of their holdings and it’s not about the Orange or Blue, they all do it."

- Adrian Karatnycky, managing partner of Myrmidon Group LLC.

And as far as her expensive warddrobe goes, it is allegedly paid for by relatives, including her husband.

Yet if the conspicuous consumption habits of Ukraine’s political elite are any indicator of their wealth, this could only mean they routinely lie on their obligatory annual income declarations.

“It’s across the spectrum. [High-ranking government officials] never declare the value of their holdings and it’s not about the Orange or Blue, they all do it,” said Adrian Karatnycky, managing partner of Myrmidon Group LLC, a private consultancy that focuses on Ukraine.

Instead of increasing transparency and acting as an effective anti-corruption enforcement mechanism, the required income statements foster it, since many politicians don’t declare the true nature of their wealth. According to legislation, members of parliament, high-ranking officials and judges must declare their income and those of their immediate family members, but not their expenses or those of their relatives and siblings.

This would explain why many public servants live lifestyles beyond their declared means or why parliamentary speaker Volodymyr Lytvyn’s white gold Breguet cufflinks are worth a big share of his annual speaker’s salary of $34,000.

Politicians, it seems, get a lot of “gifts.”

That’s how Hanna Herman, the deputy head of the presidential administration explained what an online paparazzi news source outed as a $58,000 diamond-encrusted watch.


Hanna Herman’s expensive watch

Other luxury items like cars are also hot gift items. Former President Viktor Yushchenko’s son, Andriy, was often seen in 2005 speeding around Kyiv in $130,000 BMW M6 wheels. He said a friend gave him the car.

No one has ever been sent to jail for fibbing on their income declarations.
“Many income declarations of this country’s politicians are missing a few zeroes. Otherwise, some politicians would have to explain the chartered flights they take to ski in the Alps.”

- Anatoliy Hrytsenko, chairman of the parliamentary committee for national security and defense.

This is a recurring problem that the current parliament has ignored when it postponed a package of anti-corruption laws until January. It would have required politicians such as Tymoshenko to declare her daughter’s estate in Koncha Zaspa, her mother’s and cousin’s four- and three-story homes in Dnipropetrovsk, as well as other assets and businesses belonging to her relatives.

“Many income declarations of this country’s politicians are missing a few zeroes,” said Anatoliy Hrytsenko, chairman of the parliamentary committee for national security and defense. “Otherwise, some politicians would have to explain the chartered flights they take to ski in the Alps.”

The fairytale declarations undermine the public’s trust of those in power, experts said. But even honest people who want to enter government civil service are touched.

“About 90 percent of people enter the civil service or public administration to benefit from ‘side money’,” said Semyon Gluzman, a former dissident and executive secretary of the Association of Psychiatrists.
And what to make of the elite’s vanity?



Some income/expense discrepancies



Declared Income in 2009 (Hr)


Conspicuous consumption

Yuliya Tymoshenko,
Former Prime-Minister
219,000 Estimated $5 million, 20-hectare estate in Koncha-Zaspa.
$300,000 Mercedes-Benz.
$2-4,000 designer outfits.
Volodymyr Lytvyn,
Speaker of Parliament
739,000 $34,000 white gold Breguet cufflinks.
Hanna Herman,
Deputy Head of Presidential Administration
235,000 $58,000 diamond-encrusted watch.
Viktor Yanukovych,
President
235,000 1.7-hectares on a 140-hectare estate in Mezhyhirya, whose estimated market value is $1.25 billion but leases for a discounted rate of $39/hectare.
Yuriy Lutsenko,
Former Interior Minister
146,000 $17,000 Breguet watch.
Viktor Yushchenko,
Former President
238,368 (2008) 13-hectare ranch in Novi Bezradychi worth $7.5 million.

Source: Kyiv Post



“Ukrainian society wasn’t ready to produce so many millionaires so quickly,” Gluzman said. “There simply hasn’t been enough time for society to replace the traditional Soviet values, so we have a vacuum that is being filled by former Komsomol careerists who never believed in Vladimir Lenin or the principles of Karl Marx in the first place.”

In all of this, there seems to be little room for honest citizens. “But we can’t judge, people want to live comfortably, they have economic needs and must care for their families,” Gluzman said.

Nowhere is the opportunity to make money so obvious as in the patronage network within Ukraine’s bloated government, according to Ihor Lutsenko, former chief editor of Ekonomichna Pravda and a Kyiv preservation activist. Lutsenko is now an adviser to Economy Minister Vasyl Tsushko.

Government officials and politicians also get extra cash by lending their names to events or conferences, by giving speeches or making endorsements. These honorariums are usually given by lobbyists, Lutsenko said.
“When a coalition forms a government, there is a so-called price list for ministries.”

- Oleh Rybachuk, former head of the presidential secretariat under President Viktor Yushchenko.

Another way to supplement income among mid-level government officials is to bargain for expenses on international travel. “For instance, they declare high costs of air tickets, hotel reservations and daily allowances but in fact use less expensive services and pocket the change,” Lutsenko said.

One of the most lucrative and widely used but shadow sources of incomes is so called “consulting for business,” Lutsenko said. That happens when politicians divulge crucial details on the terms of a tender, for example, in exchange for kickbacks or bribes. Politicians and officials also use their connections with decision-makers to enforce deals, contracts or regulations.

Altogether, these schemes can rake in much higher sums of money than official incomes stated on formal declarations, Lutsenko said. The most lucrative jobs are in parliament and ministries such as fuel, energy, coal and construction, in particular building roads.

Volodymyr Fesenko, head of the Gorshenin Institute think tank, said patrons of political parties are also sources of off-the-books income. “When money is delivered from a sponsor to a political party, they divide it up for party needs and for the needs of its top figures, like business travel and living expenses,” Fesenko said. Income from lobbying is centralized in parliament, since there are few independent deputies, Fesenko said.

Oleh Rybachuk, former head of the presidential secretariat under President Viktor Yushchenko, said politics is the most profitable business in Ukraine. Officeholders trade on everything, Rybachuk said, especially seats in the government.

“When a coalition forms a government, there is a so-called price list for ministries,” Rybachuk said.


Kyiv Post staff writers can be reached at gnativ@kyivpost.com and rachkevych@kyivpost.com.
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