The U.S. Department of Justice has accused Ukrainian oligarch Ihor Kolomoisky of fraud and money laundering and moved to seize his properties in the states of Kentucky and Texas.
Kolomoisky, his business partner Gennadiy Bogolyubov and their U.S. associates Mordechai Korf and Uriel Laber have not been charged with a crime. The Department of Justice filed two civil forfeiture complaints, which would allow it to take $70 million in real estate where Kolomoisky’s ill-gotten gains were allegedly parked.
These assets are part of the $5.5 billion allegedly stolen from PrivatBank by Kolomoisky and Bogolyubov before the bank was nationalized in 2016. According to the bank, $747 million ended up in the U.S. and were used to purchase real estate and metallurgical plants in many states, through a group of companies known as Optima.
PrivatBank wants this money back. The bank is suing Kolomoisky and his associates in the Delaware Chancery Court, alleging that $653 million were laundered into the Optima schemes and $96 million into other properties. PrivatBank is trying to reclaim these assets, plus compensatory and punitive damages.
Federal agents raided two of Optima’s offices in Cleveland and Miami earlier this week, without making arrests. The Federal Bureau of Investigations, the Internal Revenue Service and U.S. Customs and Border Protection are investigating the alleged money laundering. The U.S. Attorney’s office in Cleveland has an open criminal probe as well.
Despite not being criminal charges, the complaints directly accuse Kolomoisky, Bogolyubov, Korf and Laber of engaging in illegal activity and show that there are direct records of some of their allegedly fraudulent transactions. And they very well could lead to criminal charges, Ukrainian anti-corruption activists say.
Kolomoisky’s lawyer, Michael Sullivan, told the Washington Post that the oligarch “emphatically denies the allegations.” Kolomoisky told the Ukrainian media that his and Bogolyubov’s investments in the U.S. were made from the oligarchs’ personal funds earned in 2007-2008 from legitimate deals.
Criminal charges next?
Civil Forfeiture is often used as a quick way to terminate suspects’ control of properties allegedly acquired in a criminal manner. It often proceeds parallel to criminal investigations, according to John Lauro, a U.S. lawyer and former federal prosecutor.
To reclaim the properties, Kolomoisky and his associates would have to prove that the money they used to buy them wasn’t stolen. However, Lauro said that it’s rare for people to challenge civil forfeiture, as it might expose their criminal activity.
While the DOJ complaints may only target Kolomoisky and Bogolyubov’s assets, they are a sign that criminal charges may be coming for the two oligarchs, believes Daria Kaleniuk, a Ukrainain activist and executive director of the Anti-Corruption Action Center (AntAC).
“There are high prospects of progress in the criminal case against Kolomoisky,” Kaleniuk told the Kyiv Post. “I think, I believe, that we will soon see the forfeiture in a criminal proceeding,” she added.
According to Kaleniuk, U.S. prosecutors do have strong enough evidence to charge Kolomoisky with a crime. However, they do not intend to reveal everything they have on the oligarch right away.
“I think it is a very well-thought-out tactic,” Kaleniuk says.
Ukraine drags behind
More than three years have passed since the nationalization of PrivatBank, but Kolomoisky and Bogolyubov have not yet faced criminal charges in Ukraine for allegedly embezzling billions from it.
The National Anti-Corruption Bureau (NABU) has been investigating the embezzlement at PrivatBank since autumn 2019. It is not yet close to charging anyone. The agency’s leadership has said that it is a massive and complicated case, where an enormous number of financial transactions need to be checked.
The bureau’s director, Artem Sytnyk, told the Kyiv Post in February that the investigation was meeting some resistance, with experts delaying necessary evaluations.
Kolomoisky is a former business partner of President Volodymyr Zelensky, making observers initially suspect that Zelensky was running for president in 2019 as a front for the oligarch.
Kolomoisky has actively campaigned to get PrivatBank back. That road was closed for him in May, when the Ukrainian parliament passed legislation that bans returning nationalized banks to former owners. Still, he continues to challenge nationalization in the Ukrainian courts.
Although Ukraine hasn’t charged Kolomoisky, it may have helped the U.S. to do so.
The NABU, along with Ruslan Riaboshapka, the former prosecutor general fired in early March in a parliamentary no-confidence vote, gave a hand to their American colleagues, who were seeking to gather evidence on Kolomoisky in Ukraine, according to AntAC. NABU and Riaboshapka did not respond to requests for comment by the time of publication.
A global scheme
The DOJ complaints are the latest chapter in the decade-long saga of Ukraine’s largest lender. Kolomoisky and Bogolyubov once owned PrivatBank, which had a third of the country’s individual deposits and 20 million customers.
According to an audit by Kroll Inc., the oligarchs ran a Ponzi-like scheme within the bank, which was loaning money to their various enterprises. These insider loans were “paid back” using other loans, eventually creating a $5.5 billion shortfall in the bank.
The funds were sent to PrivatBank’s branch in Cyprus, before being transferred throughout the world. The Ukrainian government bailed out and nationalized the bank in December 2016.
“Kolomoisky and Bogolyubov further laundered the money by investing in the United States. They enlisted Mordechai Korf and Uriel Laber, who had previously run businesses in Ukraine and the US, for that purpose,” the DOJ’s complaint reads.
“Korf and Laber established a network of companies, generally under some variation of the name ‘Optima,’ to acquire businesses and real estate in the U.S. using the misappropriated money from PrivatBank.”
These include more than five million square feet of commercial real estate in Ohio (making Optima the biggest commercial real estate owner in Cleveland), as well as steel plants in Kentucky, West Virginia and Michigan; a mobile phone manufacturing plant in Illinois; commercial real estate in Texas and other assets. According to the complaints, Korf and Laber often failed to turn a profit.
The DOJ filed complaints against two properties — a Louisville office tower called PNC Plaza and a Dallas office park known as the former CompuCom Headquarters.
“The money used to purchase the CompuCom Campus was directly traceable to four loans obtained from PrivatBank by Kolomoisky and Bogolyubov,” the complaint read.
Reclaiming the money
Seized assets are forfeited to the U.S. government. However, Lauro said the DOJ is mindful of the victims and may negotiate to make them whole, if there is no other way to squeeze compensation from the defendants.
Kaleniuk also believes that Ukraine should be able to reclaim the $70 million in question. However, it might take years.
“Ukraine has a right to reclaim its money in full or in part,” she said.
Before this happens, she said, Kolomoisky will be doing his best to undermine Ukraine’s cooperation with the West, so Ukrainain authorities stop helping foreign detectives investigate him.
Court cases against Kolomoisky are also open in the United Kingdom, Cyprus, Israel and Switzerland. The latter has launched a criminal investigation against the oligarch, according to Kaleniuk.
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