‘Financial crime of the century’ in Ukraine wrecks lives and corrodes livelihoods across borders

By Walter Finch


THE old adage that the best way to rob a bank is to own it is playing out in courts in both Ukraine and the US.

The strategy is simple. Once the bank has been robbed of people’s savings and deposits, the proceeds can be invested into bribing judges, influencing members of parliament to protect yourself politically and even supporting the presidential candidacy of an actor on the TV station that you own.

And this theft and corruption becomes so endemic that people have to leave the land in which they were born in search of a better life. Such behaviour has laid waste to Ukraine; the largest country in Europe and the former bread basket of the Soviet Union.

One of the many great crimes that precipitated floods of emigration was the looting of PrivatBank, Ukraine’s largest bank, between 2008 and 2016. The bank was declared insolvent in 2016 after a stress test reported “imprudent lending policies”.

Businessman and tycoon Ihor Kolomoiskly, who co-owns PrivatBank, has faced a criminal probe from the FBI for alleged financial crimes.

Ihor Kolomoisky, who owns or has interests in a plethora of commercial enterprises – including the influential TV network that birthed the career of current Ukrainian president Volodymyr Zelensky – is alleged to have masterminded the $5.5 billion black hole in the accounts of PrivatBank, in which he had a 49.154 per cent stake.

The theft amounted to 5 per cent of Ukraine’s GDP and was dubbed one of the biggest financial crimes of the 21st century by Valeria Hontareva, the former chairwoman of Ukraine’s central bank.

In 2018, Hontavera said the PrivatBank fraud encapsulated a third of the population’s bank deposits – that is, Kolomoisky and his partners are alleged to have cleaned out the bank accounts of a third of the country. 

The bank was nationalised in 2016 and the taxpayer – who as we will hear already fails to fund schools or ambulances – picked up the tab. But what of the missing money? 

US prosecutors allege that $800 million of it was funnelled into the American Midwest, where it was used to purchase real estate and a string of steel mills that have suffered bankruptcy, job losses and horrendous health and safety violations under Kolomoisky’s covert ownership.

Ruslana Bletska, 27, is a Ukrainian emigre from the border town of Uzhhorod who moved to London in her early twenties. She currently works in a 3D technology company.

Growing up with the European Union lands of Slovakia within sight, her grandparents had been born in what was once the Austro-Hungarian empire and due to this she qualified for a Hungarian passport.

“Back then, we would go to Tesco in Slovakia just near the border,” Ruslana tells Redaction Report.

“It was like going to the zoo, or going to the theatre or cinema or something like that. We didn’t have supermarkets, maybe one supermarket in the town, which was horrible.

“Nowadays, in London, I feel like I go to Tesco every day, I don’t even care.

“The funny thing is, my cousin from where I was born, she went to Tesco for the first time a year ago and she sent the pictures and said, I’m so happy.”

Many of Ruslana’s friends own EU passports and have also emigrated to western countries. But the ones who don’t have been left behind.

“In my school, we didn’t have water or soap in the bathroom. Our toilets were destroyed; the lock doors didn’t close; we didn’t have a proper canteen. We didn’t even have proper lessons.

“You would call an ambulance and they wouldn’t come.”

For very many Ukrainians, the European Union and the west in general represent a promised land of rule-of-law and good governance, where oligarchs do not steal the country’s wealth and assets and use them to buy off politicians.

But the challenge with bringing a person like Kolomoisky to trial is that he belongs to a class of individuals in Ukraine who control immense wealth and know how to convert that wealth to power, in a country where the wall separating business and politics is often paper thin.

There is a group of 30 members of the Ukrainian parliament that consistently vote on decisions and policies in support of Kolomoisky. The courts of Ukraine are notoriously corrupt and pliable to oligarchal interests, and efforts to corrupt or hobble law enforcement agencies are never ending. 

Resolving the PrivatBank scandal was one of the battlefronts that incoming president Zelensky faced upon his remarkable election in 2019.

Zelensky initially rose to fame as a television actor who portrayed an ordinary man elevated to the Ukrainian presidency to fight corruption in a comedy show that his production company produced. It was aired on the 1+1 television channel, owned by Kolomoisky.

Zelensky was keen to point out that Kolomoisky was his business partner, not his boss. For his part, Kolomoisky supported Zelensky’s candidacy. 

But how could Zelensky run on an anti-corruption platform and at the same time enjoy the patronage of an oligarch accused of stealing 5 per cent of Ukraine’s GDP?

“I think Kolomoisky strongly believed that he can control Zelensky and his team, and this will be easy,” Andrii Borovyk, Executive Director of Transparency International, Ukraine explained. 

“Now my own guy as president and everything will be fine.”

According to this reading, the oligarch class in Ukraine are not interested in conducting their business in a country that is free from corruption, both in business, in politics and in the judiciary. Corruption is the means by which they acquire their wealth and it is corruption which protects it.

The byproduct of this corruption and wealth accumulation is the disillusionment, disenfranchisement and mass emigration of the general population in a country of forty million people.

Kolomoisky, who had been living in exile under the previous administration of Petro Poroshenko while the PrivatBank scandal played out, even returned to Ukraine once Zelensky rose to the presidency.

There are large question marks over Zelensky’s sincerity to go after corruption in Ukraine. His moves so far have been ambiguous, but he is a political neophyte in treacherous waters still short of his second anniversary as president. 

However, he is receiving support from across the Atlantic which was perhaps lacking under the previous US administration. US President Joe Biden was Barack Obama’s point man in Ukraine when he was Vice President and knows the country and its situation well.

On top of International Monetary Fund demands to nationalise PrivatBank and recover the lost funds, the US administration has recently issued a visa ban against Kolomoisky and moved to seize his assets in the USA through which he is alleged to have laundered some of the stolen billions.

Civil forfeiture actions are underway against some of the dozen steel mills – a strategic industry for the US – plus four tower blocks and a 484-room hotel with waterfront views in Cleveland, Ohio. Kolomoisky is alleged to have purchased them via a PrivatBank subsidiary in Cyprus and anonymous shell companies in the British Virgin Islands.

These steel mills were wracked with explosions and safety failures that ruined lives and livelihoods of thousands of workers and their families and the communities in which they were based. Such disasters are a typical result when assets are purchased to launder money rather than for commercial profit.

“It’s really extraordinary how these individuals corrode everything they touch,” US congressional staffer and Helsinki Commission policy advisor Paul Massaro, who advises members of US Congress on matters related to corruption and kleptocracy, told Redaction Report.

“This mass theft has very real consequences for human rights, democracy, the rule of law, and in these countries it undermines all three of them.

“We should really be viewing grand corruption as a crime against humanity. It has the same set of consequences: it destroys lives, people starve, people die, people don’t get education, they lose access to services. There’s so many reasons.

“It is really the threat of our age. These individuals becoming part of the integrated global elite is the contagion; having these guys in the same room as our leaders is a huge problem.”

Ihor Kolomoisky is a free man in Ukraine and is even suing to regain control of PrivatBank. Recently the first arrests in the case were made – the former CEO and chief deputy were arrested for their part in the missing billions. All parties deny any wrongdoing.

Whether this signals that President Zelensky is going to move against the oligarchs, fight corruption and serve the people remains to be seen.

Ukranian emigre Ruslana is not optimistic.

“Our country is so beautiful, we’ve got so many resources,” she muses.

“But I dream about my future here, in London. I can’t see my future there, in Ukraine.”


Featured Image: UP9 @WikimediaCommons

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