THE TRACTOR DRIVER OF THE STATE -- THE CASE OF PAVLO LAZARENKO
12/20/2001 | Майдан-ІНФОРМ
THE TRACTOR DRIVER OF THE STATE -- THE CASE OF PAVLO LAZARENKO (Part 3). The case of Pavlo Ivanovych Lazarenko, once
one of the most powerful men in Ukraine and now an inmate at a
federal detention facility in California, is a classic study of high-
level corruption in Ukraine. It involves not only Lazarenko but a
long list of players beginning with the Ukrainian president (who
appointed Lazarenko prime minister), to the head of the Intelligence
Service that vetted the appointment, to the Prosecutor's Office that
watched as an impoverished nation was bled dry. It is also the story
of a lax law-enforcement system and parliament which refused to
investigate his dealings, preferring to let the dirty work be done by
the United States and Switzerland and only afterwards becoming a
minor participant.
The extent of Lazarenko's activities may never be known. The
major frauds which have been documented in the West include his
dealings with the Naukova State Farm, United Energy Systems of
Ukraine, and the GHP Corporation scam. There is also evidence of his
relationship with President Leonid Kuchma in the creation of a
mobile-phone company in Ukraine, where Lazarenko's money was used as
the start-up capital of this firm.
Pavlo Lazarenko is alleged to have stolen hundreds of millions
of dollars via different criminal enterprises. U.S. prosecutors have
not even begun investigating his activities in other countries,
limiting themselves to money laundered into the United States. In
"KATO-82, CARPO-53, And Orphin," read how, with President Kuchma
protecting him, Lazarenko was busy hoarding money in offshore bank
accounts. During this period it was not uncommon to see transfers of
millions of dollars from account to account in different countries.
"KATO-82, CARPO-53, AND ORPHIN."
According to the second superseding indictment in the Northern
District of California, San Francisco Division:
Lazarenko received money arising from schemes to defraud
committed by the owners and principles of United Energy
International, Ltd. (UEIL), United Energy Systems of Ukraine (UESU),
and Somolli Enterprises, Inc., which were related companies doing
business in Ukraine and with Ukrainian state enterprises as follows:
In his official capacity, Lazarenko promoted the operations of
UESU and related companies by, among other things, ensuring that UESU
had a near-monopoly right to distribute natural gas to certain
commercial enterprises in the Dnipropetrovsk region of Ukraine and by
arranging for the Ukrainian government to pledge to use state funds
to repay the debts of UESU payable to RAO Gazprom, the supplier of
natural gas to Ukraine.
UESU fraudulently diverted -- to foreign bank accounts
belonging to UEIL -- payments from Ukrainian customers for natural
gas delivered to UESU and subsequently failed to pay RAO Gazprom for
the natural gas.
Between 1996 and 1997, UEIL transferred approximately $50
million to Somolli Enterprises, a Cypriot company controlled by the
same individuals who controlled UESU.
In 1996, Somolli Enterprises transferred the following sums: a)
approximately $50 million to account No. 024/10/61310/00 at AmerBank
in Poland in the name of "ORPHIN, S.a."; b) approximately $14 million
to account No. 5451 in the name of "WILNORTH"; c) approximately $23
million to account No. 21383 at Banque Populaire Suisse in the name
of "ORPHIN, S.a."; and d) approximately $14 million to European
Federal Credit Bank correspondent account No. 1150-645039 at Pacific
Bank in San Francisco for credit to account No. 151897 in the name of
"ORPHIN, S.a."
All were accounts controlled by Peter Kiritchenko. The money
was then transferred to accounts controlled by Lazarenko, including
account No. 08-05785-3 in the name of "KATO-82" at Credit Lyonnais in
Zurich, Switzerland; account No. 5353 in the name of "CARPO-53" at
Bank SCS Alliance in Geneva, Switzerland; and to accounts at European
Federal Credit Bank, among other accounts.
Prior to appointing Pavlo Lazarenko the country's prime
minister, President Leonid Kuchma was aware of his past and his sins
(see "End Note," "RFE/RL Crime, Corruption, and Terrorism Watch," 13
December 2001). It is clear that Kuchma disregarded incriminating
documents given to him by Hryhoriy Omelchenko -- the former head of a
parliamentary commission on combating corruption and author of a 1999
book titled "Corrosion of Power" -- and instead chose to have
Omelchenko investigated instead of Lazarenko.
But by early 1997, Kuchma was coming under intense Western
pressure to have Lazarenko removed. Instead, he chose a course of
passive resistance, one in which the prosecutor-general dragged his
feet in the investigation of Lazarenko. And Kuchma clearly had the
right man for the job.
Hryhoriy Vorsinov was a local prosecutor from Dnipropetrovsk
who was already battling allegations that he participated in various
illegal enterprises until one day he came to the attention of
politicians in Kyiv. They immediately noticed his talents and brought
him on board.
In 1993, the entire staff of investigators at the Prosecutor-
General's Office in Dnipropetrovsk had sent a letter to the
prosecutor-general in Kyiv asking that "H. Vorsinov," the regional
prosecutor, be removed for illegally terminating cases, abusing his
position, and on moral and ethical grounds. In response to that
letter, all the investigators whose signatures appeared on it were
summarily sacked.
In October 1995, a parliamentary anticorruption commission
recommended that Vorsinov not be appointed prosecutor-general.
Despite that protest, President Kuchma chose him for this sensitive
job. It was among the methods the president employed in implementing
his decree of August 1994 "on combating corruption."
It was Vorsinov who was given the delicate task of dealing with
the accusations against Lazarenko. He did so by stalling and
prolonging the investigation, by spending more time investigating the
whistle-blower, Omelchenko, than the accused, Lazarenko. There is
little doubt today that this entire scenario was cooked up by Kuchma,
who had been protecting, and possibly benefiting from, the protection
being granted to Lazarenko from the very beginning.
On 1 July 1997, Lazarenko was relieved of his duties as prime
minister of Ukraine. The pressure from the West had become too much
for Kuchma to bear. Lazarenko had become a liability and thus had to
go.
(To be continued.)
(Compiled by Roman Kupchinsky)
*********************************************************
Copyright (c) 2001. RFE/RL, Inc. All rights reserved.
"RFE/RL Crime, Corruption, and Terrorism Watch" is edited by Roman
Kupchinsky on the basis of a variety of sources. It is distributed
every Thursday. Direct comments to Roman Kupchinsky at
kupchinskyr@rferl.org. Back issues are online at
http://www.rferl.org/corruptionwatch/
Technical queries should be e-mailed to: iteam@rferl.org
HOW TO SUBSCRIBE
Send an e-mail to cct-subscribe@list.rferl.org
HOW TO UNSUBSCRIBE
Send an e-mail to cct-unsubscribe@list.rferl.org
_______________________________________________________
RADIO FREE EUROPE/RADIO LIBERTY, PRAGUE, CZECH REPUBLIC
one of the most powerful men in Ukraine and now an inmate at a
federal detention facility in California, is a classic study of high-
level corruption in Ukraine. It involves not only Lazarenko but a
long list of players beginning with the Ukrainian president (who
appointed Lazarenko prime minister), to the head of the Intelligence
Service that vetted the appointment, to the Prosecutor's Office that
watched as an impoverished nation was bled dry. It is also the story
of a lax law-enforcement system and parliament which refused to
investigate his dealings, preferring to let the dirty work be done by
the United States and Switzerland and only afterwards becoming a
minor participant.
The extent of Lazarenko's activities may never be known. The
major frauds which have been documented in the West include his
dealings with the Naukova State Farm, United Energy Systems of
Ukraine, and the GHP Corporation scam. There is also evidence of his
relationship with President Leonid Kuchma in the creation of a
mobile-phone company in Ukraine, where Lazarenko's money was used as
the start-up capital of this firm.
Pavlo Lazarenko is alleged to have stolen hundreds of millions
of dollars via different criminal enterprises. U.S. prosecutors have
not even begun investigating his activities in other countries,
limiting themselves to money laundered into the United States. In
"KATO-82, CARPO-53, And Orphin," read how, with President Kuchma
protecting him, Lazarenko was busy hoarding money in offshore bank
accounts. During this period it was not uncommon to see transfers of
millions of dollars from account to account in different countries.
"KATO-82, CARPO-53, AND ORPHIN."
According to the second superseding indictment in the Northern
District of California, San Francisco Division:
Lazarenko received money arising from schemes to defraud
committed by the owners and principles of United Energy
International, Ltd. (UEIL), United Energy Systems of Ukraine (UESU),
and Somolli Enterprises, Inc., which were related companies doing
business in Ukraine and with Ukrainian state enterprises as follows:
In his official capacity, Lazarenko promoted the operations of
UESU and related companies by, among other things, ensuring that UESU
had a near-monopoly right to distribute natural gas to certain
commercial enterprises in the Dnipropetrovsk region of Ukraine and by
arranging for the Ukrainian government to pledge to use state funds
to repay the debts of UESU payable to RAO Gazprom, the supplier of
natural gas to Ukraine.
UESU fraudulently diverted -- to foreign bank accounts
belonging to UEIL -- payments from Ukrainian customers for natural
gas delivered to UESU and subsequently failed to pay RAO Gazprom for
the natural gas.
Between 1996 and 1997, UEIL transferred approximately $50
million to Somolli Enterprises, a Cypriot company controlled by the
same individuals who controlled UESU.
In 1996, Somolli Enterprises transferred the following sums: a)
approximately $50 million to account No. 024/10/61310/00 at AmerBank
in Poland in the name of "ORPHIN, S.a."; b) approximately $14 million
to account No. 5451 in the name of "WILNORTH"; c) approximately $23
million to account No. 21383 at Banque Populaire Suisse in the name
of "ORPHIN, S.a."; and d) approximately $14 million to European
Federal Credit Bank correspondent account No. 1150-645039 at Pacific
Bank in San Francisco for credit to account No. 151897 in the name of
"ORPHIN, S.a."
All were accounts controlled by Peter Kiritchenko. The money
was then transferred to accounts controlled by Lazarenko, including
account No. 08-05785-3 in the name of "KATO-82" at Credit Lyonnais in
Zurich, Switzerland; account No. 5353 in the name of "CARPO-53" at
Bank SCS Alliance in Geneva, Switzerland; and to accounts at European
Federal Credit Bank, among other accounts.
Prior to appointing Pavlo Lazarenko the country's prime
minister, President Leonid Kuchma was aware of his past and his sins
(see "End Note," "RFE/RL Crime, Corruption, and Terrorism Watch," 13
December 2001). It is clear that Kuchma disregarded incriminating
documents given to him by Hryhoriy Omelchenko -- the former head of a
parliamentary commission on combating corruption and author of a 1999
book titled "Corrosion of Power" -- and instead chose to have
Omelchenko investigated instead of Lazarenko.
But by early 1997, Kuchma was coming under intense Western
pressure to have Lazarenko removed. Instead, he chose a course of
passive resistance, one in which the prosecutor-general dragged his
feet in the investigation of Lazarenko. And Kuchma clearly had the
right man for the job.
Hryhoriy Vorsinov was a local prosecutor from Dnipropetrovsk
who was already battling allegations that he participated in various
illegal enterprises until one day he came to the attention of
politicians in Kyiv. They immediately noticed his talents and brought
him on board.
In 1993, the entire staff of investigators at the Prosecutor-
General's Office in Dnipropetrovsk had sent a letter to the
prosecutor-general in Kyiv asking that "H. Vorsinov," the regional
prosecutor, be removed for illegally terminating cases, abusing his
position, and on moral and ethical grounds. In response to that
letter, all the investigators whose signatures appeared on it were
summarily sacked.
In October 1995, a parliamentary anticorruption commission
recommended that Vorsinov not be appointed prosecutor-general.
Despite that protest, President Kuchma chose him for this sensitive
job. It was among the methods the president employed in implementing
his decree of August 1994 "on combating corruption."
It was Vorsinov who was given the delicate task of dealing with
the accusations against Lazarenko. He did so by stalling and
prolonging the investigation, by spending more time investigating the
whistle-blower, Omelchenko, than the accused, Lazarenko. There is
little doubt today that this entire scenario was cooked up by Kuchma,
who had been protecting, and possibly benefiting from, the protection
being granted to Lazarenko from the very beginning.
On 1 July 1997, Lazarenko was relieved of his duties as prime
minister of Ukraine. The pressure from the West had become too much
for Kuchma to bear. Lazarenko had become a liability and thus had to
go.
(To be continued.)
(Compiled by Roman Kupchinsky)
*********************************************************
Copyright (c) 2001. RFE/RL, Inc. All rights reserved.
"RFE/RL Crime, Corruption, and Terrorism Watch" is edited by Roman
Kupchinsky on the basis of a variety of sources. It is distributed
every Thursday. Direct comments to Roman Kupchinsky at
kupchinskyr@rferl.org. Back issues are online at
http://www.rferl.org/corruptionwatch/
Technical queries should be e-mailed to: iteam@rferl.org
HOW TO SUBSCRIBE
Send an e-mail to cct-subscribe@list.rferl.org
HOW TO UNSUBSCRIBE
Send an e-mail to cct-unsubscribe@list.rferl.org
_______________________________________________________
RADIO FREE EUROPE/RADIO LIBERTY, PRAGUE, CZECH REPUBLIC