Sunday, May 16, 2021

U.S. sanctions Ukrainian tycoon Ihor Kolomoisky over money laundering allegations

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The State Department sanctioned one of Ukraine’s most powerful tycoons, Ihor Kolomoisky, as U.S. authorities also pursue a civil case alleging he stole billions of dollars from a Ukrainian bank he once owned and laundered the funds into the United States and other places.

Kolomoisky and members of his family were sanctioned under a U.S. law that allows the State Department to designate officials of foreign governments involved in human rights violations and corruption. Designation under the law prevents individuals from entering the United States, but doesn’t result in the imposition of financial sanctions, according to a State Department official.

The tycoon was involved in “significant corruption” during his stint as governor of Ukraine’s Dnipropetrovsk region from 2014 to 2015, Secretary of State Antony Blinken said in a statement Friday, alleging that the tycoon’s acts while in office “undermined rule of law and the Ukrainian public’s faith in their government’s democratic institutions and public processes.”

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Neither Kolomoisky nor a lawyer representing him in the United States responded to requests for comment.

In the civil case, Kolomoisky has denied the allegations the Justice Department has made against him, saying the real estate he held in the United States was purchased using personal funds he received through a deal he made with a mining company.

By sanctioning Kolomoisky, the Biden administration is backing up U.S. exhortations for Ukrainian President Volodymyr Zelensky, who previously starred in a television show on Kolomoisky’s network and has operated under the suspicion that he was subject to the tycoon’s influence, to take aggressive steps to reform Ukraine’s economy and political system. The country has been dominated by oligarchs since the Soviet Union’s collapse.

“This designation reaffirms the U.S. commitment to supporting political, economic, and justice sector reforms that are key to Ukraine’s Euro-Atlantic path,” Blinken said. “The United States continues to stand with all Ukrainians whose work drives reforms forward. The Department will continue to use authorities like this to promote accountability for corrupt actors in this region and globally.”

Zelensky’s office released a statement that didn’t mention Kolomoisky by name but said Ukraine must overcome its oligarch system.

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“Ukraine is grateful to all its partners for support on this path,” the statement said. “The battle with the oligarchs lies not only in the realm of criminal responsibility. It is also about creating the conditions in Ukraine, in which business can grow in a transparent and competitive environment, and large financial groups will not be able to dominate the market or influence the media and political decisions.”

Zelensky is hoping to reengage with the United States as a key partner after his phone call with President Donald Trump led to impeachment proceedings against Trump and soured U.S.-Ukraine relations.

Kolomoisky has long cut an influential figure in Ukraine, making a fortune during the savage capitalism of the 1990s and cobbling together a business empire that has included airlines, television networks, banks and energy companies. Often referred to in the Ukrainian press as “Benya” — a reference to a gangster from Ukrainian literature — he has cultivated a puppeteer-like image, regularly asserting himself, often behind the scenes, at Ukraine’s biggest political and economic moments.

After Russia invaded Ukraine in 2014, Kolomoisky increased his domestic power by becoming governor of his native Dnipropetrovsk region and funding a private army to fight Russian-backed separatists in nearby Donbas, assailing Russian President Vladimir Putin as a “schizophrenic of short stature.”

But Ukraine’s last president eventually nationalized his PrivatBank — Ukraine’s largest bank — and alleged that Kolomoisky and one of his business partners had defrauded the bank, and its depositors, of billions of dollars, prompting him to leave the country for Israel, where he also holds citizenship.

Zelensky’s election in 2019 appeared to reverse Kolomoisky’s fortunes, as the newly elected president and the tycoon had a history of business together. Kolomoisky returned to Ukraine, while Zelensky invited individuals with links to the oligarch into the new administration.

Last year, the Justice Department filed civil forfeiture complaints alleging Kolomoisky and his associates used stolen money to scoop up real estate and infrastructure in the United States. Among their purchases were more than 5 million square feet of commercial real estate in Ohio; steel plants in Kentucky, West Virginia and Michigan; a cellphone manufacturing plant in Illinois; and commercial real estate in Texas. The complaints seek to seize an office park in Dallas and the PNC Plaza building in Louisville.

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Kolomoisky also has long been facing a criminal probe by the U.S. attorney’s office in Cleveland for possible money laundering — though he has not been charged with any crimes. He has denied any wrongdoing and said the U.S. purchases were made with legitimately earned funds.

As U.S. authorities began to zero in on his U.S. property interests, Kolomoisky started calling for Kyiv to patch up relations with Moscow and was increasingly seen to be taking actions to undermine Zelensky’s political position.

Blinken appeared to make an implicit reference to that in his statement Friday. The secretary of state expressed concern about what he called Kolomoisky’s “current and ongoing efforts to undermine Ukraine’s democratic processes and institutions, which pose a serious threat to its future.”  

Daniel Fried, a fellow at the Atlantic Council and a former top U.S. diplomat, said Zelensky’s efforts to go after Ukraine’s oligarchs as promised have been uneven, and the sanctioning of Kolomoisky is a signal from the U.S. government to “do it.”

“If Ukraine succeeds in maintaining its external independence from the Kremlin and advances its domestic transformation like the Balts and like the Poles did a generation ago, that is a huge deal,” Fried said. “That will demonstrate to Russians that there is an alternative to Putinism.”

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