Is President Poroshenko linked to a dodgy $500m deal?

It became a worthy deal by any measure. An oligarch who had near from nowhere, primitive correct 28, had raised half one billion greenbacks to settle the media neighborhood that had earlier investigated him.

Serhiy Kurchenko, the « gas wizard of Ukraine », had been named publicly for the predominant time easiest a 300 and sixty five days sooner than. Now, he became ready to settle the journal that had investigated him, Forbes Ukraine. Personnel resigned en masse. Now not would they write about his irregular industry practices.

That is what he belief. Nonetheless Kurchenko would possibly additionally now not have identified that within months he would waft to Russia, the attach aside he would resolve on to explore his prized settle picked aside by prosecutors intent on seizing his resources and proving they were stolen.

To make issues worse, Forbes within the US launched upright motion to salvage its title lend a hand. It remains tight-lipped about its govt’s embarrassing approval of the 2013 deal and his advisory role.

For the sellers of United Media Holdings (UMH), the cash would possibly additionally now not have near at a better time. Boris Lozhkin, who had jam out as a journalist within the eastern Ukrainian city of Kharkiv within the Nineties, now counted himself amongst the nation’s richest and most worthy men. He walked away with numerous of hundreds of 1000’s from the sale.

His industry partner and just correct friend, the billionaire « chocolate king », Petro Poroshenko, would trot on to develop into president of Ukraine in June 2014 and make Lozhkin his chief of group and later, his chief economic adviser.

Dirty cash

Nonetheless the sale of UMH became spoiled by soiled cash and its residue will clean now not wash away.

First came the EuroMaidan revolution, which swept away the then president, Viktor Yanukovych, amid evidence that he and his clan had siphoned billions from the Ukrainian treasury. Then came an intensive pressure to employ aside their offshore web of industrial holdings. Quickly, it changed into certain that Serhiy Kurchenko sat on the guts of a « criminal enterprise » that had helped him salvage predominant oil and gas holdings and at last a media empire.

Then in 2015, it became reported that Austrian officials were investigating a $130m transaction connected to the UMH sale from a Latvian yarn to Lozhkin’s company Integrity Holdings ltd on suspicion of cash laundering. Fortunately for Lozhkin, that they had dropped the case by 2016, saying that they had considered no evidence to indicate the cash had a bootleg starting attach aside.

Nonetheless original information received by Al Jazeera’s Investigative Unit suggests the cash paid became soiled, because it came from a loan secured the employ of stolen cash. Campaigners are now calling for deeper investigation in both Ukraine and Austria.

« Ukrainian prosecutors would possibly additionally simply clean have sturdy evidence of the illicit starting attach aside of the funds paid by Kurchenko for UMH lend a hand in October 2013, » mentioned Daria Kaleniuk of Ukraine’s Anti-Corruption Hasten Centre (ANTAC).

They would maybe additionally simply clean and if fact be told they attain.

We now know that in report to pay Lozhkin and his partners, Kurchenko secured a loan of $160m from a issue monetary institution the employ of what prosecutors have established are stolen resources as security for the loan.

A doc launched by Al Jazeera last month as phase of a wider investigation shows Kurchenko supplied the issue Import Export Bank of Ukraine security of $50m held in three Cyprus shell companies moreover to property belonging to the company he became poised to bag.

A beforehand secret Ukrainian court docket report, launched by Al Jazeera in January, shows that the $50m and the three Cyprus companies were phase of a wider network of companies dedicated to the embezzlement and laundering of $1.5bn on behalf of the inclined Yanukovich government.

In December last 300 and sixty five days, a Kiev court docket seized the corporate rights of UMH. One in every of the arguments prosecutors old model became that the $160m loan agreement confirmed « indicators of laundering the proceeds of crime. »

« Why is there no confiscation of funds from these that – if we are to ponder to public court docket information –  received soiled cash from Kurchenko for UMH lend a hand in 2013? » asks Kaleniuk.

She sees an acknowledge to her possess interrogate. « The Prosecutor Overall of Ukraine would possibly presumably now not ever bustle against industry and political pursuits of Petro Poroshenko. »

Corruption ‘a priority’

Ukraine, which is ranked 131 out of 176 nations in Transparency International’s Corruption Idea Index, started receiving a $17bn loan from the International Financial Fund to succor it salvage lend a hand on its toes.

The cash came with strict stipulations that the federal government fabricate sturdy institutions that will fight corruption.

With Western make stronger, Poroshenko created a national anti-corruption bureau and appointed a dedicated anti-corruption prosecutor. It became meant to be the starting of a brand original generation, by which the « oligarchy » – rule by a fabulously filthy rich few – would be taken aside.

That didn’t happen. The bureau and its allies have faced attacks and have been foiled in their efforts to penal complex the oligarchs. Poroshenko has stopped short of setting up a specialised anti-corruption court docket, preferring to rely on the inclined judges.

In Davos in January, he instructed an viewers that the trot remained his priority.

« This is required now not for the World Bank, now not for the IMF, now not for the foreign partners. This is required for me and for Ukraine, » he mentioned, adding that this became his « principled role. »

Campaigners are now not gay. A contemporary editorial within the Kyiv Submit described Poroshenko as « the king of the rotten and kleptocratic oligarchy » and « a persecutor of his political foes and anti-corruption activists. »

Media empire

Lozhkin grew UMH from a solitary critical particular person journal in Kharkiv into an countless conglomerate controlling numerous newspapers, websites, radio stations and TV channels. It printed effectively-known magazines including Vogue and Forbes and employed around four,000 folks.

By 2013, Poroshenko owned a journal and several other media stores within it, moreover to correct below three % of UMH. He claims he offloaded his assorted media resources sooner than the deal’s announcement in June 2013. On the opposite hand, company documentation means that whereas Poroshenko would possibly additionally simply have given up his magazines and radio stations, he held onto his UMH shares till the day of the sale in October.

Paperwork held on the Cyprus company register tell that he gathered his shares right by 2011 by an offshore company primarily based totally within the British Virgin Islands (BVI).

He paid around $5m for correct below three % of the company. There is never any document that the shares were supplied till the day the company at last changed fingers in October 2013. So, unless he divested himself of the BVI company beforehand, on the level of sale, Poroshenko stood to get $15m, tripling his preliminary funding.

On top of that, journalists have wondered whether the president paid the very best tax on the deal, on condition that it became completed in offshore tax havens, by companies primarily based totally within the British Virgin Islands.

Multilayered companies and oligarchs

Below Lozhkin, the UMH possession building became account for. It comprised now not lower than five layers of companies in Ukraine, the Netherlands, Cyprus and the British Virgin Islands (BVI). The total UMH investors old model offshore companies to settle shares in a Cyprus retaining company called UMH Neighborhood Public Itsy-bitsy.

UMH Neighborhood Public Itsy-bitsy owned a Dutch company that in turn owned the total resources in Ukraine. It became owned in turn by a BVI company which became itself owned by another BVI company.

President Poroshenko first sold shares on September 12, 2011, in step with documents held on the Cyprus company register. He old model a BVI company named Linquist Products and companies Itsy-bitsy. Factual over two weeks later, Poroshenko increased his stake by procuring more shares from another Cyprus company named Torbock Holdings Itsy-bitsy.

That has been linked to oligarchs Gennadiy Bogoyubov and Igor Kolomoisky, the inclined homeowners of Ukraine’s largest lender PrivatBank.  At the time, the three billionaires were guests and industry pals, nevertheless since PrivatBank became nationalised in late 2016, their family have soured.

Poroshenko

By late 2012, Poroshenko became retaining correct below three % of the company.

Lozhkin’s BVI company, which became called Integrity International Holdings, held the bulk of the final shares, correct over Eighty %. Deutsche Bank Belief in Unusual York held around 12 % on behalf of alternative investors, with the remainder belonged to Ukrainian stockbrokers Concorde Capital, and a handful of others.

In early 2013, the local industry press reported that Poroshenko had begun promoting his media stores to UMH, including two radio stations in February and another broadcaster and journal later.

There became no document of any portion sale on the retaining company in Cyprus.

Then, on June 21, UMH presented it became to be received by Serhiy Kurchenko. The clicking release said that the neighborhood had an ‘option with Petro Poroshenko to bag his stake in « Korrespondent » and other mutual initiatives,’ and that the option « became implemented in April ».

The deal appears to be like to have been carried out on 28 October, when a issue monetary institution issued Kurchenko with a $160m loan. On the identical day, the directors of the Cyprus retaining company changed.

Lozhkin has written of the deal in his book, The Fourth Republic. « Kurchenko became itching to settle possession, which is why the deal became closed four months sooner than time desk – in early November 2013. »

Prison enterprise

Kurchenko, it has emerged, became now not procuring UMH with cash he had earned but with what he had stolen.

The Import Export Bank of Ukraine charged ardour at 10.1 % per annum and asked for security on the loan at a ratio of 178 %. As security, Kurchenko supplied one of the predominant UMH resources and $50m in cash. 

That cash became held in three Cypriot companies, Quickpace Itsy-bitsy, Kviten Solution Itsy-bitsy and Sabulong Procuring and selling Itsy-bitsy.  A secret court docket doc launched by Al Jazeera in January tell these three companies were phase of a huge « criminal enterprise » dedicated to stealing almost $1.5bn from Ukraine.

In February 2014, Ukraine had its second revolution in a decade, and Kurchenko ran to Russia, the attach aside he remains in hiding. Al Jazeera filmed his high-security arrival at an role of work in central Moscow last 300 and sixty five days.

The revolution led Kurchenko to default on the loan. On October Eight, the monetary institution wrote to repeat him that they had seized the $50m and that he clean owed them several million more.

Kurchenko is now locked in numerous upright battles for his resources, including one with Forbes journal within the US, which is now not easy him over his possession of their Ukrainian franchise. Kurchenko is represented by lawyer and inclined Pennsylvania issue senator Bruce Marks.

It is now not instructed that the sellers knew in regards to the uncertain security for the loan old model to pay for UMH, but we are in a position to interrogate what due diligence became undertaken on the time.

Austrian investigation

Six days after the $160m loan to Kurchenko and the succesful trade in possession, Lozhkin reportedly received $130.52m from the Latvian monetary institution yarn of BVI company Trejoli Commerce Ltd, which has been linked to Kurchenko.

The cash went to an Austrian monetary institution yarn held at Raiffesen Bank on behalf of his BVI company, Integrity International Holdings. The transfer ended in a suspicious assignment report being filed on the monetary institution, which in turn brought about an investigation by the Austrian authorities into suspected cash laundering.

Prosecutors determined now to not proceed with the case. It became reportedly closed in 2016. The Vienna Prosecutor’s Space of industrial mentioned it had now not received any evidence from Ukrainian officials of the illicit starting attach aside of the cash. 

« In Ukraine there would possibly be never always a investigation on this case, and there should not any conditions that will presumably give grounds for such an investigation. »

On the opposite hand, in light of the information launched by Al Jazeera, it appears to be like there would possibly additionally simply be grounds for extra investigation. In 2016, Lozhkin wrote in regards to the sale of UMH and in regards to the man to which he had supplied it, Kurchenko. He became unrepentant.

« Every oligarch has real – and alleged – skeletons within the closet, » he wrote. « Does that mean you can not make fashioned clear presents with them? It does now not, in my explore. In any other case lets now not ever ruin out of the good judgment of chilly warfare civil warfare and never-ending property redistribution. »

Hours after Al Jazeera contacted the president and his adviser about this myth, Lozhkin presented his dismissal from Ukraine’s Nationwide Funding Council by social media.

« I am a businessman and an investor, » he wrote saying he had based a brand original funding company last 300 and sixty five days. « Now it’s time to starting up the implementation of a need of funding initiatives. »

Ukrainian and Austrian prosecutors declined to narrate for this myth. A spokesman for the president mentioned he didn’t possess without lengthen or circuitously any shareholding within the United Media Holdings on October 28, 2013. Accordingly, Poroshenko didn’t get any cash from the sale referred to in our inquiry and thus would possibly additionally simply now not have any tax liabilities in that regard.

He added that Poroshenko supplied his shareholdings in all UMH initiatives in 2012 and May presumably well 2013 respectively.

Poroshenko brushed off Lozhkin from the Nationwide Funding Council on Thursday, hours after Al Jazeera contacted the boys with questions about this myth. 

Al Jazeera is calling forward to feedback from Lozhkin.