Ukrainian Top Officials Involved in Secret Offshore Deals
A number of high-ranking Ukrainian officials used a complex web of offshore companies and bank accounts to conduct property deals in multiple countries, according to a cache of leaked documents obtained by OCCRP.
The officials in Kyiv used what is known locally as a “ploshchadka” or a “conversion center,” meaning a turnkey solution for money laundering, tax evasion and hiding assets that includes companies in offshore havens, secret bank accounts and “proxies” who act as front men for the people behind the scenes who really benefit.
Among those who benefited are former members of Parliament, top members of law enforcement and sons of top officials in both the defense sector and a leading anti-corruption organization.
The Second Generation
In December 2014, Oleksandr Tereshchenko, then a 19-year-old Ukrainian student with no known businesses, sent an email to a real estate agent in London regarding his purchase of a bachelor pad within walking distance of the Houses of Parliament.
“Please ask Graham [Wilson, a lawyer] to create a [client service agreement] with his signature and stamp,” the email said. “The owner of the account that did the wire transfer just called me. If they don't get this document within the next hours, then they will request the payment be returned as an error.” The owner of the account likely needed the paperwork to explain the wire in order to satisfy money laundering regulations.
Oleksandr Tereshchenko is the son of a top Ukraine defense sector official, Yury Tereshchenko, who had spent his entire career in Ukraine's state-owned arms trading sector. In 2014, the elder Tereshchenko was the temporary acting head of Ukroboronprom, the sprawling state arms producer and exporter.
Apparently there was no time to get the document from the English lawyer, and the ploshchadka operators simply slapped together a crudely improvised invoice for the apartment, structured like those typically written in the Russian language.
According to the improvised invoice and documents detailing the wire transfers from the ploshchadka, the £106,670 initial one-third payment for the apartment was wired to the lawyers’ account from Berly Trade Ltd., a Seychelles company with opaque ownership and a bank account at ABLV, Latvia's leading offshore bank.
An earlier letter from the lawyers to their young client warned that “to comply with current Money Laundering Regulations we can only accept funds from you or a third party of which we have full details.” Lawyer Wilson declined to comment, citing client confidentiality. But if the English lawyers had ever received full details of the company that wired them more than £100,000, they might well have turned pale.
Berly Trade is clearly a newly formed paper company likely designed to be part of a ploshchadka. It had been incorporated less than six months previously, in July of 2014. That September, it opened an account at ABLV. Funds started to trickle through the accounts in October 2014, according to a redacted bank statement among the leaked documents, which covers only the first three weeks of Berly's activities.
The statement shows that $190,000 was paid into Berly’s accounts in those three weeks, much of which flowed out to other firms with accounts at the same bank. The payments do not look like normal business transactions. For example, around $42,000 was paid in six separate wires. The paperwork shows that the money was used to buy flowers from suppliers in Ecuador. Larger sums were paid to and received from other firms with accounts at ABLV.
By December 2014, millions were moving through the accounts. Besides the funds moved to London for the Tereshchenko apartment, in December 2014 Berly paid a total of around $800,000 in seven wires to another offshore firm in the Marshall Islands with a bank account at the Julius Baer bank in Switzerland. The money was "for marketing services" according to payment orders found among the documents.
In subsequent months, Berly received and wired millions more from and to other offshores, as well as from and to firms and individuals from countries including Tunisia, Turkey, the Czech Republic, Hungary, and the US.
Source of the funds
Where did young Tereshchenko find the money to buy his London bachelor pad? According to his correspondence with the London lawyers facilitating the transaction, the £332,000 for the one-room apartment came from his family.
In March of 2014 Oleksandr Tereshchenko's father, Yury Tereshchenko, wrote an op ed in the Kyiv Post on taking over Ukroboronprom. The elder Tereshchenko said that corruption had been sapping revenues from Ukraine's defense industry, but that this would stop under his watch.
"We must ensure we have zero tolerance for corruption," he wrote.
Later in 2014, the senior Tereshchenko headed the State Service for Export Control, which licences exports of military and dual-use goods (which can be used for either military or commercial purposes).
Despite Yury Tereshchenko's vow to end corruption, in December 2015 Ukraine's SBU security service arrested one of his deputies, Serhiy Golovaty, just after he received the final installment of a $250,000 cash bribe for providing an export license to a local company. According to the SBU, some of the funds were found in Yury Tereshchenko's home. The elder Tereshchenko was suspended and then fired in June 2016 from his job.
An OCCRP reporter interviewed Oleksandr Tereshchenko in London. "My father has been fired now, although it was not him who took the bribe," the younger Tereshchenko said in English honed by four years at Malvern College, an elite British public school. He did not refute the authenticity of the lawyer’s emails.
Oleksandr Tereshchenko said that it was not his father who bought him the apartment despite what the paperwork says. "I’m 20 years old and don’t have any access to this kind of funds. Why do you think [this money] comes from my father? He’s not the only relative I have.” He would not name the relative he said bought the apartment.
Yury Tereshchenko failed to respond to attempts to contact him directly.
The Deputy Prosecutor General’s foreign property deals
Like Yury Tereshchenko, Mykola Gerasimyuk, Ukraine's first deputy prosecutor general between June 2014 and December 2014, used the same ploshchadka to move funds to Europe to buy real estate.
He acquired the properties in the name of his wife, Kateryna, who in turn gave a power of attorney to two agents to act on her behalf, according to documents, contracts and emails from Gerasimyuk's inbox seen by OCCRP reporters.
The contracts say that Gerasimyuk transferred at least $150,000 via Itaco Alliance S.A. to one of the authorized agents. Itaco Alliance was established in the Seychelles in July 2014, along with Berly Trade. It shares a director with Berly Trade: Viktoria Gaidai, a cleaning lady from Kyiv. Like Berly Trade, Itaco Alliance has an account at Latvia’s ABLV.
The agent was businessman Oleg Zasidkovych, who was authorized to represent Kateryna Gerasimyuk in Slovakia. The transfers were ostensibly for construction equipment, according to the contracts.
Gerasimyuk and his wife transferred another $500,000 to Slovakia and Croatia for real estate acquisitions, wiring funds via other companies in the ploshchadka, the UK firm Smartus Business and a Belize firm, Old World Management Ltd.
Gerasimyuk also transferred up to $100,000 via the ploshchadka to pay for his daughter's university tuition fees and living expenses in the UK in 2013-14. Ploshchadka operators routed these payments via Smartus Business, the Belize firms Eyand Ltd. and Donberg Ltd. and Panama's Wiorex Trade, all of which had accounts at Latvian banks.
"My daughter is now back studying in the US," Gerasimyuk said, in a brief impromptu interview that interrupted his English lesson in his luxurious Kyiv apartment. Standing by an outsized 'Home Sweet Home' wall hanging in the hall, Gerasimyuk refused to look at the emails shown to him.
"I have no personal email address," he said.
Where was all this money coming from?
According to other emails obtained by OCCRP, Gerasimyuk was being offered bribes to drop charges against associates of Yanukovych. He was also contacted over politicized property disputes worth tens of millions of dollars.
One correspondent using the name “China Town” appealed to Gerasimyuk on behalf of Armen Sarkisyan, a businessman from the East Ukrainian town of Horlivka, offering a $500,000 bribe for his freedom.
According to the emails to Gerasimyuk, Sarkisyan was under suspicion of organizing 'titushki' or hired thugs deployed by Yanukovych against protesters in the Maidan protests, among other things. The letter said Sarkisyan “is ready for all forms of solving the problem and will act properly. Can you help?” The dialogue then continued cryptically discussing the size of the bribe. Gerasimyuk answered in Cyrillic letters, 'Match? How?'' possibly a corruption of the English 'how much'?
The applicant replied, “100,000 guests will come to you when a person receives freedom of movement, another 400,000 will be invited to celebrate when the charges are fully dropped, I will be guarantor and depository,” suggesting a total $500,000 bribe for dropping charges against Sarkisyan.
A later email from the same mysterious ‘China Town’ address sent Gerasimyuk documents relating to “activities of the Kyiv prosecutors' office directed against my firm and my family.” The attached documents relate to cases brought against the law firm Lavrynovych & Partners, run by Maksym Lavrynovych, the son of Oleksandr Lavrynovych who served as MInister of Justice under former President Viktor Yanukovych. Yanukovych fled Ukraine for Russia in 2014.
Maksym Lavrynovych told OCCRP the law firm had nothing to do with that email or the Chinatown address.
“We are a reputable law firm and never, ever were involved in any bribe or corruption cases,” he said in an email.
Gerasimyuk was also contacted directly on his personal email by top businessmen, with details of criminal investigations that they may have wanted to influence in their favor.
In August 2014, influential businessman Aleksander Granovsky sent Gerasimyuk a summary of a criminal investigation into an allegedly fake loan agreement, which, if successful, would influence a long-running dispute over ownership of one of Ukraine's largest shopping malls, Sky Mall in Kyiv, in his favor. An Estonian businessman claimed to have invested up to $120 million in the project.
Granovsky was head of the board of Assofit, one of the parties to the dispute. The mail was sent from Alexander Granovsky’s email address and the subject line read: “Backgrounder on the case. The hearing is scheduled for Monday.” The mail was sent on Sunday, Aug. 10, the day before the hearing.
According to Mikhail Merkulov, CEO of Cyprus company Arricano (Assofit's opponents in the dispute over control of Sky Mall), there has been "massive interference" in the dispute by the prosecutor general's office, police and courts in favor of Assofit including the criminal charges against representatives of Arricano and of its affiliates mentioned in Granovsky’s emails.
After leaving his job as first deputy prosecutor general at the end of 2014, Gerasimyuk became a paid parliamentary assistant to Granovsky, who had entered Parliament in November 2014 as a member for the presidential bloc of Petro Poroshenko. Granovsky told OCCRP reporters he did not try to influence Gerasimyuk in the case.
Gerasimyuk also said his new job as Granovsky’s assistant had nothing to do with the Sky Mall case.
Money to Hungary
Other Ukrainian officials also used the ploshchadka to move funds to Hungary. Roman Zabzalyuk served as a member of Ukraine’s Parliament for three terms. During his last term, starting in 2012, he was deputy head of the parliamentary group of Yulia Tymoshenko's Batkivshchyna party, and deputy head of the parliamentary committee on national security and defense. In his previous two terms he served on the anti-organized crime and corruption committee.
In 2014 and 2015, Zabzalyuk moved at least $735,000 to accounts in Hungary belonging to him and two of his parliamentary assistants, according to payment orders. Hungarian public records say Zabzalyuk and his former assistants, Yulia Konina and Anatolii Petliuk, invested the funds in a house near Budapest as well as a firm located directly adjacent to Hungary's Parliament.
Once again, Berly Trade crops up, along with Panamanian firm Adlon Investments Inc., which has an account at Latvia’s Baltic International Bank. Berly and Adlon paid the funds into Zabzalyuk’s and Petliuk’s accounts at Hungary's MKB Bank, according to invoices in the cache. According to the invoices, the payments were for car parts.
Zabzalyuk, a professional politician without significant business interests, may have received some of these funds as payments for switching his political loyalties in Parliament. In February 2012, Zabzalyuk claimed publicly he had received $450,000 as a cash bribe for quitting the parliamentary group of Batkivshchyna, which at the time opposed the increasingly authoritarian and corrupt Yanukovych administration. He said the money was paid to him by a newly created parliamentary group loyal to Yanukovych, which he initially agreed to join.
Zabzalyuk claimed his switch was in fact part of a sting operation to unmask Yanukovych's purchase of opposition members of Parliament. He remained in Batkivshchyna and claimed he had donated the funds received to a children's hospital. Zabzalyuk finally quit Batkivshchyna in January 2014, when the party led mass protests against Yanukovych.
Attempts were made to contact Zabzalyuk, Konina and Petliuk via social networks and email, but they failed to respond. No one answered the door of the house near Budapest when OCCRP reporters knocked.
Libertarians move funds to the sunshine state
Other politically connected individuals were identified as using the ploshchadka to secretly move money to their personal accounts abroad.
offshore company Berly Trade for $100,000 and asked the payment to be wired to his US account at Wells Fargo, according to a wire order and copy of his passport contained in the documents. Balashov's party co-founder Oleg Prytula, owner of a private clinic, billed Berly Trade more than $400,000 to be sent to his own US account at Wells Fargo, as well as to firms the two men control in Florida, all with accounts at Wells Fargo.Gennady Balashov is a former member of Parliament, entrepreneur and libertarian politician who ran unsuccessfully for mayor of Kyiv in October 2015. He billed
In all cases, the funds were listed as payment for importing car parts to Ukraine, and were paid to the Wells Fargo accounts via the Seychelles firm Berly Trade. There is no evidence either man is involved in the car parts business.
In 2015, Balashov and Prytula together acquired a company in the Florida resort town of Flagler Beach, Oceanside Cottages LLC, according to the Florida state corporate register. Oceanside Cottages LLC owns a beachside motel. Balashov's press secretary said he was currently vacationing in Flagler Beach when OCCRP asked for an interview.
When asked in May via Facebook how he had transferred money to the US to purchase Oceanside Cottages LLC, Balashov answered, “[We did it] nicely.”
Balashov, a luxury real estate developer and prominent videoblogger, is a leading critic of Ukraine’s system of offshores.
"The whole country hides their money in offshores and envelopes," says Balashov in a recent post, alleging that Ukraine's elite leads a 'double life.' Balashov proposes slashing Ukraine's tax system to only two taxes - a 5 percent turnover tax and 10 percent payroll tax - to eliminate the motivation to use offshores.
Son of anti-money laundering czar
Yan Klushke is the son of one of Ukraine's leading anti-money laundering experts, Stanislav Klushke. The younger Klushke is also among the clients of the ploshchadka, according to invoices drawn up between February and March of 2015. Rion Group Ltd., a Belize firm, paid $122,000 to Yan Klushke's Swiss bank account in six wires, ostensibly for sale of car parts, according to the invoices.
Stanislav Klushke was one of the officials who spearheaded Ukraine's successful drive to be removed from the blacklist maintained by international anti-money laundering watchdog Financial Action Task Force (FATF).
From 2003 to 2007 he was deputy head of the Finance Ministry's department of financial monitoring which later became the State Financial Monitoring Service in 2007. In December 2015, he ran unsuccessfully for the newly created post of head of the National Anti-Corruption Bureau, an anti-graft watchdog.
Yan Klushke has an international trading business independent of his father that may account for the payments. He represents Ukraine in the United Arab Emirates on the Ukrainian National Committee of the International Trade Chamber and on his LinkedIn page lists his current job as “consultant at Ukraine charity foundation.” He did not respond to attempts to reach him by email.
Swift documents and contracts show that Rion Group Ltd. received funds from the UK firm Tweedale Trading LLP, which in turn received funds from Berly Trading and Itaco Alliance, according to other documents.
(Additional reporting contributed by Ildiko D. Kovacs of Atlatszo.hu in Hungary and OCCRP's Anna Babinets in Ukraine)