Intellinews, 11/30/23

Corruption case against Ukraine oligarch Kolomoisky to be dropped. Another big fish looks like he will escape justice as the fraud case against top Ukrainian oligarch Ihor Kolomoisky looks like it will be dropped following a court ruling on November 29, the Kyiv Independent reports.

Kolomoisky was arrested on September 2 by the Ukrainian Security Service (SBU) and charged with money laundering and fraud. He was subsequently accused of embezzling $250mn from his bank PrivatBank by National Anti-Corruption Bureau of Ukraine (NABU) on September 8 in the most high profile corruption case in years.

PrivatBank, Ukraine’s biggest commercial bank, had to be nationalised and bailed out in 2016 after a bne IntelliNews cover story Privat Investigation exposed a fake loans scam at the bank, where the owners lent money to shell companies under their control leaving a $5.5bn hole in the balance sheet, resulting in the biggest bailout in Ukraine’s banking history.

Kolomoisky is also under investigation in the US, where he syphoned off hundreds of millions of dollars through shell companies in Cleveland, and is also being prosecuted in both London and Cyprus by the now state-owned PrivatBank in an effort to recover the money. A London court has frozen some $2bn of his assets as part of these cases in a case which is expected to go on for years.

Kolomoisky’s arrest in September came as an landmark event, as he is the second big fish NABU has attempted to jail. Previously NABU arrested Roman Nasirov, the government’s financial controller and former President Petro Poroshenko’s right-hand man, and charged him with embezzling millions of dollars in March 2017. However, Nasirov walked free after his wife came up with over $1mn bail in cash and the case was eventually dropped. Seen as a litmus test of the anti-corruption efforts in Ukraine at the time under the Western-leading EuroMaidan government, Nasirov’s case was judged as a failure.

Now it looks like Ukrainian President Volodymyr Zelenskiy’s efforts to rejuvenate the anti-corruption drive are going to suffer a similar humiliation. Ukraine has a corruption problem that will stymie any effort to raise private sector investment to pay for Ukraine’s reconstruction, as was laid out at the Recovery conference held in London in June last year.

Ukraine’s Anti-Corruption Action Center reports that on November 28, the High Anti-Corruption Court’s appeal chamber ruled that NABU had failed to meet a May deadline for completing its investigation in the case against Kolomoisky.

This ruling may invalidate the charges brought against Kolomoisky, the only charges brought against him in the PrivatBank case, despite the blatant nature of the schemes. A forensic audit of PrivatBank following its nationalisation found that 99% of the loans made by the bank to shell companies were fake.

The High Anti-Corruption Court has only been recently reactivated and its ruling means either the prosecutors or a court could close the case down, according to Vadym Valko, a lawyer at the Anti-Corruption Action Centre as cited by Kyiv Independent, although such a decision would be subject to appeal.

In a parallel decision the High Anti-Corruption Court, which is a related anti-corruption body set up at Western insistence, rejected motions to freeze Kolomoisky’s assets and impose bail and travel restrictions on them.

Charges were brought against Kolomoisky, along with several alleged accomplices, including Oleksandr Dubilet, Lyudmila Shmalchenko, Yaroslav Luhovoy, Tetiana Yakymenko and Nadiya Konopkina.

NABU’s investigation claims that Kolomoisky orchestrated a scheme in 2015 to funnel funds from PrivatBank to an offshore company and increase his share in the bank’s capital. This involved a payment of over $250mn to the offshore company under the pretext of repurchasing its bonds at an inflated cost. A portion of these funds, totalling $12mn, was then channelled to five legal entities before ultimately ending up in Kolomoisky’s personal account, according to NABU.

The NABU case against Kolomoisky is separate from the original charges brought by the Security Service of Ukraine (SBU) that were used to arrest him in September. The SBU is under the direct control of the president and was widely seen as an attempt by Zelenskiy to crack down on Ukraine’s oligarchs. Ukraine’s Economic Security Bureau (BEB) also cooperated in the SBU case that has similar allegations of fraud and money laundering of UAH500mn ($13.5mn) in 2019-2020. Kolomoisky has been held in pre-trial detention since September and refused to post bail. A court this week extended his detention into the New Year.

The court’s decision and the potential closure of the NABU case are linked to the controversial “Lozovy amendments,” Kyiv Independent reports, which imposed strict deadlines for investigations and limited the terms for sending cases to trial. The Rada passed several laws this week that undermine the judiciary and its ability to vet and bar corrupt judges from office.

Anti-corruption activists argue that these amendments aimed to protect corrupt officials by hindering investigations against them. Despite calls from activists, Parliament has yet to repeal these amendments.

The ruling on the Kolomoisky case highlights different interpretations of the Lozovy amendments, with prosecutors and some courts contending that they do not apply when multiple cases are merged, and one was opened before the amendments. The Kyiv Independent reports. The Anti-Corruption Court’s appeal chamber disagreed with this interpretation.

As the case hangs in the balance, the future of Ukraine’s efforts to prosecute Kolomoisky remains uncertain, prompting concerns about the state of anti-corruption efforts in the country.

The Kolomoisky case comes as Ukraine’s anti-corruption efforts are spluttering following a failure to reform the judiciary and bar corrupt judges from office. Zelenskiy has been trying to reform the High Commission and the Anti-corruption Court but is running into stiff institution resistance to any changes.