On March 20, 2019, Yuriy Lutsenko, the prosecutor general of Ukraine, gave a controversial interview to The Hill political new website. His comments were saturated with speculation. Apart from the groundless attack against National Anti-Corruption Bureau of Ukraine (NABU) director Artem Sytnyk and the U.S. Ambassador Marie L. Yovanovitch, Lutsenko also made some loud allegation claiming that Sytnyk closed criminal investigations against Mykola Zlochevsky’s Burisma company. On March 25, Ukrainian media announced that Lutsenko and Special Anti-Corruption Prosecutor Nazar Kholodnytsky recorded other pieces of the interview for The Hill regarding Burisma.
Burisma appeared in this scandal not accidentally. This is an energy exploration and production company operating in the Ukrainian oil and gas market. During President Viktor Yanukovych’s presidency, which ended on Feb. 22, 2014, amid the EuroMaidan Revolution, Zlochevsky used to be the minister of environmental protection in 2010-2012 and deputy secretary of the National Security and Defense Council in 2012-2014.
In order to gain international weight right after the EuroMaidan Revolution, the company appointed some well-known people to the board of directors, among whom is Hunter Biden, a son of former U.S. Vice President Joe Biden.
In his infamous interview, Lutsenko hinted on warm relations between Biden and Sytnyk and then claimed that NABU closed the case against Burisma.
The irony is that, actually, it was the Prosecutor General’s Office (PGO) who repeatedly covered Zlochevsky up from the criminal prosecution. Moreover, the only ongoing investigations into activities of Zlochevskyi’s companies are conducted by NABU.
In total there were four criminal proceedings related to Burisma and Zlochevsky’s time in office, two of which were watered down by the Prosecutor General’s Office and two are still investigated by NABU. These are:
- the criminal case concerning the arrest of Zlochevsky’s money in the U.K. and personally charging Zlochevskyi with illicit enrichment was sabotaged and later closed by prosecutors;
- in the other Prosecutor General’s Office case, companies related to Burisma suddenly disappeared from the list of suspects;
- two cases regarding the extraction of licenses by Zlochevsky’s companies and embezzlement of public funds at the ministry’s procurements during Zlochevskyi’s Ministerial tenure remain active and are investigated by NABU.
None of the criminal proceedings against Burisma was closed by NABU. Let us explain to you more in details.
Prosecutors helped Zlochevsky to unfreeze assets in the U.K.
In 2014-2015, the prosecutor’s office, managed by then Prosecutor General Vitaliy Yarema, assisted Zlochevsky with unblocking $23.5 million seized in the U.K.
In April 2014, British law enforcement officers opened a case into possible $35 million money laundering allegedly committed by Zlochevsky. The Ukrainian party became aware of this in late July 2014.
However, instead of providing maximum support and evidence for British investigation, the PGO issued two controversial letters to Zlochevsky’s defense party claiming “uncertain legal status and absence of notification of suspicion of Mykola Zlochevsky.” In t he meantime, the British law enforcers received just a partial response on their inquiry.
The PGO announced charges to Zlochevsky only in December 2014, but this was too late. The London court decided to unblock the seized assets, as the Prosecutor General’s Office failed to provide evidence on illicit origin of $23.5 million on the accounts of Zlochevsky’s companies.
Back in September 2015, U.S. Ambassador Geoff Pyatt during a speech highlighted that the Prosecutor General’s Office sabotaged cooperation with the U.K. authorities on the case and called that “the misconduct by the PGO officials who wrote those letters should be investigated, and those responsible for subverting the case by authorizing those letters should – at a minimum – be summarily terminated.’ Such a statement shows anything but Joe Biden’s alleged attempt to help Burisma avoid justice.
PGO blurred money laundering and illicit enrichment charges against Zlochevskyi
In the course of the abovementioned investigation, on Dec. 29, 2014, Zlochevsky was notified of charges in illicit enrichment in large-scale and money laundering. To investigate this case, Ukrainian investigators had to establish the origin and legitimacy of significant funds on bank accounts of companies belonging to Zlochevskyi as a former top official.
However, despite considerable public attention, the illicit enrichment of Zlochevskiy was never properly investigated and sent to the court – in two years the investigation mystically transformed into the case of tax evasion by chief accountant of one the Burisma holding companies. This was done under the Yuriy Lutsenko’s leadership at the PGO.
In the same criminal proceeding into alleged illicit enrichment, in October 2016, PGO investigators asked the State Fiscal Service to hold an unscheduled tax audit of Esko-Pivnich LLC, one of the companies of Burisma holding. The audit concerned the period of 8 months of 2016 and established some violations. As a result, the chief accountant of the company was declared a scapegoat and notified of suspicion of tax evasion.
The accountant paid outstanding taxes as prescribed by the audit, thus eliminating the grounds for criminal charges in tax evasion. The amount paid by accountant constituted 50 million UAH (approx. $1.9 mln), which was only a fraction of alleged evasion.
However, this resulted also in closure in November 2016 of the criminal proceedings regarding possible illicit enrichment and money laundering allegedly committed by Zlochevsky. Available information shows no logic in the actions of PGO investigators who combined the episode of company’s tax evasion in 2016 with the criminal proceedings on illicit enrichment and money laundering allegedly committed by Zlochevskyi in 2010-2014.
PGO covered up Burisma in the case of embezzlement of Ukrgazvydobyvannya funds
Since May 7, 2014, PGO was investigating alleged criminal activity of Ukrainian subsidiaries of Burisma, which in conspiracy with state-owned enterprise Ukrgasvydobuvannya caused substantive loses to Ukrainian budget. Burisma subsidiaries were suspected of extracting and selling gas in Ukraine for significantly discounted prices to related companies to reduce official profits, which according to the agreements on joint activity had to be shared with the state-owned company.
On July 7, 2016, Lutsenko personally held a press briefing and accused Burisma subsidiaries of conspiracy and tax evasion amounting to Hr 1 billion ($70 million) during 2014-2015.
Strangely enough, starting from October 2016 the criminal investigation abruptly stopped mentioning subsidiaries of Burisma. Thus, the company was cleared even without closing criminal investigation.
SAPO sabotaged justice for Burisma for illegal obtaining extraction licences
The other criminal case related to Burisma concerns illegal natural resources extraction licenses issued to Burisma group companies by officials of the Ministry of Environment and Natural Resources during 2010-2015. The case was investigated by the PGO until the end of 2015 and in December 2015 transferred to NABU.
NABU established the violations during the issue of licences, namely absence of obligatory approval of the municipal authorities. The evidence confirming this was promptly transferred by NABU to the Specialized Anti-corruption Prosecution office (SAPO) to take administrative court actions to cancel these licences as illegal.
SAPO, however, groundlessly missed procedural deadlines for a lawsuit on cancelling extracting licences in question: having had complete grounds for lawsuit since January 2016, SAPO only filed the case in August 2016. SAPO avoided giving a thorough explanation of why it took so long to file a claim. The case was dismissed by the court due to missed deadlines and the Appellate Court upheld this decision. As a result, Burisma companies still benefiting from these highly questionable extraction licences.
Later, on August 1, 2017, SAPO closed the criminal case stating that there was not enough evidence to prove the crime. On June 15, 2018, the investigation was renewed following the appeal of MP Tetiana Chornovol. As of March 2019, the NABU investigation is ongoing.
In addition, as of March 2019, NABU has also an ongoing investigation into alleged embezzlement of state funds totaling to Hr 49 million ($8 million) at public procurement of consulting services for implementing technologies of remote land exploration. The case does not directly concern Zlochevsky or Burisma, but regards the ministry’s activity during his tenure. The case was transferred from the PGO to NABU at the beginning of 2016.
Daria Kaleniuk is the executive director of the Anti-Corruption Action Center. She is experienced in international legal mechanisms for anti-corruption actions, particularly in stolen assets recovery and anti-money laundering initiatives. Kaleniuk holds a master’s degree in financial services law from Chicago-Kent College of Law. She was a Fullbright program student in 2010-2011.
Tetiana Shevchuk is a lawyer with the Anti-Corruption Action Center in Kyiv.
Olena Halushka is the head of international relations at the Anti-Corruption Action Center.
