Activists cry foul as courts, prosecutors clear Zlochevsky

The club of top officials of fugitive ex-President Viktor Yanukovych’s regime who have successfully avoided prosecution has a new member.

Ex-Ecology Minister Mykola Zlochevsky was cleared of corruption charges and can now return to Ukraine after three years of exile. A Ukrainian court closed the case against him in November, but the public only heard of the development when the ex-minister’s oil-and-gas company, Burisma Group, announced it in January.

The Prosecutor General’s Office sat on the case for two years. It finally changed the thrust of the investigation from illicit enrichment to tax evasion, and then settled.

But prosecutors are now under fire from anti-corruption activists for intentionally botching the case and letting Zlochevsky off the hook.

Sabotage claims

Zlochevsky was among several top officials who fled Ukraine after the EuroMaidan Revolution that ousted Yanukovych on Feb. 22, 2014. Months later, some $35 million was found in his companies’ bank accounts in the United Kingdom, prompting money laundering and illicit enrichment investigations in the UK and Ukraine.

He was also investigated for giving gas extraction licenses to affiliated companies – mainly ones in the Burisma Group.

But the charges were then whittled down to a single case of tax evasion, which was settled by a Kyiv court in November, with Burisma agreeing to pay Hr 180 million. The settlement constitutes less than 20 percent of the sum discovered in Zlochevsky’s bank account in 2014.

Burisma called the closing of the case the result of “full cooperation between the office of the prosecutor general” and Burisma’s lawyers.

However, this “full cooperation” could actually be an illegal backroom deal, claims Daria Kaleniuk, the executive director of the Anti-Corruption Action Center. “The proceedings led by the Prosecutor General’s Office weren’t just shut – they were intentionally botched,” Kaleniuk says.

Answering the claims, prosecutors say the case was investigated properly.

But “we have doubts about that,” says Yaroslav Yurchyshyn, an executive director at Transparency International Ukraine.

Lost millions

The prosecutors’ work on the Zlochevsky case has long been cause for concern.

In 2015, then-Deputy Prosecutor General Davit Sakvarelidze launched a criminal proceeding into possible abuse of office by the prosecutors who worked on Zlochevsky’s case. The National Anti-Corruption Bureau of Ukraine took over the case in early 2016, and is still investigating it.

However, in a press release sent out by the Burisma Group, Zlochevsky said that the closing of the case against him and his companies was “a big step forward for Ukraine in general, and for Burisma Group in particular.”

Zlochevsky served as Ukraine’s ecology minister in 2010-2012, during the Yanukovych presidency. During that time, the State Service of Geology and Mineral Resources of Ukraine, which works under the Ecology Ministry, granted licenses for gas extraction to Zlochevsky’s companies.

In the spring of 2014, after Yanukovych fled and the West started imposing sanctions against his associates, Andriy Kicha, Zlochevsky’s lawyer and a top manager at the Burisma Group, tried to transfer some $23 million from accounts in the UK to Cyprus. The UK authorities blocked the operation, froze the accounts, and launched an investigation to determine the source of Zlochevsky’s money, suspecting money laundering.

At the same time, Ukrainian prosecutors started an illicit enrichment case against Zlochevsky.

However, Ukrainian prosecutors provided no help to the case in the UK. In December 2014, the Prosecutor General’s Office sent Zlochevsky’s lawyer a letter stating that no active case was underway against his client. A London court then dropped the case, citing a lack of evidence, and unfroze the accounts.

According to the London court, some $20 million of the $35 million in Zlochevsky company accounts in British banks had come from fugitive Ukrainian oil trader and Yanukovych crony Serhiy Kurchenko, who is wanted in Ukraine on suspicion of embezzlement.

“That money was the first money arrested abroad, right after the EuroMaidan Revolution,” Kaleniuk said. “And we could have got it back.”

And although the Ukrainian authorities put Zlochevsky on the wanted list in Ukraine, the case never went further.

After a 30-month investigation by the Prosecutor General’s Office, the Podilsky Court in Kyiv closed the case on Nov. 17 after Burisma Group companies paid the state budget Hr 180 million in unpaid taxes. One of the group’s companies that paid the settlement was Esko-Pivnich, where the defendant was an accountant.

“Why have the proceedings regarding Zlochevsky’s possible illegal enrichment led to the proceedings against an accountant at Esko-Pivnich for tax evasion?” Kaleniuk asks.

Zlochevsky was taken off the wanted list even before the final settlement, in October, after another Kyiv court issued an order to prosecutors because his case hadn’t been actively investigated for a year.

Zlochevsky has never revealed where he has been living in the past three years. In December, a Ukrainian journalist published photos of a man she said was Zlochevsky dining in Vienna with Ihor Kononenko, a lawmaker with President Petro Poroshenko’s faction and Poroshenko’s close associate. Kononenko hasn’t commented on the issue. The faction’s spokesman told the Kyiv Post that the lawmaker couldn’t be reached.

Gas schemes

But prosecutors may not be done with Zlochevsky yet.

In July, Prosecutor General Yuriy Lutsenko announced that his office was investigating Esko-Pivnich, a member of Burisma Group, on suspicion of falsely reducing its profits with the use of fictitious enterprises, and evading about Hr 1 billion ($36 million) worth of taxes.

At the time, Lutsenko claimed that Zlochevsky was the only shareholder of Burisma Group connected to the scheme.
The gas extracting companies were suspected of selling gas to affiliated or fictitious companies cheaply. The companies then resold it at market prices.

However, according to Tetiana Shevchuk, a lawyer with the Anti-Corruption Action Center, the focus in the gas scheme investigation is already shifting away from Zlochevsky’s companies. In the latest court rulings, the ex-minister’s businesses weren’t mentioned at all, according to Shevchuk.

The Kyiv Post asked prosecutors whether the gas scheme investigation still concerned Zlochevsky’s companies, but received no response before deadline.

Kaleniuk said Burisma has now embarked on a public relations campaign to improve its reputation.