Editor’s Note: The following is an investigation by the Organized Crime and Corruption Reporting Project (OCCRP), which is based in Washington, D.C., a Kyiv Post partner. Kyiv Post staff writer Vlad Lavrov coordinated this project. The author Anna Babinets is a Kyiv-based Ukrainian journalist working for the investigative bureau Slidstvo.info.
Young billionaire-in-exile Serhiy Kurchenko's financial chains show hundreds of fictitious Ukrainian companies, dozens of offshore firms and more than 600 people serving the oligarch who became fabulously wealthy almost overnight as the suspected front man for deposed Ukrainian President Viktor Yanukovych.
Since March 20, Kurchenko has been on Ukraine’s most wanted list, nearly a month after his suspected patron, Yanukovych, also fled.
Kurchenko is accused of illegal acquisition of property and embezzlement through various trading schemes — blessed by the disgraced Yanukovych administration — that robbed Ukraine’s treasury of $1 billion, according to allegations by Interior Minister Arsen Avakov.
Kurchenko, via his company’s statement, denied any involvement in the crimes, saying it was a “misunderstanding” when the European Union put him on the list of sanctioned individuals. According to Ukrainian media, he is currently residing in Moscow.
A number of documents obtained by journalists of the Organized Crime and Corruption Reporting Project, a Kyiv Post partner, from a former worker of Kurchenko’s office, give an idea as to how the legal skeleton of Kurchenko’s business was built, which allowed, through a system of offshore companies, to pump billions of hryvnias into the bank accounts of the beneficiary. All of the accounts discovered so far were opened in the same bank.
“We were banned from talking to each other at work. And when we left work, we had to leave the desk clean and could not take anything home,” says a former office worker of Kurchenko’s SEPEK holding (also known by its Russian abbreviation VETEK). The worker’s name is withheld to ensure the person’s safety.
The database of workers shows that Kurchenko employed over 640 people. These were managers of various levels with some decision-making responsibility. Almost half of them are around Kurchenko’s age, under 30. He will turn 29 in September, and will most likely celebrate it outside of Ukraine, which he fled after the collapse of Viktor Yanukovych’s regime.
SEPEK’s PR service alone employed 15 workers. Apart from Ukrainian offices, Kurchenko had them in Geneva, Zurich and Berlin. The biggest foreign office, however, was in Moscow. It employed 21 people.
The work was divided to make sure that none of the employees had a full picture of the company’s activities. Everyone was in charge of their own, very narrow, field and could not communicate with others. He also kept track of those who left the company.
Until recently, very little was known about the structure of his group beyond a list of fictitious Ukrainian companies registered in Kharkiv and Simferopol in flats whose residents had no idea they were directors of Kurchenko’s firms. OCCRP has obtained the list of 14 offshore companies which in 2013 churned billions of hryvnias for Kurchenko’s corporation. (See list below).
Most of these companies had accounts in Latvian ABLVBank.
Its central office is located in Riga, but the geography of branches is heavy on authoritarian countries: Russia, Ukraine, Belarus, Kazakhstan, Tajikistan, Azerbaijan, Uzbekistan, Cyprus and Luxemburg. The bank website says “we are trusted…we are a group of companies led by the largest independent private Latvian bank. Our customers recommend us to their friends and partners.” The bank’s leadership are also listed on its website.The biggest amount of money was pumped though Soprema Trading Ltd., Prosperity Developments S.A. to Zevidon Trading Limited.
Soprema Trading Ltd. was registered in the British Virgin Islands and had gigantic turnovers. According to one balance sheet, in the first quarter of 2013 alone the total turnover was Hr 9.662 billion, or roughly three annual budgets of the western Ukrainian city Lviv.
Soprema Trading Ltd. traded in oil, among other things. In three months of 2013 it sold Hr 1.4 billion worth of the commodity. But the expenses were almost as high, and as a result the profit was only Hr 134,000.
Andriy Hrynchuk, managing partner of Lviv-based Hrynchuk, Mazur and Partners law firm, says that such financial results are typical for this destination, which is designed to keep the beneficiary anonymous and minimize taxes legally.
According to the results of Financial Secrecy Index 2013, published by Tax Justice Network, British Virgin Islands are among the countries that work particularly hard at preserving the privacy of the real owners. There is no database of beneficiaries kept there, even for internal use.
The study concludes that the jurisdiction has turned “into effective carte blanche for BVI companies to hide and facilitate all manner of crimes and abuses, worldwide.”
A former worker of Kurchenko’s companies says that after the money came to its accounts, Soprema Trading Ltd sent it on to Prosperity Developments S.A., whose accounts accumulated even bigger sums. The firm had featured in a Forbes magazine investigation, which called it a firm that buys fuel for Ukraine and evades billions of hryvnias worth of taxes.
According to the international database www.investigativedashboard.org, one of the company’s owners was Natalya Frolova, who resides in Kharkiv at 19-A Kromska Street. The company’s financial turnover indicates that this person may have been close to the beneficiary, but finding her is difficult because the official address actually belongs to another person.
After Prosperity Developments S.A, the money was sent on to the Belize offshore company Zevidon Trading Limited. It was the final link in the chain, and accumulated the most money in its accounts. The company’s functions were extremely varied, ranging from oil trade to paying for bespoke Italian Borrelli suits for one of the managers of Naftogaz Ukraine, the national gas and oil monopoly.
The firm also featured in a 2013 probe of parliament member Yuriy Syrotyuk to the general prosecutor and State Security Service. The law enforcers failed to find anything illegal in its operation.
But in early March this year, the Interior Ministry opened 12 criminal cases to investigate the “criminal scheme of import and sale of oil products by the company SEPEK”. In its statement, the Interior Ministry said that in 2012-2013 companies that were part of this group imported Hr 25 billion worth of oil for refining, pretending they instead planned to re-export it, which allowed the company to avoid massive tax payments. The products were then sold in Ukraine though a chain of fictitious firms.
Other offshore companies from the newly discovered portfolio shed light on brand new elements of his activities. In particular, the Registration Book of Vessels of 2012 shows that Kurchenko’s company owns an oil tanker, MARIYA K. Another company, LandowDevelopment LTD, owns an oil barge, TANK 58, while the firm Vitali Trading Ltd owns a tanker called BIANCA-K. All of the vessels were made in 1972-1973.
Viktor Lysytskiy, first vice president of Association of Shipbuilders of Ukraine, says the age of the ships is suspicious because tankers on average serve some 15 to 20 years, if major upgrades are made.
“If an oil tanker is 40 years, it’s an old shoe. It simply cannot transport such cargo as oil products,” he says.
Also, the Cyprus-based Histrax Holdings Limited in January last year received a health inspector’s certificate to import mandarins, bananas, lemons and pomegranates from southern countries. Kurchenko’s corporation had a special department called TNP Fruit. It was staffed by 17 people, and next to some of their names in the database there was a marking, “citrus.”
Despite varied business interests of all the offshore companies examined to date, they all had one thing in common: bank accounts in the same Latvian bank. All of the money that traveled through these companies at the end arrived there in various currencies. Ukraine’s law enforcers have said Kurchenko’s activities caused at least Hr 8 billion worth of damage to the nation, and these accounts would be a good place to start looking for that cash.
List of Serhiy Kurchenko’s offshore companies
Elseco Trading Limited (Registration unknown)
Histrax Holdings Limited (Cyprus)
Intinet Operations Limited (Registration unknown)
Jetlit Limited (Cyprus)
Landow Development LTD (Registration unknown)
Niolax Business INC. (Registration unknown)
Phonrun Operation Limited (Cyprus)
Portex Limited (Bahamas)
Prosperity Developments S.A. (Panama)
Soprema Trading Ltd (BVI)
Stick Energy Company INC. (Registration unknown)
Vitali Trading Ltd. (Registration unknown)
Wells Tech Limited (Hongkong)
Zevidon Trading Limited (Belize).
