Editor's Note: The following investigation was conducted by the Organized Crime and Corruption Reporting Project, a Kyiv Post partner.
Judging from Odesa Mayor Hennady Trukhanov’s latest income declaration, he has no foreign business interests. Zero. Yet according to the Panama Papers, Trukhanov is a veritable titan of business.
The Panama Papers
are confidential business records of the Panamanian law firm Mossack Fonseca, obtained and shared with the International Consortium of
Investigative Journalists (ICIJ) and Organized Crime and Corruption Reporting
Project (OCCRP) by Süddeutsche Zeitung, a German publication.
The 11.5 million documents contain details of the hidden offshore empires
of presidents and dictators, tax dodgers and wealthy people, civil servants and
organized crime figures from around the world.
The
records show that Trukhanov in fact controls a substantial business empire in
Ukraine through companies registered in the British Virgin Islands (BVI), a
notorious offshore jurisdiction often used in Ukraine by politicians and
criminals. His interests include land plots, construction of offices and
apartments, and road construction projects paid for from the state budget.
Overall,
the database contains the documents showing Trukhanov’s ownership in five
BVI-registered firms.
Curiously,
Trukhanov lists a Moscow suburb as his place of residence, which might suggest
Russian citizenship.
The
vanishing road construction funds
Kyivshliakhbud
is a private company with offices located in the industrial area of Kyiv, amid
many warehouses and production facilities.
Throughout
2015, the Kyiv Mayor’s Office paid a total of 151 million hryvnia ($9.6
million) to Kyivshliakhbud for repair of roads
in the capital, despite the fact Kyivshliakhbud had been caught stealing state
funds before.
Back
in September of 2012, the Kyiv Mayor’s Office hired Kyivshliakhbud to
lay asphalt in one of the city’s residential areas. The company got the money
but, according to court records from a pre-trial investigation, never
did the work. Instead, it allegedly transferred the state funds to a series of
intermediary companies from which the money disappeared completely.
Three criminal
investigations were launched, two of which have not been closed according to
court records. So it was not surprising that
OCCRP reporters couldn’t find the company’s office at its officially registered
address. “There is no such company here,” security guards told them.
The
address is used by Kyivshliakhbud in all documents, including the state register
and tender documentation. Calling the road repairs contractor’s phone number
didn’t work either.
But Kyivshliakhbud is actually connected to Odesa’s
mayor through a complex set of relationships. Kyivshliakhbud was founded by a
BVI-registered company, Sawyer and Branton Ltd.
The Ukrainian
company registry lists this offshore as a majority shareholder of the Odesa-based Rost Investment
Group Ltd. Trukhanov’s daughter, Kateryna, was listed as the director of SKVO
LLC, one of the companies in the Rost group, until May 12.
SKVO’s founder,
Andriy Ivancho, shows up as a shareholder along with Trukhanov in a number of
BVI companies found in the Panama Papers.
According to
Ukraine’s court records, SKVO is one of
the companies that is being investigated for allegedly siphoning the money
Kyivshliakhbud received from the 2012 state procurement deal.
The
tallest building in Odesa
Kyivshliakhbud’s
chief executive officer is Oleksandr Rashchupkin, who also heads Panteon-Yuh
LLC, registered in Odesa at 1a Henuezka street. That’s the location of Ark-Palace, one of the
most expensive apartment and office buildings in the city, which can be seen
from almost any place in Odesa. One of its towers, a 24-story edifice of 106
meters, is the tallest building in Odesa.
An
average apartment of 180 square meters here goes for about US$ 750,000. Some apartments sell for as much
as US$ 3.5 million.
This
real estate complex was built by the Rost
Investment Group.
Many
companies associated with Trukhanov are registered at Ark-Palace, 1a Henuezka,
and some own space in the building. For instance, Vynni Tradytsiyi LLC (Wine
Traditions), a company registered as a wine producer and leaser of real
estate, owns almost 350 square meters of basement space in the building.
Vynni
Tradytsiyi was founded and is still part owned by Macon Assets Ltd., which is
registered in BVI. According
to the Panama Papers documents, this offshore was founded by Trukhanov and
Ivancho as equal partners on Aug. 31, 2004. In BVI documents Trukhanov is referred to as
the owner registered in Russia, not in Ukraine: “Moscow region, city of Sergiev
Posad, 5 Parkova St.”
OCCRP
partners in Russia visited the address. The building where Trukhanov is
registered is an old, private house with a wooden facade painted green. It seems unlikely that a businessman that
together with his partners owns a network of companies linked to BVI offshores has ever lived here. Apparently,
Trukhanov uses this old house as a formal Russian address.
In 2014 Volodymyr
Ariev, a Ukrainian Member of Parliament, published records from
Russia’s migration authorities showing that Trukhanov held a Russian passport.
The documents showed that on March 24, 2011, Trukhanov obtained a replacement
passport required at the age of 45 from the Sergiev Posad branch office (the
same town as his address of convenience listed in the Panama Papers).
Trukhanov
denied he is a Russian citizen, calling it a provocation by political opponents.
However, when OCCRP asked for a comment on the issue, Trukhanov refused to
answer directly.
“He
has denied it so many times already that he does not see any point in doing
that again,” said his press secretary, Natalia Maltseva.
On April 27, three
weeks after the local version of this story was broadcast in Ukraine, Trukhanov responded to a
Slidtsvo.info reporter at a press conference in Odesa. He promised to publish
all the documents he requested from the Russian consulate general “with all the
explanations” “today or tomorrow.” On May 18, Trukhanov published on Facebook a
letter dated April 14 from the Russian Consulate in Odesa stating that he “has
not acquired Russian citizenship” and “is not a Russian citizen.” OCCRP could not verify this information.
Construction
projects for any taste and wallet
Another
business that can be traced back to Trukhanov with the help of Panama Papers is
a picturesque housing development made called Ariadna, near Odesa in
Chornomorske village. The name comes from a character in Greek mythology,
Ariadne, associated with mazes and labyrinths.
The
price for a small European-style house in Ariadna costs
as much as US$ 500,000. The project’s owner is Sofor,
a Ukrainian limited liability company. Likewise, this company is listed in court records
as one of the intermediaries that participated in the money laundering in the
2012 road repair scandal in Kyiv.
But
this construction company was not always called Sofor. In the late 1990s, it
was called Capitan and Co and was a security agency founded by Trukhanov
and Ivancho. Today, the company is partially owned by Yuriy Shumakher, Trukhanov’s close ally
and minority shareholder of the Rost Investment Group.
Shumakher
is a member of the Odesa City Council from Trukhanov’s Doviriay Delam (Trust the Deeds)
party. In 2008 Macon Assets Ltd. (BVI) owned by Trukhanov and Ivancho, started
to be co-owners with Yuriy Shumakher of another BV-company Corderoy Trading
Ltd.
On
the outskirts of Kyiv, an ugly concrete building stands in the middle of a
beautiful evergreen park. The park was once a military health resort and property of the General Directorate of Intelligence of
the Ministry of Defense of Ukraine.
One
morning in 2008, residents of the neighboring buildings noticed that the tall
pines that had been standing there the evening before were now lying on the
ground, recalls Liudmyla Motovylovets, a local resident.
The
former resort had been handed over
to Global Invest LLC, which constructed the concrete building and, according to
its agreement with the ministry, provided 17 percent of the
apartments to the military intelligence agency.
Global
Invest is associated with Trukhanov, too. When Global Invest first obtained the
land in November of 2004, its founding shareholders were Odesa residents Larysa
Streletska and Vadym Reznik, who appear in a number of companies with some of Trukhanov’s business
partners.
Later, a BVI-registered company called Sunlight
Merchants Inc., owned by Trukhanov and Ivancho, became the company
shareholder. In 2015, Trukhanov and his friends sold this
construction project to wealthy Kyiv businessman Vasyl Khmelnytskyi.
But
the funds from this deal are not listed in Trukhanov’s asset declaration. Nor are the profits from the many subcontracts
for repairs and construction of roads around the country, which all
together account for more than Hr 2 billion (US$ 79 million at
current exchange rates).
Arkadiy
Topov, an Odesa-based activist from the Anticorruption Office Initiative, analyzed the road construction deals connected to
Trukhanov and says that eight out of 10 tenders worth more than Hr 20 million
(nearly US$ 800,000) are won by companies that are part of the Rost group.
“The
small (tenders) simply do not interest them,” he adds.
Nevertheless,
Trukhanov insists that information about his businesses is just intrigues of
his political opponents.
“When
I started my political career in 2005, someone warned me: you have to be ready
that tomorrow they will call you an agent. Next day they will call you gay.
Then they will say you have a million children apparently… So I even stopped
reading about this,” Trukhanov said.
The Muay
Thai Captain
Trukhanov came to
politics from the martial arts: from 2003 until now, he has
been the President of Ukrainian
National Thai boxing Federation of Muay Thai. Together with his friends,
Trukhanov created a security agency called Capitan & Co. According to a report on Ukrainian organized crime by
Italian police, mobster Leonid Minin, one of Odesa’s most influential people at
that time, became Trukhanov’s client. Minin was reportedly one of
the prototypes for Nicolas Cage’s character in the Hollywood movie, Lord of
War.
After the USSR
collapsed, Ukraine started selling its abundant arms. Ukrainian tanks, armored
cars, grenade launchers, and machine guns were loaded onto ships in Odesa and
delivered to hot spots all around the globe. The business was controlled by
Minin. According to the Italian
report, Trukhanov, using a
Greek passport in the name of Gennidas Ouzopoulus, was
Minin’s bodyguard.
According to a
2006 report by Amnesty
International, in June, 2001, Minin, an Israeli national born in Ukraine, was
arrested and charged with arms trafficking and illegal possession of diamonds
by Italian authorities. In December 2002, the judges declared Minin
non-prosecutable for international arms trafficking because the court lacked
jurisdiction but they upheld the charge for illegal possession of diamonds, for
which he was later convicted and fined € 40,000 (US$ 41,200).
In his comments to
Slidstvo.info in 2013, Trukhanov said he
never had a Greek passport. He also said of his ties to Minin, “He was a pretty famous businessman in the city. And
naturally, many knew him. He is from Odesa, and I am from Odesa. We belonged to
a common social network.”
As
for the allegations that Trukhanov was Minin’s bodyguard, Trukhanov is
unequivocal. “Everyone classifies me as a bodyguard, I guess they think I am
not good for anything beyond that,” he said.
