ODESA, Ukraine – While you’re helping out a corrupt politician, why not try to make a little (or a lot) of extra cash on the side?
That’s the opportunity apparently presented in 2008 to Paul Manafort, former adviser to overthrown President Viktor Yanukovych and current campaign manager to Donald Trump, the presumptive Republican candidate for U.S. president.
The story begins in March 2007, when Manafort and other members of his political team in Ukraine set up a private equity fund with Russian money with the apparent aim of establishing a business in Ukraine.
According to reports in the U.S. and British media, the main investor in Manafort’s private equity firm was Russian aluminum and industrial oligarch Oleg Deripaska, who moved to dissolve the Cayman Islands-based fund in 2014.
According to court filings, the company managed to make only one investment – in an Odesa telecoms company.
However, the $19 million raised for the purchase – along with $7 million in management fees – has since disappeared.
Manafort did not reply to multiple requests for comment made through his attorney Richard Hibey, or to direct emails. The Trump campaign didn’t reply to a request for comment either. Neither did Deripaska nor his representatives respond to inquiries.
Who’s in the party?
By the early 2000s, Manafort had already made a name for himself in Ukrainian political circles by working for Donbas billionaire Rinat Akhmetov, Ukraine’s richest oligarch.
Yanukovych hired Manafort in the aftermath of the 2004 Orange Revolution. The former prime minister’s political career was on the ropes following Viktor Yushchenko’s election as president.
Manafort set to work rebranding the Yanukovych-led Party of Regions for the 2006 parliamentary elections. The makeover aimed at transforming the bumbling autocrat into an articulate democrat. Yanukovych was trained to speak in catchy soundbites.
But at the same time, Manafort was parlaying his political career in Ukraine into business links.
He attempted to buy a series of New York City properties on behalf of the now-exiled gas mogul Dmytro Firtash, who faces corruption charges in a U.S. federal court, according to a now-dismissed 2011 lawsuit filed against Firtash over racketeering allegations.
Manafort’s ties to Firtash were established at the same time he founded the private equity fund, which was called Pericles Emerging Market Partners.
It was registered in the Cayman Islands in March 2007, with the stated intention of acquiring smaller companies to consolidate them into larger “national” companies, and then selling the larger companies directly or through a public offering.
An Odesa tale
According to the Cayman Islands motion to dissolve the company, the fund started out with a potential investment of $200 million. Deripaska reportedly committed as a main investor through an offshore called Altimax Investments Limited, later succeeded by LP Surf, which launched the Cayman Islands legal proceedings.
Manafort ran the firm with two other business partners – political consultant Rick Davis and lobbyist Rick Gates.
A large portion of Manafort’s political team in Ukraine appears to have been involved in the dealings.
Legal documents name former International Republican Institute official Konstantin Kilimnik as involved “in furthering the partnership’s investment program,” along with Ukraine political consultant Philip Griffin, and Party of Regions flack Alexander Balanutsa.
After roughly a year of searching for potential purchases and negotiations – during which $7.35 million in management fees were paid to Pericles’s managers – the team settled on one purchase: Chorne More, an Odesa holding company for a number of cable and internet providers.
Chorne More had been founded in the early 2000s by a man named Serhiy Dehtyar, who, according to media reports from the time and to people who worked with him, died in 2004 after sustaining head injuries under mysterious circumstances.
Under Dehtyar and his successor, Dmitry Cherep, the company had expanded to control 45 percent of Odessa’s telecommunications infrastructure.
The company’s management at the time was closely associated with Yanukovych’s Party of Regions. Cherep’s brother Oleksandr – who also helped to run the company – was a Party of Regions member of Odesa City Council until 2014.
Investment structure gone awry?
In order to buy Chorne More, Manafort and his partners allegedly presented a plan to the investors by which the buyout was to proceed.
The legal documents allege that the investors would transfer money to a Cypriot company called PEM Advisors Limited, which would then loan the investment money to a Cyprus legal structure called a “special purpose vehicle.”
Transferring the money via a loan would allow the transactions to occur without being taxed. Shares in the SPV would then be transferred to a Manafort-controlled firm called EVO Holdings, according to the filing. That firm would then buy Chorne More through its controlling company, a UK-based offshore called Colberg Projects LLP.
In April 2008, $18.9 million was transferred to PEM Advisors. According to legal documents filed by the investors, the money didn’t go where the investors thought it would, meaning that the PEM transfer is the last point at which we know where the money was located.
Instead, according to a discovery filing in a U.S. federal court, Gates claimed that PEM directly paid $17.8 million to a Ukrainian named Andrey Vityukov.
One former employee of Chorne More, who requested anonymity due to safety fears, said that Vityukov was a lawyer who worked at the company.
According to court filings, it’s not at all clear where the lump sum actually went.
Ukraine’s company registry does not record a change in ownership in the firm until 2010, more than two years after the deal was supposedly done. Before then, Chorne More was owned by a British company called TechCorp, which was in turn controlled by the UK-registered Colberg Projects.
Colberg was controlled by two Seychelles firms: Intrahold AG and Monohold AG from 2010. In 2014, both came under investigation by the Seychelles Financial Intelligence Unit on suspicion of being used for money laundering by Yanukovych. Colberg was formed in 2006 by two BVI-registered firms called Ireland & Overseas Acquisitions and Milltown Corporate Services, both of which have been linked to Yanukovych-era corruption scandals.
Everything is political
People who worked at the firm, as well as others involved in Odesa’s telecommunications market, remember Chorne More briefly having American owners.
According to Dmitry Cherep, the former Chorne More general director, the new American owners sent him around Ukraine in an attempt to find more potential investment opportunities.
“Around five companies were prepared for negotiations,” Cherep said, adding that the investment fund replaced Chorne More’s accountant.
Cherep said that he left the company after two years upon realizing that the new management did not intend to embark on further development.
Dmitry Cherep himself was arrested in 2014 for an attempt to found an “Odesa People’s Republic,” modeled after the Donetsk and Luhansk separatist organizations, Odesa news website Dumskaya reported. Cherep was reportedly found with grenades in his car, and later provided testimony to Ukrainian law enforcement that resulted in the arrest of dozens allegedly involved in the plot.
According to Olena Vasina, an Odesa-based investigative journalist, taking over Chorne More likely fit into a larger plan by the Party of Regions to assert media control over the Black Sea city.
“Here on the southern coast, the Party of Regions was very strong at that time,” Vasina said. “In Odesa every self-respecting businessman, politician, deputy, public figure tries to launch his own TV station. If you don’t have a station, you’re nobody.”
But Cherep denied that any political influence was wielded over the company.
Legal moves to dissolve Pericles did not begin until 2014, years after the original investment was made. Though the plaintiffs are seeking to recover the lost assets through dissolving the company, they do not appear to have filed any civil suit seeking to directly retrieve the money.
Manafort left Ukraine during the 2013-2014 EuroMaidan Revolution that toppled his ex-client Yanukovych from the presidency, according to a source familiar with the lobbyist’s affairs. In March, presumptive U.S. Republican presidential nominee Donald Trump hired Manafort to run his presidential campaign.
The U.S. court filings were part of a process by which Cayman Islands court-appointed liquidators tried to depose Manafort as part of their investigation into where the company’s money went. Hibey, the Manafort lawyer, told Yahoo News in late April that Manafort had “appeared for depositions some months ago, and answered all questions.”
“We are not privy to any other developments,” Hibey reportedly added.
