After the 2014 EuroMaidan Revolution sent his former boss fleeing to Russia, American political consultant Paul Manafort — who raked in $65 million from ex-Ukrainian President Viktor Yanukovych’s Party of Regions — was bothered by one question: Why didn’t he have enough money?
One Manafort associate frantically tried to have former Party of Regions kingmaker Serhiy Lovochkin wire $500,000 to Manafort “to calm Paul down.”
When his 2014 tax bill came in, Manafort panicked, calling a half-million dollar increase a “disaster” and writing “WTF?”
Grubbing for cash would prove to be a theme for Manafort, U. S. President Donald J. Trump’s former campaign manager. He is on trial in Northern Virginia this week on multiple federal fraud charges that he concealed millions in proceeds from his political consulting business from U.S. tax authorities and laundered the cash into America through luxury purchases.
But documents, emails, and testimony from his former partner, Rick Gates, has left Manafort and his former Ukrainian backers scrambling as the cover was lifted from the opaque and dirty world of Ukrainian political financing.
“If non-registered money was used for the payment, then this can be qualified as tax evasion,” said former special investigations unit chief prosecutor Serhiy Gorbatyuk. “If an investigation establishes that the money for the payment was stolen, then it could also be embezzlement.”
Yanukovych’s former backers, including former presidential chief of staff Lovochkin and billionaire oligarch Rinat Akhmetov, rushed to deny Gates’ claims that they were among the Ukrainian tycoons who financed the Manafort operation.
“The statements made by Mr. Gates over the course of the court hearings totally undermine the credibility of Mr. Gates as a trusted witness,” a Lovochkin spokeswoman told the Kyiv Post, while Akhmetov spokeswoman Kateryna Ostroushko denied that Akhmetov’s SCM financed Manafort’s work in Ukraine.
Gates testified to a scheme that saw six Ukrainian oligarchs and politicians — Lovochkin, Akhmetov, Sergey Tigipko, Borys Kolesnikov, Victor Pinchuk and Andriy Klyuyev — pay Manafort millions of dollars through Cyprus-located offshores in exchange for “building the Party of Regions.”
Manafort benefited handsomely from the arrangement, using the funds to buy luxury items like a $15,000 ostrich leather jacket and allegedly laundering millions of dollars through U.S. real estate purchases.
When federal prosecutor Greg Andres asked Gates what the Ukrainian side expected to receive for their ‘investment,’ the answer was clear:
“They benefited financially through contracts or ownership of certain companies or percentages of companies,” Gates said.
Manafort is being prosecuted by U. S. Special Counsel Robert Mueller, who was tasked with investigating Russian meddling in the 2016 U.S. presidential election and any related crimes.
Most of the oligarchs and politicians named by Gates as paying Manafort issued blanket denials to the Kyiv Post.
Manafort faces a maximum sentence of 305 years in prison, if convicted and not subsequently pardoned. Jurors could go to deliberations as early as next Friday.
A second trial in Washington DC will test claims that Manafort failed to register as a lobbyist for Ukraine.
Former Trump campaign official Rick Gates leaves Federal Court on December 11, 2017 in Washington, DC.
In October, Trump’s one-time campaign chairman Paul Manafort and his deputy Rick Gates were arrested on money laundering and tax-related charges. / AFP PHOTO / Brendan Smialowski
Gates takes the stand
Gates joined Manafort in Ukraine in 2007, helping to rebuild the Party of Regions as a political force after its disastrous fall in 2004, when the Orange Revolution and the Ukrainian Supreme Court cancelled a rigged presidential election in Yanukovych’s favor that year. In a revote on Dec. 26, 2004, Viktor Yushchenko won the presidency.
After the Orange Revolution, Yanukovych and his backers were left in the political wilderness. In response, Gates said, Akhmetov and others hired Manafort to help catapult them back into power.
Calling Manafort “one of the most, you know, politically brilliant strategists I’ve ever worked with,” Gates testified that Akhmetov had tasked Manafort with helping create the Party of Regions.
“The relationship was such that Mr. Manafort, in essence, brought [Yanukovych] back from the proverbial political dead,” Gates said.
Manafort’s company — DMP International — brought on a team of around a dozen people for the Party of Regions contracts. That included Phil Griffin and Konstantin Kilimnik, a former Russian military intelligence (GRU) officer who worked as Manafort’s translator.
Gates also testified that Vladimir Sivkovych, a former Ukrainian politico, also worked at DMP’s Kyiv office.
Sivkovych fled to Moscow amid accusations that he organized a violent dispersal of EuroMaidan Revolution protesters on Nov. 30, 2013.
Six Ukrainians and one Russian — metals tycoon Oleg Deripaska — stand accused of financing Manafort’s work.
Manafort and Gates set up several Cyprus-based offshore accounts through a local law firm.
The Ukrainians would send them money within Cyprus from their own offshores. Prosecutors allege that Manafort concealed the income from U.S. tax authorities, and then laundered it back into the U.S. through direct debit payments on luxury purchases.
Gates testified that the Cyprus payments were structured via direct meetings with “the relevant leaders of the party.”
“They would craft a budget for the political campaign for any given year,” Gates said. “They would agree to an amount and typically agree to a payment structure.”
A certain division of labor appears to have emerged among the different oligarchs.
Tigipko
Tigipko, for example, was tasked with financing the Party of Regions’ lobbying efforts for the European Union and the U.S., Gates testified, through a Cyprus firm he controlled called Dresler Holdings.
Government exhibits show Dresler paying an offshore controlled by Manafort $5.3 million in 2012.
At the time, the Yanukovych administration had set up a Brussels-based nongovernmental organization called the European Centre for a Modern Ukraine. That company organized a lobbying campaign in Washington D.C. and across European capitals in part through a group called the “Hapsburg Group.”
Composed of former Austrian Chancellor Alfred Gusenbauer, former Polish President Alexander Kwasniewski, and former Italian Prime Minister Romano Prodi, the group had one main task: To convince Western policymakers that the Yanukovych administration’s prosecution of former Prime Minister Yulia Tymoshenko was not political, and that it shouldn’t interfere with Ukraine joining European institutions.
One former Manafort associate who requested anonymity to speak freely speculated that Tigipko’s role in financing the lobbying effort was in exchange “for other benefits he could gain from Yanukovych.”
Oleg Voloshyn, a former Foreign Affairs Ministry spokesman, noted that Tigipko had been “charged with raising parliamentary support for pro-EU legislation needed for visa liberalization and [the political and economic Association Agreement].”
A Tigipko spokesman issued a blanket denial.
“Information about the transfer of money for consulting, lobbying, and other services to the accounts of offshore companies does not correspond to reality,” he said in a statement. “We also call to your attention that the company Dresler Holdings never belonged and does not belong to Sergey Tigipko.”
Lovochkin
Gates said that Lovochkin, the former head of the Yanukovych’s Presidential Administration, played the largest role in paying Manafort.
U.S. government exhibits show offshores linked to Lovochkin funnelling $42,042,307 to Manafort from 2010 to 2013 — around two-thirds of the total that Manafort is documented to have received for his Party of Regions work.
Gates testified that Akhmetov and Lovochkin partnered after the 2014 EuroMaidan Revolution to finance the creation of Opposition Bloc, for which Manafort was paid an additional $5 million.
Lovochkin flatly denied the allegations.
“Mr. Gates’s statements regarding Serhiy Lovochkin are completely untrue. Mr. Lovochkin has never financed or provided loans to Mr. Manafort or Mr. Gates,” his press service wrote in a statement. “The reasoning behind Mr. Gates’s statements is not within our knowledge.”
Kolesnikov
Borys Kolesnikov, Ukraine’s former infrastructure minister, appears in testimony and statements from prosecutors as initially advising Manafort and Gates to use the Cypriot payment structure.
In sum, government exhibits show Kolesnikov paying $8,716,184 to Manafort between 2010 and 2013 through a series of Cypriot offshores.
Kolesnikov also issued a categorical denial of Gates’s testimony.
“I was never a client of Paul Manafort and never sent him a single hryvnia or dollar,” he wrote in a statement.
Klyuyev
Andriy Klyuyev, a former secretary of Ukraine’s National Security Council and the brief, final head of Yanukovych’s Presidential Administration, appears in Gates’ testimony as well.
Gates told the jury that Klyuyev was responsible for financing “polling work” as well as “political campaigns” for the Party of Regions. Government exhibits show payments of $4,190,111 for the work, through a company called Novirex Sales LLP.
Klyuyev could not be reached for comment. A former business associate and attorney for him, Reinhard Proksch, did not reply to multiple requests for comment.
Pinchuk
Prosecutors, supported by testimony from Gates, said that Manafort received $5 million from billionaire oligarch Pinchuk through a Cypriot company called Plymouth Consultants Limited.
Pinchuk has eked out a role for himself as a savvy positioner in Ukrainian politics. He married the daughter of former President Leonid Kuchma, and found ways to channel money to both candidates before the 2016 presidential election.
Gates testified that the money came for work on a “legal project.”
A Pinchuk spokeswoman did not reply to multiple requests for comment.
Former President Viktor Yanukovych (L), then lawmaker and leader of the Party of Regions, talks to billionaire oligarch Rinat Akhmetov, then also a lawmaker, in parliament in July 2006, four years before his election as president (UNIAN).
Cyprus cash, Kyiv spin
After Yanukovych fled to Russia amid the 2014 EuroMaidan Revolution, Manafort was left without clients.
He apparently began to scramble for new work to cover cash shortfalls left by a life of luxury. At one point, he turned towards the fledgling campaign of current Ukrainian President Petro Poroshenko.
Bloc Petro Poroshenko member of parliament Ihor Hryniv told Ukrainian media that Manafort had “tried to offer his services,” but that the engagement involved nothing more than a “three-hour conversation.”
Manafort ended up working for Opposition Bloc in 2014, corresponding with both Akhmetov and Lovochkin over strategy for the party. In many ways, it was a repeat of Manafort’s position 10 years before, when Akhmetov asked him to build a political party in the aftermath of the Orange Revolution.
But this time the FBI had begun to take a look.
In the summer of 2014, amid an FBI probe into assets allegedly stolen by Yanukovych, Gates flew to France to “notify” Lovochkin that he and Manafort would meet with investigators. Gates testified that he wanted to receive more information about the Cyprus payment structures before the FBI interview took place.
Gates said that he and Manafort told FBI agents about some of the Cyprus accounts and offshores used in the payment schemes.
And inexplicably, the allegations — and admissions — that Manafort and Gates made to U.S. investigators went untouched until 2017.
Ukrainian journalist and member of parliament Serhiy Leshchenko holds pages showing allegedly signings of payments to Donald Trump’s presidential campaign chairman Paul Manafort from an illegal shadow accounting book of the party of former Ukrainian president Viktor Yanukovych during a press conference in Kyiv on August 19, 2016. (AFP)
Ball in Ukraine’s court
Exhibits filed by prosecutors, as well as Gates’s testimony, appear to lead to a litany of wrongdoing by some of Ukraine’s most powerful figures.
One company that Gates linked to Lovochkin — Telmar Investments — does not appear on his official asset declaration, for example.
“Mr. Lovochkin has never owned a company named Telmar Investments,” his spokeswoman said in a statement. “In accordance with Ukrainian legislation, Mr. Lovochkin has declared all his property and assets and this information is publicly available.”
When asked about the matter, a spokeswoman for the National Agency on Corruption Prevention declined to say whether the agency would look into the new information.
“This is a matter for the General Prosecutor’s Office,” she said.
Yury Bezschasny, acting head of the prosecutor’s special investigations division, said that he could only use documents received via official legal requests, which have so far gone unanswered.
“We need official responses and documents from the Americans,” Bezschasny said. “The name Lovochkin on a document alone is not enough for us to draw an conclusion.”
National Anti-Corruption Bureau of Ukraine spokeswoman Daryna Manzhura did not reply to repeated requests for comment.
NABU, which confirmed that Manafort figured into an investigation into Party of Regions “black accounting” before the 2016 U.S. presidential election, issued a statement in May 2018 saying that it “is not authorized to conduct an official investigation into Paul Manafort’s involvement in receiving funds from the Party of Regions.”
Gorbatyuk, the former special investigations prosecutor, doubted that any investigation would reach a conclusion.
“Even if a criminal case is registered, that doesn’t mean that it will actually be investigated,” he said. When asked what the likelihood of a real case would be based on the allegations, he replied, “low.”
