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THE HUNT FOR BURISMA, PART II — WHAT ROLE FOR IGOR KOLOMOISKY, WHAT LONDON MISSED, WHAT WASHINGTON DOESN’T WANT TO SEE

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By John Helmer, Moscow

The UK Serious Fraud Office (SFO) and the Central Criminal Court have reported that Nikolai Zlochevsky, a Ukrainian businessman and twice the minister of state for oil and gas licences, is the controlling shareholder of the Ukrainian gas producer Burisma. So what are employees of Igor Kolomoisky, warlord of Dniepropetrovsk and controller of the Privatbank Group, doing as the shareholder representatives on the Burisma board?

Kolomoisky isn’t the accommodating, retiring, passive sort, say sources who work with him. Zlochevsky has the more bending character of the two, the sources claim. So is Burisma their cooperative and joint venture, or is Zlochevsky Kolomoisky’s front-man, just as others were for Zlochevsky in the ten-year history of Burisma’s acquisition of valuable oil and gas prospects.

Zlochevsky, now 48, headed the Ukrainian State Committee for Resources between 2003 and 2005. He then served in the Verkhovna Rada where he presided over legislation regulating resource licences. Between 2010 and 2012 he was the Minister of Ecology and Natural Resources. He then became Deputy Secretary of then President Victor Yanukovich’s National Security Council.

During the years he was a state official, if he acquired business assets, especially from licensing awards he was able to direct or influence in his official capacity, Zlochevsky was obliged to act indirectly. The transaction records [1] of the US Securities and Exchange Commission (SEC) confirm that in 2009 Zlochevsky (below, right) and a partner, Nikolai Lisin (left), were the beneficial shareholders at the receiving end of a chain in which Millington Solutions and Sunrise Energy Resources sold title to two Ukrainian gasfields, Pari and Esko Pivnich.

Zlochevskiy_Lisin

Sunrise Energy Resources was a Delaware state company; Millington Solutions [2] was a short-lived UK front, registered at an address on Regent Street, London, where the most active line of business was escort sex. Signing for Sunrise was its purported chief executive, Konstantin Tsiryulnikov; signing for Millington was Yevgeny Kozlov.

As their names suggest, these two are of Russian origin, with Soviet backgrounds. In the history of Burisma and its Ukrainian gasfields, they end up in Canada. Here is Tsiryulikov [3] today and this appears to be Kozlov [4], an Ottawa lawyer.
For the start of the transaction chain in which Esko Pivnich (pictured below in 2006-2007) ends up on Burisma’s balance-sheet, read this filing with the SEC in 2004 [5].

SER_
Sources: http://www.ceocfointerviews.com [6]

In April of 2011 Lisin, whose business lines also included petroleum products, was killed in a car crash, apparently self-induced but by accident [7]. In August 2012, a Ukrainian group calling itself the Anti-Corruption Action Centre (AntAC), reporting its research into the ownership of Ukrainian gasfields, claimed that Zlochevsky had sold out the year before, apparently after Lisin’s death.

AntAC describes itself as “a Ukrainian civil society organization, which unites experts from legal, media and civic-political sectors fighting corruption as a root cause of the key state-building problems in Ukraine.” Zlochevsky had let go of Burisma through a chain of companies called Ukrnaftoburinnya (Ukraine), Deripon Commercial Ltd. (Cyprus) and Burrard Financial Corporation (BVI). AntaAC’s reports cites Oleh Kanivets, a former chief executive of Ukrnaftoburinnya, as saying the chain ended up with Kolomoisky. “The Privat Group is the immediate owner. This company was founded [8] by Mykola Zlochevsky some time ago, but he later sold his shares to the Privat Group.”

In March 2014, days after the ouster of Yanukovich in Kiev and the installation of a new regime, the UK Serious Fraud Office (SFO) started investigating Zlochevsky. According to the evidence it presented to the Central Criminal Court between March and December of 2014, and according to Justice Blake, who assessed the evidence, there is no mention of Lisin, Deripon, Burrard or Kolomoisky. The judge’s report of how Zlochevsky came by the Pari and Esko Pivnich licences refers only to the fact that Zlochevsky was the state official in charge at the licensing authority, the State Committee for Natural Resources at the time.

The operative companies accepted by the UK investigators and the judge to have been wholly or partly owned by Zlochevsky are identified as Burisma Holdings (Cyprus), Brociti Investments (Cyprus), Chartlux Resources Inc., its subsidiary TOV Kam, Cipriato Alliance Limited (Belize), Seanon Limited, Kisaliano Holdings Limited (BVI), Infox, Vestorgia Holdings Limited (Cyprus), Egeli Services (Cyprus) , and Audrinura Trade LLP (UK). The transaction chains involving these names were reported to the SFO and to the court by Zlochevsky’s lawyer, Andrei Kicha, in order to explain how cash of up to $35 million ended up in London bank accounts of Burisma. Most of the money and most of the names were reported to have nothing to do with Burisma’s gas business but came, allegedly, from real estate dealings by Zlochevsky.

Justice Blake concluded that SFO’s investigation had been barking up the wrong tree. “The transactions appear to involve more corporate vehicles than might seem necessary, but Mr Kicha explains that special purpose vehicles are often the means of conducting large scale transactions in Ukraine and explains why foreign companies and bank accounts are preferred to domestic ones. There is nothing to suggest that any other inference than criminality is implausible.” For Blake’s judgement to lift the freeze order on the bank accounts, read this [9].

How could it be that the SFO testified, and the judge accepted, that Kicha, the lawyer acting for Burisma and Zlochevsky, was moving Zlochevsky’s cash, when AntAC and other Ukrainian evidence already suggested that Zlochevsky had sold Burisma to the Privatbank group sometime in 2011? Did SFO investigator, Richard Gould, fail to substantiate this with Ukrainian authorities in Kiev? Did the succession of Ukrainian prosecutors evade questions on the point because of Kolomoisky’s countervailing influence? The SFO won’t get into detail. According to spokesman Nilima Fox, “I am unable to share anything further, however, due to the ongoing investigation.”

Vitaly Yarema1The Blake judgement of January 21 reveals that the court is open to more evidence, but for the time being it isn’t too keen to understand what is happening in Kiev to cover up for Burisma. The Ukrainian media are reporting that Prosecutor-General Vitaly Yarema (right) was pushed out of office on February 11 because he has reopened the Burisma investigation, aiming not at Zlochevsky, but at Kolomoisky. His dismissal, according to the uncorroborated reports, was Kolomoisky’s doing.

Privat Bank won’t answer questions on the relationship to Burisma, and neither will Burisma.

One explanation for the gap in the Blake judgement is that the evidence submitted to the court not only indicates that Zlochvesky kept bank accounts at BNP Paribas in London with the Burisma name; but also that he didn’t use them for Burisma’s gas business. That, the company website suggests, was firmly under control of the two genuine directors on the Burisma board [10] – Anzelika Pasenidou and Riginos Kharalambus. These are genuine in the sense that the Americans on the board – David Apter, Devon Archer, and Hunter Biden — are not, because Pasenidou and Kharalambus directly represent the control shareholder.

An investigation of Pasenidou and Kharalambus (aka Charalambous) uncovers a fresh chain of offshore entities in which they are also board directors or executives. There is no overlap between this chain and the Zlochevsky one pursued by the UK investigators. So where, and to whom, does the Pasenidou-Kharalambus chain lead?

Andreas SofocleousPasenidou and Kharalambus are both employed by Andreas Sofocleous (right) and his eponymous law firm, Andreas M Sofocleous & Co LLC [11]. The firm’s website describes it as “one of the most successful Corporate and Commercial law firms in Cyprus. Headquartered in Limassol and with offices in Eastern Europe and the UK, the firm provides legal services for individuals and companies at a national and at multinational levels across a wide range of industries, dealing with mergers and acquisitions, cross border transactions, joint ventures, intellectual property licensing, as well as company formation and management and other business arrangements.”

This week a source close to the firm identifies employees in the firm’s banking department in Limassol as including Pasenidou, Kharalambus, Anna Korelidou, and Eleni Korelidou. Sofocleous was educated in Moscow; Pasenidou [12] in Lermontov; and Anna Korelidou [13] in Moscow and Kiev. Korelidou appears to be the senior banking lawyer in the firm; Pasenidou and Kharalambus work in the same department but under Korelidou; both are professional accountants. Eleni Korelidou also works in the same department, a source says, but she is currently out of the office on maternity leave.

The Sofocleous law firm also embraces the Sofocleous Foundation [14] (Kepaky), which is at the same address, Proteas House, 155 Archbishop Makarios Avenue, Limassol. Proteas is the name also given to Proteas Management and Proteas Nominees, company fronting operations of the Sofocleous group [15]. A search of Ukrainian entities in which Proteas Nominees is a registered director or company secretary leads to Odessa Airport Development, the private partner of the Odessa city government at the Odessa airport [16].

Anna Korelidou’s directorships lead also to Odessa Airport Development and Compen Trading (UK) [17]. Eleni Korelidou [18] can be traced to a network of very recently established entities in Panama — Alliance Capital Partners, Onix Company SA, Pan Co Ltd SA, Sunoil Trading Corporation, Stock Energy Company. These Panamanian names also lead back to Pasenidou, and to Marina Savvidou. Savvidou, 26, is registered as a company director or secretary at three UK registrations – Texoma Inc. Ltd, Greston Commercial Ltd., and Hancestar Management Ltd. Two others with the same family name, Ria Savvidou and Popi Savvidou, are recorded as being associated with the Sofocleous foundation [19]. So too is Kharalambus. A woman of the same family, also an accountant, is registered with the same foundation.

According to the Burisma website [20], the Sofocleous firm is one of its “partners”. According to Andreas Sofocleous [21], “PrivatBank has already become a reliable partner of our company for a long time, and now our long term partnership has developed into strong friendship. We hope to continue our mutual cooperation in the future!” Contacted this week by telephone, Anna Korelidou confirms that Privatbank is one of her clients. The circumstantial evidence therefore ties Burisma through the Sofocleous firm to Kolomoisky.

Vadim  PozharskyiIt does not lead to Zlochevsky. The only name on the Burisma board connected to him is Vadim Pozharskyi [22] (right). He was a protégé of Zlochevsky’s at the Ministry of Natural Resources between 2010 and 2012. When Zlochevsky moved to the presidential Security Council, Pozharskyi remained at the State Environmental Investment Agency, where, he says in his recent Wikipedia bio, he “consistently spoke in favor of signing the Association Agreement between Ukraine and the EU.” He also claims to have had a political connection – in the campaign to release Yulia Tymoshenko from prison – with the ex-Polish President, Alexander Kwasniewski. Kwasniewski is also a Burisma board director. Kwasniewski is also on the payroll of Victor Pinchuk, as can be followed here [23].

A forensic investigator familiar with Ukrainian business practice believes the lack of overlap between the Zlochevsky chain of offshore entities uncovered by the SFO and the chain tying the Burisma board to the Privatbank group is “supportive” of the conclusion that Kolomoisky is the control shareholder at Burisma.This is also claimed in a Wikipedia entry on Kolomoisky [24] – without substantiation. Independent Russian investigations emphasize infighting between the Ukrainian oligarchs, including Kolomoisky, Pinchuk, Rinat Akhmetov, the Yanukovich family, and others for stakes in the burgeoning Ukrainian gas sector [25].

That still leaves Zlochevsky, who identified himself last December on a visit to Kazakhstan [26] as the “principal” of a Burisma delegation proposing to bring US technology and money to a gas exploration venture with KazMunaiGas (KMG), Kazakhstan’s state oil and gas company. In Astana Zlochevsky was accompanied by Archer and Pozharskyi.

The memorandum signed with KMG and discussed with Kazakh Prime Minister Karim Massimov emphasized American technology and American cash for “a round of seismic and drilling operations for the hydrocarbon E&P, as well as explore the possibility of building infrastructure in the territory of the Republic of Kazakhstan.” Why KMG would need a small Ukrainian intermediary for this purpose isn’t explained.

Massimov has been the Kazakh official delegated [27] by President Nursultan Nazarbayev to conduct direct relations with the regime in Kiev. Six months before the Burisma visit, Massimov met with Prime Minister Arseny Yatseniuk in Kiev.

Arseny Yatseniuk

It is noteworthy that for the trip to Astana Burisma omitted its chief executive, Leonid Petukhov and his deputy Alexander Gorbunenko. Their career records reveal that they may have been poached by Kolomoisky from rival oligarchs: Petukhov comes from Geo Alliance, a Pinchuk asset [28]; and Gorbunenko comes from Smart Holding, which belongs to Vadim Novinsky. For an inventory of which Ukrainian oligarch owns which gas asset, as of last November 2014, read the Vlasti report [25].

Neither is trusted to represent Burisma in the lobbying for US Government cash and loan guarantees to “support energy sector reforms, promote Ukrainian self-sufficiency and mitigate corruption in the energy sector,” as a Burisma press release [29] describes its Washington pitch. Zlochevsky’s name gets as far as Astana, but apparently not as far as Washington. There Burisma is represented by the Americans on the board.

A report [30] released on Monday in Warsaw explains the reason. This is the work of the Polish Centre for Eastern Studies (Ośrodek Studiów Wschodnich, OSW); a Warsaw informant describes OSW as “an arm of Polish intelligence studying Russia, as well as Ukraine.” According to OSW, the Ukrainian oligarchs are manipulating domestic strife and the balance of power in Kiev and Washington to gain assets at the expense of their rivals. But the oligarchic system itself in Ukraine is undiminished.

“After the victory of the revolution on the Maidan in the balance of power between the major Ukrainian oligarchs – representatives of big business with strong political influence – there has been a significant change, which, however, did not undermine the oligarchic system.” Yanukovoich, Akhmetov, and Dmitry Firtash have lost assets and political influence, OSW reports. By contrast, “the most important trend in the Ukrainian oligarchic system in the past year has been a huge increase in the revenue of Ihor Kolomoyski who, since the 90s, is one of the most powerful men in Ukraine… Kolomoyski’s political success meant that he began to pursue business expansion at the expense of other oligarchs.” Read the full Polish report here [31].

The Polish report endorses the conclusion of a Washington think-tank report [32], published late last year, which attacks Kolomoisky for the worst excesses of Ukrainian asset raiding. “Raiding has apparently been an intimate part of Privat Group’s growth strategy. Kolomoisky himself is credited with the memorable quotation, “give me a 1 percent stake and I will take over the entire company.”

Matthew RojanskyThis was written by Matthew Rojansky (right), Director of the Kennan Institute at the Woodrow Wilson International Center for Scholars, in Washington. Rojansky’s research was hosted by the Economic Section of the US Embassy in Kiev. “It is possible,” Roshansky concludes, “that the realignment of forces in Ukrainian politics could unleash yet another devastating tidal wave of raider attacks under the guise of restitution of assets stolen by the previous government. It is worth recalling that the oligarchs have hardly disappeared from Ukraine, and some are in positions of much enhanced political power”.

That’s code for Kolomoisky – and Burisma. Rojansky’s conclusion is a direct appeal for the US Government to stop Kolomoisky because “corporate raiding undermines U.S. policy objectives in addition to deterring potentially profitable U.S. investments in Ukraine.”