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Ukraine gas company feels heat of US impeachment probe

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When Ukraine’s kleptocratic elite fled to Russia after a pro-western revolution in 2014, former minister Mykola Zlochevsky suddenly found himself the target of an international investigation into the sources of his wealth.

The UK’s Serious Fraud Office froze $23m in Mr Zlochevsky’s bank accounts in April that year as part of an FBI-led attempt to recover a staggering $100bn in assets allegedly stolen by President Viktor Yanukovich and his entourage, known as the “Family”.

Mr Zlochevsky, the owner of Burisma, Ukraine’s largest private gas company which acquired several of its extraction licences while he was in government, had lost a political patron when Mr Yanukovich was evicted from office. Weeks later the energy tycoon sought help elsewhere.

Burisma made a surprise appointment to its board: Hunter Biden, younger son of then-US vice-president Joe Biden. It was a move that would ultimately lead to the impeachment proceedings triggered last week against President Donald Trump.

Mr Biden’s five-year tenure on Burisma’s board — which ended this year as his father announced his run for president — was part of a shrewd campaign by Mr Zlochevsky to repair his image in the west.

The ex-minister overcame concerns about his wealth to wriggle out of corruption investigations in Ukraine and Britain and become one of the country’s richest men. Burisma’s gas production rose to 1.3bn cubic metres last year, a sizeable share of Ukraine’s total 20bcm annual output. Its revenues reportedly approach $400m a year.

Mr Zlochevsky has now been dragged into a political scandal of far greater magnitude as Congress prepares to investigate Mr Trump for pressing Volodymyr Zelensky, his Ukrainian counterpart, to dig up dirt on the Bidens in connection with Hunter’s work for Burisma.

Democrats say Mr Trump abused his office in pursuit of so-far unsubstantiated allegations that Mr Biden pushed for a Ukrainian prosecutor’s sacking to protect his son’s business dealings there.

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“There’s a lot of talk about Biden’s son, that Biden stopped the prosecution and a lot of people want to find out about that so whatever you can do with the attorney-general would be great,” Mr Trump told Volodymyr Zelensky, Ukraine’s president, in a telephone call in July, according to a rough transcript released last week.

Rudy Giuliani, Mr Trump’s personal lawyer, has pushed the claims after meeting with Ukrainian prosecutors offering supposed evidence of wrongdoing by Mr Biden and in support of conservative conspiracy theories that Kiev tried to derail Mr Trump’s election.

Viktor Shokin, prosecutor-general until 2016, then claimed Mr Biden pressured Ukraine to sack him by threatening to withhold $1bn in vital security assistance because of a probe into Burisma.

Mr Biden vehemently denies so much as discussing his son’s activities in Ukraine with him. The former vice-president has said the US — backed strongly by Ukraine’s western allies — wanted Mr Shokin fired because of his reluctance to pursue any major corruption cases.

In a speech last year, Mr Biden recalled: “I said, ‘I’m telling you, you’re not getting the billion dollars . . . I looked at them and said: ‘I’m leaving in six hours. If the prosecutor is not fired, you’re not getting the money.’ Well, son of a bitch. He got fired. And they put in place someone who was solid at the time.”

The push left Mr Biden in the bizarre position of pushing Ukraine to investigate a company where his son worked at the time. In 2015, then-US ambassador Geoffrey Pyatt publicly accused Mr Shokin of deliberately tripping up the UK proceedings by telling Mr Zlochevsky’s lawyers that there was no evidence of his wrongdoing.

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“Shokin was helping Zlochevsky to evade the asset seizure in the UK,” said Daria Kaleniuk, director of anti-corruption watchdog Antac. “Everyone who wanted to help Ukraine with asset recovery attempts knew how damaging Shokin was.”

Mr Zlochevsky — a burly, shaven-headed man — set up Burisma in 2002. The company won several of its gas production licences while he was Ukraine’s natural resources minister from 2010 to 2012, records show.

While in government, Mr Zlochevsky claimed he had sold his energy assets, but Ukrainian journalists soon found he continued to control Burisma through Cyprus-based holding companies.

When prosecutors began investigating Burisma’s licenses over self-dealing allegations, Mr Zlochevsky stacked its board with Western luminaries.

As well as the younger Mr Biden — who said he hoped to improve Burisma’s “transparency, corporate governance and responsibility” — they included former Polish president Aleksander Kwasniewski, who had visited Ukraine dozens of times as an EU envoy, and Devon Archer, Mr Biden’s longtime business partner.

Burisma paid Mr Biden $50,000 a month, according to the Wall Street Journal. Mr Kwasniewski remains a board member, according to Burisma’s website, alongside former investment banker Alan Apter and ex-Blackwater director Cofer Black.

In Monaco, where he reportedly lives, Mr Zlochevsky coorganisess an annual energy conference with Mr Kwasniewski’s foundation. Burisma did not respond to several requests for comment.

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“He invited them purely forwhitewashingg purposes, to put them on thefaçadee and make this company look nice,” Ms Kaleniuk said.

Despite US pressure to investigate him, Mr Zlochevsky strengthened his position under new general prosecutor Yuriy Lutsenko. Burisma retained its production licences and settled a tax avoidance case after Mr Lutsenko’s office downgraded the charges.

In 2017, Burisma announced that it faced no active prosecution cases, then formed a partnership with the Atlantic Council, a USthink-tankk active in promoting anti-corruption efforts in Ukraine.

Burisma donated between $100,000 and $250,000 to the Atlantic Council last year, according to its annual report, and sent executives to speak alongside the think tank’s experts at several conferences. Karina Zlochevska, Mr Zlochevsky’s daughter, attended an Atlantic Council roundtable on promoting best business practices as recently as last week.

The campaign did little to improve Mr Zlochevsky’s business reputation. The American Chamber of Commerce in Ukraine turned town Burisma’s application to join. One top western financial institution told the FT: “We’ve never worked with them for integrity reasons. Never passed our due diligence.”

“The company just does not pass the smell test,” a senior foreign businessman in Ukraine said. “Their reputation is far from squeaky clean because of their baggage, the background and attempts to whitewash by bringing inrecognisablee western names on to the board,” he added.

On Friday, Ukraine’s anti-corruption bureau said it was investigating Mr Zlochevsky’s awarding of gas production licences while he was a minister. Hunter Biden does not figure in these probes, which cover the period before he joined Burisma.

Via Financial Times

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