Graft accusations dog top Zelenskiy aides

[September 19, 2023]  By Stephen Grey and Dan Peleschuk

VIENNA/KYIV (Reuters) - In his years as the chief executive of one of Ukraine's biggest construction firms, Oleh Maiboroda kept rolls of dollar bills in a safe behind his desk.

The money, Maiboroda told Reuters, was intended to bribe public officials to approve building projects. The task of handing over the cash, he said, was entrusted to a lawyer named Oleh Tatarov, now a senior adviser to Ukraine's president Volodymyr Zelenskiy.

"Tatarov used to solve all issues with law enforcement," Maiboroda said in an interview in Vienna, where he has settled to escape prosecution in Ukraine for his own alleged role in corruption schemes involving the construction firm, Ukrbud Development LLC.

Maiboroda said bribes flowed through Tatarov from 2014 to 2019. The lawyer's contacts with police, courts and prosecutors made him a perfect go-between. "Of course he was paying" to smooth projects with authorities, including by securing building permits, Maiboroda said. "He was giving them money so these arrangements were done," he added.

Maiboroda's remarks threaten to reignite a controversy that has plagued President Volodymyr Zelenskiy even in wartime: accusations by political opponents and anti-corruption campaigners that powerful people have shielded Tatarov from prosecution.

Maiboroda provided no proof of his accusations. They echo an allegation against Tatarov, leveled by Ukraine's anti-corruption agencies, that he organized a bribe. Prosecutors closed the case in April 2022 on procedural grounds.

Tatarov, the president's adviser on law enforcement and security agencies since 2020, has denied wrongdoing and has been convicted of no crime. He has said his accusers are trying to settle political scores. Zelenskiy has previously said corruption has no place in his administration. "I want to emphasize: if those who work with me are suspected of corruption, these people will be fired. And I have not yet seen such examples in my Office," he said in an interview in December 2020 with Ukraine's Focus magazine.

Neither Zelenskiy nor Tatarov responded to detailed questions for this article.

Zelenskiy has been lauded as a wartime leader since Russia began its full-scale invasion in February last year. Still, some have questioned his commitment to making good on his pledge to fight graft. Ukraine consistently ranks in the bottom half of Transparency International's annual global Corruption Perceptions Index and, in the latest survey, for 2022, only Russia was rated more corrupt in Europe.

Billions of dollars of aid earmarked for Zelenskiy's government as well as ambitions to join the European Union ride on Ukraine proving that it is serious about fighting corruption and embracing good governance.

In a report in June, the International Monetary Fund said donors and foreign investors need to see reforms to improve governance, transparency and tackle corruption "without delay." In an assessment of Ukraine's chances of EU membership, published in June 2022, the European Commission described corruption as "a serious challenge that requires continued attention."

A survey by two Kyiv pollsters released on Sept 11 found that 78% of Ukrainians hold Zelenskiy accountable for government corruption. A related poll found that 55% believe Western military aid should be conditional on fighting corruption.

In recent months Zelenskiy has taken steps to respond to his doubters.

He fired more than a dozen senior officials in January amid public allegations of graft and impropriety, declaring, "Any internal problems that interfere with the state are being cleaned up and will be cleaned up." Earlier this month, Zelenskiy replaced his defense minister, Oleksii Reznikov, citing the need for "new approaches." This came after a series of allegations leveled by Ukrainian media that the defense ministry was procuring goods at inflated values. Reznikov told a press conference in Kyiv a week before his ouster that the reports are inaccurate.

The shake ups have left Tatarov in his post. Several political insiders interviewed by Reuters said he is a crucial figure in helping Zelensky control Ukraine's sprawling security and law enforcement agencies.

"Tatarov has become the symbol of Zelenskiy's tolerance of corruption in his inner circle," the Kyiv Independent newspaper wrote earlier this year, citing the bribery allegation.

Daria Kaleniuk, executive director of Ukraine's Anti-Corruption Action Centre (AntAC), an NGO, believes that in a healthy democracy any official accused of corruption should be suspended until cleared. "Unless Zelenskiy gets rid of Tatarov, he won't be seen as serious in purging the country of corruption," she told Reuters.

Tatarov's allies say he is a victim of his own efficiency as Zelenskiy's point man on law enforcement. "They're going to try anything they can to bring this guy down because he's the tip of the spear," said Nicola Mirto, an Italian entrepreneur and former client of Tatarov. Mirto said Tatarov has earned the ire of powerful interests by supporting Ukraine's anti-corruption drive against oligarchs.

EARLY CONTROVERSY

Zelenskiy became president in May 2019 with a promise to break with the cronyism and corruption that had blighted Ukraine for decades.

He shot to fame as an actor in a TV political satire, "Servants of the People." It opens with a group of tycoons sipping drinks above the capital's Independence Square and musing about which of their hand-picked candidates might win an upcoming presidential election.

Tatarov's government career began several years earlier. He was an official under Viktor Yanukovych, the pro-Russian president who was toppled by a popular uprising in 2014. Tatarov stirred controversy at the time with a remark after security forces fired on protesters. Tatarov claimed some shots emanated from the crowd. More than 100 people died in three days of violence.

"Some of the dead have injuries in the back of the head," he said at a meeting with European diplomats that was broadcast on Ukrainian TV. This, he said, showed "that the shots were somewhere nearby, by individuals that were among the protesters." Tatarov did not provide further evidence for his assertion at the time. In a 2020 interview with a Ukrainian broadcaster, Tatarov said all briefings he gave drew on "information from the material of criminal cases. I could not voice any personal opinions." He did not respond to questions from Reuters about the matter.

After Yanukovich's ouster, Tatarov entered private practice as a lawyer. He also became a legal adviser to a construction company that is a part of the state-owned Ukrbud corporation.

The construction sector is typical of the blurred lines between public and private sectors in post-Soviet Ukraine. British and Ukrainian company registries and court documents show that the then chairman of Ukrbud corporation, Maxym Mykytas, came to control over 75% of the shares of a private firm called Ukrbud Development LLC that is licensed to use the state corporation's logo.

Mykytas is in prison, charged with another alleged bribery scheme, involving a subway contract, which he denies. He said in a statement to Reuters none of the state corporation's resources were used by the private company that he indirectly controls.

According to Maiboroda, Mykytas used Tatarov for difficult tasks, including bribe payments on behalf of Ukrbud Development. Maiboroda said he used to receive regular instructions from Mykytas to hand over sums of cash to Tatarov. In his statement to Reuters, Mykytas accused Maiborada of "false testimony" and behaving "like a cornered animal" after himself being accused of corruption. He said Tatarov's contacts and influence were being "greatly exaggerated."

Maiboroda said Tatarov was a slick operator, working away from the office in smart cafes where he met his contacts and using encrypted apps for communications. "He knew about law enforcement and warned us to be careful about saying almost anything on the phone," Maiboroda told Reuters.

He said Tatarov either collected cash payments himself or sent a driver to do so. Maiboroda said the money was signed for by Tatarov and accounted for as expenses for construction projects. Maiboroda showed Reuters what he said was a list of bribes, recorded in a spreadsheet, totaling $1.8 million paid by Tatarov. He also shared three signed cash receipts that matched entries on the list. Maiboroda said the signatory was Tatarov and the list of bribes was from Ukrbud Development's accounts. Reuters could not independently verify this.

Reuters shared the receipts with Mykytas and Tatarov. Mykytas said they are a forgery. Tatarov didn't respond. The National Anti-Corruption Bureau of Ukraine (NABU) said experts would need to study the material to verify it.

A NEW ROLE

Zelenskiy appointed Tatarov to advise on law enforcement and security agencies in August 2020. Zelenskiy said it would be unfair to cast all officials who worked under Yanukovych as representatives of the old guard. "The main thing is that a person is honest," Zelenskiy told reporters several days after Tatarov's appointment.

Soon afterwards, NABU, an independent agency, opened an investigation into Tatarov on suspicion he arranged to bribe an Interior Ministry official in 2017 on behalf of Ukrbud Development.

The alleged bribe – a free parking spot for the Interior Ministry official in return for a lowball valuation of some state land – appears modest. But NABU estimated the under-valuation of the land cost the state 81 million UAH ($3.1 million at the time).

Ukrainian business man Oleh Maiboroda walks past a fiaker horse carriage in Vienna Austria, September 18, 2023. REUTERS/Leonhard Foeger

WhatsApp records, obtained by investigators and seen by Reuters, include an instruction from Tatarov to an accountant for Ukrbud Development to provide the official with a parking place in a Kyiv development with "100% discount" in thanks for his efforts. The Interior Ministry official told Reuters he purchased the parking space at market price and he denied making the valuation.

Two senior law enforcement officials told Reuters that Mykytas confessed to the bribe in an October 2020 video recording in which he said Tatarov arranged the payment. Tatarov has not commented on the matter. In a prison interview with a Ukrainian news website, published on Dec. 22, 2020, Mykytas railed against Tatarov. "Tatarov and I did everything together, but if Tatarov sits in the President's Office, why should I be in prison?”

NABU was preparing to order Tatarov's arrest, the two law enforcement officials told Reuters, armed with evidence including the messages, other correspondence and independent valuations. But before NABU could act, Prosecutor General Iryna Venediktova, a former MP from Zelenskiy's party, made changes to the team handling the case. She brought in more prosecutors, including herself, in early December 2020. Three weeks later, her office transferred the case to the state security service, the SBU.

Then, in January 2021, Mykytas withdrew his confession. He told Reuters he accused Tatarov in the mistaken belief that the lawyer and others were trying to steal his business. Meanwhile, the SBU investigation stalled. A court in Kyiv then refused to give investigators more time and, in April 2022, state prosecutors closed the case on these grounds.

Artem Sytnyk, the head of NABU during this period, told Reuters that he believes the case was closed for political reasons. He said his agency had presented substantial evidence, including the Whatsapp messages. Sytnyk, who left his post in April 2022 after a seven-year term, said the bureau was "doing its job" in investigating Tatarov but "the judicial system got involved and prevented the right thing from happening." Sytnyk said he was given no advance notice that the case was being taken away from his agency and described the move as "completely illegitimate."

A spokesman for the office of the General Prosecutor said in a statement to Reuters that Venediktova's changes to the prosecution team were due to the "exceptional complexity" of the case. The case was subsequently removed from NABU, the spokesman said, on the orders of a Kyiv district court.

The spokesman accused NABU of failing to pass evidence to the SBU. The court's refusal to extend the investigation meant that prosecutors didn't have "the opportunity to thoroughly, comprehensively, and impartially investigate all the circumstances of the criminal offences," the spokesman added.

Zelenskiy removed Venediktova, the prosecutor general, in July 2022 as part of a post-invasion purge of officials accused of having failed to root out Russian agents or sympathizers from their agencies. He appointed her ambassador to Switzerland. Her deputy Oleksiy Symonenko resigned in January 2023 after media reports he was holidaying in Spain during wartime. Neither Venediktova nor Symonenko commented for this article.

"GREEN CARDINAL"

Tatarov is not the only member of Zelenskiy's inner circle to have courted controversy. So too has the president's chief of staff, Andriy Yermak, an associate from Zelenskiy's prior career in the entertainment world. Yermak too did not respond to questions for this article.

The son of a Soviet diplomat, Yermak previously worked in film and TV production. These days, he is frequently alongside Zelenskiy at government meetings and public events. He is known among foreign diplomats as the "green cardinal" because of his reputed influence and because, like his boss, he has taken to wearing khaki.

In March 2020, a month after Yermak became chief of staff, video tapes surfaced in which Yermak's brother, Denys, now a soldier, is heard discussing appointments to government jobs and suggesting he could open doors. Denys confirmed the recording was of him but said he was vetting candidates and ideas for projects he was proposing to the government through a citizens' appeal, and that the tapes had been edited in a politically motivated bid to discredit his brother. Andriy Yermak also dismissed the recordings as a political hit job.

The recordings were made by a former police instructor, Dmytro Shtanko, who was killed in action in east Ukraine in October 2022, according to his widow, Liudmyla Bielievtsova. She told Reuters Shtanko's aim was to expose high-level graft and that her husband was driven by a sense of duty. "He wanted Ukraine to be a normal country," she said.

Questions arose about Zelenskiy himself in October 2021 when it emerged that he had used offshore companies to manage his wealth and that shortly before his election he had transferred a stake in a British Virgin Islands firm to an associate. This associate, Sergey Shefir, later became a top aide to Zelenskiy, working in a voluntary unpaid capacity. Zelenskiy told Ukrainian television network ICTV in October 2021 that the offshore arrangement was to protect his TV production business from political pressure by the Yanukovych government.

An October 2021 review by the National Agency for the Prevention of Corruption found "no evidence of illegal enrichment."

Shefir told Reuters all his business activities were lawful and all necessary tax declarations were filed. "Based on the income received and the declarations submitted, I paid all the taxes and other mandatory payments required by the legislation of Ukraine," he said.

Shefir said Zelenskiy had submitted all required declarations of property and income. These were verified by anti-corruption agencies, he said, and "no violations of anti-corruption legislation were found."

Zelenskiy's administration has also drawn criticism at home for purchasing goods at above market price. In January, Ukrainian media reported that the Ministry of Defense was buying eggs at more than twice the market price and potatoes at nearly three times market value. A junior defense minister resigned as a result of the article. He is currently being prosecuted for buying low-quality kit at inflated prices. Vyacheslav Shapovalov, in a statement to Reuters through his lawyer, denied wrongdoing and said he had never sought unfavorable contracts.

Yaroslav Zheleznyak, an opposition lawmaker, said Western donors should take note of reports of corruption. So far, over 41 countries have committed a total of more than $140 billion in civil and military aid to Ukraine, including over $70 billion from the United States, according to the Ukraine Support Tracker of the Kiel Institute for the World Economy.

Zheleznyak told Reuters that unless corruption is addressed, Western donors risk losing substantial sums. "Now they are stealing our money," he said of officials who tolerated graft. "In the future they could steal your money."

With a greater demand for accountability from Ukrainians, Zelensky has taken high-profile steps to fight wartime corruption. On August 11, he fired all the regional heads of military recruitment centers after an audit turned up alleged abuses by officials, including illegal enrichment and helping draftees escape. Earlier this month, police detained one of Ukraine's richest men, Ihor Kolomoisky, on suspicion of fraud and money laundering. Kolomoisky has previously denied wrongdoing.

On Sept 12, after a public outcry, Zelenskiy vetoed legislation that would have allowed officials to keep their mandatory asset disclosures sealed from public view for a year.

Ukraine's anti-corruption authorities have doubled down on their work and say they have made more progress than at any time since their establishment in 2015. In the first half of this year, they launched nearly 300 cases and sent 58 indictments to court, according to NABU. Current NABU director Semen Kryvonos told Reuters his agency is prioritizing wartime crimes in key sectors like defense and reconstruction and involving high-ranking officials.

LAND FIT FOR HEROES

The view that corruption persists in wartime is widespread among several dozen residents interviewed by Reuters in a visit to several towns and villages north of Kyiv that were engulfed in the fighting last year. There is also hope that, after the sacrifice of war, the country has reached a turning point.

Pointing to an alleyway in Irpin where volunteers bringing food to residents were shot dead by Russian soldiers, Halyna, a 44-year-old local woman, said that nowadays when she deals with local officials, "there's no hint of bribes any more.”

Kaleniuk, the anti-corruption campaigner, believes the war has created irreversible pressure for reform. "Everything has changed" since Russia's invasion, she said. "The demand for a change in society is huge. And so are the requirements for reform to achieve what people want: integration in NATO and the European Union.”

((reporting by Stephen Grey and Dan Peleschuk; editing by Janet McBride))

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