Friday, October 15, 2010

Ukraine: Government of former Ukrainian Prime Minister Yulia Tymoshenko, accused of misappropriating more than $400 million

Copyright (c) 2010. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave., N.W. Washington DC 20036.

International Auditors Say Former Ukrainian Government Misused Funds


An international audit alleges that the government of former Ukrainian Prime Minister Yulia Tymoshenko misappropriated more than $400 million.

The audit, ordered by the current Ukrainian government in May, was contracted to the American law firm Trout Cacheris, who in turn engaged the international law firm Akin Gump Strauss Hauer & Feld, as well as Kroll Inc., an investigative and forensic audit company.

The audit -- whose findings were released on October 14 -- focused on six cases involving procurement of automobiles, sugar, the sale of carbon credits, the purchase of pharmaceutical and medical equipment, and the government's land-registration program.

Covering the period from 2008 to the beginning of this year, the investigation claims that Tymoshenko's government wrongly used some $280 million from the sale of carbon credits.

According to the Kyoto Protocol, proceeds from the sale of carbon credits are to be spent on environmental projects. The audit claims these funds were inappropriately transferred to cover severe shortages in Ukraine's state pension fund.

Another finding claims that $140 million of state funds were used to purchase minivans for the Health Ministry, vehicles which then were allegedly used by the Tymoshenko presidential campaign.

Viktor Yanukovych defeated Yulia Tymoshenko in a bitter struggle for the Ukrainian presidency in January.

Tymoshenko's former deputy prime minister, Hryhoriy Nemyria, told RFE/RL that the audit is part of a concentrated government effort against the leaders of the opposition.

"We denounce Trout Cacheris' claims as clearly politically motivated," Nemyria said. "We consider these, so to speak, findings as yet another example of the systemic oppression directed at the leaders of the opposition, and we deny that this so-called audit has any legal standing."

Trout Cacheris senior partner Plato Cacheris rejected claims that the audit amounts to a "witch hunt."

"The strength of our findings and conclusions is further evidenced by the fact that the Ukrainian government has directed that civil suits be filed in the United States' courts and in the United Kingdom courts," Cacheris said. "These courts are widely regarded as the most open and transparent in the entire world."

Asked about conflicts of interest and the cost of the audit, Akin Gump partner Mark MacDougall said: "The important the unique and I think unprecedented level of transparency that has been brought to the investigation of misconduct in this country."

Whether attempts will be made to recover allegedly misused money is to be decided by Ukraine's Justice Ministry and the Prosecutor-General's Office, MacDougall said.

Nemyria questioned the qualifications of Trout Cacheris to conduct an impartial audit, saying: "This law firm specializes in defending clients of dubious reputation, among those are [FBI spy] Robert Hansen...[Russian spy] Aldrich Ames and a number of others. With clients like these, I'm sure Trout Cacheris felt right at home dealing with President Yanukovych and Prime Minister [Mykola] Azarov."

Plato Cacheris has also represented Monica Lewinsky, Watergate scandal figure John Mitchell, and Iran-Contral scandal witness Fawn Hall.

Nemyria also said that for Akin Gump to take part in any audit concerning Ukraine was a clear conflict of interest. He said Akin Gump has long been the legal adviser to Dmytro Firtash, one of the owners of RosUkrEnergo, a gas-trading company who was the intermediary in the gas dealings between Russia and Ukraine.

Tymoshenko's government removed Firtash's company from that intermediary position.

"The cost of the nine-month investigation has not been announced. [The investigation] has been funded by the Ukrainian taxpayers," Nemyria said. "It represents a blatant attempt to discredit the opposition by smearing its leadership and follows the pattern of repressive tactics orchestrated against opponents of the Viktor Yanukovych regime."

Since Yanukovych became president of Ukraine, several members of the Tymoshenko government have been investigated. One, a senior customs official, has been jailed.

The full 176-page report of the audit is available on the Ukrainian Finance Ministry's website.

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