Ukraine to Seek Restitution of $500 Million from Lazarenko and Tymoshenko

Ukraine’s Ministry of Revenues and Duties is seeking $500 million that former Prime Minister Pavlo Lazarenko and former Prime Minister Yulia Tymoshenko are believed to have spirited out of the country during a now-infamous money laundering operation that ended with Lazarenko in an American prison and Tymoshenko an unindicted co-conspirator.

More details of Tymoshenko’s time as a natural gas oligarch (her nickname in Ukraine was “Gas Princess”) and her company, United Energy Systems of Ukraine (UES or UESU) are bound to come out as a result. Of more immediate importance, it is increasingly apparent that it would be wrong to pardon or release Tymoshenko with these charges outstanding.

Apparently erroneously reported as a suit against Tymoshenko and her former partner (the action is not yet available online in PACER or otherwise), the court case stems from efforts by the United States and others to prosecute Lazarenko for an enormous money-laundering and kickback scheme he ran (allegedly with Tymoshenko) through corrupt practices in Ukraine’s natural gas industry. Tymoshenko’s company, UES, was at the center of many of these schemes, and the United States Department of Justice has not been shy about calling her an unindicted participant.

Lazarenko was released from prison in 2012, but the United States has been determinedly gathering up as many of Lazarenko’s assets as possible to satisfy his conviction (he was fined millions of dollars on top of being sentenced to prison). It is here that Tymoshenko’s involvement becomes important, as both the USDOJ and Ukraine are seeking assets held by Tymoshenko and UES in addition to Lazarenko’s assets to recoup the money stolen from Ukraine during the scheme.

The action by Ukraine appears to be what is called an interpleader action, where someone (here it is Ukraine) tries to become a formal party to existing court proceedings involving other parties, claiming a specific interest in the property at issue. Simply, Ukraine is trying to get back some of the money Lazarenko (and allegedly Tymoshenko) took from the country by graft in the late 1990s, before the United States government does. With two other lawsuits in Federal District Court still pending against UES and Yulia Tymoshenko, expect more dirt about how UES and Tymoshenko allegedly hid assets in the U.S. over a decade ago.

The interpleader action is going to take some time to work through. Federal courts move relatively quickly through their dockets, but unraveling a complex asset-hiding operation involving hundreds of millions of dollars will take time and extensive discovery (depositions and related investigations alone will likely take well over a year). Given Tymoshenko’s close ties with Lazarenko at the time the scheme was underway and the allegations in other courts that UES and Tymoshenko used a network of dummy corporations to move funds, we are almost certainly years from a resolution of this case.

Yet the larger and more immediate point is that we are very likely on the cusp of finding new evidence of alleged criminal acts by Tymoshenko as the American (and Swiss) matters come unfrozen. It is now much more difficult to justify pardoning Tymoshenko, who was convicted of abuse of office (essentially for illegally signing Ukraine to a ruinous natural gas contract in order to bolster her Presidential ambitions) in 2011. This will be a test of Europe’s commitment to the rule of law, a commitment that has sometimes degenerated to a case of special pleading where Tymoshenko is concerned.

Ukraine is set to sign an Association Agreement and a related free trade agreement with the European Union later this month in Vilnius. Some of the European nations whose signatures will be needed on the Association Agreement have transitioned from the worthy goal of demanding an end to selective prosecution in Ukraine (an issue addressed by an independent American firm and by complete overhauls of the criminal and judiciary codes) to making Tymoshenko’s freedom the sine qua non of the Agreement.

Europe cannot indulge itself in the fallacy of believing that attachment to a person is attachment to the rule of law. Tymoshenko has a host of legal actions pending against her in Ukraine and the United States, and even the European media are beginning to understand that she is hardly the martyr to justice and democracy she has made herself to be. With Russia growing increasingly insistent that Ukraine end its Westward drive, now is the time to be clear-headed. Baseless demands for Tymoshenko to be pardoned — with so many credible allegations still outstanding and developing — must not stand in the way of a true commitment both to the law and to a serious policy toward Ukraine.

Ukraine and the EU must grow closer together, even as the world dives again into the muck of Tymoshenko’s rise and fall.

Image Copyright Shutterstock.com/Sean Nel