By Serhiy Leshchenko, Ukrainska Pravda, April 4, 2014
One of the most powerful political clans in Ukraine is on the verge of destruction. The so-called “gas group,” headed by Dmytro Firtash, Serhiy Lyovochkin and Yuriy Boyko, may lose significant influence or even disappear as a result of the charges brought by U.S. justice against their leader.
Last month Dmytro Firtash was first arrested in Vienna at the request of the FBI and then released from custody after posting EUR 125mn bail in the Austrian court–an amount that set a record in Austria. Today he lives in the Vienna Ritz Carlton hotel, where he occupies three rooms, as he waits for the court’s decision on his extradition to the US.
Ukrainska Pravda attempted to phone Firtash for his comments but all attempts to connect through the hotel desk were unsuccessful. Nobody picked up the receiver in his room.
That evening, Firtash read his teleprompted address on television, in which he called himself a victim of repression. “All of this is obviously politically motivated,” he said.” Ukraine has become the field of confrontation of the largest geopolitical centers of influence in today’s world: the U.S. and Russia. I found myself in the epicenter of this conflict,” yesterday’s “gas king” announced.
Ukrainska Pravda has in its possession U.S. government charges against Firtash. The document had been prepared for the Grand Jury of the Northern District of Illinois still in 2012 and approved in June 2013.
With this decision the grand jury, which must adopt this type of decision in the absence of the accused, gave approval to the U.S. Ministry of Justice to investigate Firtash. Because the grand jury meetings and the preliminary investigations are secret, Firtash did not even suspect that, for the past several years, he was on the FBI’s “radar.”
Grand jury decisions are confidential to avoid jeopardizing the reputation of a person in the absence of evidence. However, the fact that the U.S. this week brought official charges against Firtash means that they found sufficient evidence to bring him to justice in the U.S. The only issue now is for Austria to give approval for the extradition of Firtash to the U.S.
“Defendant DMITRY FIRTASH, also known as “Dmytro Firtash,”and “DF,” exercised control over “Group DF,” an international conglomerate of companies that were directly and indirectly owned by Group DF Limited, a company organized under the laws of the British Virgin Islands,” begins the document that could lead to the destruction of one the of the political business groups.”
The key entity in the indictment of Firtash is the company he established in Switzerland, the “Bothli Trade AG” which managed his interests in India.
In or around April 2006, Bothli Trade AG entered into a memorandum of understanding with the State Government of Andhra Pradesh. In the memorandum of understanding, Bothli Trade AG and the State Government of Andhra Pradesh agreed to set up a joint venture for the purpose of mining various minerals within Andhra Pradesh, including ilmenite, a mineral which can be processed into various titanium-based products such as titanium sponge. The project was to bring $500 million revenue annually.
Another key member of the Firtash deal is the American legal entity named “Company A” in the indictment. “This is a Delaware corporation that has its main office in Chicago, Illinois. Company A was purchaser of the titanium products,” the document explains.
According to sources, “Company A” is the aircraft manufacturing giant Boeing, which matches the description.
As stated in the indictment, in or around February 2007, “Company A” entered into a memorandum of agreement with Firtash’s Austrian Ostchem Holding AG company, by and through Bothli Trade AG. The agreement specified that the parties would work towards entering into a supply agreement whereby Bothli Trade AG would supply 5mn to 12mn pounds of titanium sponge to Company A on an annual basis.
The titanium sponge for the Americans was to be derived from Firtash’s project in India. However, in order to implement it, the Ukrainian oligarch had to obtain a license from the government of Andhra Pradesh and the central government of India. As the American investigation has revealed, Firtash decided to pay bribes to ensure that the Indian authorities gave approval for his project.
” Firtash authorized payment of at least US $18.5mn in bribes to officials of both the State Government of Andhra Pradesh and the Central Government of India to secure the approval of licenses for the project,” the indictment states. At least six people were involved in the process.
“(For this purpose) a criminal organization was established, which consisted of the accused Dmytro Firtash, Andras Knopp, Suren Gevorgyan, Gajendra Lal, Periyasamy Sunderalingam, K.V.P. Ramachandra Rao and others known and unknown,” the document states. The Ukrainian oligarch is considered to be the leader of the criminal organization.
“The accused Dmytro Firtash was the leader of the enterprise. In that capacity, he oversaw, directed and guided certain of the enterprise’s illegal activities,” the indictment says.
In particular, he personally met with Indian officials, such as the now deceased member of the legislature and the chief minister of the Andhra Pradesh state Chief Minister Y.S. Rajasekhara Reddy. His close associate Rao was identified by the FBI as a member of the Firtash criminal gang. Today Rao is a deputy in the state’s parliament.
“Firtash further directed his subordinates to create documentation to make it falsely appear that money transferred for the purpose of paying these bribes was transferred for legitimate commercial purposes,” the indictment states.
The US prosecutor describes the illegal activities of Firtash’s organization in five paragraphs:
(a) utilizing United States financial institutions to engage in the international transmission of millions of dollars for the purpose of bribing Indian public officials in connection with obtaining approval of the necessary licenses for the project, which project was forecast to generate more than $500 million in revenues per year, including revenues generated from the sale of titanium products to Company A;
(b) using facilities of interstate and foreign commerce to coordinate, plan, facilitate and promote the bribery of Indian public officials;
(c) using Group DF, including its business reputation and financial resources, in order to advance, participate in and finance the project, as well as to fund, transfer and conceal bribe payments made in connection with the project;
d) using threats and intimidation to advance the interests of the enterprise’s illegal activities; and
(e) traveling in interstate and foreign commerce to further the goals of the criminal enterprise.
According to the prosecution, Firtash was the one who assigned responsibilities among his subordinates for controlling the process of obtaining licenses through bribery.
Among the six members of the criminal group a person by the name of Andras Knopp is mentioned. This person is one more weak link for Firtash. As described in the indictment, Knopp met with the Indians and the representatives of “Company A”, and also advised on bribes to the Indian officials.
But apart from his Indian machinations, Andras Knopp appeared in another suspicious matter. A former minister of culture in Communist Hungary, Knopp was the CEO of the Eural Trans Gas company. Yuriy Boyko, Firtash’s partner, made the company a supplier of all gas from Turkmenistan to Ukraine, enabling “in the air” profits of hundreds of millions of dollars. Legal support for the creation of Eural Trans Gas was provided by the “lawyer” for the crime boss Semyon Mogylevych, who “gave cover” to Firtash.
In addition to Firtash and Knopp, also included in the case is a subordinate of Firtash, the Ukrainian Suren Gevorgyan, who traveled to Seattle and Cincinnati for meetings with “Company A” regarding the supply of titanium products. Gevorgyan personally signed documents designed to hide the payment of bribes to the Indians and also oversaw the full amount of revenues.
Two Indians and a citizen of Sri Lanka ensured the necessary decisions by the Indian authorities as well as the receipt of the money.Ramachandra Rao
Another person accused is Gajendra Lal. He had residency rights in the US and lived in Winston-Salem, North Carolina. Lal advised on the payment of bribes and the falsification of documents. He also regularly flew to India for meetings with Firtash, Knopp and others to advance the project. Additionally, Lal met with an unidentified “Mr.C” who demanded extra money for bribes on behalf of the Indian officials. Mr. Ramachandra Rao, who worked as advisor to Minister Reddy and is currently a member of the state parliament in India, is identified by investigators as the person who demanded the bribes.
Another defendant Periyasamy Sunderalingam met with Rao to determine the overall size of the bribes and also looked after the transmission of kickbacks. These six, including Firtash, “colluded” to organize the Indian project according to “racketeering conspiracy”, as that term is defined by American law.
This conspiracy included 57 transfers in the amount of US $10,597,000. The first transaction in the amount of US $200,000 was made from a “Greensboro Corporation” to the M/S Yash Fashion LLC company on April 2006. Then Firtash used the accounts opened in the name of the nominal (meaning fictitious) companies in order to receive funds to be distributed to Indian officials as bribes.
Many people wonder how to tie this story of bribes to American jurisdiction. First, the buyer of titanium sponges was supposed to be this mysterious “Company A” from Chicago — obviously Boeing. Second, one of the members of the criminal gang was a resident of North Carolina. The additional justification is even more interesting.
Americans based their right to bring Firtash and his accomplices to justice on the argument that the conspiracy participants carried out their criminal activity with the help of e-mail accounts located on servers based in the U.S. They discussed their plot through electronic correspondence that passed through American servers. Another thing that binds Firtash and accomplices to the jurisdiction in Chicago is their use of mobile phones belonging to the Chicago operator AT&T.
According to the indictment of Firtash, the assets he received as a result of the Indian deal are not the only assets subject to confiscation by the United States. Even property that allowed him to influence the Indian business would be subject to confiscation as well.
For this reason, the U.S. is demanding to deprive Firtash of all the shares that ensured his participation in Group DF Limited, and also all (!) assets of Group DF Limited, together with its subsidiaries.
The indictment contains a list of almost 200 companies and accounts itemized on 11 pages that would be seized from Firtash if he is found guilty. During the investigation this property is to be frozen — it may not be sold, decreased in value, even evaluated for sale. In addition, the indictment demands the confiscation from Firtash the sums already paid in bribes – US $10,597,000.
In fact, the conviction of Firtash in America and the required confiscation of property would mean total ruin for him and also serious problems for his shady partners, including the Russian oligarch Arkady Rotenberg, the former head to the presidential administration Serhiy Lyovochkin and the former energy minister Yuriy Boyko. After all, the Austrian companies Centragas Holding and Ostchem Holding, which own Firtash’s chemical plants and banking assets in Ukraine, are marked for confiscation.
Furthermore, if defeated in court for breaking the law, Firtash faces imprisonment on five counts. Each count carries 5 to 20 years to run consecutively. So, in theory, Firtash faces 55 years in prison.
But in reality, the U.S. has Sentencing Guidelines, which provide detailed instructions for determining sentences. When simplified, a sentence is equal to the longest of the specified terms. Therefore, if Firtash refuses to make a deal with the prosecution and to plead guilty, he could get around 20-25 years in American prison.
In addition to the scandal in Ukraine, the case has caused a sensation in India. The country has an extradition treaty with the U.S. and the deputy Rao could be handed over to justice in Chicago.
“This accusation against the participation of an Indian legislator is without precedent. It’s a slap for India, with its terrible reputation for corruption. But these charges also open a can of worms as to whether an Indian deputy can be convicted in an American court for acts of bribery that allegedly took place in India,” writes the Times of India.
Ukrainska Pravda asked the American lawyer Gene Burda, who is experienced in representing Ukrainian clients in American courts, to comment on the situation in which Firtash finds himself.
” In the Indian case the expected punishment is 5 to 20 years for each of the five violations. Also expected is the confiscation of all property used to influence the criminal organization. In this case, according to the U.S. government, this property consists of the entire Group DF. The indictment states that it was specifically Group DF that allowed Firtash to have the necessary influence to commit criminal acts. On this basis, the government asks for the confiscation of the entire Group DF.
In addition, confiscation goes into effect from the moment the illegal act was committed, and the government has the right to cancel all agreements with the property of Group DF, starting with the day that the confiscation claim was announced — that is starting in April 2014. So now everyone who seeks to buy the assets of Group DF risks coming face to face with the U.S. government regarding ownership rights.
Naturally, there is a practical side to this issue. To what extent is such confiscation realistic when the property is located outside the U.S.? I would advise everybody to pay attention first of all to the Lazarenko case, whose assets are frozen and are still being contested in the U.S. and offshore. The process is usually long, but fully functional in many countries. Of course, there will be countries such as Russia or Ukraine where such confiscation would be difficult to implement. However, stopping cash flows and bank accounts is fairly simple.”
Meanwhile, Firtash probably has not yet realized the full extent of his problems. He is looking for international lawyers and lobbyists to avoid extradition to the U.S. In his public defense, Firtash is preparing to take advantage of a least several public images. For example, for purposes of his public reputation, he wants to be seen as a philanthropist and a fighter against the Yanukovych regime. In the meantime, in his televised address from Vienna, the oligarch calls himself the victim of a worldwide conspiracy.
In fact, if Firtash wants to remain free and keep some of his assets, he would do well to take completely different actions –to look for American lawyers who are experienced in making deals with the prosecution. He should not irritate the FBI with claims of political persecution but rather consider what kind of information would be of interest to the U.S. government.
For example, American prosecution might leave Firtash alone, after he serves a much lesser sentence, in exchange for a sincere confession on his activities in India, as well as those with Yanukovych, Mogilevich and the Russian leadership.
The main thing is for Firtash to understand his real predicament in time. If he reaches a deal with the prosecution, Firtash has to be prepared to forego a portion of his money, which will be confiscated by the Americans. Maybe he will lose a few friends and will be unable to influence politics. But the U.S. would not leave Firtash with a zero balance in his account either.
Meanwhile, Firtash is confidently repeating the mistakes of Pavlo Lazarenko, who for several years could not understand that it was all over for him. So the “American saga” of Dmytro Firtash is just beginning.
Translated by Anna Mostovych