Pavlo Lazarenko reportedly stole millions from Ukraine?€™s state coffers, but a fondness for fine Californian real estate may have proved to be his undoing.
Pavlo Lazarenko might never have made headlines had he not had a weak spot for flash property. The former Ukrainian prime minister and presidential candidate skipped his native country in February 1999, fleeing an embezzlement charge.
His colleagues in parliament ?€” where he headed the Hromada faction ?€” had demolished his presidential hopes by voting that same February to strip him of his immunity from prosecution, a privilege given all Ukrainian parliamentary deputies. And they gave a major boost to incumbent President Leonid Kuchma, who had sought at all costs to keep Lazarenko and his money out of the running.
After a brief stay in Greece (to recuperate from a stress-induced heart attack, he said), Lazarenko landed in the United States, where he sought political asylum. It was a shrewd move, as it spared him immediate extradition to Switzerland to face money-laundering charges. But U.S. newspapers were little interested in the asset-stripping schemes that reportedly netted Lazarenko hundreds of millions of dollars. That was just more evidence of staggering corruption in the former Soviet Union, by then an almost routine story.
No, reporters were more interested in the house. While Lazarenko fought extradition, his family sat out the proceeding in a swank Marin County, California, mansion. A brochure for the property ?€” which boasted five swimming pools, nine bathrooms, two helicopter pads and a 189-square-meter master bedroom ?€” made it into the hands of reporters. Better yet, there was a celebrity connection. The estate, bought for nearly $7 million in cash, had reportedly been Eddie Murphy?€™s home.
But Lazarenko?€™s bid for a luxurious exile hinged on convincing the U.S. authorities that he would face serious political persecution should he be deported to Ukraine. And he, as a one-time presidential contender in his own country, understood that, with an election year on in the United States, it is easy to find friends.
Presidential Politics
What ensued was a curious footnote to the 2000 presidential elections. Republicans, eager to tar Vice President Al Gore with complicity in ?€” or at least willful ignorance of ?€” post-Soviet corruption, said the administration of President Bill Clinton had turned a blind eye to the rapacity of their counterparts in Russia and Ukraine.
Republican presidential contender George W. Bush played precisely that card during the presidential debates, when he alleged that money from International Monetary Fund loans "ended up in [former Prime Minister] Viktor Chernomyrdin?€™s pockets."
Bush was wrong ?€” in fact if not in substance. Chernomyrdin was never charged with laundering IMF funds, but IMF money certainly helped subsidize massive capital exodus by Russia?€™s oligarchs, a class to which Chernomyrdin belonged.
The Republicans rightly smelled blood. And well before the debates began, Lazarenko was happy to oblige them on the corruption issue.
From his cell in California, Lazarenko came forward with the allegation that Ukraine ?€” much like Russia ?€” had mishandled its hard-currency reserves in violation of arrangements with the IMF. According to Lazarenko, $613 million in IMF funds were diverted from the Ukrainian Central Bank in December 1997 and invested through offshore subsidiaries into speculative government bonds, reaping interest rates of up to 66 percent.
The Financial Times broke the story in January. Rumors had circulated for months about the possibility that former Ukrainian Central Bank head and current Prime Minister Viktor Yushchenko ?€” who enjoyed the wide approbation of Western advisers ?€” had been involved. A parliamentary investigation of the matter, however, remained sealed in Kiev.
Enter Lazarenko. After he aired the allegations, the Financial Times reported that Republican congressmen Dan Burton of Indiana and Curt Weldon of Pennsylvania had discussed the possibility of Lazarenko?€™s testimony before the U.S. Congress.
Lazarenko never took the witness chair on Capitol Hill. But the scandal shook what little confidence remained in Ukraine. And it caused the country more than embarrassment: The IMF declined to resume lending, a heavy blow to the state?€™s finances.
Lazarenko had fronted the information in what looked to be an attempt to shore up his bid to stay in the States. But did he aid his cause? He had, after all, implicated himself in a massive scam: The misallocation of the IMF money took place on his watch.
It seems to have been a calculated risk. Lazarenko was gambling that he could make a case that the Kuchma administration had it in for him if he returned to Ukraine. In Lazarenko?€™s words, he faced "physical extermination" if he went back.
He had a point. Lazarenko had indeed contributed mightily to Ukraine?€™s parlous state. But it also could not have happened without complicity at the top. Leonid Kuchma ?€” who appointed him prime minister ?€” had a strong interest in shutting him up.
Shortly before he made his first appearance before a U.S. court over his extradition, the newsroom of the Kyiv Post ?€” where I worked at the time as a reporter ?€” received a letter from one of Lazarenko?€™s lawyers. It offered an all-expense-paid jaunt to San Francisco to testify that Lazarenko would be tortured in jail should he return. No one took the offer. But the persecution defense was not without merit. When I told a Ukrainian friend about the letter, she said, "They should have sent me. I?€™d tell them that I?€™d throttle him myself."
If U.S. prosecutors were to look closely at the parliamentary proceeding that sped his exit from Ukraine, they would have noticed that he faced a ?€” relatively ?€” piddling charge. Prior to the parliamentary vote, Ukraine?€™s prosecutor general had accused him of embezzling 5 million hryvnya ($2.7 million at the time) from state coffers to fix up his dacha outside Kiev.
Par for the course as far as Ukrainian officialdom goes. Misdirecting state funds is the rule, rather than the exception, in Ukraine, and when it comes to dacha repair, it is still not uncommon to see army conscripts bartered off as cheap construction labor for local bigwigs.
The embezzlement charge had a more level motive: It allowed Kuchma to eliminate a troublesome rival for the presidency without airing troublesome details about the corruption that pervaded his administration.
And it was Lazarenko?€™s lavish tastes that tripped him up. Had he not had such strong competition in the home-redecorating category, things might have happened differently.
Keeping Up With the Kovals
I met Bohdan Mysko in 1999. The Aspen, Colorado-based oil millionaire had come back to his ancestral land to dole out advice and aid, chiefly as an adviser to former President Leonid Kravchuk.
The phenomenon of the "repat" ?€” first- or second-generation emigrants who have flocked to the former Soviet bloc in search of fame, fortune or political influence ?€” is worthy of a separate discussion. Some, such as Vaira Vike-Freiberga, the current president of Latvia, met with success. Most, however, found that they barely shared a mother tongue; many went home with their bank accounts considerably lightened.
Word had it in the Ukrainian diaspora that Mysko also planned to go great guns as an investor. Mysko denied that he had any business interests in Ukraine, but he had made one major investment: refurbishing a mansion that once belonged to Ukrainian Party boss Volodymyr Shcherbytsky.
Mysko envisioned the place as a sort of clubhouse for Ukraine?€™s ruling clique. The place would be "like Camp David," he told me. A comparison to Hugh Heffner?€™s Playboy mansion would have been more appropriate.
The place had a lavish rococo interior, richly embellished with expensive smut. Brass nymphs were splayed atop the balustrade. By the door, Mysko had a gun case with beautifully engraved side-by-side shotguns. A surround-sound cinema with reclining seats in the den. And the estate?€™s bunker ?€” which once was supposed to shield Ukraine?€™s Party faithful from NATO bombs ?€” had been turned into a wine cellar. With a huge brass penis for door handles.
It also had a humble touch. Mysko, an up-by-the-bootstraps sort, had made his fortune in South American oil business. But he never forgot his Galician roots: The garden had a model thatched-roof cottage, an idealized take on the home that Mysko fled during the war.
But Mysko had a problem. He had done a bang-up job on the estate, for sure, but now some of the Ukrainian compradors had cast an envious eye on the place ?€” Lazarenko included.
Problem was, no one had clear title on the place. Mysko may have refurbished the building, but the land beneath was a different question. Land ownership has yet to be solidly established in Ukraine; Mysko may have paid for the place, but it could be confiscated on a whim.
Later on, Mysko showed me a before-and-after video of the refurbishment job. I was treated to a video tour of the house, narrated by Houston interior decorator William Stubbs. You could hear him frown as he sized up the Shcherbytskys?€™ sorry bathroom fixtures. "That, I think, is supposed to be a shower," he said, framing a disapproving shot of a utilitarian showerhead that hung over a drainage floor.
Mysko chimed in with his own narration. "Fucking commies," he hooted. "Look at that, no taste at all."
It was true. Shcherbytsky may have once been the most powerful man in Ukraine, but he inhabited a tatty old place. The billiard table was shredded, the furniture Soviet-modular and the place a distinctly down-at-heel look.
Mysko was proud. The place had landed a spot in Architectural Digest ?€” doubtless the first place in Ukraine to receive the honor. "They?€™d visit this place and they couldn?€™t believe their eyes," ?€” they, presumably, meaning the government big shots he had hosted at the place. "They could never do it like this, you know why?"
I shrugged no.
"Because they got no fucking taste."
At least one man had tried to keep up with Mysko: Pavlo Lazarenko. Lazarenko had for a time occupied a neighboring plot. According to Mysko, Lazarenko got the idea for the lavish landscaping job from him.
Pointing to a sculpted pond ?€” next to a bocce ball court ?€” Mysko said that Lazarenko had tried to outdo him with his own landscaping job. That refurbishment would figure in the prosecutor?€™s charges.
Millions Over Marin
So real estate envy, it seems, may have played a role in Lazarenko?€™s downfall in Ukraine. But once in exile, why should he take more risk? After all, a $7 million mansion in California is no place to lie low. Lazarenko?€™s putative wealth was supposed to have reach upward of a billion; he had the cash at his disposal to retire where journalists or prosecutors might not ask so many prying questions about the sources of his wealth.
Lazarenko?€™s motives can only be guessed at. But what seems clear is that such chutzpah is in his character. In late 1998, after returning from arrest in Switzerland ?€” he had been carrying a Panamanian passport and was detained on a money-laundering charge ?€” he made a triumphant return to Ukraine. Rather quixotically, he vowed to pursue his campaign for president.
For someone whose domestic political reputation was forever tarnished, he seemed to have returned to the scene with confidence. The only giveaway was a slight tic: Lazarenko blinked furiously, especially when forcing a telegenic smile.
At a packed press conference, he protested his innocence, allowing only that "Lazarenko is no angel."
But he still held parliamentary immunity from prosecution at the time. Worse still for the administration of President Kuchma, he had promised to name names of corrupt officials. But Lazarenko never came forward ?€” at least not in Ukraine.
The Kuchma administration, which was readying for a fall 1999 election campaign, did not want details about corruption leaked to the press that might implicate members of the presidential entourage ?€” or the president himself.
After all, the Ukrainian administration had to keep a lid on a similar scandal, involving Oleksandr Volkov, one of the president?€™s closest advisers. A Belgian judge in 1997 froze $3 million of Volkov?€™s money on suspicion of money laundering, but Volkov never faced legal repercussions in Ukraine. In fact, Belgian investigators complained of "very high level" obstruction as they pursued their case.
And Lazarenko and Kuchma went way back. They both came from the eastern industrial center of Dnipropetrovsk, graduating from the same ranks of Communist Party functionaries. In fact, the country?€™s ruling clique came to be known as the "Dnipro-petrovsk clan." And many Ukrainians privately believed that the Kuchma-Lazarenko feud was really a dispute among thieves.
The property abuse charge allowed Kuchma?€™s prosecutors to turn public opinion ?€” and the parliament ?€” against Lazarenko. And in an election year, it insured that not too many details would tarnish the president. Meanwhile, the Swiss were busy preparing a case against Lazarenko at the urging of the Ukrainian government, which bombarded Swiss federal prosecutors with incriminating materials.
In June, a Swiss court convicted Lazarenko in absentia of money laundering, giving him an 18-month suspended sentence and confiscating nearly $6.6 million from his Swiss bank accounts.
Meanwhile, in the United States, Lazarenko faces up to 20 years for conspiracy and money laundering and 10 years for individual cases of illegal property transfer.
A San Francisco federal court has rescheduled a hearing on the Lazarenko case for Nov. 28.
Pavlo Lazarenko might never have made headlines had he not had a weak spot for flash property. The former Ukrainian prime minister and presidential candidate skipped his native country in February 1999, fleeing an embezzlement charge.
His colleagues in parliament ?€” where he headed the Hromada faction ?€” had demolished his presidential hopes by voting that same February to strip him of his immunity from prosecution, a privilege given all Ukrainian parliamentary deputies. And they gave a major boost to incumbent President Leonid Kuchma, who had sought at all costs to keep Lazarenko and his money out of the running.
After a brief stay in Greece (to recuperate from a stress-induced heart attack, he said), Lazarenko landed in the United States, where he sought political asylum. It was a shrewd move, as it spared him immediate extradition to Switzerland to face money-laundering charges. But U.S. newspapers were little interested in the asset-stripping schemes that reportedly netted Lazarenko hundreds of millions of dollars. That was just more evidence of staggering corruption in the former Soviet Union, by then an almost routine story.
No, reporters were more interested in the house. While Lazarenko fought extradition, his family sat out the proceeding in a swank Marin County, California, mansion. A brochure for the property ?€” which boasted five swimming pools, nine bathrooms, two helicopter pads and a 189-square-meter master bedroom ?€” made it into the hands of reporters. Better yet, there was a celebrity connection. The estate, bought for nearly $7 million in cash, had reportedly been Eddie Murphy?€™s home.
But Lazarenko?€™s bid for a luxurious exile hinged on convincing the U.S. authorities that he would face serious political persecution should he be deported to Ukraine. And he, as a one-time presidential contender in his own country, understood that, with an election year on in the United States, it is easy to find friends.
Presidential Politics
What ensued was a curious footnote to the 2000 presidential elections. Republicans, eager to tar Vice President Al Gore with complicity in ?€” or at least willful ignorance of ?€” post-Soviet corruption, said the administration of President Bill Clinton had turned a blind eye to the rapacity of their counterparts in Russia and Ukraine.
Republican presidential contender George W. Bush played precisely that card during the presidential debates, when he alleged that money from International Monetary Fund loans "ended up in [former Prime Minister] Viktor Chernomyrdin?€™s pockets."
Bush was wrong ?€” in fact if not in substance. Chernomyrdin was never charged with laundering IMF funds, but IMF money certainly helped subsidize massive capital exodus by Russia?€™s oligarchs, a class to which Chernomyrdin belonged.
The Republicans rightly smelled blood. And well before the debates began, Lazarenko was happy to oblige them on the corruption issue.
From his cell in California, Lazarenko came forward with the allegation that Ukraine ?€” much like Russia ?€” had mishandled its hard-currency reserves in violation of arrangements with the IMF. According to Lazarenko, $613 million in IMF funds were diverted from the Ukrainian Central Bank in December 1997 and invested through offshore subsidiaries into speculative government bonds, reaping interest rates of up to 66 percent.
The Financial Times broke the story in January. Rumors had circulated for months about the possibility that former Ukrainian Central Bank head and current Prime Minister Viktor Yushchenko ?€” who enjoyed the wide approbation of Western advisers ?€” had been involved. A parliamentary investigation of the matter, however, remained sealed in Kiev.
Enter Lazarenko. After he aired the allegations, the Financial Times reported that Republican congressmen Dan Burton of Indiana and Curt Weldon of Pennsylvania had discussed the possibility of Lazarenko?€™s testimony before the U.S. Congress.
Lazarenko never took the witness chair on Capitol Hill. But the scandal shook what little confidence remained in Ukraine. And it caused the country more than embarrassment: The IMF declined to resume lending, a heavy blow to the state?€™s finances.
Lazarenko had fronted the information in what looked to be an attempt to shore up his bid to stay in the States. But did he aid his cause? He had, after all, implicated himself in a massive scam: The misallocation of the IMF money took place on his watch.
It seems to have been a calculated risk. Lazarenko was gambling that he could make a case that the Kuchma administration had it in for him if he returned to Ukraine. In Lazarenko?€™s words, he faced "physical extermination" if he went back.
He had a point. Lazarenko had indeed contributed mightily to Ukraine?€™s parlous state. But it also could not have happened without complicity at the top. Leonid Kuchma ?€” who appointed him prime minister ?€” had a strong interest in shutting him up.
Shortly before he made his first appearance before a U.S. court over his extradition, the newsroom of the Kyiv Post ?€” where I worked at the time as a reporter ?€” received a letter from one of Lazarenko?€™s lawyers. It offered an all-expense-paid jaunt to San Francisco to testify that Lazarenko would be tortured in jail should he return. No one took the offer. But the persecution defense was not without merit. When I told a Ukrainian friend about the letter, she said, "They should have sent me. I?€™d tell them that I?€™d throttle him myself."
If U.S. prosecutors were to look closely at the parliamentary proceeding that sped his exit from Ukraine, they would have noticed that he faced a ?€” relatively ?€” piddling charge. Prior to the parliamentary vote, Ukraine?€™s prosecutor general had accused him of embezzling 5 million hryvnya ($2.7 million at the time) from state coffers to fix up his dacha outside Kiev.
Par for the course as far as Ukrainian officialdom goes. Misdirecting state funds is the rule, rather than the exception, in Ukraine, and when it comes to dacha repair, it is still not uncommon to see army conscripts bartered off as cheap construction labor for local bigwigs.
The embezzlement charge had a more level motive: It allowed Kuchma to eliminate a troublesome rival for the presidency without airing troublesome details about the corruption that pervaded his administration.
And it was Lazarenko?€™s lavish tastes that tripped him up. Had he not had such strong competition in the home-redecorating category, things might have happened differently.
Keeping Up With the Kovals
I met Bohdan Mysko in 1999. The Aspen, Colorado-based oil millionaire had come back to his ancestral land to dole out advice and aid, chiefly as an adviser to former President Leonid Kravchuk.
The phenomenon of the "repat" ?€” first- or second-generation emigrants who have flocked to the former Soviet bloc in search of fame, fortune or political influence ?€” is worthy of a separate discussion. Some, such as Vaira Vike-Freiberga, the current president of Latvia, met with success. Most, however, found that they barely shared a mother tongue; many went home with their bank accounts considerably lightened.
Word had it in the Ukrainian diaspora that Mysko also planned to go great guns as an investor. Mysko denied that he had any business interests in Ukraine, but he had made one major investment: refurbishing a mansion that once belonged to Ukrainian Party boss Volodymyr Shcherbytsky.
Mysko envisioned the place as a sort of clubhouse for Ukraine?€™s ruling clique. The place would be "like Camp David," he told me. A comparison to Hugh Heffner?€™s Playboy mansion would have been more appropriate.
The place had a lavish rococo interior, richly embellished with expensive smut. Brass nymphs were splayed atop the balustrade. By the door, Mysko had a gun case with beautifully engraved side-by-side shotguns. A surround-sound cinema with reclining seats in the den. And the estate?€™s bunker ?€” which once was supposed to shield Ukraine?€™s Party faithful from NATO bombs ?€” had been turned into a wine cellar. With a huge brass penis for door handles.
It also had a humble touch. Mysko, an up-by-the-bootstraps sort, had made his fortune in South American oil business. But he never forgot his Galician roots: The garden had a model thatched-roof cottage, an idealized take on the home that Mysko fled during the war.
But Mysko had a problem. He had done a bang-up job on the estate, for sure, but now some of the Ukrainian compradors had cast an envious eye on the place ?€” Lazarenko included.
Problem was, no one had clear title on the place. Mysko may have refurbished the building, but the land beneath was a different question. Land ownership has yet to be solidly established in Ukraine; Mysko may have paid for the place, but it could be confiscated on a whim.
Later on, Mysko showed me a before-and-after video of the refurbishment job. I was treated to a video tour of the house, narrated by Houston interior decorator William Stubbs. You could hear him frown as he sized up the Shcherbytskys?€™ sorry bathroom fixtures. "That, I think, is supposed to be a shower," he said, framing a disapproving shot of a utilitarian showerhead that hung over a drainage floor.
Mysko chimed in with his own narration. "Fucking commies," he hooted. "Look at that, no taste at all."
It was true. Shcherbytsky may have once been the most powerful man in Ukraine, but he inhabited a tatty old place. The billiard table was shredded, the furniture Soviet-modular and the place a distinctly down-at-heel look.
Mysko was proud. The place had landed a spot in Architectural Digest ?€” doubtless the first place in Ukraine to receive the honor. "They?€™d visit this place and they couldn?€™t believe their eyes," ?€” they, presumably, meaning the government big shots he had hosted at the place. "They could never do it like this, you know why?"
I shrugged no.
"Because they got no fucking taste."
At least one man had tried to keep up with Mysko: Pavlo Lazarenko. Lazarenko had for a time occupied a neighboring plot. According to Mysko, Lazarenko got the idea for the lavish landscaping job from him.
Pointing to a sculpted pond ?€” next to a bocce ball court ?€” Mysko said that Lazarenko had tried to outdo him with his own landscaping job. That refurbishment would figure in the prosecutor?€™s charges.
Millions Over Marin
So real estate envy, it seems, may have played a role in Lazarenko?€™s downfall in Ukraine. But once in exile, why should he take more risk? After all, a $7 million mansion in California is no place to lie low. Lazarenko?€™s putative wealth was supposed to have reach upward of a billion; he had the cash at his disposal to retire where journalists or prosecutors might not ask so many prying questions about the sources of his wealth.
Lazarenko?€™s motives can only be guessed at. But what seems clear is that such chutzpah is in his character. In late 1998, after returning from arrest in Switzerland ?€” he had been carrying a Panamanian passport and was detained on a money-laundering charge ?€” he made a triumphant return to Ukraine. Rather quixotically, he vowed to pursue his campaign for president.
For someone whose domestic political reputation was forever tarnished, he seemed to have returned to the scene with confidence. The only giveaway was a slight tic: Lazarenko blinked furiously, especially when forcing a telegenic smile.
At a packed press conference, he protested his innocence, allowing only that "Lazarenko is no angel."
But he still held parliamentary immunity from prosecution at the time. Worse still for the administration of President Kuchma, he had promised to name names of corrupt officials. But Lazarenko never came forward ?€” at least not in Ukraine.
The Kuchma administration, which was readying for a fall 1999 election campaign, did not want details about corruption leaked to the press that might implicate members of the presidential entourage ?€” or the president himself.
After all, the Ukrainian administration had to keep a lid on a similar scandal, involving Oleksandr Volkov, one of the president?€™s closest advisers. A Belgian judge in 1997 froze $3 million of Volkov?€™s money on suspicion of money laundering, but Volkov never faced legal repercussions in Ukraine. In fact, Belgian investigators complained of "very high level" obstruction as they pursued their case.
And Lazarenko and Kuchma went way back. They both came from the eastern industrial center of Dnipropetrovsk, graduating from the same ranks of Communist Party functionaries. In fact, the country?€™s ruling clique came to be known as the "Dnipro-petrovsk clan." And many Ukrainians privately believed that the Kuchma-Lazarenko feud was really a dispute among thieves.
The property abuse charge allowed Kuchma?€™s prosecutors to turn public opinion ?€” and the parliament ?€” against Lazarenko. And in an election year, it insured that not too many details would tarnish the president. Meanwhile, the Swiss were busy preparing a case against Lazarenko at the urging of the Ukrainian government, which bombarded Swiss federal prosecutors with incriminating materials.
In June, a Swiss court convicted Lazarenko in absentia of money laundering, giving him an 18-month suspended sentence and confiscating nearly $6.6 million from his Swiss bank accounts.
Meanwhile, in the United States, Lazarenko faces up to 20 years for conspiracy and money laundering and 10 years for individual cases of illegal property transfer.
A San Francisco federal court has rescheduled a hearing on the Lazarenko case for Nov. 28.
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