Zelensky’s anti-corruption squad swoops on Ukrainian oligarchy

The Hawker 800 corporate jet carrying Volodymyr Yatsenko to Vienna last month was about to leave Ukrainian airspace when it turned round and flew to Kyiv.

Minutes earlier, anti-corruption investigators had filed preliminary charges against Yatsenko, the former deputy chief executive of Ukraine’s largest lender, PrivatBank, in connection with a bank fraud that cost taxpayers billions of dollars. Yatsenko was attempting to flee the country, prosecutors said, on a jet owned by Igor Kolomoisky, the oligarch.

Yatsenko was arrested as soon as he landed. Two other former top bank executives were also charged — issued with a preliminary notice of suspicion, under the Ukrainian system — in connection with what was one of the biggest bank frauds in recent European history. Yatsenko, who has been released on bail, could not be reached for a comment.

Five years ago, regulators found a $5.5bn hole in PrivatBank’s balance sheet, allegedly stemming from fraudulent and related-party lending. The systemically important institution had to be nationalised and recapitalised with state funds amounting to 6 per cent of Ukrainian gross domestic product. Before it was rescued, the bank was partly owned by Kolomoisky.

The swoop against Yatsenko, led by the specialised anti-corruption agency NABU, was the first important move by Ukrainian authorities to go after the perpetrators of the alleged fraud.

For anti-graft campaigners and Ukraine’s western allies and donors, it has been a long time coming.

Volodymyr Zelensky, the former television comedian elected president in 2019, has been under intense pressure from the US, EU and IMF to follow through on his promise to sweep away corruption and the oligarchic system. But his relationship with Kolomoisky has been ambiguous.

Zelensky became a star on the oligarch’s television channel and enjoyed his support during the presidential campaign. Kolomoisky’s lawyer served as Zelensky’s chief of staff early in his presidency. Parliament passed a law preventing the bank’s former owners from reclaiming ownership through litigation, but the president himself sent mixed messages on whether the nationalisation of PrivatBank was correct.

“These cases went forward only because of my activity,” Iryna Venediktova, Ukraine’s chief prosecutor, told the Financial Times. She explained in detail the need to insert herself directly into the matter after subordinates dragged their feet on approving the notices.

“Why is this an important case? Because huge amounts of money were in principle taken from the people of Ukraine . . . [we] need to return it.”

The IMF has frozen a $5bn financial lifeline to Kyiv pending further action in the case. Meanwhile the Biden administration is leaning on Zelensky’s government to prosecute those responsible for the fraud. This month the US imposed a visa ban on Kolomoisky and his family over his “involvement in significant corruption” from 2014 to 2015. Analysts and formal Ukrainian officials said the US sanctions were a strong signal to Kyiv to hold PrivatBank’s former owners and officials to account.

“We support this [US sanctions] decision and we are working to return the money . . . to return justice to Ukraine,” Zelensky said in a recent address to the nation.

Ten days after the US move, the chief prosecutor filed preliminary charges against three more former top managers at the bank. Authorities say the two cases could account for about $319m of lost assets. 

“Certainly, the EU, US and IMF want investigations into corruption . . . to see that the country is able to combat corruption,” Venediktova said. “And we need to demonstrate this.”

Kolomoisky and his fellow billionaire partner Gennadiy Bogolyubov did not respond to interview requests. They have previously denied wrongdoing and are still seeking to overturn the nationalisation through domestic courts. PrivatBank meanwhile is trying to recover billions of dollars in assets from the two men through court cases in London and Delaware. US authorities are probing commercial property purchases made by the two businessmen in various states.

But Zelensky’s endorsement of US sanctions against Kolomoisky and other recent actions have raised hopes that he is preparing to get serious about pursuing the case.

“In the eyes of the general public and Ukraine’s international partners the fight for the future of PrivatBank continues to be a litmus test for the future of Ukraine,” said Sharon Easky, chair of the now state-owned and profitably run bank.

“The most recent actions against [the bank’s former management] sends a very strong and positive signal to society and Ukraine’s international partners that those who caused the unprecedented losses and failure of PrivatBank will be held accountable,” she added.

Venediktova said that while “everyone wants these all-powerful Kolomoisky and Bogolyubov in these cases”, the NABU investigation had not resulted in any charges against them.

Ukraine’s oligarchs have allies within the law enforcement system, which is still regarded as riddled with corruption. NABU said Yatsenko was tipped off about imminent charges against him, “which is why he tried to leave Ukraine”. Venediktova said her office was conducting an internal review, adding that a “very small circle of people” knew of the plans.

Tetiana Shevchuk, a lawyer at Kyiv-based anti-corruption watchdog Antac, said it was “still too early to say whether Zelensky’s move against Kolomoisky is genuine”.

“It does not look like pure imitation either,” she added.

Oleksandr Danylyuk, a former finance minister who oversaw PrivatBank’s nationalisation, said Zelensky was torn over what to do about his powerful former ally.

“Kolomoisky basically helped Zelensky to come to power but now Zelensky is willing to trade him for both public support and backing of the US,” he said. “This is something that Zelensky takes very hard. He has no choice.”