Sanctions Loosen As Assets Of Yanukovych Allies Elude Ukraine's Grasp

KYIV -- For a year after the demise of his boss, former Ukrainian President Viktor Yanukovych's deputy chief of staff was barred from the European Union, part of the punishment for the ousted leader and senior allies suspected of stealing public funds before he was brought down by street protests.

Now, Andriy Portnov is not only sanctions-free, he is suing the European Commission for punishing him in the first place -- and warning that Ukraine's current, pro-Western leaders are the ones who should be worried about prosecution.

The turnabout is a glaring example of one of the many challenges that Ukraine's leaders are facing, and finding it hard to surmount, after coming to power in the wake of the Euromaidan protests that sent Yanukovych packing for Russia in February 2014.

Portnov’s story is a case study in Ukraine's uphill struggle to prosecute key figures from the old regime and reclaim their assets, including billions of dollars the new government says has been squirreled away abroad.

The head of the department for special investigations at the Ukrainian Prosecutor-General's Office, Serhiy Horbatyuk, said that his agency uncovered the "appropriation of funds" by Portnov worth 140,000 hryvnia (about $7,000).

That is just a tiny fraction of a tantalizing bounty. The prosecutor’s office says it has identified some 300 billion hryvnia ($15 billion) worth of assets misappropriated by 14 former senior officials -- less than $30 million of it in Ukraine, with the rest scattered around nations including Austria, Switzerland, Cyprus, Latvia, the United Kingdom, Liechtenstein, and Italy.

Of that total, the prosecutor's office says Ukrainian authorities have managed to freeze 5.5 billion hryvnia (about $275 million). Prime Minister Arseniy Yatsenyuk said on May 12 that $1.4 billion in Yanukovych assets has been frozen, and there was no immediate explanation for the discrepancy.

Whatever the figure, though, freezing the assets does little good unless the authorities can prove they were acquired through corrupt means, reclaim them, and return them to state coffers drained by political turmoil and the deadly conflict with Russian-backed rebels in eastern Ukraine.

The amount confiscated so far is a minuscule 5,014 hryvnia -- less than $250.

"The arrest [of assets] looks beautiful for the media, for support, and as a public relations stunt, but has no correlation with the real result," said Vitaliy Shabunin, head of the Anticorruption Action Center, a nongovernmental organization that specializes in anticorruption investigations and asset tracing.

Shabunin charged that incompetence and lack of coordination between the agencies responsible are hampering government efforts to turn suspicions into successful prosecutions.

Under Ukrainian law, assets can only be confiscated if an official has been convicted of an economic crime.

"As of today, not a single court has ruled to confiscate property [abroad] or to send a request abroad to return it," said Deputy Prosecutor-General Vitaliy Kasko.

Such decisions may not come for a long time, if ever. Prosecutors have only initiated cases against a few of the 18 former officials who remain under EU sanctions.

Shabunin believes that their failure to act has allowed many former officials of the Yanukovych era to transfer their assets to third parties, potentially putting them out of reach for good.

Some of the assets are hiding in plain sight. A case in point is Mezhyhirya -- the lavishly outfitted Yanukovych residence outside Kyiv that was swarmed by stunned Ukrainians after he fled, becoming a symbol of both his own over-the-top tastes and the corruption that critics say marked his rule.

Serhiy Klyuyev, a parliament member who formerly represented Yanukovych's Party of Regions, was the proxy owner of the estate and was sanctioned by the European Union in March 2014, freezing any assets he held in EU countries.

But while the land Mezhyhirya stands on has been returned to state ownership, the buildings themselves -- like Yanukovych's other luxury homes in Ukraine -- have not. Meanwhile, Klyuyev has sold his shares in the proxy company, Tantalit, to the company’s lawyer and the firm itself.

Moreover, the European Union may lift its sanctions against Klyuyev next month, although the latest move by Ukrainian prosecutors could make that less likely: This week, Prosecutor-General Viktor Shokin requested that parliament lift his immunity from prosecution, accusing him of fraud, misappropriation of property, and abuse of power, and saying he should be imprisoned for 10 years. Klyuyev denies any wrongdoing.

In March, when the EU lifted its sanctions against Portnov and three other people, it extended the measures against another four -- including Klyuyev -- until June.

It left the sanctions against Yanukovych, former Prime Minister Mykola Azarov, and 12 others in place until December.

Portnov has dismissed the accusations against him as laughable and claims the post-Yanukovych authorities falsified documents in order to get him on the sanctions list.

The first hearing in his lawsuit over the sanctions is scheduled for May 21 at the EU court in Luxembourg.

"Very soon, I am not only going to prove that the actions of the Ukrainian authorities were illegal but also a breach of European standards by those in the European Union who used the information provided by the Ukrainian authorities," Portnov told RFE/RL in April.

Portnov suggested he will not stop at a lawsuit, making clear he wants to turn the tables on the leaders who came to power after Yanukovych's ouster.

"I think that the Ukrainian authorities, starting with government members and finishing with the president, need to watch their own Internet banking closely," Portnov said. "What offshore accounts are they using? How are they signing agreements in offshore jurisdictions?

"When the time comes, we will find the assets the current government is hiding abroad, and it will be the subject of a criminal prosecution," he said.