PANDORA, OLIGARCHS, POLITICS

Kolomoisky and ZelensKy

There is one thing that is undeniable about Kolomoisky: he is skilled in the art of having the right friends in the right places at key moments.

Using PrivatBank as a springboard, Kolomoisky built a financial empire in post-Soviet Ukraine, the Privat Group, encompassing a wide variety of interests, including holdings in transportation, energy and media. His is reported to be among Ukraine’s richest citizens. Along the way he appears not to have shied away from employing hardball tactics on occasion: Forbes?reported?in 2013, for example, that Privat Group goons played a role in what it portrayed as a hostile takeover in 2006 of the Kremenchuk steel plant. Forbes went on to describe Kolomoisky as a “raider.”?

In late February of this year, Kolomoisky’s name was?connected?to hardball tactics employed in a management tussle at Centrenergo, a Ukrainian state-owned provider of electricity.

At the heart of the Centrenergo maneuvering, according to media reports, was Kolomoisky’s ability to call the shots from the shadows: the government of then-prime minister Oleksiy Honcharuk reportedly sought to dilute Kolomoisky’s influence over the company via a management reshuffle, but the maneuvering stalled his plans.

In late February a frustrated Honcharuk reportedly asked President Volodymyr Zelensky to clarify his position on Kolomoisky. (Before rising to the presidency, Zelensky starred in a comedy show broadcast on a television channel controlled by Kolomoisky). “One moment we fight against Kolomoisky, the other we don’t,” Honcharuk said,?according to?Ukrainian outlet Dzerkalo Tyzhnia, apparently in reference to his government's effort to change Centrenergo’s management. A few days later, Zelensky appeared to answer the question by dismissing Honcharuk and his government. Kolomoisky denied any involvement in engineering the government’s downfall.

The Centrenergo controversy was reminiscent of a similar episode five years earlier involving Ukrnafta, a state-owned oil company in which Kolomoisky’s Privat Group has held a 42 percent share.

In 2015, at the time of the dispute at Ukrnafta, Kolomoisky was not just a powerful entrepreneur but also the governor of the Dnipropetrovsk Region. His lavish financing of private military groups was credited with helping check the advance of Russia-backed rebels in Eastern Ukraine. The conflict remains stalemated in the Donbas.?

While Privat Group held a minority stake in Ukrnafta, Kolomoisky’s strong connections to managers at the company helped him wield outsized influence over the years. A long-time Ukrnafta director, for example, was Ihor Palytsia, who is currently a member of parliament and widely considered a close political ally of Kolomoisky. Kolomoisky strengthened his influence over Ukrnafta in 2010, when a management agreement was brokered that effectively gave Privat Group the ability to appoint top managers and wield effective veto power over the strategic decision-making process.

The trouble at Ukrnafta in 2015 followed passage of legislation that was designed to enhance the government’s influence at state-owned enterprises.

BURISMA GROUP HOLDINGS AND MYKOLAIV ZLOCHEVSKY

Burisma Holdings Limited?(Ukrainian:?Бур?сма Холдингс) is a holding company for a group of energy exploration and production companies. It is registered in?Limassol,?Cyprus, but based in?Kyiv,?Ukraine. Burisma Holdings has operated in the?Ukrainian natural gas market?since 2002. It is one of the largest private?natural gas?producers in Ukraine.?It is owned by?Ukrainian oligarch?Mykola Zlochevsky?through his company Brociti Investments Limited (Ukrainian:?Брос?т? ?нвестментс Л?м?тед).

Burisma's subsidiaries include Esko-Pivnich, Pari, Persha Ukrainska Naftogazova Kompaniya, Naftogaz Garant, KUB-Gas and Astroinvest-Ukraine

Burisma's subsidiaries include Esko-Pivnich, Pari, Persha Ukrainska Naftogazova Kompaniya, Naftogaz Garant, KUB-Gas and Astroinvest-Ukraine.

History

Burisma was founded in 2002.?Consolidation of the Burisma Group took place mainly in 2006 and 2007.It became a major shareholder of Sunrise Energy Resources, a?Delaware Corporation, which in 2004 acquired Ukrainian companies Esko-Pivnich (Ukrainian:?Еско-П?вн?ч) and Pari (Ukrainian:?Пар?), which owned?natural gas?exploration licences.?In 2009, shares in these companies were transferred to Millington Solutions Limited.?However, shortly thereafter Millington ceased to exist, at which point Burisma claimed ownership of those two companies. In 2012, Persha Ukrainska Naftogazova Kompaniya (First Ukrainian Oil and Gas Company,?Ukrainian:?Перша Укра?нська нафтогазова компан?я), Naftogaz Garant (Oil and Gas Guarantee,?Ukrainian:?Нафтогаз гарант), and KrymTopEnergoServis (CrimeaTopEnergoService,?Ukrainian:?Кримтопенергосерв?с) became a part of the Burisma Group.

In 2014, Burisma signed a cooperation agreement with?KazMunayGas, the national oil and gas company of Kazakhstan.?In 2016, Burisma bought two?hydraulic fracturing?(fracking) fleets.?In 2017, bought a 3,000-horsepower?Service King Manufacturing SK 3000?drilling rig for $40 million (USD); it was the most powerful drilling rig in Eastern Europe at the time.

In February 2016, Burisma acquired a 70% stake in KUB-Gas (КУБ-Газ). In 2017, it bought a majority stake in Diloretio Holdings Limited, a company which owned Ukrainian gas companies SystemOilEngineering (Ukrainian:?Системойлинжиниринг), Naftogazopromyslova geologiya, (Oil and Gas Industrial Geology,?Ukrainian:?Нафтогазпромислова геолог?я), and Tehnokomservis (TechnoComService,?Ukrainian:?Технокомсерв?с). Also in 2017, Burisma bought Nadragasvydobuvannya (Subsoil Gas Extraction,?Ukrainian:?Надрагазвидобування) and GasOilInvest (Гасо?л?нвест). In April 2019, Burisma acquired Astroinvest Ukraine (Астро?нвест-Укра?на), a natural gas trader.

In 2015, Burisma was one of the founders of the?International Forum on Energy Security for the Future?and partnered the?Electric Marathon.In 2017, it signed a partnership agreement with the?Atlantic Council?to promote anti-corruption measures.

In the?2020 United States presidential election, the?re-election campaign?of President?Donald Trump?and his allies promoted allegations of corruption focused on the relationship between Burisma and?Hunter Biden. The claims were first propagated by an editor of?Breitbart News, and subsequently formed the basis of?a pressure campaign by Trump and associates?to push the Ukrainian government to announce an investigation of the younger Biden's role with Burisma, culminating in Trump's?impeachment?and?acquittal. Republicans hoped to use the Burisma allegations to tarnish?Biden's 2020 Presidential campaign, but an investigation by the Republican-controlled Senate Homeland Security and Finance Committees shortly before the 2020 presidential election concluded that there was no evidence of improper influence or wrongdoing by Joe Biden.

Operations

Burisma's primary operations are in Ukraine, supplemented by activities in Germany, Mexico, Italy, and Kazakhstan.?It holds 35?gas production licences in Ukraine in the?Dnieper-Donets,?Carpathian, and?Azov-Kuban?Basins.?Exploration and production activities are carried out at eight sites in five regions.?Burisma also provides natural gas well services, including hydraulic fracturing. Burisma plans to build a?liquefied petroleum gas?(LPG) plant in?Kharkiv?with a capacity of 50,000 tonnes per year.

In 2016, Burisma was the second largest privately owned natural gas producer in Ukraine after?DTEK, accounting for 26% of all natural gas produced by privately owned companies and more than 5% of total gas production in Ukraine. According to the company, it produced 1.3?billion cubic metres (4.6×1010?cubic feet) of natural gas in Ukraine in 2018.

In Kazakhstan, the company has provided?drilling services?to KazMunayGas and its subsidiaries, including at the?Urikhtau gas field. ?In Italy, Burisma develops three?geothermal power?projects in partnership with Gesto Investimento e Gest?o.

Burisma's subsidiary Esko-Pivnich operates in the?Kharkiv Oblast, and Pari operates in Western Ukraine (Lviv,?Ivano-Frankivsk?and?Cherni.vtsioblasts). KUB-Gas operates in?Luhansk Oblast, ?GasOilInvest in?Poltava Oblast, and Nadragasvydobuvannya in?Dnipropetrovsk Oblast. Burisma also owned KrymTopEnergoServis, a company which leased three gas deposits in?Crimea. However, after?annexation of Crimea by the Russian Federation, KrymTopEnergoServis ceased operation as Burisma subsidiary.

Corporate matters

Ownership

Burisma Holdings is owned by Brociti Investments Limited, a?Cyprus-based company owned by Ukrainian former politician and businessman?Mykola Zlochevsky. Zlochevsky was minister of natural resources under?Viktor Yanukovych, then president of Ukraine.Brociti Investments acquired Burisma Holdings in 2011. Before that acquisition, Mykola Zlochevsky and Mykola Lisin each owned a 50% interest in Burisma Holdings. Lisin, a Ukrainian politician, died in a traffic accident in 2011.

Management

Aleksander Kwa?niewski, former?President of the Republic of Poland, was appointed to the board in January 2014.

Taras Burdeinyi is the?chief executive officer?of Burisma Holdings,?and Alan Apter is chairman of the?board of directors. As of 14 October 2019, the members of the board of directors, in order of seniority, are Alan Apter,?Aleksander Kwa?niewski,?Joseph Cofer Black, Karina Zlochevska, Christina Sofocleous, Riginos Charalampous, and Marina Pericleous. Aleksander Kwa?niewski, former president of?Poland, joined the board in January 2014. In 2017,?Joseph Cofer Black, former director of the?Counterterrorism Center?of the?Central Intelligence Agency?(1999–2002) in the?George W. Bush?administration and former?Ambassador-at-Large?for?counter-terrorism?(2002–2004), was appointed to the board.?Karina Zlochevska, daughter of Mykola Zlochevskiy, was also appointed in February 2016.

DEVON ARCHER

In April 2014,?Devon Archer, a former senior adviser to the?John Kerry 2004 presidential campaign, and?Hunter Biden, an attorney and the son of then-US vice president?Joe Biden, joined the board.

?Archer left the company in 2018

HUNTER BIDEN

Hunter Biden left the company in April 2019, when his term as Director expired.

His salary was $ 83,000 per month which would make an aproxímate annual salary of $996,000 per year or around one Million Dollars.

Before Hunter Biden, there were Joseph Cofer Black and Alan Apter. Black, currently a Burisma director and speaker at Burisma’s annual Energy Security Forum, is not a bean counter.

For the CIA, he spent 20 years in Africa, and in 1994, he helped capture Carlos the Jackal in Khartoum, Sudan, according to a profile in The New York Times.

Leading up to 9/11 saw Black in the top counterterrorism spot at the CIA. He was praised for predicting the event, and criticized for not having a better response plan. Black went to the State Department in 2002. As if that weren’t weird enough, he then went to military personnel contractor Blackwater from 2006 to 2008, and advised Mitt Romney in the 2008 campaign cycle.

The other Burisma exec is Alan Apter. He’s the chairman of the board at Burisma to this day, and has another CIA connection, albeit illicit. Before being appointed to Burisma in 2013, Alan Apter was a corporate lawyer at the New York City firm Sullivan & Cromwell, yes THE Sullivan & Cromwell that decades ago had continued its clients’ funding of the Nazis, and later figured heavily into the CIA’s founding by its managing partner, Mr. Allen Dulles himself. (Dulles was fired by President John F. Kennedy after he engineered the covert Bay of Pigs operation to overthrow Fidel Castro. Kennedy refused to send back-up, having been informed by Dulles of the mission only after it failed.) Obviously it’s been a long time since the Bay of Pigs, yet still it’s noteworthy that one of the firm’s former lawyers is sitting on the board of a Cyprus-based Ukrainian energy company.

Both men joined the board in 2013. It was almost as if Zlochevsky anticipated the lurch toward the West, and wanted to start greasing the right palms. After his buddy Yanukovych fled to Russia, he fled to Europe. Suspicion was growing about the rights to those natural gas wells, and how he acquired them.

In August 2015, Kyiv Post (normally Western friendly and left-leaning according to Media Bias Fact Check), published a lifestyle blog on the Zlocci store in Kyiv. It says the boutique, which sells shoes made of ostrich and crocodile, is owned by none other than Zlochevsky. The item refers to Zlochevsky as “wanted” and “presumably living abroad.”

The same article notes that the Zlochevsky-boutique connection emerged after his daughter, Karina Zlochevska, posted photos from the Zlocci Facebook page on her Instagram account. Zlochevska sits on the Burisma board with Apter, Black and the former president of Poland, Alexander Kwasniewski.

Zlochevsky is now back in Ukraine, as this story from Ukrainian news agency Interfax reported. This was after former U.S. Department of Justice attorney John Buretta, retained by Burisma, had met with the Ukraine prosecutor general Yuriy Lutsenko (the man who replaced the prosecutor fired under pressure from Vice President Joe Biden), and then gave an interview noting that there had never been any evidence of wrongdoing both in the United Kingdom and Ukraine (see Part IV: How Burisma’s founder turned scrutiny into prestige).

Financial results

Burisma Holdings does not disclose its financial results. It has been calculated, based on a minimal natural gas price, that the company's revenue in 2018 may have totaled at least US$400?million.

Investigations

In April 2014, the?Serious Fraud Office of the United Kingdom?launched a money laundering investigation against Zlochevsky, and as a result, accounts of Burisma Holdings and its parent Brociti Investments at the London branch of?BNP Paribas?containing US$23 million were frozen. That money was transferred as a result of complex transactions by a company controlled by a Ukrainian businessman?Serhiy Kurchenko, a subject of the?European Union restrictive measures.?When the?Ukrainian prosecutor general's office?failed to provide documents needed for the investigation, a British court in January 2015 dropped the case and ordered to unfreeze the assets.?In September 2015, then-U.S. Ambassador to Ukraine?Geoffrey Pyatt?gave a speech in which he called out Ukrainian prosecutors for failing to cooperate with the investigation.

Office of the Prosecutor General of Ukraine and?National Anti-Corruption Bureau of Ukraine?(NABU) have conducted in total 15?investigations on Burisma's owner Zlochevsky. In 2016, former Prosecutor General?Yuriy Lutsenko?accused Burisma subsidiaries of conspiracy and tax evasion of about one billion?hryvnias?(US$70?million) in 2014–2015, but later during investigation subsidiaries of Burisma were not mentioned.?Tax audit of Esko-Pivnich by the?State Fiscal Service?found some violations in 2016. As a result, 50?million?hryvnias?(US$1.9?million) of additional taxes was paid to eliminate criminal charges.?In total, Burisma paid additional 180?million?hryvnias?(US$7.44?million) of taxes to avoid further criminal proceedings.A criminal investigation was conducted if natural resources extraction licenses were issued to Burisma subsidiaries legally during the period Zlochevsky held government office. Although violations of the procedure were established by NABU, the?Specialized Anti-Corruption Prosecutor's Office?missed procedural deadlines for a lawsuit and the case for nullifying licenses was dismissed by the court. In October 2019, Prosecutor General?Ruslan Riaboshapka?announced that all 15?investigation cases will be reviewed.