[Congressional Record Volume 165, Number 155 (Wednesday, September 25, 2019)]
[House]
[Pages H7910-H7911]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           SUPPORT UKRAINIAN PEOPLE BY ROOTING OUT CORRUPTION

  The SPEAKER pro tempore. The Chair recognizes the gentlewoman from 
Ohio (Ms. Kaptur) for 5 minutes.
  Ms. KAPTUR. Madam Speaker, as co-chair of the House Congressional 
Ukrainian Caucus, I rise to provide some background on why the 
conversations between President Donald Trump and the newly elected 
President of Ukraine, President Volodymyr Zelensky, are so vitally 
important to liberty and our Nation's national security.
  There is no more important strategic alliance for liberty and with 
our military than America's membership with European allies in NATO, 
our dependable transatlantic allies who stood at our side through so 
many battles for the values we share. The blood lands of Europe 
directly influence the very founding of our Republic, our fundamental 
ideals of democracy. NATO, today, stands ready every hour of every day 
to defend our liberty.
  Ukraine, today, is the scrimmage line for liberty for its defense on 
the European Continent. Thus, when a U.S. President holds back military 
assistance to Ukraine through NATO and other instrumentalities, 
Congress must insist on transparency on any conversations that relate 
to our cooperation with the nation of Ukraine.
  Please let me remind, after the collapse of communist Russia in 1991, 
officially known as the Union of Soviet Socialist Republics, Ukraine 
became a free nation. At least it had a chance to be. Ukraine had been 
occupied for all of modern history by Russia and began its jagged path 
forward to the free world, a path that has been tortuous and fraught 
with danger and setbacks.
  It will be a permanent blot on American history that certain 
Americans, including President Trump's campaign manager, Paul Manafort, 
and several other Trump operatives were actually involved in supporting 
the corrupt pro-Russian political operatives in Ukraine and doing it to 
earn money, millions and millions of dollars from Kremlin allies. What 
an abomination to liberty.
  Since Ukraine's Euromaidan Revolution of Dignity 5 years ago, the 
Ukrainian people have bravely demonstrated their resolute commitment to 
their nation's democratic future.
  The latest example is the recent historic Presidential and 
parliamentary elections in Ukraine, which international observers 
lauded as free and fair. What progress.
  Ukraine has managed to make critical reforms, despite the immense 
pressure of Russia's illegal invasion of Ukraine in which 13,000 poorly 
equipped Ukrainian troops and many civilians who were in the pathway 
lost their lives; 30,000 have been injured; and 1.5 million Ukrainians 
have been dispossessed of their properties and are displaced.
  Tragically, Ukraine is at war and must fight a two-front war: one 
against Russia and one against the enemy from within, the scourge of 
corruption aided by Kremlin allies every minute of every day.
  While Ukraine has sought to shake off the vestiges of Soviet 
repression, Ukraine's oligarch class has subverted this progress in 
order to steal and plunder from the people of that nation to advance 
their own sick, insatiable, and corrupt moneyed interests.
  In fact, it might surprise people to hear that, in the State of Ohio, 
the Ukrainian oligarch who owned the television station that made the 
current President of Ukraine famous is the largest commercial real 
estate owner in Cleveland, Ohio. With a net worth of over $1.2 billion, 
Ihor Kolomoisky is one of the richest oligarchs in Ukraine. But he 
travels between Ukraine, Cyprus, Israel, and here. His own son was on 
the basketball team at Cleveland State University.
  But this oligarch ran the show, servant of the people, who propelled 
President Zelensky to stardom. And so the question for history is: Will 
President Zelensky be his own man, or will he be beholden to oligarchs? 
Will he stand for liberty, and will the people of this country and this 
House, who are the Representatives, stand for liberty against 
repression?
  Madam Speaker, I include in the Record material related to my remarks 
this morning.

                    [From Clevescene, June 11, 2019]

How Ukrainian Oligarchs Secretly Became the Largest Real Estate Owners 
                         in Downtown Cleveland

                            (By Sam Allard)

       In an explosive legal complaint filed last month in 
     Delaware, attorneys for a major Ukrainian bank alleged that 
     two oligarchs who founded the bank and controlled it from 
     2006 to 2016 laundered hundreds of millions of dollars in 
     fraudulent corporate loans to purchase assets in the United 
     States and unjustly enrich themselves and their associates.
       Dubbed the ``Optima Schemes'' in the 104-page document, 
     these ``brazen fraudulent schemes'' were successful, among 
     other things, in making the oligarchs and their co-defendants 
     the largest commercial real estate holders in Cleveland.
       With money siphoned from public bonds and 20 million 
     private Ukrainian citizens who'd opened accounts with 
     PrivatBank, the oligarchs Igor Kolomoisky and Gennadiy 
     Bogolyubov doled out corporate loans to shell companies that 
     they controlled. They used PrivatBank ``as their own personal 
     piggy bank,'' in the words of the complaint.
       Those loans were then laundered in multiple digital 
     transactions, sent through dozens of other shell companies 
     that had been created exclusively for the purpose of 
     laundering. These accounts were managed by coconspirators at 
     PrivatBank's branch in Cyprus.
       The true origin of the money thus concealed, funds were 
     then shipped to LLCs in Delaware (hence the legal filing 
     there). Those LLCs--``One Cleveland Center, LLC,'' to take 
     just one example--were used to acquire properties and 
     metalworking facilities in the U.S. Kolomoisky and Bogolyubov 
     are mineral magnates and own mining factories and 
     metalworking plants in Ukraine.
       The men on the ground in the United States, according to 
     the complaint, were a Miami-based trio: Mordechai ``Motti'' 
     Korf, his brother-in-law Chaim Schochet, and Uriel Laber. 
     These three men managed the ``Optima'' companies: Optima 
     International, Optima Ventures and Optima Acquisitions, all 
     of which were created and ultimately controlled by Kolomoisky 
     and Bogolyubov.
       ``Optima Ventures'' should be a familiar local name. It was 
     the company, launched in 2007, used to acquire properties in 
     the U.S. for Kolomoisky and Bogolyubov. The majority of these 
     properties were in Cleveland.
       Chaim Schochet was Optima's ``front man'' in Northeast 
     Ohio. He told the Plain Dealer in 2012 that his local goals 
     were twofold: ``making money for investors betting on the 
     upside of a Midwestern city, and contributing to the 
     betterment of a downtown that more high-profile buyers ha[d] 
     passed by.''
       But his investors' funds were ill-gotten, according to the 
     complaint, proceeds from ``massive, systematic and fraudulent 
     loan misappropriation and recycling schemes. (In the 2012 PD 
     piece referenced above, Schochet was reportedly ``circumspect 
     about discussing how [Optima Ventures] is structured or who 
     the major investors are.'')
       The loan recycling schemes were functionally identical to a 
     ponzi scheme, except instead of paying purported profits to 
     early investors with funds from more recent investors, the 
     Ukrainian oligarchs and their cronies within PrivatBank paid 
     off early fraudulent corporate loans with money from new 
     fraudulent corporate loans.
       ``On paper, this appeared to be a repayment,'' the 
     complaint explains. ``But in reality, it was a sham and 
     fraud, as PrivatBank was repaying itself and increasing its 
     outstanding liabilities in the process. This process was 
     carried out over and over again, over a period of many 
     years.''
       In December 2016, the Ukrainian state was forced to 
     nationalize PrivatBank as a result of the oligarchs' conduct. 
     The state injected more than $5.5 billion into the bank to 
     prevent its collapse, and ``preserve the stability of the 
     [Ukrainian] financial system.'' In 2018, the bank reverted to 
     private ownership.
       The complaint alleges that Korf, Schochet and Laber were in 
     on the racket, aware of the systematic corruption because 
     they were under direct supervision from Kolomoisky and 
     Bogolyubov (or their trusted lieutenant inside PrivatBank, 
     Timur Novikov), and because they were enriched in the 
     process. Korf, Schochet and Laber received ``substantial 
     financial remuneration,'' according to the complaint, which 
     they used to acquire

[[Page H7911]]

     millions of dollars worth of property in Florida.
       Using the laundered loan proceeds, Optima acquired the 
     following Cleveland buildings:
       One Cleveland Center: 1375 E. 9th St. Acquired for $86.3 
     million in May, 2008.
       55 Public Square. Acquired for $34 million in July, 2008.
       Huntington Building: 925 Euclid Ave. Acquired for $18.5 
     million in June, 2010.
       AECOM/Penton Media Building: 1300 E. 9th St. Acquired for 
     $46.5 million in August, 2010.
       Crowne Plaza Building: 777 St. Clair Ave. Acquired in a 
     joint venture with Denver-based Sage Hospitality Group.
       Here's an example of exactly how the properties were 
     acquired, via the complaint:
       On April 29 and 30, 2008 . . . two Ukrainian [metal plants] 
     owned or controlled by [Kolomoisky and Bogolyubov] drew down 
     $2.7 million and $4.3 million in loan proceeds from 
     PrivatBank Ukraine. The purpose of the loans was ``financing 
     of current business activities of the entity.'' On April 30, 
     2008, Bocatoro Enterprises Ltd. (``Bocatoro Enterprises''), a 
     Cypriot entity owned or controlled by [Kolomoisky and 
     Bogolyubov] drew down $40 million in loan proceeds from 
     PrivatBank Cyprus for ``replenishment of floating assets for 
     payments according to contracts, including purchase of 
     shares.''
       However, the loan proceeds were not used for their stated 
     purposes. Instead, the loan proceeds were combined with funds 
     from other sources linked to [Kolomoisky and Bogolyubov] and 
     laundered in forty-two transactions through fifteen 
     Laundering Accounts, including the accounts of Defendant 
     Kolomoisky's Divot Enterprises, Ralkon Commercial, and 
     Pavanti Enterprises, as well as Defendant Bogolyubov's 
     Bonique, and [K&B's] Blisont Capital and Brotstone accounts.
       On information and belief, [K&B] and their co-conspirators 
     used Pavanti Enterprises to misappropriate and transfer a 
     combined $36.1 million into the U.S. to the Multi-State Title 
     Agency Ltd. to fund the acquisition of One Cleveland [Center] 
     through Optima One Cleveland Center LLC for Optima Ventures.
       At its height, Optima Ventures controlled 2.8 million 
     square feet of downtown Cleveland commercial real estate. 
     This was a larger footprint than even Forest City Enterprises 
     at the time.
       In recent years, Optima has been selling off its Cleveland 
     properties, most of which have fallen into disrepair and 
     suffer from high vacancy rates.
       The AECOM building, for example, which Optima acquired in 
     $46.5 million in 2010, was sold to New-Jersey based Rugy 
     Realty last summer for $38 million. When Optima bought AECOM 
     (the former Penton Media Building), it was 90-percent 
     occupied. But when Rugby purchased it last year, it had 
     dropped to only 57-percent occupancy and was in need of 
     significant renovations.
       ``We'll fully renovate the lobby so it fits the 21st 
     century and doesn't look like the 1980s,'' Rugby principal 
     Robert Ades said at the time of purchase. Rugby's plans also 
     included updating the elevators, the mechanical components of 
     which reportedly dated back to 1972.
       The Huntington Building (The 925 Building) was sold to 
     Frank Sinito's Millennia Companies last year for $40 million. 
     A full overhaul of the building was projected to cost $300 
     million. The property was characterized by the PD at the time 
     of sale as a ``gaping hole in the heart of a revitalizing 
     downtown.''
       A situation of disrepair and vacancy can also be found at 
     55 Public Square, the only building other than One Cleveland 
     Center that remains in Optima's local ownership portfolio.
       A sale was in the works with K&D development last year, but 
     K&D pulled out, calling the project ``unworkable.'' Though 
     Optima had purchased it for $34 million in 2008, it was 
     appraised for only about $20 million last year. The Plain 
     Dealer reported that the building was ``in dire need of a 
     makeover'' and that ``only a smattering'' of businesses 
     occupied the 2nd through 11th floors of the 22-story 
     structure. The John Q Steakhouse space on the ground floor 
     has been vacant for years.
       Optima retains a management stake in what is now the 
     downtown Westin Hotel (formerly the Crowne Plaza) and owns 
     One Cleveland Center, which it refinanced in 2010. Optima 
     Management Group, the management company affiliated with 
     Optima Ventures, also works out of One Cleveland Center.
       Scene spoke with a representative there by phone, who asked 
     that questions for Chaim Schochet about the so-called 
     ``Optima Schemes'' be submitted via email. Shochet provided 
     the following via Optima Management Group late Tuesday 
     afternoon:
       The allegations in this lawsuit--part of an orchestrated 
     political attack by a Ukrainian bank against investors in our 
     thriving businesses--are false, defamatory and utterly 
     without merit. We intend not only to contest but to disprove 
     these reckless allegations, and to demonstrate that they are 
     part of a smear campaign driven by a Ukrainian political 
     agenda that we have nothing to do with. We are immensely 
     proud of our extensive track record building a vibrant real 
     estate portfolio in Cleveland, and we will not let a 
     frivolous lawsuit tarnish our hard-earned reputation or 
     distract us from our mission to continue to serve the 
     interests of the Cleveland community.
       Filed on behalf of the current PrivatBank shareholders, the 
     Delaware complaint seeks damages which could include all of 
     Optima's U.S. assets. Those include properties in Dallas and 
     Louisville and metallurgical assets in addition to the 
     Cleveland portfolio. Among the metallurgical assets that 
     Optima Acquisitions acquired was a steelmaking plant in 
     Warren, Ohio, called Warren Steel Holdings LLC. Warren Steel 
     shuttered permanently in 2016 and laid off 162 workers due to 
     ``unforeseeable business circumstances.''
       Kolomoisky and Bogolyubov are now back in Ukraine after 
     having fled from their residences in Switzerland to Israel in 
     2018. Both oligarchs reportedly have Ukrainian, Israeli and 
     Cypriot citizenship.
       The Daily Beast reported in April that Kolomoisky is under 
     FBI investigation and that the U.S. Attorney's Office in the 
     Northern District of Ohio was involved in a wide-ranging 
     probe. Kolomoisky's lawyer said that his client 
     ``categorically denied'' laundering any money into the United 
     States.
       Kolomoisky has reportedly returned to Ukraine, however, 
     with the tacit protection of new president Volodymyr 
     Zelenskiy, a comedian who played the Ukrainian President on 
     the TV show Servant of the People (now streaming on Netflix).
       That show, immensely popular in Ukraine, aired on a network 
     owned by Kolomoisky.

                          ____________________