[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.
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