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U.S./Ukraine: Lazarenko Money-Laundering Trial Opens

The trial in the United States of former Ukrainian Prime Minister Pavlo Lazarenko began yesterday -- nearly five years after he was arrested on charges of using U.S. banks to launder at least $114 million he is accused of stealing from Ukraine. Lazarenko says the money was legally obtained, and accuses Ukrainian President Leonid Kuchma of masterminding the case against him. RFE/RL reports the trial could have political repercussions in Kyiv.

Washington, 16 March 2004 (RFE/RL) -- Federal prosecutors in San Francisco say Pavlo Lazarenko brought millions of dollars to the United States intending to launder it, or move it from bank to bank in order to "cleanse" it of any traces of its origin.

Lazarenko says there is no need for him to launder money that he earned legally in Ukraine. If that is the case, the prosecutors argue, why did he enter the United States in 1999 using a forged passport purporting to have been issued by the Central American nation of Panama?

Further, the prosecutors point to Lazarenko's conviction, in absentia, by a Swiss court four years ago on similar charges, for which he received an 18-month suspended sentence.

“Here he appoints the man who's considered the most corrupt man of the land [as] prime minister, and [this perception was present] before Lazarenko became prime minister."
According to some estimates, Lazarenko stole perhaps as much as $1 billion in Ukraine a decade ago when industries once owned by the former Soviet state were being privatized. Kuchma appointed him prime minister in 1996, but fired him a year later when Lazarenko decided to challenge Kuchma for the presidency.

Lazarenko sought asylum in the United States in 1999, saying that he had been subject to three assassination attempts in Europe. But Kuchma's government accused Lazarenko of embezzling money from Ukraine. In the meantime, U.S. law-enforcement officials said they had evidence of Lazarenko's money laundering.

Lazarenko was subsequently arrested and jailed in a U.S. federal prison. He was released a year ago after posting $86 million in bail. He is now under 24-hour surveillance to ensure that he does not try to flee before his case is resolved.

The trial began yesterday. Lazarenko has insisted that he acquired his millions legally -- and with Kuchma's knowledge and approval. Any details that may emerge during Lazarenko's testimony may prove an embarrassment for Kuchma.

Kuchma is not running for re-election in Ukraine's presidential elections in October. But whomever he supports to run in his stead could find the testimony damaging to his chances of victory, according to Anders Aslund. Aslund was a financial adviser to the Ukrainian government from 1994 to 1997. He now specializes in international economics at the Carnegie Endowment for International Peace, a private policy-research center in Washington.

Aslund says he has little sympathy for Kuchma's potential embarrassment. At the time Kuchma appointed Lazarenko as his prime minister, Aslund says, Lazarenko was widely perceived in Ukraine as the most corrupt man in the country. Aslund says Kuchma's only excuse for making the appointment would be that he had no choice, given Lazarenko's great influence at that time. And yet, Aslund says, Kuchma did have the power to dismiss Lazarenko in 1997. "There's no excuse for Kuchma,” he said. “Here he appoints the man who's considered the most corrupt man of the land [as] prime minister, and [this perception was present] before Lazarenko became prime minister."

Aslund is less certain about the outcome of the trial. The judge in the case has ruled that prosecutors must first prove that Lazarenko got his millions illegally in Ukraine. Only then can they try to prove the money-laundering charge. Aslund says it may be difficult to prove that Lazarenko broke Ukrainian law at a time when the country was just beginning to establish new legislation following the breakup of the Soviet Union.

"Legislation in Ukraine at the time was rudimentary and contradictory,” he said. “On the one hand, you can argue that nothing could be done [legally] because all laws were contradictory. On the other hand, you could argue that anything was legal because the legislation was highly incomplete."

There is also the widely held suspicion that Kuchma's chief political opponent and a potential Lazarenko accomplice, Yuliya Tymoshenko, is corrupt as well. Prosecutors say that a decade ago, when Tymoshenko was president of Unified Energy Systems, the country's leading energy company, she helped get money to Lazarenko and his partners in exchange for preferential treatment for the gas company.

Tymoshenko was the deputy to Viktor Yushchenko when he was briefly Kuchma's prime minister. Yushchenko is running for president in the October election, and Tymoshenko is seen as his likely choice for prime minister if he wins. Their chances of victory also could be hurt by damaging testimony from the Lazarenko trial.

But which political bloc is hurt by the testimony depends a great deal on how the news is handled in Ukraine. The country's media is largely controlled by the government, so it is uncertain how much of the testimony will be heard by the Ukrainian public.