Lazarenko money-laundering trial opens in U.S. (03/21/04)

Lazarenko money-laundering trial opens in U.S.

by Andrew F. Tully
RFE/RL Belarus and Ukraine Report

The trial in the United States of former Ukrainian Prime Minister Pavlo Lazarenko began on March 15 - five years after he was arrested on charges of using American banks to launder at least $114 million he is accused of stealing from Ukraine. Federal prosecutors in San Francisco say Mr. Lazarenko brought millions of U.S. dollars to the United States intending to launder it.

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

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

According to some estimates, Mr. Lazarenko stole perhaps as much as $1 billion in Ukraine a decade ago when industries once owned by the old Soviet state were being privatized. President Leonid Kuchma appointed him prime minister in 1996, but fired him a year later when Mr. Lazarenko decided to challenge Mr. Kuchma for the presidency.

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

Mr. 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.

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

Mr. Kuchma is not running for re-election in Ukraine's presidential elections in October. But whoever he supports to run in his stead could find the testimony damaging to his chances of victory, according to Anders Aslund.

Dr. Aslund was a financial adviser to the Ukrainian government from 1994-1997. He now specializes in international economics at the Carnegie Endowment for International Peace, a private policy research center in Washington.

Dr. Aslund said he has little sympathy for President Kuchma's potential embarrassment. At the time Mr. Kuchma appointed Lazarenko as his prime minister, Dr. Aslund says, Mr. Lazarenko was widely perceived in Ukraine as the most corrupt man in the country.

Dr. Aslund said Mr. Kuchma's only excuse for making the appointment would be that he had no choice, given Mr. Lazarenko's great influence at that time. And yet, Dr. Aslund says, President Kuchma did have the power to dismiss Mr. Lazarenko in 1997.

"There's no excuse for Kuchma. Here he appoints the man who's considered the most corrupt man of the land [as] prime minister, and [this perception was present] before Mr. Lazarenko became prime minister," Dr. Aslund said.

Dr. Aslund said he is less certain about the outcome of the trial. The judge in the case has ruled that prosecutors must first prove that Mr. Lazarenko got his millions illegally in Ukraine. Only then can they try to prove the money-laundering charge.

Dr. Aslund noted that it may be difficult to prove that Mr. Lazarenko broke Ukrainian law at a time when the country was just beginning to establish a new legislation following the break-up of the Soviet Union.

"Legislation in Ukraine at the time was rudimentary and contradictory. 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," Dr. Aslund explained.

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

Ms. Tymoshenko was the deputy to Viktor Yushchenko when he briefly served as President Kuchma's prime minister. Ms. Yushchenko is running for president in the October election, and Ms. 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.

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