http://www.foreignpolicy.com/articles/2014/03/19/dmytro_firtash_ukraine_billionaire_corruption_arrest?wp_login_redirect=0
Foreign Policy
19Mar2014
Voice
Married to the Ukrainian Mob
Meet Dmytro Firtash, the shady billionaire at the heart of Russia’s energy stranglehold over Kiev.
BY Michael Weiss
[ GRAPHIC ]
Buried in the news of Russia's invasion, and now annexation, of the Black Sea peninsula of Crimea was the second most important event to affect the new Ukrainian government last week -- and it happened in Austria. On the evening of March 12, one of the most notorious Ukrainian oligarchs, Dmytro Firtash, whose fortune has been estimated at anywhere from $673 million to the tens of billions, was arrested in Vienna, right outside of one of his offices in the Margareten district. Neither he nor his bodyguards put up a struggle, according to press reports, although Group DF, the massive international holding company Firtash owns, has said in a statement that the whole thing was a "misunderstanding" which would be "resolved in the very near term."
But the misunderstanding involved agents from Austria's organized crime division and its elite counterterrorism special ops unit, which doesn't bear the hallmarks of a short-term mix-up, even by European standards. Austrian authorities have said that Firtash was detained on suspicions of bribery and forming a criminal organization related to overseas business deals. On March 18, the oligarch himself claimed that his arrest was "without foundation" and that he believes "strongly that the motivation was purely political." Bail has been set at a record-breaking $174 million, which the Vienna criminal court expects Firtash to post shortly, though he won't be able to leave Austria.
Relations between Washington and Moscow have deteriorated precipitously since November, when then-Ukrainian President Viktor Yanukovych backed out of an E.U. association agreement that he'd spent years lobbying for and opted for a $15 billion bribe from President Vladimir Putin instead. Now, almost a month after Yanukovych's night-flight from Kiev and his formal ouster from power by the Ukrainian Rada, and three weeks after Russian forces invaded and occupied Crimea, the West has groped to find ways to punish politically keyed-in moneymen, from Moscow to Kiev. For the better part of a decade, Firtash wasn't just one of Ukraine's richest oligarchs, he was the principal conduit for the astonishingly profitable and legendarily crooked gas trade between Russia and Ukraine.
According to the New York Times, Firtash, who has stakes in the energy, media, real estate, banking, and chemical industries, was detained on bribery and other as-yet-unspecified charges at the request of the FBI, which had been investigating the Ukrainian business mogul since 2006. Eight years is certainly a long time to wait. And while it is true that Firtash had so far avoided landing himself on the European Union's list of 18 sanctioned Ukrainians -- most of them former officials in the Yanukovych government, as well as their relatives -- few who are familiar with his background or are now closely monitoring an increasingly assertive U.S.-EU effort to counter Russian aggression believe that this high-profile collaring simply occurred out of the blue.
Firtash is simply too good of a political target and the timing, too suspicious. According to Standard Bank analyst Timothy Ash, Firtash "has close ties to Russia via the energy sector, and perhaps even to [President Vladimir] Putin." One of the oligarch's chemical companies, Ash notes, got large discounts from Gazprom, Russia's state-controlled gas giant, at a time when Naftohaz, Ukraine's state gas company, was paying premium prices for imports. The ownership of the Swiss-registered gas trading company RosUkrEnergo is also almost evenly divided between Firtash and Gazprom, indicating that the Ukrainian oligarch was a close partner of the Kremlin.
"The arrest is not a coincidence," former U.S. Ambassador to Ukraine William Taylor, told Foreign Policy. "I suspect there are many Ukrainian businesspeople who are very nervous at this point. The United States has put sanctions and visa bans on a few individuals, and Firtash would be a leading candidate. He clearly supported President Yanukovych." The timing of the arrest might have been opportunistic, but the investigations of criminal activity were very real -- and U.S. law enforcement agencies had been closing in for some time. Indeed, Taylor said he suspected that the Austrian operation had something to do with longstanding allegations that Firtash is tied to organized crime in the United States and Europe.
One degree of separation from the FBI's "10 Most Wanted"
As it happens, Firtash has admitted to his mob connections -- to Taylor, in fact. In December 2008, the Ukrainian personally requested a meeting with the ambassador to make "his case to the [U.S. government]." A State Department cable, subsequently published by WikiLeaks, stated: "Firtash's bottom line was that he did not deny having links to those associated with organized crime. Instead, he argued that he was forced into dealing with organized crime members including [Semion] Mogilevich or he would never have been able to build a business."
The Ukrainian-born Mogilevich, thought to be more powerful than John Gotti or Whitey Bulger ever were, is currently on the FBI's "10 Most Wanted" list. He was indicted by the U.S. Justice Department in 2003 on 45 counts of mail fraud, wire fraud, securities fraud, money-laundering, and racketeering related to a multinational, publicly traded front company called YBM Magnex, Inc, which at its height was valued at $150 million. It claimed to manufacture magnets -- except that it didn't. Instead, YBM Magnex drove its share prices up on the Toronto Stock Exchange by convincing shareholders that the money Mogilevech and his conspirators were moving around banks globally was for the purchases of raw materials. But the end product never existed. In 2009, FBI agent Peter Kowenhoven told CNN that Mogilevich "has access to so much, including funding, including other criminal organizations, that he can, with a telephone call and order, affect the global economy."
The Mogilevich Organization, as the FBI refers to his criminal empire, keeps an especially diverse portfolio: In addition to murder, prostitution, money-laundering, and precious gems dealing, it also traffics in both weapons and nuclear materials. Based in Budapest, the syndicate has branches in Prague, Vienna, Moscow, Israel, France, and Slovakia. In fact, Mogilevich was himself briefly arrested in Moscow in 2008 on tax fraud charges, but was soon released on bail. Ignoring numerous U.S. extradition requests, the Kremlin now allows Mogilevich to reside comfortably on Russian soil, which may be still another reason that Firtash was grabbed while in Austria, which, unlike Russia, has an extradition treaty with the United States. (The FBI has said it hopes Mogilevich travels abroad so that it can have him arrested, too.)
There are plenty of third parties linked to both Mogilevich and Firtash, and even one company where both men were directors at the same time. They also shared the same Israeli attorney, Zeev Gordon. In 2006, Gordon admitted to the London-based corruption watchdog Global Witness that he had acted as a trustee in 2002, when Firtash set up Eural Trans Gas (ETG), a powerful gas trading company and joint venture between Naftohaz and Gazprom. A day after ETG was born, on Dec. 5, 2002, it won a contract to transport gas from Turkmenistan to Ukraine in exchange for gas worth as much as $1 billion on European markets. Not bad for a company founded in a Hungarian village with $12,000 in startup capital.
ETG has extraordinarily opaque origins. Gordon, for instance, was one of four original shareholders in the company. The other three were, as the watchdog Global Witness put it, "three hard-up Romanians with no connection to the gas industry, one of whom was an out-of-work actress who says she took part in order to pay her phone bill." The Israeli lawyer further claimed that Firtash's role in ETG was as a strictly private investor, not as an agent of either Gazprom or the Ukrainian government, then headed by President Leonid Kuchma. Yet a decade ago, Firtash was a relatively unknown and smalltime businessman. Even in 2006, Global Witness could not account for why someone whose photograph was not yet publicly available was authorized to control such a lucrative enterprise with the blessings of both Kiev and Moscow, especially when the creation of a state-owned gas transport vehicle would have been the more logical joint venture between the two governments. To this day, no one can say with complete certainty how Firtash landed himself in such an elite position, or on whose behalf he was actually acting.
Humble origins
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The monopoly man
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