Years after he was accused of stealing hundreds of millions of dollars in Ukraine and secretly amassing a real estate fortune in the United States, oligarch Ihor Kolomoisky was stripped of his Ukraine citizenship in a stunning move that could remove his protections in the event he’s charged in one of the largest U.S. money laundering cases of its kind.
The order by President Volodymyr Zelenskyy could potentially open the way for prosecutors to move for extradition against the billionaire -- the target of a federal grand jury investigation -- for allegedly siphoning the money from Ukraine’s largest bank and buying steel mills and skyscrapers in the American heartland.
"They are taking serious measures," said John Herbst, a former U.S. ambassador to Ukraine. "It may be a response to this latest expression of concern about corruption in Ukraine. If this is true, this is a big deal. Ukraine, of course, is fighting for its life."
Mr. Zelenskyy’s order in the midst of the war with Russia comes after years of legal battles by prosecutors to seize U.S. properties they say the oligarch and his partners bought with money stolen from his former bank -- the losses large enough to cripple the country's economy -- and moved into the United States between 2008 and 2015.
A Pittsburgh Post-Gazette investigation found that after the purchase of the real estate -- including steel factories, skyscrapers, and office parks -- they failed to pay millions in property taxes, shuttered factories, and left hundreds of steelworkers without jobs.
Mr. Zelenskyy's decision last week represents a surprise move by the Ukraine president, a former actor whose once popular TV show appeared on a network owned by Mr. Kolomoisky and who owes much of his early political success to the oligarch.
Though they were once close, the president has tried to distance himself from Mr. Kolomoisky, experts say, and has been under pressure because of the need to respond to the criminal case in the United States and to continue to appease a U.S. government that has been cracking down on kleptocracy and providing funds for Ukraine’s war.
Since the Russian invasion, the U.S. has funneled billions to the country, including a new $270 million military package.
Just last week, a panel of U.S. senators led a hearing to look for ways to speed up the seizure of assets owned by Russian oligarchs -- including yachts, money and artwork -- and use it to help Ukraine to rebuild.
So far, the stripping of the oligarch's citizenship has not been published by the government and the president's office has yet to make a statement. But two sources close to the president and who spoke to the Post-Gazette on the condition of anonymity confirmed the president’s order.
For years, Mr. Kolomoisky was safe in his native country because there’s no extradition treaty between the United States and Ukraine.
But without citizenship, he’s open to being taken into custody and sent to the U.S.
Mr. Kolomoisky, who was banned from the U.S. by the State Department last year over corrupt practices, did not respond Saturday to repeated interview requests.
In addition to Mr. Kolomoisky, nine others, including Gennady Korban, chief of the Dnipropetrovsk Oblast Territorial Defense Force and a one-time ally of the oligarch, and Vadym Rabinovich, leader of the pro-Russian political party, have been stripped of their citizenships, according to a document posted on Facebook and reported by The New Voice of Ukraine news outlet.
Mr. Herbst, the former U.S. ambassador to Ukraine, said he believes such action comes at a critical time for the nation.
"Zelenskyy is heroically leading the country. And they are very much aware that their image has a corruption problem," he said.
In recent days, Mr. Zelenskyy fired the head of Ukraine’s spy agency and the prosecutor general over concerns of alleged treason within their agencies.
Paul Pelletier, a former federal prosecutor and fraud chief at the U.S. Department of Justice, said one of the reasons that Mr. Zelenskyy is taking action against Mr. Kolomoisky is to answer any criticism of the United States for its efforts to help a country known for corrupt leaders.
"I think this is showing in a very tangible way that Zelenskyy is not your typical Ukrainian leader and he is not going to tolerate corruption," he said. "It's purposeful and he's [messing] with the most powerful people in his country."
The U.S. departments of Justice and State did not respond to media inquiries Saturday.
The actions in Ukraine follow the first ongoing federal money laundering investigation into the steel industry and a case that has deeply impacted the lives of steelworkers in the Midwest.
In Ohio, Mr. Kolomoisky and his partners purchased a factory in Warren, but over time it was plagued with dangerous breakdowns after workers said the owners failed to invest in safety and to clean up rampant hazardous waste violations.
Two explosions inside the plant left some workers badly injured and disabled, records and interviews show.
"It hit the heartland and it directly impacted peoples' lives," said Mr. Pelletier, who once led laundering prosecutions in Miami. "Most people never see [the effects of] money laundering as vividly as this."
In Illinois, Mr. Kolomoisky and his partners bought a shuttered cell phone factory, pledging to find tenants and create jobs. And ultimately, they stopped paying the taxes and the utility bills, owing hundreds of thousands of dollars.
They shut down the Warren Steel plant in 2016, owing millions in utility bills and to local businesses, while leaving 162 workers without jobs.
"This destroyed my life," said Brian Shaffer, who was left disabled from injuries during a blast in 2010. "We put all we had into that place, and they left us with nothing."
Over the past two years, prosecutors have seized some of the properties or have forced Mr. Kolomoisky and his associates to sell them to recover millions of dollars in what was once a real estate empire, including 13 steel mills, five skyscrapers, and two office parks. In all, nearly $760 million was used to pay for the real estate and other expenses, records show.
Acting on a search warrant, federal agents descended on the company's offices in Cleveland and Miami in 2020, hauling away boxes of records, but so far, no charges have been publicly filed.
Former Ukraine General Prosecutor Ruslan Ryaboshapka, who met with U.S. law enforcement agents in Kyiv in 2020, said he discussed extradition terms with them and that he favored finding a way to send the oligarch to the U.S. if charges are filed.
Because Mr. Kolomoisky was a Ukraine citizen, it would have been difficult, but this lifts a hurdle.
"This is absolutely real if there is political will in Ukraine," he said. "Now the extradition is closer -- it remains to file charges in the U.S.A."
A legal expert in Kyiv, who spoke to the Post-Gazette on the condition of anonymity because of the sensitivity of the matter, said he expects Mr. Kolomoisky and his lawyers to fight the action, arguing that there is no provision in the Ukraine Constitution to strip someone of his birthright.
A dispute has emerged over whether the president can draw on legislative authority to strip people of their naturalization, or whether the constitution prohibits it.
Though the president's order will likely gain international support in some countries, any move by Ukraine authorities to take the oligarch into custody and deliver him to U.S. law enforcement will be challenged, he said.
Despite any legal efforts by Mr. Kolomoisky, who has filed hundreds of lawsuits to gain control of his former bank, the president's order is critical in letting the world know where he stands, said Kenneth McCallion, a former federal prosecutor who once represented former Ukraine Prime Minister Yulia Tymoshenko.
It will "break the stranglehold that the oligarchs such as Kolomoisky have had over politics and the economy," he said. "Zelenskyy and his advisers have finally come to the realization that even if they can successfully fend off the Russian invasion of Ukraine, the victory will be a pyrrhic one unless the country can function as a true democracy, rather than an oligarchy with only the trappings of democratic structures."
Tanya Kozyreva reported from Kyiv. Michael Sallah: msallah@post-gazette.com; @mikesallah7. Ashley Murray: amurray@post-gazette.com.
First Published: July 24, 2022, 10:00 a.m.
Updated: July 24, 2022, 1:17 p.m.
