Yulia Tymoshenko’s Controversial “Middle-Man”
The opaque money trail behind Yulia Tymoshenko’s bid to become Ukraine’s next President. How a lack of transparency and the involvement of suspicious characters threaten Ukraine’s democratic process.
On March 13th 2018, Two Paths (New York) and Avenue Strategies Global (Washington) signed a contract and registered in the United States under FARA (Foreign Agent Registration Act) which is administered by the Department of Justice. Marlen Kruzhkov, head of Two Paths, represented Yulia Tymoshenko, while Avenue Strategies Global was signed by Barry Bennett. A Political consultant, Bennett worked in a senior position for Donald Trump during the 2016 election campaign.
Kruzhkov is a lawyer and lobbyist working in New Jersey, not a political consultant. The Two Paths mailing address is 350 W. 70th Street, New York, which is a property owned by Kruzhkov. Such contracts are very common in Washington.
Nevertheless, this particular contract has been scrutinised by the United States and Ukrainian media because Tymoshenko refuses to disclose who is paying $65,000 per month, or the $780,000 per annum, for the consultancy services. This is a far greater amount than the total income that Tymoshenko declared in her 2016 ($34,000) and 2017 ($21,000) e-declarations to the Ukrainian National Agency for the Prevention of Corruption (NAPC). The consultancy fees are not being paid by the Batkivshchina (Fatherland) party either.
It is therefore of interest to Ukrainian experts, journalists and bloggers to investigate who is financing Tymoshenko’s contract because this will throw a spotlight on which domestic political forces and foreign governments are backing Tymoshenko’s 2019 election bid to become Ukrainian president.
In the 2010 elections in Ukraine, one of the election campaign groups supporting Tymoshenko was financed by Viktor Medvdchuk. This group was headed by President Leonid Kuchma’s former speechwriter, Vasyl Baziv who remains one of Tymoshenko’s political technologists. After the Orange Revolution, many senior members of Medvedchuk’s SDPUo (United Social Democratic Party), such as Bohdan Hubsky and Vitaliy Portnov, joined BYuT (the Tymoshenko block).
Medvedchuk is highly controversial in Ukraine because his daughter is the god-daughter of Russian President Vladimir Putin. Medvedchuk’s Ukrainian Way movement is the most pro-Russian political force in Ukraine and is accused of being behind a thwarted coup attempt led by Volodymyr Ruban, who was allegedly in cahoots with Nadia Savchenko, the Ukrainian pilot held captive by Russia. Savchenko was elected to parliament by Batkivshchina while she was being illegally held in a Russian prison.
The Washington contract reveals four conflicts of interest with Ukrainian legislation. The first is that Tymoshenko’s silence throws into doubt her commitment to the rule of law, transparency and fighting corruption. The e-declarations submitted since 2016 by Ukrainian officials are supposed to shed transparency on their incomes, assets and bank accounts. In the case of this contract, three quarters of a million dollars is not accounted for by Tymoshenko’s 2016 and 2017 e-declarations and the suspicion is that this originated from undeclared and therefore illegal offshore accounts. The second conflict is that Kruzhkov is acting as a “middle-man” for money coming from unknown sources, very likely from offshore accounts, and being delivered to Washington consultants, Avenue Strategies Global. The third is that if the source of the money is Russian then this is a question at a time when Ukraine is at war with Russia of national security. Ukrainian journalists have been wondering if Tymoshenko’s absence from the January 18th 2018 parliamentary vote on the bill which declared Russia to be an “aggressor state” is coincidental or something more nefarious. The fourth is that the lack of transparency opens up allegations of foreign powers interfering in Ukrainian politics and next year’s presidential and parliamentary elections. This is not the first time these improprieties have surfaced. A notable example occurred when Viktor Yanukovych took Russian money for his 2004 and 2010 election campaigns, but this practice was supposed to have ended.
An insider with direct knowledge of the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) procedure suspects the contract was funded by offshore bank accounts. Therein lies the problem for both Tymoshenko and Avenue Strategies Global. Tymoshenko has not disclosed if she has an ownership stake in Two Paths. Tymoshenko is either not being truthful regarding the sources and amounts of her wealth, or she is in violation of Ukrainian law by receiving a sizeable gift from a third-party, to pay for her consultant’s fees.
For Avenue Strategies Global, the complexity of Tymoshenko’s arrangement is potentially far more problematic. If Avenue Strategies Global failed to conduct basic Know Your Customer (KYC) due diligence on Two Paths, , Barry Bennett and his partners have potentially opened themselves to far-reaching scrutiny from the U.S. government. The U.S. Department of Justice is likely working closely with the U.S. Department of the Treasury, specifically the Financial Crimes Enforcement Network (FinCEN) to determine if wire payments received to fund Two Paths, LLC’s bank account triggered any suspicious activity reports (SAR).
Were there any currency transaction reports (CTR) which may have also triggered a red-flag? If yes, then FinCEN will launch an anti-money laundering (AML) investigation through the U.S. Bank Secrecy Act (BSA). The U.S. Internal Revenue Service (IRS), Federal Bureau of Investigation (FBI), FinCEN, and OFAC would lead this multi-agency investigation if evidence of wrongdoing is uncovered.
Who is Kruzhkov?
In 2015, in an article published in the Brussels-based EU Observer, Kruzhkov admits to representing Russian oligarchs in the US. Russian oligarchs do not do as they please but act according to Putin’s wishes. Kruzhkov is very involved as a ‘middle-man’ for Russian and Ukrainian money coming into the US to buy influence (as in the Tymoshenko contract), and purchase businesses and property. The main “investors” of these assets are Russians and Chinese, rather than Ukrainians. Kruzhkov is therefore a curious choice for Tymoshenko. After all, there are many US consultancies and lobbying companies available for hire by foreign politicians on K Street in Washington.
Kruzhkov’s work has been heavily involved in representing Russian clients in the US. None of his past work shows he has knowledge of Ukraine, its politics, reforms and national security. Furthermore, the overwhelming majority of Kruzhkov’s work has dealt with Russia. Furthermore, as his interview in EU Observer showed, Kruzhkov is an opponent of US and Western sanctions against Russia.
Kruzhkov’s past contracts dealing with Russia and Ukraine have included:
- Representing a client in the formation of a joint venture between an American technology company and various Russian investors with the total value of investments equal to $42 million.
- Lead U.S. counsel for the restaurant Groups Café Pushkin, Taras Bulba, and Buddha Bar.
- Lead U.S. counsel for largest importer and distributor of ethnic foods in the U.S., with a special focus on Russian and Ukrainian cuisine.
- Represented Russian clients in the purchase of various magazines, each valued between $3-17 million.
- Represented a client in the purchase of Latvian mineral deposits valued at $25 million.
- Represented client in purchase of Mongolian mines valued at $180 million.
- Lead U.S. counsel for Russian investor group investing in numerous real estate and hotel projects in the U.S. with an emphasis on the New York City area.
- Negotiated an auction agreement for largest private collection of Russian Orthodox icons in the world valued at $85 million.
- Represented the purchaser of a mineral refining plant in Ukraine valued at $128 million.
- Represented a Russian Fund in connection with a litigation relating to its real estate investments in New York City.
Tymoshenko is already under investigation by NABU (National Anti-Corruption Bureau) for taking $5 million from former Libya leader Maummar Gaddafi to help finance her 2010 election campaign. Former French President Nicolas Sarkozy is under investigation by the French authorities for accepting a much larger sum from Gaddafi. Tymoshenko’s current contract in Washington violates Ukrainian laws and could expose her to a second investigation by NABU. Both cases show her willingness to accept money from anywhere irrespective of its origins or potential damage to Ukrainian national security. One of Tymoshenko’s blind spots, as with all populists, is that she believes she is clever while Ukrainian citizens and Western experts are “idiots” who can be hoodwinked. In a globalised world with social media, it is impossible to keep questions such as the Gaddafi money and Washington contract quiet.
Tymoshenko claims to be a “pro-Western politician” and Batkivshchina is an associate member of the European Peoples Party. If she expects however, to be treated as a European politician she should begin to act like one and act in a transparent manner regarding her finances. This includes stating who is paying $780,000 for her US consultants. It is simply not plausible to answer questions from the Ukrainian media with “I don’t know”. Ukraine deserves better.
Taras Kuzio is a Non-Resident Fellow at the Center for Transatlantic Relations, Johns Hopkins – SAIS and Professor at the Department of Political Science National University Kyiv Mohyla Academy. His book, Putin’s War Against Ukraine. Revolution, Nationalism and Crime was published in March 2017.