Trump’s cam­paign man­ager haunted by past busi­ness

Kyiv Post - - Front Page - BY JOSH KOVENSKY [email protected]

ODESA, Ukraine – While you’re help­ing out a cor­rupt politi­cian, why not try to make a lit­tle (or a lot) of ex­tra cash on the side?

That’s the op­por­tu­nity ap­par­ently pre­sented in 2008 to Paul Manafort, for­mer ad­viser to over­thrown Pres­i­dent Vik­tor Yanukovych and cur­rent cam­paign man­ager to Don­ald Trump, the pre­sump­tive Repub­li­can can­di­date for U.S. pres­i­dent.

The story be­gins in March 2007,

when Manafort and other mem­bers of his po­lit­i­cal team in Ukraine set up a pri­vate eq­uity fund with Rus­sian money with the ap­par­ent aim of es­tab­lish­ing a busi­ness in Ukraine.

Ac­cord­ing to re­ports in the U.S. and Bri­tish me­dia, the main in­vestor in Manafort’s pri­vate eq­uity firm was Rus­sian alu­minum and in­dus­trial oli­garch Oleg Deri­paska, who moved to dis­solve the Cay­man Is­lands-based fund in 2014.

Ac­cord­ing to court fil­ings, the com­pany man­aged to make only one in­vest­ment - in an Odesa tele­coms com­pany.

How­ever, the $19 mil­lion raised for the pur­chase – along with $7 mil­lion in man­age­ment fees - has since dis­ap­peared.

Manafort did not re­ply to mul­ti­ple re­quests for com­ment made through his at­tor­ney Richard Hibey, or to di­rect emails. The Trump cam­paign didn’t re­ply to a re­quest for com­ment either. Nei­ther did Deri­paska nor his rep­re­sen­ta­tives re­spond to in­quiries.

Who’s in the party?

By the early 2000s, Manafort had al­ready made a name for him­self in Ukrainian po­lit­i­cal cir­cles by work­ing for Don­bas bil­lion­aire Ri­nat Akhme­tov, Ukraine’s rich­est oli­garch.

Yanukovych hired Manafort in the after­math of the 2004 Orange Rev­o­lu­tion. The for­mer prime min­is­ter’s po­lit­i­cal ca­reer was on the ropes fol­low­ing Vik­tor Yushchenko’s elec­tion as pres­i­dent.

Manafort set to work re­brand­ing the Yanukovych-led Party of Re­gions for the 2006 par­lia­men­tary elec­tions. The makeover aimed at trans­form­ing the bum­bling au­to­crat into an ar­tic­u­late demo­crat. Yanukovych was trained to speak in catchy sound­bites.

But at the same time, Manafort was par­lay­ing his po­lit­i­cal ca­reer in Ukraine into busi­ness links.

He at­tempted to buy a se­ries of New York City prop­er­ties on be­half of the now-ex­iled gas mogul Dmytro Fir­tash, who faces cor­rup­tion charges in a U.S. fed­eral court, ac­cord­ing to a now-dis­missed 2011 law­suit filed against Fir­tash over rack­e­teer­ing al­le­ga­tions.

Manafort’s ties to Fir­tash were es­tab­lished at the same time he founded the pri­vate eq­uity fund, which was called Per­i­cles Emerg­ing Mar­ket Part­ners.

It was reg­is­tered in the Cay­man Is­lands in March 2007, with the stated in­ten­tion of ac­quir­ing smaller com­pa­nies to con­sol­i­date them into larger “na­tional” com­pa­nies, and then sell­ing the larger com­pa­nies di­rectly or through a pub­lic of­fer­ing.

An Odesa tale

Ac­cord­ing to the Cay­man Is­lands mo­tion to dis­solve the com­pany, the fund started out with a po­ten­tial in­vest­ment of $200 mil­lion. Deri­paska re­port­edly com­mit­ted as a main in­vestor through an off­shore called Al­ti­max In­vest­ments Lim­ited, later suc­ceeded by LP Surf, which launched the Cay­man Is­lands le­gal pro­ceed­ings.

Manafort ran the firm with two other busi­ness part­ners - po­lit­i­cal con­sul­tant Rick Davis and lob­by­ist Rick Gates.

A large por­tion of Manafort’s po­lit­i­cal team in Ukraine ap­pears to have been in­volved in the deal­ings.

Le­gal doc­u­ments name long­time In­ter­na­tional Repub­li­can In­sti­tute of­fi­cial Kon­stantin Kil­imnik as in­volved “in fur­ther­ing the part­ner­ship’s in­vest­ment pro­gram,” along with Ukraine po­lit­i­cal con­sul­tant Philip Grif­fin, and Party of Re­gions flack Alexan­der Balanutsa.

Af­ter roughly a year of search­ing for po­ten­tial pur­chases and ne­go­ti­a­tions - dur­ing which $7.35 mil­lion in man­age­ment fees were paid to Per­i­cles’s man­agers - the team set­tled on one pur­chase: Chorne More, an Odesa hold­ing com­pany for a num­ber of ca­ble and in­ter­net providers.

Chorne More had been founded in the early 2000s by a man named Ser­hiy De­ht­yar, who, ac­cord­ing to me­dia re­ports from the time and to peo­ple who worked with him, died in 2004 af­ter sus­tain­ing head in­juries un­der mys­te­ri­ous cir­cum­stances.

Un­der De­ht­yar and his suc­ces­sor, Dmitry Cherep, the com­pany had ex­panded to con­trol 45 percent of Odessa’s telecom­mu­ni­ca­tions in­fra­struc­ture.

The com­pany’s man­age­ment at the time was closely as­so­ci­ated with Yanukovych’s Party of Re­gions. Cherep’s brother Olek­sandr - who also helped to run the com­pany - was a Party of Re­gions mem­ber of Odesa City Coun­cil un­til 2014.

In­vest­ment struc­ture gone awry?

In or­der to buy Chorne More, Manafort and his part­ners al­legedly pre­sented a plan to the in­vestors by which the buy­out was to pro­ceed.

The le­gal doc­u­ments al­lege that the in­vestors would trans­fer money to a Cypriot com­pany called PEM Ad­vi­sors Lim­ited, which would then loan the in­vest­ment money to a Cyprus le­gal struc­ture called a “spe­cial pur­pose ve­hi­cle.”

Trans­fer­ring the money via a loan would al­low the transactio­ns to oc­cur with­out be­ing taxed. Shares in the SPV would then be trans­ferred to a Manafort-con­trolled firm called EVO Hold­ings, ac­cord­ing to the fil­ing. That firm would then buy Chorne More through its con­trol­ling com­pany, a UK-based off­shore called Col­berg Pro­jects LLP.

In April 2008, $18.9 mil­lion was trans­ferred to PEM Ad­vi­sors.

Ac­cord­ing to le­gal doc­u­ments filed by the in­vestors, the money didn’t go where the in­vestors thought it would, mean­ing that the PEM trans­fer is the last point at which we know where the money was lo­cated.

In­stead, ac­cord­ing to a dis­cov­ery fil­ing in a U.S. fed­eral court, Gates claimed that PEM di­rectly paid $17.8 mil­lion to a Ukrainian named An­drey Vi­tyukov.

One for­mer em­ployee of Chorne More, who re­quested anonymity due to safety fears, said that Vi­tyukov was a lawyer who worked at the com­pany.

Ac­cord­ing to court fil­ings, it’s not at all clear where the lump sum ac­tu­ally went.

Ukraine’s com­pany registry does not record a change in own­er­ship in the firm un­til 2010, more than two years af­ter the deal was sup­pos­edly done. Be­fore then, Chorne More was owned by a Bri­tish com­pany called TechCorp, which was in turn con­trolled by the UK-reg­is­tered Col­berg Pro­jects.

Col­berg was con­trolled by two Sey­chelles firms: In­tra­hold AG and Mono­hold AG from 2010. In 2014, both came un­der in­ves­ti­ga­tion by

the Sey­chelles Fi­nan­cial In­tel­li­gence Unit on sus­pi­cion of be­ing used for money laun­der­ing by Yanukovych. Col­berg was formed in 2006 by two BVI-reg­is­tered firms called Ire­land & Over­seas Ac­qui­si­tions and Mill­town Cor­po­rate Ser­vices, both of which have been linked to Yanukovych-era cor­rup­tion scan­dals.

Ev­ery­thing is po­lit­i­cal

Peo­ple who worked at the firm, as well as oth­ers in­volved in Odesa’s telecom­mu­ni­ca­tions mar­ket, re­mem­ber Chorne More briefly hav­ing Amer­i­can own­ers.

Ac­cord­ing to Dmitry Cherep, the for­mer Chorne More gen­eral di­rec­tor, the new Amer­i­can own­ers sent him around Ukraine in an at­tempt to find more po­ten­tial in­vest­ment op­por­tu­ni­ties.

“Around five com­pa­nies were pre­pared for ne­go­ti­a­tions,” Cherep said, adding that the in­vest­ment fund re­placed Chorne More’s ac­coun­tant.

Cherep said that he left the com­pany af­ter two years upon re­al­iz­ing that the new man­age­ment did not in­tend to em­bark on fur­ther de­vel­op­ment.

Dmitry Cherep him­self was ar­rested in 2014 for an at­tempt to found an “Odesa Peo­ple’s Repub­lic,” mod­eled af­ter the Donetsk and Luhansk separatist or­ga­ni­za­tions, Odesa news web­site Dum­skaya re­ported. Cherep was re­port­edly found with grenades in his car, and later pro­vided tes­ti­mony to Ukrainian law en­force­ment that re­sulted in the ar­rest of dozens al­legedly in­volved in the plot.

Ac­cord­ing to Olena Vasina, an Odesa-based in­ves­tiga­tive jour­nal­ist, tak­ing over Chorne More likely fit into a larger plan by the Party of Re­gions to as­sert me­dia con­trol over the Black Sea city.

“Here on the south­ern coast, the Party of Re­gions was very strong at that time,” Vasina said. “In Odesa ev­ery self-re­spect­ing busi­ness­man, politi­cian, deputy, pub­lic fig­ure tries to launch his own TV sta­tion. If you don’t have a sta­tion, you’re no­body.”

But Cherep de­nied that any po­lit­i­cal in­flu­ence was wielded over the com­pany.

Le­gal moves to dis­solve Per­i­cles did not be­gin un­til 2014, years af­ter the orig­i­nal in­vest­ment was made. Though the plain­tiffs are seek­ing to re­cover the lost as­sets through dis­solv­ing the com­pany, they do not ap­pear to have filed any civil suit seek­ing to di­rectly re­trieve the money.

Manafort left Ukraine dur­ing the 2013-2014 EuroMaidan Rev­o­lu­tion that top­pled his ex-client Yanukovych from the pres­i­dency, ac­cord­ing to a source fa­mil­iar with the lob­by­ist’s af­fairs. In March, pre­sump­tive U.S. Repub­li­can pres­i­den­tial nom­i­nee Don­ald Trump hired Manafort to run his pres­i­den­tial cam­paign.

The U.S. court fil­ings were part of a process by which Cay­man Is­lands court-ap­pointed liq­uida­tors tried to de­pose Manafort as part of their in­ves­ti­ga­tion into where the com­pany’s money went. Hibey, the Manafort lawyer, told Ya­hoo News in late April that Manafort had “ap­peared for de­po­si­tions some months ago, and an­swered all ques­tions.”

“We are not privy to any other de­vel­op­ments,” Hibey re­port­edly added.

Cam­paign chair­man Paul Manafort checks the podium be­fore Repub­li­can Pres­i­den­tial can­di­date Don­ald Trump speaks dur­ing an event at Trump SoHo Ho­tel, June 22 in New York City. (AFP)

Repub­li­can preseden­tial can­di­date Don­ald Trump speaks dur­ing an event at the an­nual Rolling Thun­der “Ride for Free­dom” pa­rade ahead of Me­mo­rial Day in Wash­ing­ton, DC, on May 29, (AFP)

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