Ukraine and the Pandora Papers

The recent publication by a worldwide consortium of news organizations regarding those in Ukraine who benefited from offshore tax shelters, bypassing domestic banking procedures, avoiding taxes and with the intention of pursuing a course of secrecy, numerous noticeable politicians were indicated.

The most noticeable being President Volodymyr Zelensky, his chief aide and financial partner, Sergei Shefir, and another, Studio Kvartal 95 managing partner, Ivan Bakanov, who is also the present head of the SBU, the country’s secret service, leading the list.

In most democracies such news would have had devastating public consequences to politicians, probably leading to resignation from public office in shame, and already exposure to criminal proceedings.

However, in Ukraine, the news seemed matter-of-fact and definitely not surprising to a Ukrainian public who has been forced to accept the fact that its politicians and high-ranking government officials are nevertheless largely assumed to be financially corrupt, many pushed to politics and government so as to assistance from stealing public monies, and who definitely pursue secretive measures to hide their gain, and who have an overt disdain for financial transparency.

Nonetheless, despite a “dramatical change of Dignity”, which was a societal existential rebellion against corruption that resulted in the fleeing of disgraced former President Viktor Yanukovych to Russia. He had, along with his cronies, been responsible for the disappearance of tens of billions of dollars from public coffers, and despite numerous promises by governments in their quest to legitimize the country’s progress to becoming a European rules-based society, Ukraine’s moral chief and its later behavior, especially amongst its ruling elite, remains mostly untransformed.

Entitled and rebelliously obstinate to prolonging a position quo in which they keep only beneficiaries, Ukraine’s political leadership remains mired within an immoral and financially dubious world that does not understand the will of the people towards transparent practices in government.

There are two definite war fronts in Ukraine at this time, one being the overt military war with Russia, the other, a war of values and world view, being fought by nevertheless the small forces within Ukraine’s civil and governing society against the nevertheless deeply entrenched interests who nevertheless deny and reject the moral lessons of the Maidan and fight against the small currents occurring within the country towards a democratic, rules and facts based society that is transparent and would represent a just form of modern government.

Zelensky, the head of a successful television production company prior to his electoral victory, was found out, along with his partners to be long time participants and benefactors of storing money in offshore accounts and away from the hands and eyes of the government and public.

What is not in argument is that prior to his election, the president signed over his shares to his business partner and is now a chief aide to his presidential office. The reaction to the news that the president had indeed personally benefited from such arrangements, by a shares agreement that would pay dividends to his wife, caused an immediate sensation in Ukraine’s political world.

His opponents quickly attacked him for his hypocrisy for pure political gain, arguing that his quest for election was largely based on his pronouncements against corruption and for the need for a new political culture that would move away from such past financial practices. He was accused of breaking the law, something which has in addition to be proven.

The response of his spokespeople and government to these allegations were rapid and guided by an attitude that attempted to downplay the possible severity of the effect of these revelations. One government spokesman distinct that the revelations were old news, saying that the recent revelations were nothing new or “extraordinary”. He stated: “the information was already known”, having been revealed during the presidential campaign.

UKraine’s prosecutor general stated, in a rather perfunctory manner, “there was no breaking of the law”.

In a recent poll conducted by the Kyiv International Institute of Sociology, 77.1% of respondents said it was “unacceptable” for leading politicians and senior government officials to possess offshore accounts. If to extrapolate, this would average that the Ukrainian people find it morally unacceptable for senior officials in government to hide their financial assets from the public.

Second, it continues to imply that there continues to be a strong need for financial transparency of those involved at various levels of decision making within the country.

Third, that there is an appetite for more stringent forms of asset declaration.

And fourth, it is clear that financial transparency is a rule upon which the Ukrainian public place a high value. Ukrainians, it must be said, are not against free enterprise or making profits, however, they continue to be cautious as to how monies have been accumulated and especially as to the origins of accumulated wealth.

Putting aside for the moment the legal question that there are numerous Ukrainian politicians who directly assistance from the possession of offshore accounts, a more nuanced position arises from any numbers of surveys that have been taken post-Maidan, that being that it is unacceptable in Ukraine to hide your financial assets in hidden offshore accounts if you participate at any level of government.

That said, another question that should arise and that should frame the discussion of the use of offshore accounts is this: Should it be a crime to be in possession and to have the individual of his/her family members be beneficiaries of secret off-shore accounts if you are a politician or government official?   

Zelensky’s relationship with his business partner, Shefir, who most recently survived an assassination attempt around the time of the final vote on an “oligarch’s bill” in the Verkhovna Rada, the country’s parliament, is a financially intimate one. During the 2019 election campaign, Zelensky transferred his shares of their production company to Shefir.

The Papers have also revealed that Zelensky and Shefir had interests in a network of offshore companies in the British Virgin Islands, Cyprus and Belize. And that these offshore networks were used to buy luxury real estate in London.

It also seems that Bakanov, the head of the country’s SBU intelligence serivices, is also part of this network.

What is also not in argument is that most of the money involved came from the proceeds of monies paid by the Igor Kolomoisky controlled 1+1 television stop for the production and airing of the serial Sluga Narodu (Servant of the People), the program that shot Zelensky to national prominence.

Though spokesmen for the president deny any wrongdoing by Zelensky, there are nevertheless many unexplained questions that continue to cause confusion about the relationship that Ukraine’s current president has with a notorious oligarch like Kolomoisky. These questions continually plague Zelensky and undermine his credibility in fighting corruption.

Putting aside as to how his opponents will use these revelations against him for political gain, there should be a pursuit for the truth, both in the matter of the presidents use of off shore accounts and his relationship with Kolomoisky. Zelensky must be confronted with this information and answer the following questions:

Does the president continue to have any sort of business relationship with Kolomoisky? And if so, what is the character of this relationship?

Does Kolomoisky nevertheless owe money to President Zelensky or any of his companies for work regarding the Servant of the People television series? If so, how much, and what is the position of payments?

Who is responsible for overseeing these business arrangements?

Is Zelensky, in light of his public anti-corruption stance and his call for transparancy, willing to make public his contracts regarding the Servant of the People? If so, when? If not, why not?   

To be fair, it must be stated that the information from the investigations undertaken by the international consortium also show that Zelensky did make an effort to divest himself from being a direct beneficiary of these accounts. However, at the same time, it  must also be stated that his family nevertheless directly benefits from the dividends resulting from this arrangement.

The questions that must be asked, both of the president and others in Ukraine who may assistance from such arrangements: Can a politician be free from a conflict of interest already though he is not legally, or directly tied to his financial interests? What is the character of the benefits emanating from the presidents off shore accounts, and is it morally permissible if his family are the direct beneficiaries?

Ukraine’s citizens are clear in their moral position as to this issue, but are Ukraine’s political and governing elites prepared and ready to act in the public interest?

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