WRITTEN BY DMYTRO GNAP AND GRAHAM STACK

A secretive VIP jet charter business that may have helped officials flee Ukraine as the government of Viktor Yanukovych collapsed appears closely linked to the business empire of current Ukrainian President Petro Poroshenko.

The trail of documents connecting the little-known Business Airlines to Poroshenko involves an offshore money-laundering investigation and an unlikely cast of characters: old university friends, a 10-pin bowling enthusiast and a Ukrainian woman who ran a high-end boutique airline despite no apparent credentials for doing so.

Yaroslav Yurchyshyn, executive director of Transparency InternationaI Ukraine, told OCCRP that the elaborate web of offshore corporations and activities uncovered by OCCRP reporters likely has a dual motive.

"In our view, the key motive here is tax reduction using the British Virgin Island's zero profit tax," Yurchshyn said. "But hiding (the company's true) ownership may have been an additional motive."

The origins of the web connecting Poroshenko to Business Airlines stretches back nearly 30 years to the Taras Shevchenko University in Kyiv, where in 1989 a young Poroshenko studied in the Faculty of International Relations and Law with a student named Serhiy Zaitsev.

Poroshenko eventually hired Zaitsev, who rose through the ranks to become one of the top managers of Roshen Confectionary, Poroshenko’s profitable candy business.

According to a 2015 investigation of Intraco by the Financial Investigation Agency of the British Virgin Islands Zaitsev has other, murkier connections to Poroshenko’s business empire. To understand what investigators have uncovered requires a look at the global criminal services industry that flourishes in more than 130 “offshore” tax havens around the world.

Thinking way, way ahead

The first stage of the investigation involves a company called Intraco Management Ltd., born 14 years ago in the murk of a notorious tax haven.

In 2002, a Panama-based legal firm called Mossack Fonseca created Intraco Management and a group of paper corporations in the British Virgin Islands (BVI). Intraco Management was created as a “shelf company”. The creation of the BVI shelf companies is a routine service provided by Mossack Fonseca for its wealthy clients. A common technique for hiding money is to switch its ownership rapidly among a large number of offshore corporations that exist only on paper; companies like Mossack Fonseca keep a number of such companies aging on the shelf until needed, so they would appear to be legitimate companies in business for some years when they were finally used. Mossack Fonseca went on to become known world-wide in 2016 when its internal documents were released as the Panama Papers, 11.5 million documents detailing how some among the global elite sought to avoid taxes and hide illicit wealth.

Three years later, a group of such shelf companies sprang to life. In July 2005, Geoffrey Magistrate, a Cyprus company services provider affiliated with Mossack Fonseca, bought up the batch: Parkside Consulting, Euro Business Investment, Linquist Services, Brackley Group and Intraco Management Ltd. The ostensible owners of these companies were Cypriot “proxies” or front men; it is unknown who were the beneficial owners.

Ten years after that, on Oct. 2, 2015, alarm bells rang in Magistrate's office: the BVI Financial Investigation Agency (FIA) had launched an investigation into Intraco Management on suspicion of money laundering. Agents filed a request to Mossack Fonseca for full information about Intraco's “beneficial ownership” – the hidden people behind the company – and its bank accounts.

But there was something very curious about the sequence of events in the FIA investigation.

The letter sent by the FIA warned Mossack Fonseca against tipping off its customers about the investigation. To do so would constitute a criminal offense. But the FIA letter that Mossack Fonseca received on Oct. 2 was post-dated Oct. 16, giving Mossack Fonseca and Magistrate ample time to take preventive action before the investigation officially began.

Magistrate filed for dissolution of Intraco Management that same day, Oct. 2. - a move that presupposes permission from the real owners. Then he filed information on ownership and finances of the company as requested by FIA.

Magistrate drew up and signed the forms specifying Intraco’s ownership on the same day Oct. 2, post-dating the form to Oct. 15, 2015.

The form named Zaitsev, Poroshenko’s acquaintance and top employee.

Yet the form contained puzzling errors. Magistrate said Zaitsev was a Ukrainian citizen, but spelled his first name incorrectly, using a 'g' as Sergei while the correct transliteration of the Ukrainian name in a passport would use an 'h' -- Serhiy.

This suggests that when Magistrate filed the form, he did not have a copy of Zaitsev's passport in front of him – odd if Zaitsev was already on file as owner of the company. Magistrate also failed to provide a date of birth for Zaitsev.

And finally, the address for Zaitsev provided in the papers, 29a Elektrikiv Street, is not Zaitsev's home address, but the address of Poroshenko's business headquarters.

On October 6, Mossack Fonseca sent Magistrate forms and payment request to commence the dissolution process.

On October 20, Magistrate sent the completed full application for liquidation to Mossack Fonseca. Some of the data Magistrate filed was false. He stated that Intraco Management "has never had a bank account." Yet documents seen by OCCRP show that in reality large volumes of cash flowed through an Intraco Management bank account at Austria's Raiffeisen International.

Under BVI law, companies can only be dissolved if they are in “good standing,” so the advance tip-off meant the dissolution process could start before the investigation began. Intraco was officially dissolved on Dec. 1, 2015, which indeed preempted the FIA investigation.

When OCCRP asked Magistrate about these contradictions, he said only, "We don't discuss anything about our company or clients." He would not say if he was personally acquainted with Zaitsev, and hung up.

 

VIP planes

 Zaitsev, too, declined to speak to OCCRP about Intraco Management.

But in May 2016, in an interview with the news service Interfax Ukraine he was asked directly whether he created Intraco for Poroshenko, and if the president was the real owner.

"No, it is not true," [that he holds the company for Poroshenko] he said. "I have, and had, my own business interests and projects, for which I have set up a number of companies."

Yet Ukraine's company register does not show Zaitsev to be founder of any local businesses. The records indicate that Zaitsev does hold shares in Poroshenko’s holding company for Roshen, the Central European Confectionary Plant. He and three other top managers received a 0.5 percent stake in it in 2014 as a bonus.

Zaitsev is known to represent Poroshenko's interests. For instance, in 2013 he featured in security market filings as representative of Vernon Holdings Ltd., an offshore vehicle Poroshenko used to hold a controlling stake in Crimean ship repairers Sevastopol Morskii Zavod.

Thanks to a new law that took effect in April 2015 in Ukraine, political figures now face criminal prosecution if they fail to fully disclose their properties and ownership stakes. This law applies to Poroshenko and such political lieutenants as Ihor Kononenko, an ally and high official in the president’s party, the Petro Poroshenko Bloc Solidarity.

Neither Poroshenko nor Kononenko has declared any interest in Intraco.

Links between Intraco, Business Airlines and Poroshenko

Internal Intraco documents, obtained by OCCRP reporters, show that Intraco handles things such as international payments for fuel and airport fees for Business Airlines. Zaitsev does not appear anywhere in those records.

Ukraine's corporate register indicates Business Airlines is owned and managed by a Ukrainian woman named Darya Tsaregorodtseva, an accountant who is also an Intraco director. The Business Airlines website was taken down in 2015 for unknown reasons, but a cached version says it operates a fleet of 16 executive jets based in Kyiv and Moscow.

The most recent records available indicate the VIP charter business has millions of euros in annual turnover. Between 2009 and 2011, the business took in more than €15 million via Intraco, according to documents seen by OCCRP.

The cached website shows Business Airlines headquartered at 29a Elektrivkiv Street, the same address provided for Zaitsev in Intraco’s files. It’s also the former headquarters of Ukrprominvest, the industrial conglomerate founded by Poroshenko, as well as Poroshenko's holding company, Prime Assets Capital Management.

The property is owned by the Monitor sports club; Poroshenko owns 55 percent of Monitor via Prime Assets Capital, his holding company for assets other than Roshen. The remainder is owned by Ukrprominvest co-founders Kononenko and Oleh Gladkovsky.

The Ukrprominvest consortium was dissolved in 2012, but many of its former component parts remain headquartered here, such as car-and-bus-maker Bogdan Motors Corporation, now under sole control of its former CEO Gladkovsky, who is now the first deputy head of Ukraine's Defense and Security Council. The Soviet-era Leninska Kuznya shipyards, co-owned by Poroshenko and Kononenko, is historically based at this address on the banks of the Dnipro River that flows through Kyiv.

The address also hosts the 5th Element elite fitness club, owned by Poroshenko and Kononenko, as well as the honorary consulate in Ukraine of the Seychelles Islands, run by honorary consul Gladkovsky (who used to go by the family name Svynarchuk).

Last but not least, this is the address of the Ukrainian Association of Ten-Pin Bowling, of which Kononenko is president. His wife, Liliia, is a member of the national team.

Read more