DOJ seeks to seize 55 Public Square through forfeiture over money laundering allegations

CLEVELAND, Ohio – The Justice Department wants to seize a Cleveland office tower linked to a Ukrainian oligarch who is under FBI investigation for international money laundering.

Prosecutors filed documents in U.S. District Court in Miami, seeking to obtain 55 Public Square through civil forfeiture. The 22-story building, once one of the city’s prize business locations, has been muddled in financial difficulties. Its owner defaulted on a $14 million loan earlier this month.

In documents, government attorneys said the money used to buy the building came from “embezzlement, misappropriation and fraud.” The records detail a minute-by-minute breakdown of how investigators believe money was funneled from Ukraine to several businesses until it reached Cleveland.

The filings are part of the government’s continued legal assault on Igor Kolomoisky, once one of the most powerful men in Ukraine. Last summer, attorneys for the Justice Department sought to seize two other properties – one in Dallas and another in Louisville, Kentucky, – that are linked to Kolomoisky. Those cases are pending.

He and his associates are accused of laundering tens of millions of dollars through U.S. real estate, with much of the money plowed into Cleveland office buildings through a series of companies under the Optima business umbrella, according to court records.

From about 2008 through 2015, Optima was one of the largest downtown landlords. It owned more than 2 million square feet of office space, and its investments in Cleveland totaled more than $100 million, according to court records.

The documents allege that Kolomoisky helped siphon $5 billion from PrivatBank, a Ukrainian lender that he and Gennadiy Boholiubov opened in 1992.

The men fleeced the bank out of loans from about 2008 to 2016, repaid the loans with more loans and then poured some of the money into U.S. properties, according to court documents. The scheme was uncovered in 2016, and the bank was taken over by the National Bank of Ukraine.

The filings Wednesday offer much of the same boilerplate detail on Kolomoisky and Boholiubov that had been filed in August in forfeiture proceedings involving buildings in Dallas and Louisville.

But the case involving 55 Public Square offers a glimpse of how investigators think the laundering worked. On June 27, 2008, the Southern Mining Co., which was partially owned by Kolomoisky, withdrew $28.7 million from a loan it had received from PrivatBank. The loan application indicated that the money was needed to help the Ukrainian mining company, the filings show.

Parts of that amount flowed through various businesses, and it was commingled with funds from other companies, according to the filings. As the closing date drew near, the money was converted to U.S. dollars, and it bounced through PrivatBank’s Cypress office and other businesses.

In the end, Optima paid $12.8 million in an initial payment on the $34 million sales price. It obtained a mortgage of more than $21 million.

Optima had obtained $18.5 million in loans for the office tower since 2017, federal attorneys said in the filings. Earlier this month, Optima defaulted on the loans, owing more than $14.5 million on the principal, interest and property taxes to the lender, 55 Bridge Lending of Cleveland.

Cuyahoga County valued the office building, with a seven-level garage, at $20 million. Attempts to reach attorneys in the case were unsuccessful late Wednesday afternoon.

The FBI in Cleveland is conducting an ongoing investigation of Kolomoisky and Boholiubov. Federal attorneys in Miami are handling the civil forfeiture cases.

The criminal probe became public Aug. 4, when federal authorities raided the offices of Optima Management Group at One Cleveland Center at East 9th and St. Clair Avenue. Two days later, federal prosecutors sought to seize the properties in Texas and Kentucky tied to Optima.