Ihor Kolomoyskiy and Hennadiy Boholyubov Sue U.S.
Two Ukrainian tycoons under investigation by the FBI for money laundering are suing the United States for attempting to seize their Texas commercial building worth $23 million, saying the government’s actions violate the sovereignty of their home country.
Optima Ventures, a U.S. real-estate holding company
controlled by billionaires Ihor Kolomoyskiy and Hennadiy Boholyubov, informed a
Florida court on February 5 that it will file for arbitration against the
United States in the World Bank’s International Center for Settlement of
Investment Disputes (ICSID).
The U.S. Justice Department last year moved to seize three
of Optima Venture’s commercial buildings, including in Texas, Kentucky, and
Ohio, accusing Kolomoyskiy and Boholyubov of purchasing them with money
embezzled from Kyiv-based PrivatBank and later laundered by U.S. shell
companies.
The billionaires deny the allegations, saying they have not
been charged with any crime in Ukraine. Furthermore, they say some of the
PrivatBank loans the U.S. claims were used to buy the Texas buildings have been
performing in accordance with borrowing agreements.
“The United States is attempting to regulate the propriety
of conduct occurring in Ukraine -- the management of a Ukrainian bank in the
territory of Ukraine -- and has expropriated Ukrainian investors’ investment in
the [Texas commercial building] based on the United States’ own interpretation
and application of Ukrainian criminal law to Ukrainian conduct,” their
complaint filed to ICSiD stated.
They further claimed that “the United States is effectively
seeking to substitute itself for the Ukrainian Prosecutor’s Office.”
It is unclear if the tycoons will seek arbitration for the
other two buildings the U.S. government is seeking to expropriate. Lawyers for
Optima Ventures did not return a call for comment.
Backing Zelenskiy
Kolomoyskiy is one of the most powerful tycoons in Ukraine
with assets ranging from oil and gas to metals and media. His television
stations backed the candidacy of President Volodymyr Zelenskiy during the 2019
campaign and he is reported to have close ties to his administration.
Ukrainian media also say he has outsized influence over the
nation’s courts. Ukraine’s justice system is notorious for corruption and
Western officials have said courts are often beholden to powerful political and
business leaders.
The National Bank of Ukraine accused the two tycoons in 2016
of using their PrivatBank, then one of the nation’s largest lenders, as a
personal piggy bank to distribute themselves loans. Ukraine later nationalized
the bank and pumped in $5.5 billon to stave off its collapse.
Parroting the Ukrainian central bank, the United States
accuses the Ukrainian magnates of laundering the loans from PrivatBank through
Delaware shell companies with the help of two American associates, Mordechai
Korf and Uriel Laber, who oversee their U.S. assets from Miami and own a
minority stake in Optima.
William Kirtley, a Geneva-based lawyer specializing in
investment arbitration at Aceris Law, told RFE/RL that the Optima Ventures
ICSID case is a “fairly big deal” as arbitrations against the United States are
rare.
The overwhelming majority of ICSID arbitration cases involve
emerging market nations, such as Ukraine, where the rule of law is weak.
Of the more than 800 cases registered by ICSID over the
decades, the United States has been a party in only 5 cases, or 0.6 percent,
according to the ICSID. Eastern European and Central Asian is the largest
region by cases, accounting for just over a quarter of all cases, according to
ICSID.
ICSID was established in the 1960s to settle disputes
arising between an investor -- be it an individual or a corporation -- and a
foreign government.
However, ICSID arbitration is essentially off-limits to most
individuals except the very wealthy due to the high cost of arbitration,
Kirtley said.
The average cost of arbitration for a claimant is $6
million, according to a 2017 study by Allen & Overy.
ICSID arbitral tribunals rule on a limited number of issues,
including expropriations, and seek to determine if public international law has
been violated.
A tribunal may consider rulings by a domestic court when
making their decision, but it is not binding, Kirtley said. Thus, an arbitral
tribunal can rule that an expropriation was illegal regardless of what a
domestic court determined, he said.
Even if a tribunal determines an expropriation was legal, it
may still award compensation to a foreign investor, Kirtley said.
However, tribunals generally do not award compensation to a
foreign investor if a domestic court expropriates an asset due to a crime, he
said.
“It is very hard for a foreign investor to win a case when
they have unclean hands,” he said. “If what [Kolomoyskiy] is doing is illegal
under American laws, then the United States stands a very low chance of ever
having a negative reward rendered against it.”
The Department of Justice said it does not believe its
actions violate the U.S.-Ukraine Bilateral Investment Treaty, according to the
February 5 filing by Optima Ventures.
The United States signed the bilateral treaty with Ukraine
that is the basis of Optima Venture’s lawsuit in the 1990s.
ICSID arbitration is not the only step Kolomoyskiy and
Boholyubov are taking to protect their wealth in the United States.
In December 2020, their U.S. metals holding, Georgian
American Alloys (GAA), filed a lawsuit against its U.S. insurance company for
not accepting a claim arising from PrivatBank’s case against the Ukrainian
billionaires and their two American associates.
PrivatBank is suing the tycoons, Korf, and Laber in a
Delaware court for hundreds of millions of dollars, claiming they defrauded the
bank and used the money to buy U.S. assets, including a GAA subsidiary.
GAA’s insurance policy from AXIS included coverage of a
“wrongful act” committed by the company, its subsidiaries or its directors,
according to the lawsuit. Korf and Laber are among the holding’s directors.
The tycoons and their American associates claim that the
PrivatBank lawsuit -- which they describe as representing “various errors and
omissions with respect to the issuance of corporate loans” -- should be covered
under the policy.
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