The Oil and the Glory

Why does Viktor Yanukovich suddenly care about corruption? Take a wild guess.

Why does Viktor Yanukovich suddenly care about corruption? Take a wild guess.

Are we surprised at the latest report of corruption out of the former Soviet Union, released days before local elections in Ukraine, which alleges that the country’s past government — like the 12 Ukrainian governments that preceded it — had some possible problems with dishonesty?

We are not.

Ukraine’s current government, led by President Viktor Yanukovich, released a hefty report earlier this month alleging far-ranging corruption under Yanukovich’s predecessor, Yulia Tymoshenko, who served as prime minister (her second stint in the job) from 2007 to 2010. The allegations involve $480 million worth of commodity deals, shell companies, tax havens, padded contracts, and other sundry hallmarks of official corruption. “The investigation revealed evidence of misapplication of state funds and apparent fraud involving the highest levels of the previous administration, specific ministries, and private corporations,” the report says. Yanukovich’s government has filed lawsuits based on some of the findings already.

By far the largest of six cases of alleged misappropriation cited involves siphoning off some $280 million in carbon credit sales from Ukraine’s participation in a climate-change program. According to the investigators, Ukraine received the money from Japanese and Spanish electric companies as part of the Kyoto Protocol, which allows pollution emitters to offset excessive carbon dioxide output by paying for “credit” from companies or countries that have reduced their own emissions. The Tymoshenko government violated the terms of the program contracts by not using the money for clean-energy purposes, as required, but rather to shore up the finances of the country’s pension fund, the investigators say. (The probe does not allege that Tymoshenko or any other Ukrainian politician personally pocketed the carbon credit money, and doesn’t accuse Tymoshenko herself of any wrongdoing.)

Why aren’t we aghast? Consider Transparency International’s annual Corruption Perceptions Index, released Tuesday. For the 13th straight year, Ukraine was named one of the most corrupt countries on the planet; this time it ranked 134 out of 178, with 178 being the most corrupt. In my experience, U.S. businessmen, diplomats, and journalists who work in the region have long described the Ukraine as the most corrupt of the former Soviet republics. In 2006 — a year after Tymoshenko began her on-again, off-again tenure in government — an 84-page report by the U.S. Agency for International Development concluded that this deep-seated corruption began “immediately after independence” in 1991-92. What always happens in Ukraine, the report said, is that “[t]op political and business figures collude behind a facade of political competition and colonize both the state apparatus and sections of the economy.”

Considering this inglorious history, the fact that Yanukovich would single out the two years of governance presided over by Tymoshenko, his main political opponent leading up to the country’s local elections this Sunday, ought to raise a few eyebrows. Ukraine has had 14 governments since independence, and by Transparency International’s reckoning, Tymoshenko’s was bad but hardly the worst:

Rubenstein Public Relations

Any serious attack on corruption must investigate all or none of Ukraine’s post-Soviet leaders, says Taras Kuzio, a Ukraine expert at Johns Hopkins University. “If you believe that only one of the 14 governments since 1991 is corrupt, you probably still believe in Santa Claus,” he told me. “You can review all 14 governments, or draw a line under what happened and say that from now on we follow the rule of law. But [the current investigation] is a parody.”

Then there are the investigators themselves: The legal team Yanukovich’s government assembled to prepare the report is composed mostly of American heavy-hitters with reputations for fixing big PR problems. Plato Cacheris is a high-profile defense attorney who has represented Aldrich Ames and Monica Lewinsky. Mark MacDougall, a partner at the top-tier law firm Akin, Gump, Strauss, Hauer & Feld, was once dubbed “The Cleaner” by the American Lawyer magazine for his self-styled specialty of “reputational recovery,” or aggressively pursuing retractions from journalists and scholars who write unflattering copy about various of the world’s oligarchs and corporations. Kroll Associates is a storied New York investigative firm that in 2001 successfully absolved former Ukraine President Leonid Kuchma of complicity in the decapitation of a journalist named Giorgiy Gongadze.

This lineup, and not the results of what the Wall Street Journal reports is a $2 million investigation so far, is at risk of becoming the story. Mary Jacoby of Main Justice, a legal industry website, reported in a recent headline (subscription required): “Akin Gump lawyer becomes issue in Ukrainian corruption probe he led.” Jacoby was referring to MacDougall.

So how do we look at the investigation, and the investigators? I emailed Paul D’Anieri, a Ukraine scholar and dean of the college of liberal arts and sciences at the University of Florida. He responded: 

Is the investigation biased? I think that’s pretty obvious. Until Yanukovich empowers someone to investigate his administration, and others, this is blatantly political. Are the U.S. investigators inserting themselves into Ukrainian politics? Yes. They have been hired (and are being well paid) to advance the interests of their client, and that is what they are doing. Even if the U.S. firms are being completely “objective,” the time period for investigation and the issues to be investigated were selected by the Ukrainian government. This is meant to produce an incomplete portrayal, and the U.S. firms are fully aware of it. For example, they weren’t asked to look into transactions in Donetsk Oblast, where Yanukovich’s Party of Regions has been in power continuously. Nor were they asked about the period when Yanukovich was prime minister. If you let the entity being investigated dictate the scope of the investigation, you cannot make any serious claim of objectivity.