Fined $10 Million for Role in Laundering $44 Million From Ukranian C…

Fined $10 Million for Role in Laundering $44 Million From Ukranian Citizens Through Extortion and Fraud

SAN FRANCISCO – LAWFUEL – Press Release Service – United States Attorney Kevin V. Ryan announced that Pavel Lazarenko, a former Ukrainian Prime Minister, was sentenced today to nine years imprisonment and ordered to pay a $10 million fine for extorting over $40 million dollars from Ukranian citizens and laundering over $20 million through American banks. Pavel Lazarenko, 53, of Dnepropetrovsk, Ukraine, stands convicted of one count of conspiracy to launder money, seven counts of money laundering, five counts of wire fraud, and one count of interstate transportation of stolen property. The sentencing proceedings are on-going, and the Court will address the United States’ request for $22,846,00 in forfeiture and the victim’s restitution claims on September 29, 2006, at 2:30 p.m. and August 31, 2006, at 9:00 a.m. respectively.

This sentence is the result of a six-year investigation led by agents of the Federal Bureau of Investigation and Internal Revenue Service-Criminal Investigation. This is the second time that a head of state from another country has been sentenced in the United States.

U.S. Attorney Kevin V. Ryan stated, “As we explained to the Court, Pavel Lazarenko misused his office to steal tens of millions of dollars for himself at the expense of the Ukrainian people and then sought to use the United States, and its banking system, as a safe haven to escape from the crimes he committed in Ukraine, Switzerland, and elsewhere. The defendant’s crimes lasted for over seven years, and resulted in a $44 million loss to Ukrainian citizens and the laundering of over $21 million through the American banking system. As this case shows, we will persevere and obtain convictions and lengthy sentences for corrupt public officials – even if they are from foreign countries – especially when they abuse the American banking system to conceal their ill-gotten gains. I thank IRS- Criminal Investigation and the FBI for their commitment and outstanding work on this case.”

According to court filings, throughout the 1990s, the defendant engaged in a massive abuse of both his public office and the United States’ financial system. As Ukraine emerged as an independent country, the defendant took advantage – through extortion and fraud – to enrich himself and conceal $44 million of ill-gotten gains through a maze of offshore accounts, in violation of both Ukrainian and federal law. According to the government’s sentencing memorandum, the money laundering conspiracy lasted from January 1992 through June 1999.

Court filings state that as part of his scheme, Lazarenko controlled and directed others to open accounts and transfer funds multiple times through offshore banks to conceal his ill-gotten gains. Court filings further state that individuals further helped Lazarenko in obtaining Panamanian travel documents that allowed him to travel outside Ukraine without obtaining visas. The defendant also laundered funds through a sham company, called Dugsbury, to acquire a house worth over $6 million at 100 Obertz Lane in Marin County, California.

IRS Special Agent in Charge, Roger L. Wirth said, “IRS Criminal Investigation’s expertise in conducting financial investigations is well suited to identifying and investigating the corrupt actions of public officials. Those individuals who chose to violate the public trust can expect to be investigated, prosecuted and sent to prison.”

During the trial, evidence showed that Mr. Lazarenko, committed various acts of extortion and fraud, including the extortion of a Ukrainian businessman and the defrauding of Naukovy State Farm, a Ukrainian state-owned enterprise. Mr. Lazarenko concealed the source and his receipt of these funds and falsely understated his income and assets to the people of Ukraine for 1996 and 1997. The defendant then transferred millions of dollars of ill-gotten gains through coded accounts at banks in Switzerland, Antigua, and ultimately into bank accounts and property in the United States.

FBI Acting Special Agent in Charge Arhur Balizan stated, “This sentence is a successful resolution to an investigation that has spanned many years and involved many complex crimes which were committed in numerous countries. This is another example of a successful outcome based on working closely with our law enforcement partners to expose complex criminal acts.”

The defendant was charged with illegally extorting $30 million from a Ukranian businessman and illegally obtaining $14 million from a farm owned by the state. The evidence at trial showed that Mr. Lazarenko told the businessman that he worked “50/50” with everyone. The businessman, Peter Kirichenko (who has pleaded guilty to one count of interstate transportation of stolen property), understood from the conversation that in order to operate in the Ukraine, he would have to provide 50 percent of the profits from the business and a 50 percent ownership interest in the company to Lazarenko. Lazarenko then laundered the funds through a series of bank accounts, including various banks in the Bay Area such as Commercial Bank, Pacific Bank, Bank of America, WestAmerica Bank and others.

Mr. Lazarenko was convicted on June 3, 2004 by a federal jury after a ten-and-a-half week jury trial. The jury convicted the defendant of 29 counts of money laundering, wire fraud, and interstate transportation of stolen property. For further details on the jury conviction, see the June 3, 2004 press release. On May 20, 2005, United States District Judge Martin J. Jenkins issued an order affirming the conviction of Mr. Lazarenko on 14 counts. The court affirmed the convictions with respect to all of the money laundering counts, including the money laundering conspiracy, as well as certain counts of wire fraud and interstate transportation of stolen property. The court also dismissed certain counts and denied Mr. Lazarenko’s motion for a new trial. For further details on the court’s order, see the May 20, 2005 press release.

Mr. Lazarenko arrived in the United States in February 1999 and was indicted by a federal grand jury on May 18, 2000, on charges of conspiracy to launder money, money laundering, wire fraud and interstate transportation of stolen property.

The sentence was handed down by U.S. District Court Judge Jenkins following the court’s order affirming the jury’s conviction of Mr. Lazarenko on fourteen counts: one count of money laundering conspiracy, seven counts of money laundering, in violation of 18 U.S.C. § 1956; five counts of wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346; and one count of interstate transportation of stolen property, in violation of 18 U.S.C. § 2314. Judge Jenkins also sentenced the defendant to a three year period of supervised release. The Court will hold a status conference regarding restitution August 31, 2006, at 9:00 a.m., and will address the United States’ application for forfeiture on September 29, 2006, at 2:30 p.m.

Assistant U.S. Attorney Peter Axelrod is prosecuting the case with the assistance of legal assistants Christine Tian and Mae Chu. The Department of Justice Organized Crime and Racketeering Section supported the prosecution. Stephanie Hinds and Patty Kenny are handling the forfeiture actions on the case with the assistance of legal assistants Alicia Chin and Carolyn Jusay.

Further Information:

A copy of this press release and related court filings may be found on the U.S. Attorney’s Office’s website at www.usdoj.gov/usao/can.

Electronic court filings and further procedural and docket information are available at https://ecf.cand.uscourts.gov/cgi-bin/login.pl.

Judges’ calendars with schedules for upcoming court hearings can be viewed on the court’s website at www.cand.uscourts.gov.

All press inquiries to the U.S. Attorney’s Office should be directed to Luke Macaulay at (415) 436-6757 or by email at [email protected]

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