Ukrayinska Pravda exposes president’s Mezhygirya deal

The president of Ukraine is only elected for five years, but a tradition is developing that lets the highest officeholders keep their luxurious state residences long after they leave office – perhaps for life. And many don’t like it, citing the sweetheart – if not scandalous – means of presidential acquisition.

President Viktor Yanukovych, for example, shows no intention of moving out of Mezhygirya state residence near Kyiv, even as critics accuse him of illegally obtaining the mansion and use of the 140 surrounding hectares of land.
During Soviet times, Mezhygirya mansion was owned by the Central Committee of the Communist Party. After the collapse of the U.S.S.R., foreign delegations used the place.

But when Yanukovych became prime minister for the first time in 2002, the status of the mansion was changed from “state residence” to “state dacha.” In 2003, Yanukovych’s Donetsk-based charity fund Revival of Ukraine (Vidrodzhennya Ukrayiny) rented the house and the land around it.

According to the Internet paper Ukrayinska Pravda, which has extensively investigated the case, Yanukovych paid a much lower rental fee than the market price – Hr 107,000 annually, or less than $2,000 monthly. In 2005, a court cancelled the rental agreement.

But after Yanukovych took over the prime minister’s office for the second time in 2004, another court dismissed the previous legal decision and the mansion went back to Yanukovych.

Renting, however, is not as good as owning. In 2007, Mezhygirya was put up for sale with no competititive bidding, which is required in such cases. It was snapped up by the Donetsk-based company Medinvest Trade, which quickly sold it to another company, Tantalit.

Due to the nation’s moratorium on land sales, Tantalit rented the estate’s property from the Vyshhorod district administration. According to Ukrayinska Pravda, citing the rental agreement, the rental fee of 192 hectares of land was Hr 626,645 per year – or just Hr 4 per acre – extremely low for land near Kyiv.

Yanukovych has confirmed that he bought the house but did not reveal the price he paid. “First I rented that house, then the rental price started to rise rapidly and I decided to buy the house. The price was very serious; I even had to sell my flats in Donetsk and Kyiv. I do not own the land though, there is another owner who is currently investing in the mansion’s development,” Yanukovych said last year.

However, according to documents cited by Ukrayinska Pravda, Yanukovych might have a lot to do with land owners. One of founders of Tantalit is Pavlo Lytovchenko, who worked for Yanukovych for years. Another founder is a mysterious Austrian company.

It’s complicated, but here is the trail cited by Ukrayinska Pravda: Tantalit was founded by Austrian company Euro East Beteiligungs GmbH. This company reportedly owns shares of London-based company Blythe (Europa) Ltd. According to Companies House in Britain, the firm has one employee – its director Reinhard Proksch.

A similar land scandal occurred over Yanukovych’s favorite hunting place, a forest next to the small village of Suholuchya near Kyiv.

The forest used to be in state possession. But through a transfer similar to Mezhygirya in 2007, during Yanukovych’s second tour as prime minister, the estate was put under the State Forest Agency and then transferred to the private company Dim Lisnyka. This company was founded by close Yanukovych allies – Energy Minister Yuriy Boyko and two regional governors, Serhiy Tulub and Volodymyr Demishkan.

But they are not the only owners. Here is where the mysterious Reinhard Proksch appears again.

Astute Partners Ltd., which is the founder of Dim Lisnika, is registered to the same address in London of Blythe (Europa) Ltd. and has only employee – head of the company Reinhard Proksch, a trustee employed by people who do not want to be identified as owners of the business, Ukrayinska Pravda found. According to experts, this is a classic scheme to cover people’s tracks and muddy the waters, fueling corruption through non-transparent deals. Ukrainian politicians frequently try to cover their tracks by hiding their business deals behind Western fronts.

Serhiy Leshchenko, the journalist from Ukrayinska Pravda who exposed the property transfers, said none of the companies involved would comment to him. “I sent journalist requests to Tantalit, to Mezhygirya, asked numerous pro-presidential party members, but I have never heard back. My e-mails to those foreign ‘owners’ went ignored as well,” Leshchenko said.

Ex-Prime Minister Yulia Tymoshenko asked for an investigation, but the general prosecutor found the deal clean. And that decision provided politicians with the cover they needed.

“After the conclusion of the general prosecutor, there is nothing to comment on Mezhygirya – there was no law violation there,” said deputy head of Kyiv region’s land committee Yuriy Vyazmitinov. According to him, the Dim Lisnyka deal is also clear – there are no law violations there either.

Yanukovych, however, is not alone among presidents in creating a soft nest. First Ukrainian President Leonid Kravchuk, who held the post from 1991-1994, lives in a state-owned house in the elite Koncha Zaspa suburb.
Ex-President Leonid Kuchma, whose corrupt and authoritarian reign lasted from 1994-2005, is also in a state-owned dacha in Koncha Zaspa.

When Tymoshenko became prime minister in 2005, she cancelled Kuchma’s permission to occupy the mansion. But in 2007, when Yanukovych returned to the post, her decision was reversed.

Ex-president Viktor Yushchenko is still living in a state-owned dacha in Koncha Zaspa. He owns two houses in Novi Bezradychi village, but has indicated that he is happy to stay put if his successor lets him. Many think there has been a tradeoff between the two men.

Political expert Vadym Karasyov, close to Yuhshchenko, sees “no politics in the Mezhygirya case and no politics in the fact that Yushchenko still lives in a governmental estate. It is not against the law and if there are any questions they should be answered by the general prosecutor or the courts” – two institutions widely distrusted for ineffectiveness and corruption.

Political analyst Volodymyr Fesenko said kindness to heads of states is a Soviet hangover: “This is what we have left from the Soviet Union, where most top government members held their dachas for lifetime. Of course, this is not the case in any civilized country. Partly because of that, we are also among countries with the highest number of state residences.”

Fesenko sees the passage of a clear law on presidential entitlements as the only solution.

Kyiv lawyer Tetyana Montyan, who specializes in land cases, said the country needs to start an open registration list of land that publicly documents properties and transfers. “Land deals are closed businesses in Ukraine. Nobody knows who the real owners are,” she said. “We have to do as all civilized countries do and open registration files and cadastres, including details of ownership, tenure, and value of every land parcel.”

Fesenko noted how the “situation with Mezhygirya came to a full stop after the general prosecutor’s decision [that no law was broken]. Of course, the opposition will continue to develop this topic, but I seriously doubt there will be any other investigation.”

According to the rental agreement, Tantalit has the right to buy the land in Mezhygirya. Experts expect a deal when the media spotlight dims.

Tantalit is already starting to develop the territory and starting to build a yacht club, a golf course and a horse stable. According to the construction documents, these amenities will be part of the “recreational business” of Tantalit – and perhaps mostly for the benefit of one very powerful person and his friends.

Kyiv Post staff writer Svitlana Tuchynska can be reached at tuchynska@kyivpost.com.