Updated: September 23, 2020 9:13:44 am
A former Member of Parliament, a bank in Cyprus, a US Department of Justice indictment and an auto start-up in Gurugram figure in an investigative memorandum on a Ukrainian businessman, prepared in August 2017 by the Financial Crimes Enforcement Network (FinCEN), the US regulatory agency for enforcing money laundering laws.
The memorandum on Dmytro Firtash and people allegedly linked to him, including former Kiev mayor Leonid Chernovetskyi and his son Stepan Chernovetskyi, was based on 40 suspicious activity reports (SARs) submitted by banks that included JP Morgan Chase Bank, Standard Chartered, Deutsche Bank Trust Company Americas and Citibank in the US, records investigated by The Indian Express show.
In 2013, Firtash and five others were indicted by the US Department of Justice (DOJ) for allegedly conspiring to pay at least $18.5 million in bribes to government officials to secure licences for mining minerals in Andhra Pradesh from 2006.
Others indicted with Firtash, who was charged with violating the Foreign Corrupt Practices Act (FCPA), were KVP Ramachandra Rao, a close advisor of former Chief Minister YS Rajasekhara Reddy and later a Congress Rajya Sabha member; Andras Knopp, a Hungarian businessman; Suren Gevorgyan of Ukraine; Gajendra Lal, an Indian national and permanent resident of the US; and, Periyasamy Sunderalingam of Sri Lanka.
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The mining project was expected to generate more than $500 million annually from the sale of titanium products.
According to the indictment, bribes were concealed and transferred through Firtash controlled-Group DF Ltd to various entities using financial institutions in the US.
“Firtash also allegedly directed his subordinates to create documents to make it falsely appear that money transferred for the purpose of paying these bribes was transferred for legitimate commercial purposes, and he appointed various subordinates to oversee efforts to obtain the licenses through bribery,” the DOJ said.
Also in FinCEN Files | On US radar: India links of Dubai gold major flagged by anti-drugs task force
The SARs collated by FinCEN flagged transactions worth $0.80 million by Firtash’s Swiss firm Bothli Trade AG to KVP Ramachandra Rao and Romtex Co Limited at a bank in Cyprus between May 2007 and February 2009.
In April 2006, Bothli Trade and the Andhra Pradesh government set up a joint venture to mine ilmenite, a mineral which can be processed into titanium sponge. According to the US indictment, Bothli Trade was one of the firms that was used to transfer funds to several entities for alleged payment of bribes to Indian officials.
In an email response to The Indian Express, KVP Ramachandra Rao said: “I never received any money from any Company including M/s Bothli Trade AG. Further, I never had any Bank Account in any Foreign Bank or a Bank Account in any Foreign Country till today in my life. Factually, I too came to know about these alleged transactions through Press Reports after the Indictment was made public. I have no role whatsoever in either granting licenses for mining in Andhra Pradesh or in these alleged transactions. I can firmly say that inclusion of my name in the said indictment was based on misconception of facts, false allegations and fabricated reports.”
There’s another transaction involving Stepan Chernovetskyi that has an India link. FinCEN flagged two wires of $1.1 million from Cyprus-based Rionole Holdings Limited to Gurugram-based auto start-up Creative Webmedia Pvt Ltd in 2016. The ultimate beneficial owner of Rionole Holdings was Stepan Chernovetskyi, the report stated.
It said the wires were sent from Bank of Cyprus to HDFC Bank in India. Bank of Cyprus closed the account of Rionole Holdings following adverse media reports on Stepan Chernovetskyi.
In July 2016, Spanish police arrested Stepan Chernovetskyi and 10 others for allegedly laundering $11 million through purchase of local property. Police alleged that Firtash operated through the 11 accused to funnel funds from offshore accounts in Cyprus and the British Virgin Islands into Spanish property purchases.
Chernovetskyi, who denied the allegations, was released on bail. Subsequently, a Spanish court demanded the extradition of Firtash in the case. Chernovetskyi appealed in a Spanish court to close the investigation against him and the ruling was in his favour.
In India, Creative Webmedia runs a digital platform to buy and sell cars. According to RoC records, Stepan Chernovetskyi is the majority shareholder of Creative Webmedia, set up in December 2012. He invested about Rs 85 crore in the auto start-up until September 2019, records show. For financial year 2019, the company booked a loss of Rs 13.79 crore, while its income from operations was Rs 10.86 crore.
HDFC Bank declined to comment. The official spokesperson for the Chernovetskyi Investment Group said: “All information about our companies required by law to be in a public domain is there…We do not comment or disclose any commercial and bank information related to our companies and our partners due to the confidentiality restrictions.”
Firtash, who was linked to Paul Manafort, former campaign manager of US President Donald Trump, was arrested in Vienna in March 2014. He is currently under house arrest in Austria and fighting extradition to the US.
Dan K Webb, attorney of Firtash, said: “SARs are confidential, may not be disclosed by a financial institution, and may not be disclosed to a person that is allegedly the subject of a SAR. As a result, Mr. Firtash and his representatives will not engage in any correspondence with you that is in any way reliant on the unlawful and criminal disclosure of SARs and thus will not respond to the questions in your letter.”
Incidentally, India is yet to order an investigation into the titanium mining bribery scandal.
Following the DOJ indictment, the National Crime Bureau of US issued a red notice in 2014 against KVP Ramchandra Rao through Interpol and sent a request to the CBI for provisional arrest of Rao.
Rao moved the Andhra Pradesh High Court, which granted a stay on coercive action from the state police in the case in April 2014. The court also asked the CBI and the central government to file affidavits in the case — the case has not made headway ever since. That same year, the Andhra Pradesh government scrapped the mining project and withdrew all permissions granted to the joint venture firm.
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