Audit claims Ukrainian officials misspent millions

AP News
Posted: Oct 14, 2010 10:56 AM
Audit claims Ukrainian officials misspent millions

President Viktor Yanukovych's government lashed out at his predecessor Thursday, publishing an audit that claimed former Prime Minister Yulia Tymoshenko's Cabinet had misappropriated hundreds of millions of dollars.

The allegations pit Tymoshenko, one of the driving forces behind the 2004 pro-democracy Orange protests, against the pro-Russian Yanukovych, the man whose fraud-tainted presidential victory that year she helped to invalidate. A fractious Orange coalition then ruled until Yanukovych returned to power by winning the 2010 vote.

Tymoshenko's allies denounced the study by three U.S.-based firms, calling it part of a government crackdown on the opposition. They also charged the auditors were biased, saying one has previously represented Yanukovych's financial backers.

The study conducted by two law firms and one forensic auditing company claimed that Tymoshenko's government committed fraud and resorted to "classic international money laundering mechanisms" while buying sugar, vaccines, importing expensive foreign cars and even selling carbon credits to other countries.

The audit by Trout Cacheris PLLC, Akin Gump Strauss Hauer&Feld LLP and Kroll Inc., which covered the period from 2008 to the beginning of this year, claimed that Tymoshenko's Cabinet spent $140 million (euro101 million) on German minivans for alleged medical use by the Health Ministry that were later used in Tymoshenko's mobile campaign advertisements.

It also said the former Ukrainian government misappropriated some $280 million (euro200 million) that was received for the sale of carbon credits as part of the Kyoto protocol. That money was used by the country's Pension Fund, which was strapped for cash amid a severe recession, the audit said.

In addition, the study claimed that Tymoshenko's government misspent $24 million (euro17 million) on sugar that was never delivered to Ukraine, and misappropriated $44 million (euro32 million) while importing vaccines and medical equipment.

"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 auditors said in a statement. "We have gathered powerful circumstantial evidence of conduct that is not typical of honest officials and business people."

Speaking during a trip to Lithuania, Yanukovych said it was time that corrupt officials were brought to justice.

He vowed to make sure that "the Ukrainian people know their quote unquote heroes have been robbing the country for years and have also been destroying the democratic principles of its development," according to the Interfax news agency.

Tymoshenko's top aide Hrihoriy Nemyria denounced the audit as a "witch hunt of the opposition." Since Yanukovych took power, a number of former officials who worked in Tymoshenko's government have been investigated, questioned and one has been jailed.

"We denounce these findings. They are obviously politically motivated," Nemyria told The Associated Press.

He would not comment on the specific accusations, saying he hasn't read the report yet, but said the previous government committed no wrongdoing.

Nemyria charged that Akin Gump should not have been allowed to conduct the audit because it represented financial backers of Yanukovych's party in the past. Mark MacDougall, partner at Akin Gump, denied there was any conflict of interest, but would not comment on the claim that his firm had represented businessmen loyal to Yanukovych.

The firms declined to say how much they were paid for the audit. Plato Cacheris of Trout Cacheris only said the companies received "much less than was stolen."

A senior Ukrainian government official speaking on condition of anonymity said the audit cost the state $2 million (euro1.4 million). The official was not authorized to discuss the issue publicly with the media.

The firms said the Ukrainian government has already filed two lawsuits based on the results of the audit _ one in the United States and one in Britain _ against companies they say helped launder money.

Yanukovych's government says it intends to use the audit's findings to get back the money that was misspent.