Former Ukranian leader Lazarenko sentenced
in San Francisco

By Julia Cheever, Bay City News Service

August 25, 2006

SAN FRANCISCO (BCN) - A former prime minister of Ukraine was sentenced by a federal judge in San Francisco today to nine years in prison and fined $10 million for laundering millions of dollars in extortion funds through U.S. banks.

U.S. District Judge Martin Jenkins said "a significant sentence is appropriate" for Pavel Lazarenko, 53, because of his "utilization of the financial system of this country to conceal ill-gotten gains."

Lazarenko was prime minister -- the second-highest position in Ukraine -- in 1996 and 1997.

He was convicted by a jury in Jenkins' court in 2004 of 14 counts of laundering $21.7 million through American banks, money laundering conspiracy, wire fraud and transfer of stolen funds.

Prosecutors said he obtained the funds through extortion and kickbacks while holding a series of Ukrainian government posts in the 1990s. Lazarenko fled to the United States in 1999.

Prosecutors said the 14 counts concerned a total of $44 million in illegally gained funds, including $30 million extorted from former Ukrainian businessman Peter Kiritchenko and $14 million skimmed off from Naukovy State Farm, a state-owned dairy farm.

The unusual trial required prosecutors to prove both that the money laundering, fraud and stolen property transfers took place in violation of American law and that the money was gained illegally under Ukrainian law in effect at the time.

Lazarenko is only the second former foreign leader to be prosecuted in a U.S. court.

The other was deposed Gen. Manuel Noriega of Panama, who was sentenced in federal court in Miami in 1992 to 30 years in prison for cocaine trafficking. U.S. Attorney Kevin V. Ryan said after Lazarenko's sentencing, "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 gains," Ryan said.

Defense attorney Doron Weinberg said that if the conviction were upheld, he would consider the sentence fair, but said Lazarenko's lawyers expect the conviction to be overturned on appeal.

"We believe no American crime was committed," Weinberg said. "We expect that will be the result on appeal and so we expect the conviction will be set aside."

Defense attorneys argued during the trial that Lazarenko gained his wealth legally through business deals during a tumultuous time in the early 1990s as the former Soviet republic moved from a Communist to a capitalist economy.

Weinberg said that Lazarenko is likely to serve only three and one-half to five years in prison, with credit for previous time in jail and for good behavior.

Defense attorneys had suggested a sentence of a little more than four years, while prosecutors, charging he "engaged in massive abuse of both his public office and the United States' financial system," urged the judge to impose a penalty of more than 19 years.

Last fall, Lazarenko told a Ukrainian television interviewer he had cleared his name in the U.S. courts and in March, he was elected in absentia to a regional parliament in Dnepropetrovsk, according to the government brief, which accused him of "an ongoing refusal to accept any responsibility for his criminal activities."

Jenkins scheduled a further hearing for Sept. 29 to consider the government's bid for forfeiture of $22.8 million in money laundering proceeds and a request by Kiritchenko for $17.3 million in restitution. Kiritchenko, who pleaded guilty to a felony charge and became a prosecution witness against Lazarenko, is awaiting sentencing.

The forfeiture request includes $21.7 million in money laundering proceeds plus another $1.2 million for an increase in value of a Novato house Lazarenko bought with some of the proceeds in 1998.

Lazarenko bought the house, which once belonged to actor Eddie Murphy, for $6.7 million, but it was re-appraised at $7.9 million this spring, according to a prosecution brief.

Jenkins will also consider on Sept. 29 Lazarenko's motion for release on bail while he appeals.

Lazarenko has been on home detention at an undisclosed location on an $86 million bond since 2003 and is paying for the costs of a security task force to maintain the house arrest.

Lazarenko was originally convicted of a total of 29 counts, but last year, the judge dismissed 15 counts of wire fraud and transfer of stolen property, saying there wasn't enough evidence for those convictions.

Earlier, midway through the 2004 trial, the judge dismissed 24 other counts related to alleged kickbacks on a natural gas distribution contract and a housing enterprise.

The two actions together left only 14 counts in place from a 53-count indictment filed against Lazarenko in 2000.

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