Accused money launderers left a path of bankrupt factories
newsinteractive.post-gazette.com
newsinteractive.post-gazette.com
Managers and employees think they're getting a lifeline. In reality they're getting a new owner who cares very little about the long-term health of the operation and the safety and well-being of its employees.
The new owner will use financial engineering to extract as much cash as possible while cutting capital expenditures as much as possible. Eventually, the business will have no choice but to file for bankruptcy. Along the way, all cash paid out of the business will have been legitimized.
Employees and towns suffer the consequences. Ugly and sad.
Welcome to London.
people think “money laundering” is hard or impossible and will point to articles like this one as “see they got caught”
it is completely unfalsifiable when the reality is that money is fungible and it is a complete waste of resources to try to enforce a whitelist
it isn't necessary to have no evidence of the money, but that is also possible too but wasnt necessary here or in most areas of reintegration
the whole economy has practically no separation from licit and illicit sources and they routinely traverse back and forth
Might happen eventually if governments move to centralized digital currencies though.
I think it’s a crime that attracts folks of all kinds. It’s a good business, you don’t “hurt” anyone besides the government, very quiet, sex, money, etc. The bad shit is where the money comes from.
Speculation being that investments in economy are perceived as a very good thing and the origin of the money is not checked that tightly.
Because it is indistinguishable
UK territories (or whatever you want to call them) don't have the geopolitical baggage that larger economic unions do, so they are good intermediaries with laws that are more relevant for business in the 21st century
Of course the counter is these UK territories will be too useful for the corrupt politicians for them to want to ban.... Much like Switzerland.
If a country pisses off the EU, for example by applying sanctions to one of its member states, the EU can reply "fine, we won't trade with you". This is a credible threat because the EU has a large share of the world economy.
The UK could also threaten to not trade with a country, but this is a much smaller threat as the UK is a much smaller part of the world economy.
In geopolitics, size matters: https://pontifex.substack.com/p/why-scotland-should-leave-th...
Remember the British Commonwealth is quite large with Canada, Australia, India, South Africa, etc. These create special relationships that don't exist with the EU.
Banning all UK entities, means cutting off all of the Hong Kong relationships, many commonwealth relationships, anglo countries.
As important as the EU relationship is. The Anglo alliance of countries holds the true power and it has been this way since WWII.
I wonder which of these "too big to fail" statements will end up being the one that actually kills the global economy.
https://fair.org/home/russia-has-oligarchs-the-us-has-busine...
the scope and type of available power is what distinguishes oligarchs from mere rich businessmen. In that particular case the Kolomoisky dukedom happened to be right next to the insurgency and he, like it were the actual feudal times, had to "raise the fyrd" so to speak to protect his dukedom and the whole kingdom by extension - his forces were among the key ones who blocked the insurgency from expanding further in the first months when the Ukrainian state and army were kind of in disarray.
https://www.nationofchange.org/2016/11/01/security-firm-runn...
Imagine someone buying a new BMW M5 car on finance. Later, this guy claims that his car got stolen, gets a check from the Insurance company. Further, he uses this money as a down payment to buy a home in Texas. Do we call this "laundering"? I don't think so, since this money is traceable; neither placement, nor layering is involved. Yes, he schemed with his buddies to have his new car stolen, taken to Mexico. He can be prosecuted for his involvement in the theft, not for "money laundering".
An actual business with a factory is going to look like pretty good collateral to a bank making a loan, but the bank loses money on the loan when the company goes bankrupt. It’s not in the bank’s interest to do this. But bank employees could’ve been bribed, sure.
So this sounds like a form of “long firm fraud” or maybe “control fraud.” For more about it, I recommend reading Lying for Money: How Legendary Frauds Reveal the Workings of Our World.
(Not that I’m an expert; I just read a book.)
So, it is a form of collusion between bank executives and powerful loanees. Who holds the bag? Usually the government in the Indian case: for instance, Indian govt has 61.23% ownership in State Bank of India, a large bank in India. In India, many politicians are also businessmen--real or fake; these people with dual masks (politician and businessman) are so good at scamming the govt, banks, public works contracts.
Awarding government contracts to companies owned by relatives and political allies is another way though that's more easily detected.
As someone whoes family is in banking, it's not a low level employees at bank who is bribed. High level executive at a bank is pressured into passing a loan for a project which otherwise wouldn't pass bank's strict loan approval in return sometimes the high level executive will be offered financial favours when he would have retired
Sometimes the high level executive would have sent his son or daughter to US or UK for studies and suddenly they turn millionaire and banker claims they made good business there but infact it's the money laundered to UK from India, ending up in their foreign bank accounts
Modern scheme in India:
1. Get citizens excited about new infra projects using tons of advertisements, and propoganda YouTube channels
2. Open a tender for the project
3. Pass on the bids to your favourable "company"
4. Now this favourable company puts in the winning bid and wins
5. Favourable company sends money to the political party through electoral bond
6. favourable company which is now a contractor on infra projects is forced to accept subcontractors who are usually acting as fronts and belong to family members of the politicians. These subcontracting firms either outsource the real work or they get into brand/asset building with public money.
This scheme works really well as they are skeaming off 20% of the project budget through various contractor companies and general public has no way to figure out anything.
However, if one wants to pull off 2000 crores ($300M USD) scam, it is done through banks. Here are two recent examples from the state of Andhra Pradesh: 1. Rayapati Sambasiva Rao, Ex MP 8000 Cr (1B USD) 2. Sujana Chowdary, MP, 5700 Cr (750M USD)
Add scams that are in the range < 100M USD.
Prices are typically very stable, and they will notify of predicted significant price changes months in advance. We got notifications late last year of predicted price changes throughout the first half of 2021.
The worrying thing is that the West gave international legitimacy to these wealthy elites, while only pointing fingers at the endemic corruption in their countries.
Wouldn't it be quite difficult to prevent foreign money being laundered in some other country? I would guess verifying whether the money is legit coming from some weird foreign jurisdictions is probably quite difficult. The only way to work around that would probably reject all customers who are sending money from there.
Basically there's another very rich black market that won't be stopped easily.
In Post Soviet Countries challenging the Oligarchs is like asking for a death sentence. What is required is a Western effort to go after these Crooks helping the elected Government to implement a system that can be trusted.
The thing is, if you want to do something about them, you're going to need to use a lot of violence - because those people will happily use violence against you.
Most people aren't interested in a starting a war, and would rather keep their heads down, and mind their own business.
A good friend of mine once worked for a small software shop that was building some accounting software for power plants. When the project was almost done, the mafia guys in charge were reviewing it. The realized that if it was actually used, it would be waaay to revealing. The project got canceled immediately. With a clause to “stay quiet or else”...
And a couple of years back the government was trying to “crack down” on the gray economy. They released an app, that you could scan a receipt (from grocery shops, restaurants, everywhere really) and verify that the establishment has indeed paid its tax and has registered the transaction with the tax office.
However people “in the know” got access to a special api. When the verification is taking place there is actually a web hook being sent, which you can register for. And pay your tax “on demand” only when someone actually wants to verify it.
As far as I am aware this system is still in place today... Though its too esoteric to explain to the public so nobody really cares it seams. The public is like “sure government is crooked, like what else is new” :(
This is a use case for Bitcoin/crypto I hadn’t previously thought of. The public auditability is exactly the reason I don’t think it’s good for citizen use cases, but it seems perfect for government use cases. There’s an issue of how revenues get accurately added to the ledger, but tying a transaction to say an ID generated when a return is submitted would make it possible to track one’s own payment.
Not the case with Kolomoisky, who was not involved with state security. Generally, Ukrainian oligarchs do not come from state security background.
That this scheme was even considered seems like a more general enddictment of the history of US corporate and industrial regulatory oversight... Just put it on the wall next to the SEC and Wall Street, with highlights on Bernie Madoff and the subprime mortgage crisis.
Kolomoyskyi is just a smart shark without security or criminal background, Akhmetov has criminal background (Donetsk region), Pinchuk is related to former President Kuchma (indirect Communist party background), Poroshenko has Communist party background, Firtash is a frontman for criminal organization (mastermind fled from Hungary to Moscow).
The whole Western commitment to anticorruption is on display on Mayfair street in London.
This is a bit of an understatement. If Mayfair is not the most expensive neighborhood in the world, it's close. A large number of the residents of Mayfair are former soviet state security who became oligarchs with the money to live there by pillaging their country then funneling that cash to the west with the aid of western banks including British banks.
Business outside of 'established rich places' may often include huge sums for bribery and that money comes back in many ways, including 'very expensive real estate in NY / London' etc. and Dubai is becoming a major centre of such activity. [1]
The question is, how long can Dubai balance it's claims to legitimacy and integrity, while at the same time looking the other way? Will nascent powers like India and China even care? It's going to be an interesting next 50 years.
[1] https://www.transparency.org/en/news/the-united-arab-emirate...
Carry over from the massive corruption created from handing control over the entire population to the state bureaucracy, in the name of creating a non-exploitive communist economy.
Local news is critical for reasons I hope I don't need to explain here, as are investigative departments that dig in deep and uncover things like this. The PG (IIRC) got a Pulitzer for their work on the Penn State/Jerry Sandusky scandal some years back and it makes me proud to see them still doings like this, the Block family be damned.
Interesting how the article shows how this translates to destruction of capital assets and, eventually, people. That’s not necessarily clear otherwise.
So basically we let foreigners buy our land.
They can't live in the house/building, but they control the people whom do.
We make it difficult for hard working Americans to buy a home, but let foreigners scoop it up with funny money?
This has bothered me for years. Especially when it's not easy for Americans to buy foreign land.
(Supposedly the government asks about the origin of the wealth before the sale now, but in my county (Marin County) it looks fishy. I have neighbors who don't speak a lick of english, but are living in mansions. My gripe isn't cultural. I just have doubts on the origin of the cash they buy houses/land/buildings with.)
That becomes an issue if you want to later sell to a local, but if it's unaffordable to locals, who cares.
Might be a non-issue if there's a tax-treaty reduction on withholding if the US was dumb enough to sign one with a tax haven (Canada does with Barbados and Bermuda) and you form the corp there.
Not a lawyer/US resident/citizen.
Although, they did just increase investment amounts to $1.8M (and $900k for economically disadvantaged areas) from $1M/$500k, so the bar did get higher.
https://www.uscis.gov/working-in-the-united-states/permanent...
Especially "foreigners are buying homes to leave them vacant" is not a real thing - that does nothing except lose them money.
Gold is valuable because you can't just survey and frame up more of it. And real estate starts functioning like that when you can't survey and frame up more in an area.
A vacant home has made good money in any desirable area, for the past 10 years anyway.
Launderers with tainted money buy struggling businesses that have large assets as collateral for loans, and then walk away with the loan. It leaves the bank holding the asset to be sold off.
From the launderer's value at risk perspective, $10m in dirty money is worth probably $5m or less clean, because if you taxed that $10m and did all the fees, and then there is the risk of being caught for the crime that generated it, 50% free and clear seems pretty good.
The more I learn about the investment business, the more I think it's like crime without the violence. The money laundering problem in Canada is most obvious by the oversupply of certain retail businesses, but there are other scams I see on investment prospectuses more often than seems normal. The two problems I think is a lot of the launderers are politically connected, so there is no scrutiny, and even if leadership did something, it would only be to put even more of a burden on law abiding businesses.
Imo, complex laws and regulations only affect the people who follow them, and they reward corruption.
Were the factories profitable? If not seems like the money benifited the employees. Looks like the front line employees got hurt and the community but every other employee made off with dirty money.
If they got away with it then it would just look like a normal bankruptcy. Extracting the money already happened with more or less legitimate-looking business expenses.
Defrauded? This is the entire concept of collateral.
In this case, though, apparently the bank was in on it.
If they pay $80 million in "cash" for a steel plant and then turn around and ask a legitimate bank for a loan with the plant as collateral, how much can they realistically get for the loan? Any amount is going to be a lot and the lender is assuming that risk, so one would think that due diligence would consider the unique depreciation that could occur in an asset that requires massive maintenance inputs to maintain sustainable operability and hold it's capital value, and that they would build in some contractual mechanism to monitor the value of the asset and enforce it's upkeep.
Even a car dealerships does this with leased vehicles to ensure that the value of the car they get back at the end of the lease matches their projections closely enough that they can sell it off again.
And yes, banks try not to be defrauded. "Due diligence" is about catching problems like this or at least reducing them to manageable levels.
But I don't know the details; I just read a book about fraud.
I recall a certain person being hesitant to send US tax dollars there because of corruption concerns.
I think you meant IIRC, but the C is the problem. That certain person had no problem with corruption in Ukraine, it was just that he needed some of it's corruption to act in his favor first.
And the jump from the article to "So is Ukraine basically the playground where all of the worlds corrupt elite steal millions?" Is a little (not a little) broad. It's a former Soviet bloc state and this is pretty much table-stakes corruption for those.
Ukraine has probably the most fertile soil in the world. Like Egypt it has fed Europe and then Russia for a long time.
It is also one of the most corrupt countries in the world, like Russia and China.
Most Westerners just can not imagine what corruption is at those levels. For decades the grain was put into trains and half the grain had "disappeared" in destiny. This happens at all levels.
Nobody goes there to help the country. Like lots of countries in Africa the big guys (Russia or EU, or USA) go there to plunder the country. It is too rich and too strategic.
It is also the playground for big countries to fight. Instead of fighting WWIII and fucking the entire world with radioactive waste, the big guys play on playgrounds like Ukraine their power games.
The US does not want Europe to dismantle NATO after it is not necessary anymore where Europe can arm itself. It also does not want Europe and Asia to integrate further because that means the end of USA hegemony in the world.
Also the military industrial complex in the US needs a reason to exist. If threats do not exist, they will create them in order to survive or "their money" will be redirected to things like social welfare. Americans need to feel unsafe all the time so they agree to pay for new weapons in new taxes.
UE wants to expand to get the wealth of Ukraine resources and Russia does not want to lose them.
That is very bad for Ukraine. The people that can, like my ex girlfriend, just leave the country.
When is the last time this happened?
Traditionally, we hear about money laundering involving low-overhead, cash-oriented businesses where money can be injected and extracted by falsifying volume.
But these were large capital purchases into an industry in destress with numerous facets of regulatory exposure, from the industry's risk to the environment and the high potential safety risks for workers to the special status of the industry to national security - it invites scrutiny of lots of alphabet agencies, especially if your scheme involves ignoring all of their requirements to juice profits.
This leads me to believe the "masterminds" only ever saw it as a short-term play, so back to my original bewilderment, how much were they able to extract in just several years compared to the large upfront costs? And were they skimming so much from neglect that it wouldn't have been worth it just to run these as legitimate, sustainable businesses?
I wonder if the had just maintained these steel facilities and avoided the safety and environmental problems, and made it into Trump's presidency intact, would they have just been able to sell them off high on the back of Trump's protectionist, domestic steel revival rhetoric and made a killing and be sitting pretty today, given that all the legal pressure on them for this is from the US and they seem to have already been given a pass for stealing $5.5 billion in Ukraine from Ukraine.
And I don't really get how that "launders" the money trail. The only point at which the transfers of funds seem murky is when they go through the she'll companies in the BVI.
This feels like the makings of a great article that some editor said, "write up what you have, we're just going to publish it and move you onto something else." There are just so many things unexplained or unexplored.