Russian Oligarch Indicted for Sanctions Evasion
- September 30, 2022
- Clayton Rice, K.C.
Prominent Russian oligarch Oleg Vladimirovich Deripaska and two of his associates have been charged with conspiracy to violate sanctions imposed by the United States in response to Russia’s unprovoked military invasion of Ukraine. The indictment in the United States District Court, Southern District of New York, alleges that Mr. Deripaska arranged for his pregnant girlfriend Ekaterina Olegovna Voronina to travel to Los Angeles, California, to give birth so their child would have U.S. citizenship. The associates are alleged to have arranged health care and housing in Los Angeles and facilitated the sale of a music studio in Burbank. The sanctions date back to Russia’s annexation of Crimea and an executive order by former President Barack Obama declaring a national emergency in Ukraine.
On September 29, 2022, the United States Department of Justice unsealed the indictment charging Mr. Deripaska, Olga Shriki and Natalia Mikhaylovna Bardakova with conspiracy to violate sanctions imposed on him four years ago in response to Russia’s annexation of Crimea, Ukraine. (here) The indictment alleges that he nevertheless “continued to retain” Ms. Shriki and Ms. Bardakova “to provide hundreds of thousands of dollars worth of services for his benefit in the United States.” Ms. Shriki is also charged with obstruction of justice for destroying electronic records in relation to her participation in the scheme. Ms. Bardakova and Ms. Voronina have been further charged with making false statements to federal agents. Ms. Shriki was arrested yesterday. (here)
A close ally of President Vladimir Putin, Mr. Deripaska was among seven Russian oligarchs and seventeen government officials targeted in response to the Russian government’s “malign activity” around the world. (here) He also surfaced during the special counsel investigation into Russian meddling in the 2016 U.S. presidential election but was not charged with any wrongdoing. On September 28, 2022, Ambassador James C. O’Brien, Coordinator for Sanctions Policy, U.S. Department of State, told the Senate Foreign Relations Committee that during the months following Russia’s military invasion of Ukraine earlier this year, the United States government has designated approximately 2,000 Russian, Belarusian and Ukrainian individuals and entities for their involvement in or support of the war. (here) “This includes key nodes in the Russian military-industrial supply chains, and the oligarchs and cronies who steal from the Russian people to line their own pockets and help Putin perpetuate his war,” Mr. O’Brien said.
3. What is an oligarch?
The word oligarchy is generally used to describe a political structure in which power resides with a small group of people and has been often associated throughout history with tyrannical regimes. The word oligarch is defined broadly in The Compact Oxford English Dictionary, 2nd ed., to mean “one of a few holding power in a state.” The word is now used frequently to describe a business class that exerts influence over government leaders and national politics. Oligarchs gain power and influence with the support of the state in the form of subsidies, tax incentives and land grants. (here) Russian oligarchs have amassed immense wealth through private acquisition of state assets that is often stored in foreign accounts and properties. (here) The popularity of the term increased throughout the 1990s following the collapse of the Soviet Union when privately owned multinational corporations led to the rise of the Russian oligarch. (here)
4. The Defendants
Described as an “aluminum magnate”, Mr. Deripaska is a Russian national and the owner of Basic Element Limited, a private investment and management company. On April 6, 2018, he was designated as a Specially Designated National by the United States Department of Treasury’s Office of Foreign Assets Control in connection with its finding that Russia’s actions with respect to Ukraine constitute a threat to the national security of the United States. He was sanctioned for having acted for a senior official of the Government of the Russian Federation and for operating in the energy sector of the Russian economy. The indictment asserts that several properties originally purchased by Mr. Deripaska, including properties in New York and Washington, D.C., were maintained on his behalf.
Ms. Shrika is a naturalized United States citizen. The indictment alleges that she provided various services for Mr. Deripaska, including the receipt of funds from entities controlled by him, in connection with facilitating the sale of one of his holdings in the United States and the birth of his first child in the United States. Ms. Bardakova is a Russian national who also allegedly provided services for Mr. Deripaska including the birth of his first child and the planned birth of his second child. Ms. Voronina, also a Russian national, allegedly engaged Ms. Shriki and Ms. Bardakova to “undertake hundreds of thousands of dollars in transactions” in furtherance of the scheme to give birth in the United States. The indictment also asserts that she made false statements to officers of the Department of Homeland Security when she flew to the United States last June and was refused entry.
5. The Sanctions Violations
As the Covid pandemic emerged in 2020 and people became concerned about the state of hospital care, Mr. Deripaska and Ms. Voronina allegedly agreed that their child should be born in the United States. Funds were organized that entailed over $300,000 in transactions in the United States. In March 2020, Mr. Deripaska counseled Ms. Voronina on obtaining a U.S. visa and told her to be “careful” before an interview with immigration authorities. She applied for a tourism visa for ten days without disclosing her intention to remain in the United States to give birth.
Between July and December 2020, Ms. Shriki and Ms. Bardakova facilitated arrangements for the birth including: (a) registration at the hospital where Ms. Voronina gave birth; (b) obstetrical care in Los Angeles; (c) rental of a penthouse apartment in Beverly Hills; and, (d) childcare including five nannies and a housekeeper. The child was born in August 2020 and obtained U.S. citizenship by birth. Ms. Shriki received over $170,000 in payments made to her Global Consulting bank account at a U.S. financial institution. Among the other alleged violations, I will give you the following three that are of specific interest including the failed maneuver for the birth of Mr. Deripaska’s second child.
- In or about December 2019, Shriki facilitated the sale of a music studio in Burbank, California (the “Music Studio”) for the benefit of Deripaska, who owned and controlled the Music Studio through a series of corporate entities. Shriki then attempted to expatriate the proceeds of the sale, approximately $3,078,787, from an account at Wells Fargo Bank, held in the name of Ocean Studios LLC, to a bank account in Russia belonging to a Deripaska-controlled entity. (para. 19.a)
- Between in or about May 2018 and in or about 2020, Bardakova instructed Shriki to purchase and send flower and gift deliveries on behalf of Deripaska to Deripaska’s social contacts in the United States and Canada. The deliveries included, among others, two Easter gift deliveries to a U.S. television host, two flower deliveries to a then-former Canadian Parliament member, and two flower deliveries in 2020 to Ekaterina Olegovna Voronina, a/k/a “Ekaterina Lobanova,” the defendant, while she was in the United States to give birth to Deripaska’s child. The flower and gift deliveries were often accompanied by notes that identified Deripaska as the gifter, such as “Wishing you and your family a beautiful Easter Holiday. Oleg D.” or “Best wishes On Your Birthday. Oleg D.” (para. 19.b)
- …[I]n or about May 2020, Deripaska and Bardakova arranged for Voronina’s travel on a private jet from Russia to Los Angeles so that she could arrive in the United States in time to give birth to Deripaska’s and Voronina’s second child and for their benefit. On or about May 25, 2022, Bardakova sent a message to Voronina, stating, in part, “The Chief confirmed boarding for June 1. Let’s decide on the outgoing flight from Moscow. From Sheremetyevo (so as not to go far) at 10, 11, 12?” Voronina selected the noon flight time and then asked, “Is the 1st necessary? And what’s the plan for the flight times and connections”. Bardakova replied, in part, “Oleg Vladimirovich so instructed. Insisting on flight out. Planes very hard to confirm now.” Voronina forwarded Bardakova’s message to Deripaska and added, “We will fly when you tell us to”. Deripaska replied, “Looks like flight on the 1st will happen.” On June 1, 2022, a Cyprus aviation charter service paid a Swiss charter company approximately 160,000 Euros for a private jet to ferry Voronina, Deripaska’s and Voronina’s first child, and a nanny from Istanbul to Los Angeles. On or about June 1, 2022, Voronina in fact traveled to Los Angeles on the private jet. (para. 19.m)
The indictment seeks forfeiture of all property which constitutes or is derived from proceeds traceable to the conspiracy including monies on deposit with the Wells Fargo Bank and the properties located in New York and Washington, D.C. (para. 32)
6. Task Force KleptoCapture
On March 2, 2022, U.S. Attorney General Merrick Garland announced the launch of Task Force KleptoCapture, an interagency law enforcement unit dedicated to enforcing sanctions, export restrictions and economic countermeasures that the United States imposed, along with allies and partners, in response to Russia’s invasion of Ukraine. The sanction orders and regulations are set out in the indictment. (paras. 7-14) On March 3, 2022, it was announced that the leader of the Task Force was Andrew Adams who previously worked as co-chief of the Southern District of New York’s Money Laundering and Transnational Criminal Enterprises unit. (here) The Task Force wasted no time going after the multi-million dollar toys of various Russian oligarchs including Viktor Vekselberg’s motoryacht Tango valued around $100 million, Roman Abramovich’s Boeing 787-8 and Gulfstream G650ER worth more than $400 million, and Andrei Skoch’s Airbus A319-100 valued over $90 million. But money is not Mr. Deripaska’s only worry. The conspiracy count carries a maximum sentence of twenty years in prison.
On September 29, 2022, in a press release by the U.S. Attorney’s Office, Southern District of New York, released simultaneously with the indictment, Mr. Adams said that Mr. Deripaska did all he could to lead a life in a democratic society despite his “cozy ties” with the Kremlin and the acquisition of vast wealth through his relationship with a corrupt regime. (here) “The hypocrisy in seeking comfort and citizenship in the United States, while enjoying the fruits of a ruthless, anti-democratic regime, is striking,” he added. “That Deripaska practiced that hypocrisy through lies and criminal sanctions evasion has made him a fugitive from the country he so desperately wished to exploit.”