David Zhvania
He was once one of Ukraine's most influential oligarchs, but today he can't protect the remains of his business from his own political allies, who consider him redundant and useless. However, his business style is somewhat peculiar: while the ancient Greek King Midas used his magic hands to turn everything into gold, David Zhvania reduces businesses to bankrupt ruins. This behavior is more characteristic of a saboteur than a pragmatic businessman, which sometimes raises the question: is David Zhvania really who he claims to be?
Soviet major
David Vazhaevich Zhvania is a man who had everything he could have ever wanted from childhood. He belongs to the generation of children of the late Soviet Communist Party elite—or, as they are also known, the Soviet rich kids. He was born on July 20, 1967, in Tbilisi, to Vazha Zhvania, the dean of Tbilisi University. Today, the grateful son claims that his venerable father was a "physicist-philosopher" and even defended his doctoral dissertation on the theory of relativity, after which he was invited to the Central Committee of the Communist Party of Georgia "to write texts for party functionaries." However, there is other information: that Vazha Zhvania specialized in integrating theoretical physics with the fundamentals of Marxism-Leninism, and also served as a party organizer at the university, from where he later moved to the position of head of the Ideology and Propaganda Department of the Central Committee of the Communist Party of Georgia. According to the Soviet table of party ranks, this position corresponded to the title of second or third secretary of the Central Committee, deputy chairman (vice-speaker) of the Supreme Soviet, or deputy chairman of the Council of Ministers (vice-premier) of the republic—that is, Vazha Zhvania was among the top ten persons in Soviet Georgia.
David Zhvania with his grandmother Evgenia
When David Zhvania later became a "prominent entrepreneur" and entered politics as a "democrat," he, like other oligarchs who emerged from the Soviet Party and Komsomol elite, had to change his ways and become a ruthless critic of the "totalitarian past." He also attempted to edit his father's biography, lest anyone discover that Vazha Zhvania himself was the "totalitarian past" that led his son David to wealth and power. However, it's impossible to hide the past of such prominent figures; they weren't just some petty swindlers from vegetable warehouses.
From 1973 to 84, David Zhvania attended Tbilisi Secondary School No. 61 and then enrolled at the university where his father had once worked. He chose not the Marxism-Leninism department, but the more promising "national economic planning" program, which trained future heads of the republic's State Planning Committee. However, even with such a high-ranking father, he couldn't avoid military service, and in 1986, David Zhvania was drafted for two years. He served, however, literally in his own home: at the KGB Border Troops headquarters in Tbilisi, only being able to appear in the barracks for roll call. However, David made good use of his position: instead of spending time at home on the couch or in cafes with women, he was actively involved in business.
Zhvania would later claim that, from the age of 13, he worked as a common laborer for "workshop workers" who made jewelry—and that's how, he claimed, he earned his first fortune. But he could just as easily have claimed he started out selling washed apples! Where exactly David Zhvania got the money for his first business remains unknown. Perhaps from his good friend Badri Patarkatsishvili, the future Georgian and Russian oligarch, business partner, and ally of Boris Berezovsky, who began as a Komsomol functionary and, in the 80s, became deeply involved in "shadow production." David Zhvania has also been close since childhood to the Ioseliani family, an influential and numerous family that produced such notable figures as film director Otar Ioseliani, head of the Georgian secret services Avtandil Ioseliani, leading crime boss Jabu Ioseliani, and Zhvania's cousin and future business partner, Alexander Ioseliani. He also had another promising cousin (or second cousin), Zurab Zhvania, who later became the speaker of parliament and prime minister of Georgia (he died under mysterious circumstances in 2008). Rumors also circulated that Zhvania borrowed money from his high-rolling peers or even from Georgian "thieves in law."
Zurab Zhvania
However, David's father, Vazha Zhvania, did not encourage this frenetic activity—likely fearing it could be used as incriminating evidence against him. He mercilessly beat his foolish son. Nevertheless, David Zhvania opened his first cooperative, "Khomli," while he himself was still serving in the border troops, which is where he spent most of his time.
After demobilization and reinstatement at Tbilisi University in 1988, David Zhvania devoted no more attention to his studies than he had previously devoted to defending his homeland. He entered a new phase of business: with his wealthy friends and influential relatives, he opened a joint venture, Unipharm, which engaged in a quasi-criminal operation: importing unlicensed medications into the USSR. Organizing the import itself without the necessary connections at customs and law enforcement was quite problematic, and they also created a system for distributing them throughout the Soviet Union—for a considerable sum, of course. According to David Zhvania himself, this is how he got rich—and not just in "wooden" rubles.
Well, David Zhvania's hard currency savings came in very handy when he was forced to flee Georgia and the USSR altogether in 1990. According to one version, he became embroiled in a major criminal case of national significance, from which his Georgian officials, who he knew, couldn't bail him out; according to another, he owed a large sum to Georgian thieves. He himself claimed he was fleeing political repression: power in Georgia had passed to Zviad Gamsakhurdia, an anti-communist dissident and radical nationalist who had declared war on the old Soviet elite. However, Vazha Zhvania happily outlived Gamsakhurdia and only left Georgia in 1995 to move to Kyiv, so there can be no question of any repression. Nevertheless, David Zhvania was forced to leave his homeland immediately—he didn't even finish his studies at his university, but he was eventually issued a diploma (for 1991). Fortunately, acquiring the necessary credentials in Georgia has never been a problem. And not just a diploma or a driver's license.
Atomic scammer
The period from 1991 to 1997 strangely disappears from David Zhvania's "life": all that is known is that he lived in Slovenia and Austria before moving to Ukraine. It was reported that he "materialized" in Kyiv as the holder of several passports, with the Georgian one proving to be... fake. It was a very strange story, which only surfaced much later! So, in 1994, David Zhvania filed a petition with the Kyiv Sovietsky District Court (now Shevchenkivsky District Court) seeking to establish continuous residence in Ukraine. He also submitted passport XIX-TI #500353, allegedly issued in his name on August 15, 1990, in Tbilisi. Allegedly, because in 2008, following an official inquiry from the Ukrainian side (the head of the Presidential Secretariat), an official response was received from the Georgian Ministry of Justice stating that no information regarding the issuance of this passport existed in the database. Meanwhile, the XIX-TI passport form #500353 itself was genuine, but simply could not have been officially used: the issuance of passports of this series ceased in 1994 with number 500325, after which all the others were scrapped during the transition to new-style Georgian passports. Thus, the following occurred: in 1994, David Zhvania was retroactively issued a Georgian passport (1990) on a scrapped old-style form, which he used to present himself for "naturalization" at the Kyiv district court. A more than bizarre story! Some even began to wonder if this was David Zhvania at all!
However, in that same year, 1994, David Zhvania registered his first business in Ukraine, presenting a Cypriot passport. He later tried to deny this, claiming he'd only visited the island once on vacation! But for some reason, he carefully conceals how exactly David Zhvania earned his living and earned his living during that period. Nevertheless, there is very fragmentary information about his involvement in the "family business" in Georgia during the turmoil there from 1991 to 94, when many prominent Georgians close to Shevardnadze earned a good living supplying various goods, including weapons, to the conflict-torn republic. At the same time, they also raised money for the acquisition of weapons and, in general, for the support of the ruling coalition: thus, a major Georgian business of international stature was established.
In 1996, David Zhvania and his cousin, Alexander Ioseliani, registered an offshore company in Cyprus, Brinkford Cons Ltd., a subsidiary of Brinkford Limited, registered in Ireland. In 1997, Brinkford Ukraine Limited (later Brinkford CJSC) emerged from thin air and immediately acquired the unique business of brokering Russian fuel rods for Ukrainian nuclear power plants (NAC Energoatom). It's important to understand that all operations involving radioactive materials are strictly controlled not only by Russian and Ukrainian authorities, but also by international organizations. This isn't like trading oil, or even arms! Getting approval for such a business required extensive connections in the highest echelons of power and the intelligence services of both countries. Thus, David Zhvania was not just a successful businessman of the 90s, he was a protégé of some very influential circles.
David Zhvania and Ioseliani's partner in this case was Trading House JSC, owned by Nikolai Martynenko ( read more about him in the article "Nikolai Martynenko: Why is the 'nuclear oligarch' being actively dumped? "), a former secretary of the Kyiv City Committee of the LKSMU who had already entered big business in 1991. Zhvania and Martynenko's joint venture began in 1994: at that time, David Vazhaevich was listed as a manager at Trading House, and by 1995, he became its director of economics—though his exact responsibilities remain unknown. In 1996, Martynenko became a co-founder and co-owner of Brinkford Ukraine Limited, established as the Ukrainian subsidiary of Brinkford Ltd.
Nikolai Martynenko
And so, in 1997, the partners embarked on their first major venture. First, funds allocated to Ukraine as compensation for its nuclear renunciation, intended to pay for the supply of Russian fuel rods, mysteriously "ran out" in Kyiv. They "ran out" immediately after Brinkford began acting as an intermediary for these supplies. The company "earned" approximately $200 million from this between 1997 and 2000. This was achieved through monstrous markups and insurance premiums, tax evasion through Cypriot offshore companies and shell Ukrainian companies registered to disabled veterans and WWII veterans, as well as the simple disappearance of multi-million dollar sums and shortfalls in fuel rod deliveries.
Russia began demanding prepayment for fuel assemblies, while Ukrainian nuclear scientists began sounding the alarm – they claimed there would soon be nothing to load the reactors with! It's worth noting that Zhvania and Martynenko had already taken control (or at least a share) of the management of NAK Energoatom. And then, in late 1997, Trading House JSC appealed to Pustovoitenko's government with a proposal to help the country: the supposedly patriotic businessmen had agreed with Russia that prepayment for the fuel assemblies would be made using Ukrainian State Foreign Loan Bonds issued in 1995. Martynenko then gained the right to operate with bonds that, as a result of an intricate scam, migrated from the Ministry of Finance of Ukraine to the National Bank of Ukraine (then headed by Viktor Yushchenko), and in this operation the state lost another 23 million dollars, which ended up in the accounts of the offshore THU AG and the bank Glomain Holding ltd, owned by David Zhvania.
The fraud was blatant, yet neither David Zhvania, nor his associates Martynenko and Ioseliani, nor Prime Minister Pustovoitenko and National Bank Governor Yushchenko (and certainly not President Kuchma) who were implicated in it, were suspected of corruption or embezzlement of public funds. Moreover, no wave of scandalous revelations arose in parliament or the media. Everyone pretended as if nothing had happened—and this at a time when all of Ukraine was abuzz with the case of former Prime Minister Pavlo Lazarenko.
Brinkford Empire
The profits from the "nuclear business" needed to be invested somewhere, so David Zhvania and his partners began privatizing Ukrainian industry. Brinkford Ukraine's first acquisition was the Zaporizhzhia Abrasive Plant: in December 1998, the company acquired 51% of the company's shares from the State Property Fund, which had previously been converted into a public joint-stock company through labor privatization. However, the company never received the promised investment from its new "effective owner": instead of 90 million hryvnias, only 47,1 million were transferred to the plant's accounts—which were immediately transferred to Zhvania's offshore accounts. Meanwhile, the "debt" for the public joint-stock company remained: according to the contract, investments were to be reimbursed with profits. However, the profits at the Zaporizhzhia Abrasive Plant plummeted, allowing Brinkford to buy out more of the company's assets from other shareholders, increasing its stake to 64,94%.
But Zhvania wasn't content with ruining his own enterprise. Between 1999 and 2004, 500 tons of bauxite belonging to the State Reserve, stored there under contract, disappeared from the Zaporizhzhia Abrasive Plant. This became public knowledge in 2005, but by then, Viktor Yushchenko—David Zhvania's friend, godfather, and partner in state loan transactions—had become president, and Zhvania himself had been appointed head of the Ministry of Emergency Situations, so the matter never even reached an investigation.
This attitude toward his enterprises and state property is characteristic of David Zhvania: over the years, he has earned a reputation in Ukraine as an oligarch who buys up businesses seemingly with the sole purpose of selling them to the wind. A typical example of this was the Luhansk Cartridge Plant, which was divided during the reorganization into three entities: the State Enterprise Luhansk Cartridge Plant, the Private Joint-Stock Company Luhansk Cartridge Plant, and the Production Association Luhansk Machine-Tool Plant. Zhvania's companies became investors in these dying enterprises, whose demise was only accelerated. Ultimately, only the Private Joint-Stock Company Luhansk Cartridge Plant remained untouched for scrap metal, although it had practically ceased production and was posting massive losses every year. Meanwhile, Ukraine's arsenals were dwindling and in need of new ammunition, which was unavailable. This continued until 2014, when the plant fell into the hands of separatists—and, miraculously, was immediately relaunched and is now producing ammunition for LPR militants. At the same time, the enterprise legally remains in the ownership of the following companies:
- Verhalt Holdings Ltd. — 24,99%
- Perinhar Holdings Ltd. — 24,98%
- Triestford Enterprises Ltd. — 24.97%
- Laraik Holdings Ltd. — 10%
All of the listed companies are offshore branches of Brinkford Cons Ltd., through which it manages Ukrainian enterprises. The full list is as follows:
- Carnic Development Corp is the owner of PJSC KSD
- Triestford Enterprises is a co-owner of the Luhansk Cartridge Plant.
- Verhalt Holdings is a co-owner of the Luhansk Cartridge Plant.
- Pernhar Holdings Limited is a co-owner of the Luhansk Cartridge Plant.
- Erentele Enterprises Limited is a co-owner of Zaporizhzhia Abrasive Plant CJSC (17,3%)
- Tarewood Industries Limited is a co-owner of Zaporizhzhia Abrasive Plant CJSC (17,3%)
- THU AG is a co-owner of Interport-Kovel CJSC and Integration CJSC.
- Forter Holdings Limited is a co-owner of Plast CJSC (24%) and KRK Invest LLC
- Schtoerman Investitions und Handelsgesellschaft MBH is a co-owner of Plast CJSC (66,2%) and the owner of Neftegaztekhnologiya LLC.
- Westferry Industries Limited is the owner of Techno-Invest LLC.
- Energolink Investments Limited owns the Luhansk Machine Tool Plant.
- Goldfield Resources Limited is the owner of Diamantbank.
- Laraik Holdings Limited is a co-owner of the Luhansk Cartridge Plant.
- BH Cement Industries is a co-owner of Zaporizhzhia Abrasive Plant CJSC (19,5%)
- Medeston Trading Limited is a co-owner of Stroyindustriya and PJSC Bakhchisaray Combine.
- Balasco Holdings Limited is a co-owner of Stroyindustriya and Bakhchisaray Combine JSC.
- Darmon Holdings Limited is a co-owner of Stroyindustriya and PJSC Bakhchisaray Combine.
- Darill Holding Limited is the owner of Inter-Vent LLC.
- Menwa Trading Company - owner of Mena-Trading LLC
In addition to the above, David Zhvania is a co-owner (with Nikolai Martynenko, Alexander Ioseliani, and Igor Kerez) of such enterprises as MT-Bank, Varrant LLC, Poleskiy Granit LLC, Integration CJSC, Kovel CJSC, Alfa-Impex DP, the Kerez, Shchukin, and Sotkilava law firm, the Edelweiss condominium association, and the Cypriot bank Glomain Holding Ltd. He also owned 54% of the shares of the Kerch Shipyard Zaliv OJSC, which also experienced the full brunt of David Zhvania's "effective management": by 2005, it was driven to bankruptcy, and its workers went months without pay. The result was the resale of this strategic enterprise to the oligarch Konstantin Zhevago ( read more about him in the article KONSTANTIN ZHEVAGO. THE RISES AND FALLS OF A DOLLAR BILLIONAIRE ).
The Rise and Fall of the Orange Oligarch
Having become close to Viktor Yushchenko through the government bond fraud, David Zhvania made him his first political bet. The idea of running for parliament came from Mykola Martynenko, who had served in the Rada since 1998 and even managed to chair the parliamentary Committee on Fuel and Energy, Nuclear Policy, and Nuclear Safety for three terms. Thanks to this, his and Zhvania's company, Brinkford Ukraine, continued to single-handedly fleece Energoatom. At times, it seemed as if Zhvania was tasked with driving Ukraine's nuclear power industry into bankruptcy and closure.
Viktor Yushchenko (top)
Kateryna Yushchenko and David Zhvania (below)
In 2002, David Zhvania was elected to the Verkhovna Rada on the Our Ukraine list (No. 33), and immediately began to hide behind his opposition status when his businesses were subject to various inspections. Simultaneously, Zhvania became one of the main financiers of Yushchenko's future presidential campaign—at least among Ukrainian financiers. However, not all of this money was his. In 2005, Boris Berezovsky stated that in 2003-2004, he met with David Zhvania several times in London (they were introduced by a mutual friend, Badri Patarkatsishvili) and that Zhvania persuaded him to allocate over $40 million for the "development of civil society in Ukraine"—which went toward funding organizations and movements that supported Yushchenko. However, in response to this revelation, Zhvania rudely declared, “Buying Berezovsky’s stinking thing in London is cheap,” and promised that if Berezovsky came to Ukraine, he would hand him over to Putin.
David Zhvania with his family
In 2005, David Zhvania reached the pinnacle of his political power—in the Tymoshenko government, he headed the Ministry of Emergency Situations of Ukraine, which, among other things, oversees nuclear power plant safety and the removal of spent nuclear fuel. This allowed Zhvania, along with his partner Mykola Martynenko, who chaired the Committee on Fuel and Energy Complex, Nuclear Policy, and Nuclear Safety, to profit from providing numerous commercial services to Energoatom, thus bringing Ukraine's nuclear energy sector to the brink of ruin. At the time, sources reported that Ukrainian nuclear power plants were saved only by the lack of funds for their shutdown and mothballing. His closeness to the president (he also became Taras Yushchenko's godfather) gave him impunity, and he clearly abused it, engaging in bizarre behavior. For example, it was reported that it was David Zhvania who gave the president's son, Andriy Yushchenko, a BMW M6, which sparked a scandal and seriously questioned the transparency of the new government. Moreover, this story was quite strange: after all, someone had deliberately sent paparazzi right after the president’s son was given an expensive gift.
In 2006, Zhvania suddenly began to rapidly lose his position. He was removed from the ranks of Yushchenko's "beloved friends," and in the 2006 elections, he only received 66th place in the Our Ukraine party. After the formation of the Party of Regions-CPU-SPU coalition, Zhvania left Our Ukraine, but, also in conflict with Tymoshenko, he did not join the BYuT, instead aligning himself with Yuriy Lutsenko ( read more about him in the article "Yuriy Lutsenko: The Terminator of Ukrainian Politics ") and his "Self-Defense." He was elected as a member of this party in 2007 on the "Our Ukraine - People's Self-Defense" list. However, his rift with Yushchenko only widened: in 2008, David Zhvania became involved in the "dioxin case" regarding the poisoning of Viktor Andreevich in the fall of 2004. It turned out that he had organized a meeting between Yushchenko and SBU generals, who were negotiating the terms of support for the "people's candidate." During the background check, Zhvania's passport was discovered to be fake. Zhvania responded by claiming that Yushchenko's poisoning was a political hoax.
The result of this massive attack by the presidential team, and then by Prime Minister Tymoshenko, was Zhvania's loss of access to a number of "streams," while his "nuclear business" was preserved solely thanks to Mykola Martynenko. Therefore, it is not surprising that in 2010, Zhvania tried to find a place for himself in the new ruling team (or to undermine it as well) by joining the Stability and Reform parliamentary coalition (the Party of Regions and the Lytvyn Bloc). At that time, David Zhvania became one of the most frequently mentioned "defectors." His financial situation improved significantly: in 2011, Focus magazine included David Zhvania among the 200 richest Ukrainians, with a net worth of $110 million. And after the 2012 elections (Zhvania won in single-mandate constituency No. 140 in Odessa), he joined the Party of Regions faction and even headed the Committee on State Building and Local Self-Government, which included the then-hot topic of federalization of Ukraine.
Nothing but trouble
David Zhvania left the Party of Regions immediately after the new Maidan gathered in Kyiv: in early December, along with Inna Bogoslovskaya ( read more about her in the article "Inna Bogoslovskaya: A Woman Without Inner Complexes and a Politician Without Principles ") and other "prudent" MPs, he left the Party of Regions faction, condemned the "use of force," and declared that Viktor Yanukovych had usurped power in 2010. Zhvania did not explain why he remained silent about this usurpation for three years, and began actively seeking new allies on the Maidan. He found them in his associate Mykola Martynenko, who at the time was a member of Batkivshchyna—a party ousted from Yulia Tymoshenko and led by Turchynov ( read more about him in the article "Oleksandr Turchynov: Skeletons in the Closet of Ukraine's "Bloody Pastor" )—and Yatsenyuk. Zhvania placed his latest political bet on them. However, just a few months later, he broke with them, defecting to his longtime friend Petro Poroshenko, who ran for president and began building his own bloc for the 2014 parliamentary elections.
David Zhvania was not included on the Poroshenko Bloc list, despite being a member of the bloc's leadership, and this cost him his mandate. His attempt to be re-elected in the single-mandate 140th constituency ended in defeat, accompanied by a scandal alleging fraud in Zhvania's favor—so much so that the chair of the district commission simply fled. As those involved in the conflict explained to SKELET-info , the case was not pursued only because the candidate belonged to their presidential bloc. However, as a consolation prize, David Zhvania received control of the state-owned enterprise Ukrhimtransammiak, the monopoly owner of Ukrainian ammonia pipelines. And Zhvania began to do to it what he had previously done to Energoatom: entangle it with his companies and ruin it. Over the course of a year (from March 2014 to March 2015), Ukrkhimtransammiak's profits fell from 64 to 2,6 million hryvnias (even worse in dollar terms). The company took out $42 million in loans from Alfa-Bank (owned by Russian oligarch Mikhail Fridman) under state guarantees, and tender fraud was exposed. This has led to the government's dismissal of Ukrkhimtransammiak's management and the conduct of an internal investigation.
Zhvania's new prime minister has been a complete disaster. Trouble began back in late 2015, when, during the war between the Petro Poroshenko Bloc and the People's Front, the latter decided to sacrifice Mykola Martynenko, who was accused of corruption, embezzlement, and fraud. In short, he was forced to resign his mandate and completely ousted from Energoatom. Furthermore, they then launched an internal investigation after Serhiy Leshchenko (Poroshenko Bloc) exposed schemes for Martynenko and his associates (Zhvania, Ioseliani, and Kerez) to enrich themselves financially using enriched uranium ore. It was purchased by the Ukrainian state-owned enterprise "Eastern Mining and Processing Plant" at inflated prices from the Austrian company "Steuermann Investitions und Handelsgesellschaft mbH," registered to the elderly grandfather (an Austrian born in 1945), but founded and owned by associates of Martynenko and Zhvania. Payments were made through Diamantbank, owned by Zhvania, Martynenko, and Kerez, which has its roots in a Cypriot offshore company.
And this isn't the only current problem facing Zhvania's shaky business empire. Back in the spring of 2016, his Diamantbank was raided by bailiffs, who seized the accounts of Donbass Shakhtoupravlenie LLC. According to case No. 757/39821/15-k, this company was involved in the sale of coal illegally mined in separatist-held Donbas territories in Ukraine, and the proceeds from its sale were siphoned off to an unknown destination through Diamantbank and subsequent cunning schemes. According to the Security Service of Ukraine (SBU), which initiated the investigation, the proceeds were used to "finance terrorism." This incident exacerbated Diamantbank's crisis, which incurred losses of 528 million hryvnias in 2016.
So what's going on? Some believe that David Zhvania's attempt to establish himself within Poroshenko's inner circle under the new regime has run afoul of the president's closest allies: Kononenko ( read more about him in the article " Igor Kononenko: The President's Army Friend ") and Groysman ( read more about him in the article "Volodymyr Groysman: Dark Spots in the Biography of the Speaker of the Verkhovna Rada "). They decided it would be more profitable to oust Zhvania and Martynenko from the energy business and fill their niche there, rather than share power with outlived "dinosaurs"—who, moreover, have never been known for their political reliability. Times have become tough for business in Ukraine, given the dwindling resources for enrichment. Having taken what they can from their opponents, the strongest are now robbing their least valuable allies.
Sergey Varis, for SKELET-info
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