It is impossible to either believe or verify Poroshenko.
foreword
Petro Poroshenko's business has been soaring in the last eighteen months—the years of his presidency—as a businessman. His assets in shipbuilding, banking, and especially his confectionery business have increased exponentially. Such asset growth and super-profitability are impossible in any civilized country, unless the business is connected, for example, to drug trafficking. But in impoverished Ukraine, every opportunity for enrichment is open to you—if you're the president of Ukraine.
This was proven by personal example by the “partycrat” Leonid Kuchma, the “democrat” Viktor Yushchenko, the “banditcrat” Viktor Yanukovych, and the first legal billionaire in this position, Petro Poroshenko.
Poroshenko's business genius is a myth. He's been in power since the late 1990s, but never, no matter what his position in the government, has his business demonstrated such high performance: not under Kuchma, not under Yushchenko, not under Yanukovych. Yet his high position almost always guaranteed Poroshenko protection from competitors, state tax demands, and the vagaries of the market. So, since 2014, how could Poroshenko's companies have acquired so much free capital, allowing him to do things he could never have before—for example, literally building up Kyiv with Roshen stores? While Ukraine lost up to 20% of its GDP during the same period, and any business in our country is barely making ends meet (if at all)?
The answer is simple: P. Poroshenko could have attracted such volumes of free working capital in Ukraine only in two ways:
— using funds withdrawn from the budget;
— using income received from sources that have nothing to do with his business (for example, as payment for the Prosecutor General’s Office’s imitation of an investigation of criminal cases against members of V. Yanukovych’s gang, etc.).
Petro Poroshenko's covert sabotage of anti-corruption initiatives, the removal of the office of President of Ukraine from the scope of anti-corruption legislation, the cover-up of corrupt officials from the Yanukovych era, and the Prosecutor General's Office's sabotage of anti-corruption investigations directly testify to Petro Poroshenko's personal fear of legal responsibility for corruption.
P. Poroshenko publicly promised to sell his business upon assuming the presidency of Ukraine. He lied. As he had done many times before becoming president, and as he did regularly after occupying the highest office in the country.
Recently, he deceived voters again by promising to transfer his business to a so-called "blind trust." Our colleagues at Ekonomichna Pravda explain why.
"Argument"
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The Guarantor's "Blind Trust," or Where Did Poroshenko Put Roshen?
Last Thursday, Petro Poroshenko forced many Ukrainians to dive headfirst into financial dictionaries. Everyone who wanted to understand what the president had actually done with the Roshen corporation, which he had publicly promised to sell almost two years ago, was forced to resort to this method.
Thus, in response to a question from a Hromadske TV journalist, Poroshenko stated that he had signed an agreement to transfer his stake in Roshen to an independent trust based on the blind trust model. The president emphasized that he has no control over the assets. "This is an important and necessary step that signals that the culture of relations between business and politics in Ukraine is changing," US Ambassador to Ukraine Pyatt subsequently wrote on Twitter.
Is this really true? EP examined how a "blind trust" works and how Western practitioners use this tool. First, though, let's recall how the "sell Roshen" operation unfolded in the media.
How Poroshenko “sold” Roshen
The saga surrounding the sale of Poroshenko's confectionery empire has been ongoing since April 2014. Even before becoming president, he stated in an interview with the German newspaper Bild that he was ready to sell the concern.
Moments before his victory, when the Central Election Commission's preliminary results became known, he reaffirmed his intention. A few months later, journalists reminded the president of his promise, and he replied that he had reached an agreement with Rothschild Group, which would help him sell the company.
Then came statements ranging from "we'll sell it soon" to "Russia is in the way," to news of the assets being transferred to Western investment companies for management. Incidentally, Poroshenko had already announced this in the summer of 2015.
During the intermission of these events, the Swiss company Nestlé expressed interest in the presidential concern and even held negotiations, but to no avail. The Swiss were unwilling to pay more than a billion dollars for Roshen, while Poroshenko valued his company at $3 billion.
And only now has it become known that the president’s assets have been transferred to a “blind trust.”
What is a blind trust?
The most common format for Ukrainian officials is to register a business in the name of their wife, son, daughter, parents, mother-in-law, or another relative. In some cases, where there is a special trust, it can be transferred to a former colleague or friend. In the West, the practice of officials transferring their assets to management under the "blind trust" principle has been in place for half a century. It was introduced precisely to eliminate conflicts of interest that could arise among civil servants who own their own businesses.
A blind trust is a trust in which trustees or fiduciaries who have been entrusted with the management of the assets are given complete discretion over the assets. These fiduciaries cannot communicate with the owner; they make their own business decisions and are completely isolated from the owner. The trustees can sell the assets and purchase new ones in their place.
A blind trust must include assets not only of the official himself but also of his associates, particularly family members. The owner takes no action to manage these assets during the term of the trust. Only at certain times, usually every six months, does the beneficiary receive a report on the quality of the asset management and, accordingly, receive income or losses.
Where applicable
As is well known, countries in the civilized world, with the exception of Muslim countries, are divided into two groups: civil law countries (based on Roman law) and common law countries (English tradition). The concept of "trust" exists only in legal systems based on common law (Anglo-Saxon). Countries where it is common include England, the United States, Canada, Australia, and New Zealand.
In other countries, the concept of trust either does not exist at all, as in Germany or Austria, or exists in certain specific forms, such as in Switzerland or Panama. Ukrainian legislation also lacks such a concept, according to experts at Creston Guerent Group Ukraine. Countries that do not recognize trusts cannot even derive the concept from their existing categories. In such countries, trusts are often interpreted as a specific type of agreement, such as a mandate.
Blindness or nearsightedness
Many politicians and potential government officials believe that by placing their assets in a "blind trust," they supposedly insure themselves against any public claims. Is this true? In theory, "blind trusts" are a surefire bet. They offer the perfect combination of legislative aloofness and financial savvy, making them a convenient tool for the political elite who can't bear to part with their businesses.
The advantages are obvious: by waiving the right to personally manage their own money, officials can deflect any accusations of insider trading or "dirty" investments. History is replete with examples of American politicians and presidents using "blind trusts." One in three serious presidential candidates has had such an experience, and not always a positive one. Some have dismissed "blindness" as merely mild "myopia."
However, in the US, such manipulations are difficult to hide.
Firstly, the relationship between government officials and blind trusts is regulated by a legislative framework developed over the years.
Secondly, there is a special US Office of Government Ethics (OGE), which monitors compliance with all requirements.
OGE representatives emphasize that conflicts of interest among officials can only be avoided if they use a "qualified" blind trust, which is subject to a number of requirements. Specifically, these can only be "institutional trustees"—banks or other financial institutions that easily pass the test of genuine independence.
For example, Republican presidential candidate Mitt Romney underreported his assets, citing that they were placed in a blind trust, even though the trustee was his personal attorney and close friend. Ultimately, even if the onerous requirements are met and a qualified blind trust is created, a trust deed does not eliminate the conflict of interest, American experts acknowledge.
Third, violations related to conflicts of interest by officials are often subject to federal criminal law. This means that failure to prevent such conflicts is more than just a reputational issue. Every year, the Office of Government Ethics compiles a list of officials who have violated criminal law. The prospect of appearing on this list forces officials to act more cautiously.
Overall, in 2012, only seven out of 100 U.S. senators had completed the blind trust process. In the House of Representatives, the share was even lower—12 out of 435. These figures haven't changed much in recent years. This is largely due to the complex and cumbersome nature of these financial instruments. Therefore, demand for such products has always been relatively modest, as no one wants to complicate their lives.
But America isn't alone. Poroshenko is certainly not the only representative of the post-Soviet camp to have turned to the "blind trust" model. In 2012, acting First Deputy Prime Minister Igor Shuvalov announced the transfer of his family's assets to a "blind trust" management structure. Prior to this, Western media reported that the Shuvalov family had purchased $18 million worth of Gazprom shares through a company registered in the Bahamas. These transactions took place before 2008, before Shuvalov moved from the presidential administration to the government.
To eliminate the possibility of a conflict of interest, Shuvalov announced that he was transferring his assets to a "blind trust." Whether he actually did this is unknown, but such statements have been made. In the UK, "blind trusts" were used for opaque campaign financing. For example, from 1992 to 1997, when the Labour Party was in opposition, its leaders received funding from "blind trusts."
* * *
On the one hand, Poroshenko disappointed millions of Ukrainians by repeatedly failing to fulfill his promise to sell his business. On the other hand, he set an example to the army of officials of how one can engage in politics or work for the state while owning a business empire, and how to do so without facing any consequences.
However, assets transferred to qualified "blind trusts" still pose a conflict of interest for the official. They will remain so until they are sold. This is acknowledged by Western legal experts. After all, the official who transferred these assets to the trust has sufficient knowledge of them to grant them preferential treatment when shaping the state's economic policy.
This issue can only be resolved when the assets are sold and replaced with others. If Poroshenko's "blind trust" cannot sell Roshen as agreed, then such a trust is a sham.
If Poroshenko transferred a company to a "blind trust," will Ukrainians stop thinking it's his asset? Or, say, the State Fiscal Service? Or will he himself forget about it? Of course not. Another question is who can verify whether a trust is "blind" or "half-blind," if the country has no relevant agencies, no regulations, not even a legal definition of the term.
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Dmitry Denkov, published in the publication Economic truth
Translation: Argument
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