Carpetbagging "Crony Capitalism" in Ukraine

Last December, before being named Ukraine's Finance Minister, American-born Natalie Jaresko accepted Ukrainian citizenship as a prerequisite for getting the job, but -- in almost one year since -- she has not renounced her U.S. citizenship, according to U.S. records and a Ukrainian official.

The Ukrainian Constitution allows for only "single citizenship," meaning that a foreigner who is granted Ukrainian citizenship must terminate his or her previous citizenship and must submit a document attesting to that renunciation "within two years from the date of granting of Ukrainian citizenship," said Mariia Budiakova, press secretary of the Ukraine Embassy in Washington.

The U.S. government publishes quarterly the names of Americans who have renounced their U.S. citizenship and those names -- printed in the Federal Register since last December -- do not include Jaresko, who has chosen to remain a U.S. citizen, a fact confirmed by Budiakova.

Jaresko appears to be exploiting the two-year period for submitting proof of renouncing her prior citizenship so she can hold her powerful Ukrainian position for two years with the option of then dropping her Ukrainian citizenship and keeping her U.S. citizenship.

But that manipulation of the process creates the appearance of a carpetbagger with dual loyalties and reinforces the image, highlighted by Russian media, of a Ukrainian government being run behind the scenes by the United States and other outsiders.

There's also the possibility that Jaresko is exploiting this opportunity to learn all she can about the inner workings of the Ukrainian government to position herself to quit her post after two years, drop her temporary Ukrainian citizenship, and become a well-paid consultant with valuable contacts inside Ukraine's Finance Ministry.

Such opportunism would fit with Jaresko's history. Though hailed as the face of Ukrainian "reform," Jaresko has long used her official connections to enrich herself, an inconvenient truth that undercuts the U.S. government's desired image for the regime in Kiev as committed to the fight against corruption.

Prior to her appointment as Finance Minister, Jaresko, a former U.S. diplomat, headed the U.S.-taxpayer-financed Western NIS Enterprise Fund (WNISEF), created in the 1990s to help jump-start an investment economy for Ukraine and Moldova. WNISEF was overseen by the U.S. Agency for International Development (USAID).

WNISEF officials were limited to $150,000 in compensation a year, but Jaresko maneuvered to exceed that total, ultimately collecting more than $2 million a year by shifting management of WNISEF to her own private company, Horizon Capital, and arranging to get lucrative bonuses when selling off investments, even as the overall WNISEF fund was losing money, according to official records.

For instance, Jaresko collected $1.77 million in bonuses in 2013, according to WNISEF's latest available filing with the Internal Revenue Service. In her financial disclosure forms with the Ukrainian government, she reported earning $2.66 million in 2013 and $2.05 million in 2014, thus amassing a sizeable personal fortune while investing U.S. taxpayers' money supposedly to benefit the Ukrainian people.

Meanwhile, WNISEF continued to hemorrhage money, shrinking from its original $150 million to $89.8 million in the 2013 tax year, according to the IRS filing. WNISEF reported that the bonuses to Jaresko and other corporate officers were based on profitable exits from some investments even if the overall fund was losing money. [See Consortiumnews.com's "How Ukraine's Finance Minister Got Rich."]

Hailed as "Reformer"

Still, Jaresko and other foreigners who were brought in to fill key positions in the current Ukrainian regime were described as "technocrats" whose only interest was to bring good government to Ukraine, a country long saddled with institutionalized corruption. Jaresko was hailed as a Ukrainian "reformer" who -- in the words of New York Times' columnist Thomas L. Friedman -- "shares our values."

But Jaresko's business history offers little reason for optimism about Ukraine rooting out official self-interest. Indeed, Jaresko would seem to fit the bill as a classic "crony capitalist," someone who takes advantage of government connections to line his or her own pockets. Her failure to expeditiously comply with the Ukrainian Constitution and renounce her U.S. citizenship reinforces the view that she is more opportunist than reformer.

According to recent accounts from Ukraine, official corruption remains a deep-seated problem more than a year-and-a-half after the February 2014 overthrow of President Viktor Yanukovych, who was lambasted by the Western media for having a sauna in his official residence, the sauna becoming emblematic of his alleged abuse of power.