9 - Understanding the Dynamics of White-Collar Criminality in Ukraine

Summary

Introduction

This chapter examines the nature of white-collar criminality in Ukraine. Post-Soviet states have been described as ‘states with flexible legality’ (Wedel, 2005), where politicians, ministers and public officials have enjoyed unlimited powers. This chapter analyzes the concept of politically driven white-collar criminality and its harmful influence within otherwise legal entrepreneurship in the Ukrainian context as well as in overtly illegal activities.

The COVID-19 pandemic of 2020–21 has brought heightened consideration of the role of the state in planning a strategic response to economic upheaval. In the early 1990s, reaction to the collapse of the Soviet Union focused on reducing the role of the state and allowing the free market to drive economic recovery. Entrepreneurs and entrepreneurial culture were believed to be able to replace or invigorate state planning and production (Kovacs, 1994). However, the endemic conflicts of interest existing in the higher levels of the Soviet bureaucratic structure left those in charge of the vast industrial Soviet estate to identify opportunities for personal enrichment during privatization (Organized Crime Observatory, 2013; Kupatadze, 2015). An underdeveloped legal and regulatory framework effectively offered immunity for the political and business elite in their appropriation of state assets and transferring of ownership from state to private hands.

In this chapter we consider white-collar criminality involving the embezzlement of state funds by those with the ability to coerce political power. One of the best-documented examples of such political corruption is that of Pavlo Lazarenko, the former prime minister of Ukraine. Lazarenko abused his official role to issue contracts, permits and licenses in return for financial remuneration (Organized Crime Observatory, 2013). Applying Levi's (2008) fraud typology, it is possible to consider Lazarenko's crimes as pre-planned fraudulent activities using political and legal means. In 1995–96, Lazarenko was the Ukrainian deputy prime minister, with specific responsibility for the energy sector. He was thus able to ‘leverage illegally procured gas into virtually any commodity through unregistered barter transactions; he could then trade the goods on the open world market’ (Nichols, 2007: 10). Lazarenko's reforms of the energy sector allowed certain companies to acquire the monopoly of purchasing natural gas from Russia and engage in its resale in certain regions of Ukraine (Organized Crime Observatory, 2013). For example, he obtained a state guarantee to buy US$200 million worth of gas from the Russian majority state-owned energy corporation Gazprom (Organized Crime Observatory, 2013).