Big bank, big bust: Another dot-path connected with Ukraine and the suddenly legitimate laptop

Another timeline gets interesting.

The New York Times’s admission this past week that the Hunter Biden laptop was not Russian disinformation has come at an opportune time.  It’s an obscurely opportune time, to be sure.  But it’s opportune nonetheless.

What makes it so is a reminder that the seed money used to start a cybersecurity non-profit called Global Cyber Alliance (GCA), whose interests and personalities rather remarkably replicated those of Russiagate and Alfa-gate in 2015 and 2016, came from an asset forfeiture settlement with the French banking giant BNP Paribas.

Those dots connect.  Some readers already know how. For others, here’s the BNP angle.

In a recent article (link above), we saw that in September 2015, Cyrus Vance, Jr., then the prosecutor for New York County, used $25 million of the BNP Paribas settlement to start up GCA.  CrowdStrike executive Shawn Henry joined GCA’s board in October 2015, and was a member of it, along with a number of Obama administration alumni, when he (Henry) was called in to have a look at the Democratic National Committee’s cyber-intrusion on 4 May 2016.  (Michael Sussmann, you may remember, was the Perkins Coie attorney who called Henry in.)

Simultaneously (literally the same day), GCA and a tech industry trust group, M3AAWG, announced a partnership to address the very problem that had just speared the DNC:  phishing and poor email security.

Oddly enough, just days before Henry was called in and the GCA-M3AAWG partnership was announced, DOD’s DARPA on 22 April 2016 announced a solicitation for research grants on “Enhanced Attribution,” a cybersecurity topic that encompassed the DNC’s security problem (along with the usual host of other cybersecurity vulnerabilities) and a trademark hobbyhorse of CrowdStrike’s:  attributing identities and motives to cyber-actors.

The DARPA project’s description of its intent made for an arresting fit with what a set of M3AAWG members ended up doing with DNS lookups between Russian bank Alfa Bank and a subcontractor for the Trump Hotels.  That whole episode has for months now been under investigation by John Durham’s special counsel team.

A cynic might conclude that the DARPA funding was seized on, through the academic institution Georgia Tech – one of the M3AAWG members – to pay for the “Alfa-gate” attempt to Enhance a creative Attribution against Mr. Donald Trump.  (What the Hillary campaign and DNC paid for, remember, was Michael Sussmann’s time as a go-between for the Alfa-gate story with the FBI.)

So much is backstory at this point.  But the NYT acknowledgment about the Biden laptop has prompted a flurry of reminders about Biden-related episodes from years ago, including one in which BNP Paribas played a major role.  And that reminder sparked another for me, concerning a rat-hole I’ve never had time to go down.

Considering what BNP paid for with its 2014 settlement, it had to be worth pulling the string on that.  And boy, was it.

BNP backstory

To begin with, BNP Paribas’ settlement, reached in June 2014, was by far the largest such bank settlement to date with U.S. authorities.  BNP was accused of violating U.S. sanctions in transactions with Iran, Cuba, and Sudan, to the tune of some $8.9 billion.  The asset forfeiture agreed to in the settlement approximated that amount at just shy of $9 billion.  This amount dwarfed the previous record-holder:  HSBC’s $1.9 billion agreement in December 2012.

Like HSBC, BNP got by with a deferred prosecution agreement in which the bank made major adjustments like moving its legal compliance division from Europe to New York and hiring additional compliance specialists, many of whom in these cases are former U.S. government officials.

I’ve discussed before the opportunities that creates for, shall we say, cross-pollination between the federal executive branch’s priorities and those of the international bank.  (See the links in the extended 2019 treatment on HSBC, linked above.)  I hope it isn’t necessary in 2022 to point out that that perspective can’t possibly be overly cynical.  At worst, it can only be just cynical enough.  Revolving door professionals whom the bank is compelled to hire, to keep tabs on all its proprietary activities and information, are a moral hazard you could float an aircraft carrier through.

Cyrus Vance, Jr. explains why he didn’t prosecute Harvey Weinstein in 2015. PBS video, YouTube

For a bit of added perspective, keep in mind that no one went to jail for nearly $9 billion in sanctions violations.  As with HSBC after 2012, the punishment for BNP was bringing in an army of babysitters whose fealty is to the U.S. federal government.  One doesn’t utter the words “pet bank.”  But one wants to.

The colossal fine was split among the several entities seeking judgment against BNP Paribas:  the U.S. Department of Justice, the U.S. Treasury, the U.S. Federal Reserve, the State of New York, and New York County.  It may surprise many to learn that the big monetary awards went to the State of New York and New York County, which each came out of it with $2.24 billion in forfeited assets, aside from a couple hundred million in statutory fines.  The other entities split the rest.

So Cyrus Vance, Jr. had a lot more to play with than the $25 million he put into the GCA partnership in 2015.  The state, for its part, allocated money to various projects in (mostly) urban areas, with the biggest chunk naturally going to New York City.

Again, one doesn’t say “shakedown,” but the noun certainly does drive by with a loud honk.

Things that make you go, Hmm

In this section we’ll see why.

It’s time for a bit of history and a romp through the Gregorian calendar.  If I mention that according to the Washington Post, federal investigators got an anonymous tip about BNP’s sanctions violations in 2009, you might think the bank was being treated with a certain amount of arms-length suspicion between 2009 and 2014.

Another report that suspicions had cropped up as early as 2007 might seem to reinforce that likelihood for you.

And a Reuters article in 2012, recounting the existence of an ongoing investigation of potential sanctions violations by BNP Paribas, might well confirm the same general idea pretty securely in your head.

With this history, it may seem unlikely to you that BNP Paribas, under suspicion for violating U.S. sanctions on Iran, would be on a list of companies benefitting from the financial and economic “thaw” with Iran that began in January 2014, after the 2013 Joint Plan of Action (JPOA, the precursor to the JCPOA) was announced in November 2013.

You might not imagine that BNP Paribas would get special dispensation in February and March 2014 to make undisclosed financial transactions with Iran.

But you’d be wrong.  BNP Paribas received such dispensation from the U.S. Treasury in that period – even though, whether the investigation started in 2007, 2009, or just sometime before 2012, federal authorities had to know by January 2014 the nature of the sanctions violations they got an $8.9 billion plea to six months later.

Via YouTube

The WSJ reported that “BNP Paribas was granted two licenses allowing the bank to conduct certain commercial and financial transactions in Iran, according to documents obtained through a Freedom of Information Act request.

“The licenses were granted in February and March as prosecutors sought to punish the bank with a hefty fine, which may ultimately exceed $10 billion, according to people familiar with the matter.”

WSJ continued:  “It is unclear why BNP sought the Iran licenses or why Treasury officials granted them at a time when authorities were seeking to punish the bank over alleged sanctions violations in that country. Treasury declined to comment.”

WSJ went on to note that “BNP was one of more than 100 organizations that received permission to conduct specific business in Iran in the first three months of 2014, according to records from Treasury’s Office of Foreign Assets Control.”

BNP Paribas was doing other very interesting things in the period when it was apparently under investigation.  One was making some 55 foreign loans backed by the U.S. Export-Import Bank, tallied by Diane Katz of the Heritage Foundation.  As noted by Lachlan Markay at Washington Free Beacon, Hillary Clinton had busied herself during her tenure as Secretary of State advancing the interests of Clinton Foundation donors in Ex-Im Bank business. 

And BNP Paribas was one of the Clinton Foundation donors that had a lot of Ex-Im business when Hillary was in office, according to The Atlantic (citing McClatchy) in 2015.

Clinton Global Initiative session in 2014. Clinton Global Initiative video, YouTube

In her July 2014 article at Daily Signal, just after BNP’s plea, Diane Katz highlighted the most recent of those loans:  a transaction in which equipment made by Caterpillar was sold to a mining company in Ukraine.

The mining company whose transactions fit the description was Ferrexpo Yeristovo (FYM), an iron ore mining concern.  That line of Ex-Im-backed funding had been opened in 2010, when we have reason to believe BNP had been under suspicion by U.S. authorities for some time, but was also involved with the U.S. Ex-Im Bank as a lender in dozens of foreign projects for U.S. companies.

Interestingly, 2010 was also when Ukrainian oligarch Mykola Zlochevsky, nominal owner of Burisma, became, first, Ukraine’s Chairman of the State Committee for Material Reserves (March to July 2010), then Minister of Environmental Protection (July to December 2010), and then Minister of the Environment and Natural Resources (December 2010 to April 2012) under President Viktor Yanukovych.  As recounted in a UK court document listing Zlochevsky’s government positions in this period (included as an exhibit in a U.S. Senate report), these “three positions were connected with the licensing of exploration and production of the natural resources of Ukraine.”  (See p. 18 of the Senate report PDF.)  That would include mining iron ore and other minerals as well as pumping natural gas.

And so, Zlochevsky and Burisma

I know that those who’ve followed the saga of Burisma closely have been chomping at the bit to get to BNP’s role in it.  But this matters, so let us take a moment to satisfy ourselves that before any of us knew about BNP dropping a dime on Burisma’s nominal owner in the UK in early 2014, BNP was lending funds to at least one of the Ukrainian mining companies whose leases and operations Zlochevsky oversaw when he became Ukraine’s Minister of Environment and Natural Resources.

Mykola Zlochevsky as Minister of Ecology of Ukraine.  Wikipedia: Svetlana.pashko – Own work

Caterpillar, incidentally, was selling to other Ukrainian companies, including Burisma.  This point will strike a chord with our Burisma cognoscenti, who can tell us that in 2015, Hunter Biden, representing Rosemont Seneca – which had connected with Burisma the year before – was on the same NGO board with Caterpillar executive William Lane, the company’s Director of International Governmental Affairs.  The board was that of the U.S. Global Leadership Campaign (now the U.S. Global Leadership Coalition).

Zlochevksy was no doubt well aware of what he could expect from BNP Paribas if he wanted to spirit $23 million of Burisma cash out of a BNP account in London and whisk it away to Cyprus.  Presumably he had such awareness when he opened the account with BNP in 2013.

But before we get to the 2014 sequence of events, consider the additional piece of information that, as described in the British court ruling on Zlochevsky’s $23 million withdrawal (U.S. Senate report exhibit, p. 26), BNP had had a due-diligence investigation of Zlochevsky done in 2013, when Zlochevsky sought to open an account with the bank.  The UK court document indicates Zlochevsky applied to open his account in April 2013.  In August 2013, the risk-management firm Kroll Associates UK Ltd. provided BNP with a risk report on the Ukrainian magnate.

Kroll Associates UK is the British arm of the U.S. company K2, formerly Kroll Associates Inc., where, as we may recall from my 2018 article, Bill Priestap’s wife Sabina Menschel was employed until she left for rival company Nardello in September 2015.  And as also previously noted, Nardello had been hired in 2014 by the law firm Boies Schiller, where Hunter Biden was then working, to investigate Burisma.

So everybody pretty much knew everybody in this little circle, as things began erupting in the first quarter of 2014.

Just think about it for a moment or two, and it becomes clear that BNP, Burisma, Boies Schiller, K2, Kroll Associates, Mykola Zlochevsky, Hunter Biden, and quite probably Sabina Menschel (who had to be pretty senior at K2 in August 2013, since she took over as COO of Nardello two years later) were no mystery to each other.  No one here, seeking the services of another in this group, was a “walk-in.”  These were not persons or entities interacting mainly through pro forma avenues of business necessity, as if they had plucked names out of a phone book or from a website.  The milieu each was in was the milieu all of them were in.

BNP, remember, was under investigation

BNP Paribas was also not a mystery to U.S. authorities.  New York state prosecutors and the U.S. DOJ were investigating the bank, and had been since at least 2012.  To gather evidence, they were probing its various activities using the means at their disposal, including surveillance of the bank’s transactions.  Those transactions included moving funds around overseas, and applications for the same.

So when Mykola Zlochevsky in 2013 opened a BNP account in the UK, and in March 2014 prompted the withdrawal of $23 million in Burisma funds that account to Cyprus, it’s not just possible but quite probable that the U.S. Treasury Department was aware of it.

Let’s take a moment to recall that BNP’s role in this matter was finding the proposed Zlochevsky transaction suspicious, and notifying the UK’s Serious Fraud Office (SFO) of its suspicions before agreeing to the transaction.

In other words, as I put it above, BNP was dropping a dime on the nominal proprietor of Burisma, as he tried to move $23 million out of the UK in the wake of the Ukraine crisis of 2014.

And seemingly overnight, sanctions-buster BNP Paribas went from being one of the chosen 100 authorized to do business with Iran, holder of two U.S. Treasury licenses to swap money with the mullahs, to facing the biggest asset forfeiture in history for sanctions violations.

By overnight, I mean pretty close to overnight.  Let’s assume the shortest time under federal investigation, and say BNP had been squirming under the federal microscope since 2012.  In spite of that, BNP was still making loans backed by Ex-Im Bank, including at least one to the mining company in Ukraine, through early 2014.

In January 2014 BNP was authorized to conclude transactions with Iran, whose pariah regime BNP was also under investigation for violating sanctions on.

Then, almost as if in lockstep with events in Ukraine, by 13 February 2014 BNP was expressing concern publicly that it would have to set aside the hefty sum of $1.1 billion for a settlement with U.S. authorities.

On 20 February, BNP client Mykola Zlochevsky fled Ukraine.

On 11 March 2014, Zlochevsky’s agent in London told BNP Zlochevsky wanted to move $23 million to Cyprus.  Between 11 and 22 March, BNP informed the UK SFO that this appeared to be a suspicious transaction.  (The sequence of events, with dates, is described in the Senate report’s UK court opinion, starting on p. 18.)

Vice President Joe Biden and son Hunter golfing with Devon Archer, who sat on the board of Ukrainian energy firm Burisma Holdings alongside Hunter

On 22 March the SFO launched his investigation of Zlochevsky, and on 28 April 2014 announced that a probe was in progress.  During the month of April 2014, the SFO issued three document production orders to BNP Paribas, two of which the bank complied with by 11 April.  The SFO investigator, Richard Gould, filed statements with the court on 14 and 16 April; the 16 April filing sought a court order to freeze the funds in Zlochevsky’s account on suspicion that he was laundering money.  The order was granted.

It was also in April 2014 that Burisma, of which Zlochevsky was the formal owner, began sending $166K a month to an account owned by Rosemont Seneca.  Hunter Biden was named to Burisma’s board on 18 April 2014.  Also that month, Hunter Biden’s Rosemont Seneca partner Devon Archer became a board member for Burisma.

And by 30 April 2014, BNP’s rapidly worsening expectations about a settlement were that the bank might be on the hook for a sum “far in excess” of $1.1 billion.

In May, the third of the SFO’s April production orders to BNP yielded over 6,000 documents in the period 6 through 20 May 2014.  The SFO clearly meant to take the case seriously and give Zlochevsky a deep scrub.

In the parallel BNP drama in the U.S., by 13 May 2014 the talk was of a settlement of at least $3 billion.  On 30 May the figure had jumped to potentially over $10 billion.

On 23 June 2014, the final tally of $8 to $9 billion was previewed.  The plea deal came in a week later at $8.97 billion.

This rapid escalation by U.S. authorities against Zlochevsky’s banker BNP Paribas, at the same time Hunter Biden and Rosemont Seneca were establishing a relationship with Zlochevsky’s company Burisma, doesn’t come off as coincidence.

It seems a lot more like U.S. government agencies knowing what was going on the whole time, and making a move on BNP for motives of their own, when BNP brought Zlochevsky and Burisma to the attention of authorities in the UK.

The more BNP had to produce for the UK SFO, the more the settlement total climbed.  Meanwhile, in the months of April, May, and June, with the potential sum soaring from $1.1 billion to possibly over $10 billion, Burisma was shoveling more than $166K a month at its two new board members, Hunter Biden and Devon Archer – a development of which at least three U.S. federal agencies had to be fully aware.

A coda to the $23 million episode, in December 2014, tends to solidify the impression of a very specific defensive, punitive reaction against BNP.  The UK court ultimately ruled in early 2015 that the SFO had had insufficient reason to suspend Zlochevsky’s withdrawal pending investigation, and allowed the transaction to proceed.

But blogger shipwreckedcrew, a long-time writer at RedState among other outlets, did a dive on that history, and gives us essential perspective on how that decision came about.  It wasn’t by an extended process of argument in court.  It was more of an abrupt change of front in early December 2014, when the SFO suddenly found a handful of documents he hadn’t properly disclosed to Zlochevsky’s legal team.  On that basis, he dropped his objection to releasing the funds under the original judicial order.  He did ask for another order to prevent the transfer of funds, but that request was not granted.

Says shipwreckedcrew:

UK Court records reflect that a three-day hearing on the $23 million was held from December 3 to December 5, 2014. Burisma was represented by British Solicitors (British trial attorneys) who pressed the Court to order the SFO at the end of the second day to produce further records that it was withholding. The SFO denied that it was withholding any such records. However, on December 5 the SFO concluded there were a small number of documents that should have been disclosed, and disclosure was then made. Based on those records, the SFO stated that it agreed that Burisma’s funds should be released. 

On 20 January 2015, the British judge rendered his ruling denying a new restraint order.  At the time, Zlochevsky’s banker, BNP, was waiting for its historically-punitive sanctions-violation plea to be formalized in the U.S.  That would ultimately happen on 1 May 2015.

After the January 2015 court decision, the UK SFO had nowhere to go with the Zlochevsky probe, and Zlochevsky got his $23 million out of London. 

Zlochevsky certainly wanted that.  He wanted the money; he probably had an equal desire to see the SFO’s probe shut down so that no further revelations could come from its 6,000-plus disclosed BNP Paribas documents.  And it seems like a good bet someone else did too.

Feature image:  BNP Paribas Headquarters, Paris (detail).  Wikipedia:  Tangopaso – Own work.

4 thoughts on “Big bank, big bust: Another dot-path connected with Ukraine and the suddenly legitimate laptop”

  1. To paraphrase one of Charles McCarrys’ fictional characters, in Shelleys’ Heart, “in the end, it’s the Poor Boys against the Rich Boys.”

  2. I’m not worried about Ukrainian or even Russian corruption. Seems like we have the same problem right here.

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