The Yatsenyuk Team Wants to Monopolize the Gambling Business in Ukraine

The Yatsenyuk team wants to monopolize the gambling business in Ukraine

The government is making efforts to legalize the gambling business and hand it over to mafia oligarchs.

In the new 2016 year, the authorities plan to fill the state budget through the legalization of gambling in Ukraine, but the main profits from the industry are to be monopolized by a clan of oligarchs with criminal pasts. INFORMATOR decided to investigate the problematic provisions of the new bill and reveal the main lobbyists of the law legalizing casinos, “one-armed bandits,” and bookmakers.

As is known, in 2009 year gambling on the territory of Ukraine was banned by Yulia Tymoshenko’s government. The reason was the massive rise in crime and numerous family tragedies that followed from players’ instant loss of huge fortunes. However, as became clear later, by officially “banning” the gambling business, the billion-dollar profits from it were simply pushed into the “shadow” economy. The tough fight by numerous activists, even during the Revolution of Dignity, could not break the illegal business, which was “protected” by numerous officials and law enforcement officers.

Ukraine’s powerful have long tried to legalize gambling, especially since all the “owners” of this sphere were part of Viktor Yanukovych’s close circle. Parliamentarians and public figures periodically reminded of the need to return excessive profits under state control, to which the main spokespeople for the billionaires responded: in 2013 year Forbes named this sector the most promising direction.

The new authorities also did not ignore this highly profitable sector, and in 2015 year government officials increasingly spoke about legislative regulation of the entertainment industry and legalization of sports betting. The main engine of this initiative was the odious oligarch Leonid Yurushov — one of the principal business partners and financial donors of Arseniy Yatsenyuk. Government circles claim that Yurushov is the author of the bill titled Law No. 3632 “On the De-shadowing of the Gambling Market and Ensuring Budget Revenues for the Fulfillment of Social Obligations.” According to the prime minister’s circle, the law will regulate the legal activities of the gambling business and could direct an unprecedented flow of revenues into the state treasury. Economy Minister Natalia Yaresko repeatedly made statements and tried in every way to convince of the importance of this step, and after the Verkhovna Rada did not agree to adopt it and sent it back for revision, she issued a telling speech about the importance of legalizing the gambling business. Publicly, both Arseniy Petrovych himself and, as experts assert, the government included budget items for 2016 year that envisage legalization of the business.

It is already known that the National Service in the Field of Gambling will be under the control of the bill’s author — Leonid Yurushov. He wrote the bill “On Gambling in Ukraine” based on the Russian analogue belonging to the odious German Gref (who, through legislation, took control of the entire Russian gambling business), but his Ukrainian colleague made significant amendments for the economic crisis. All requirements prescribed for large market players relate to structures he controls, which have been operating in the shadow since 2009 year. The hotels proposed as sites to legalize casino play are also owned by Yurushov: the luxury InterContinental hotel in central Kyiv, the five-star Fairmont Grand Hotel Kyiv on the Dnipro embankment, and in Boryspil Airport, which he and Arseniy Yatsenyuk seized in 2014 year. Other hotels are still under negotiation.

The main “operator” and de facto controlling structure of the gambling business in Ukraine will be Yurushov’s own company “PariMatch” (http://www.parimatch.com/),), which, despite the official ban, actively developed its activities both in Ukraine and abroad. In Kyiv alone there were and are PariMatch betting shops and online casinos, including in the Khreschatyk Hotel.

The significant role Leonid Yurushov and Arseniy Yatsenyuk have assigned to the planned legalization of gambling is evidenced by the fact that in June 2015 year Pari-Match became the title sponsor of the Ukrainian Premier League (UPL) — the country’s elite football division, signing a contract worth 43 million hryvnias (about $1,7 million) for the next two seasons. At the event presentation, Yurushov’s chief deputy — the official owner of the controlling stake in Pari-Match, Eduard Shvindlerman — appeared before the public. Previously this businessman was generally non-public and almost no one knew of his existence. Industry experts consider him one of the “grey cardinals” of the betting industry in the post-Soviet space. In past years Shvindlerman was closely associated with the business empires of Viktor Medvedchuk and the brothers Hryhoriy and Ihor Surkis. After Tymoshenko’s measures, they re-registered the licenses of their companies under foreign jurisdictions (in offshore zones in Malta, Gibraltar, Curaçao, etc.) and operate officially from there.

The scale of Yurushov’s and Shvindlerman’s business empire is illustrated by a recent scandal in the United States, where two of Shvindlerman’s subordinates — financiers Anatoliy Holubchyk and Vadym Trincher — were arrested and imprisoned. They are now serving sentences for large-scale fraud. At the same time, PariMatch obtained a license in the United Kingdom.

Clearly, if the bill on legalizing the gambling business in Ukraine submitted to the Verkhovna Rada is adopted, the entire industry will be captured by Arseniy Yatsenyuk’s clan and Leonid Yurushov’s structures, which as a state structure will launch aggressive promotion of their business aimed at quickly and spectacularly emptying Ukrainians’ wallets. The lion’s share of the profits will remain in the hands of the respective establishments, while budget revenues are planned to be obtained at the expense of Ukrainian problem gamblers.

The main lobbyist for the gambling business in the Ukrainian parliament has become the scandalously known deputy Viktor Romanyuk — head of the inter-factional deputy association “Deputy Control,” “famous” for promoting dirty and clearly corrupt bills. Previously he promoted a law in the Verkhovna Rada to legalize prostitution. His current main task is Arseniy Petrovych’s assignment — persuading lawmakers to support the gambling bill.

Thus, after a detailed study of the bill “On Gambling in Ukraine,” experts named the main reasons why this legislative initiative will be disastrous for the state. The main threat it contains is the proposal to allow all types of gambling, including slot machines, online games, bookmaker bets, and poker. For a number of games there are no territorial restrictions (poker, bookmaker offices, internet), which could trigger a rapid spread of gambling in the country and the swift involvement of broad segments of the population in gambling (this is an aggressive business that aggressively recruits new “clients”). In fact, the bill allows large-scale and uncontrolled development of this profitable industry, which will simply transfer large sums of family savings to the accounts of operators.

In addition, the government bill contains a number of provisions and risks that introduce corrupt practices and possible fraud in the gambling sector. At the same time, the draft largely fails to solve the stated tasks: introducing effective state regulation in the gambling sector, ensuring the rights and legitimate interests of citizens, and developing the hotel industry and tourism.

A number of the bill’s articles directly contradict current Ukrainian legislation. Thus, articles 8, 24, 49, 50, 56, 57, 58, 59, 60, 61, 62, 66 contradict the norms of the Law of Ukraine “On Licensing Types of Economic Activity” dated 02.03.2015 No. 222-VIII. Articles 7, 8, 18, 19, 51 contradict the norms of the Laws of Ukraine “On Confirmation of Conformity” dated 17.05.2001 No. 2406-III, “On Standardization” dated 05.06.2014 No. 1315-VII, and “On Accreditation of Conformity Assessment Bodies” dated 17.05.2001 No. 2407-III. In addition, the requirements of Ukrainian legislation in the field of cryptographic information protection and electronic document circulation have been ignored.

The proposed bill entirely lacks the concept of an “electronic seal” and provisions related to its application by software-technical means, which makes it impossible to form the electronic documents provided for in article 10 of the bill, since the Laws of Ukraine “On Electronic Documents and Electronic Document Circulation” dated 22.05.2003 No. 851-IV and “On Electronic Digital Signature” dated 22.05.2003 No. 852-IV require the application to an electronic document (analogous to a paper document) of electronic signatures of the head and chief accountant of an enterprise, as well as the enterprise’s electronic seal.

According to the proposed provisions, only “international certification” for compliance with “international standards” defined by the Authorized Body is envisioned, and the deletion from the bill’s text of requirements regarding cryptographic protection and the need to create a comprehensive information protection system, as well as the removal of the State Special Communications Service (Derzhspeczvyazok) as the authorized body for such checks, allows gambling organizers to operate uncontrollably on inadequately certified gaming equipment.

As we can see, these “inconsistencies” with current legislation are written so that the business is controlled from foreign centers and responsibility is removed from the “overseers” of the profitable business who will remain in Ukraine.

A separate risk is the absence of an allowed maximum bet amount. If it is absent, this is even more likely to influence the development of such an illness as gambling addiction. For example, in the Russian Federation all slots have a bet limit not exceeding 200-1 000 rubles. If a person has a gambling addiction, that limit gives a chance to preserve their wallet. But the mentioned legislator, on the contrary, envisions that problem gamblers will empty their wallets as much as possible.

According to the bill, an authorized body — the National Service in the Field of Gambling — will be created. It will have the status of a central executive authority. It is declared that the regulator must implement an electronic state monitoring system. It will control gambling activities in real time (bets, winnings, payouts, settlements with players). The Service will also issue licenses for conducting online gambling.

It is envisaged that an organizer of gambling can only be a legal entity founded and operating on the territory of Ukraine with charter capital of at least two million euros.

There will be a single operator in the lottery market, selected on a competitive basis. The cost of a lottery license, which will be issued following a competition for 10 years, is not defined. Only those legal entities that have conducted lotteries for at least five years and have international experience conducting lotteries in at least three foreign states, with turnovers of at least three billion euros over five years, will be admitted to participate in the competition. The lottery operator will be able to grant another person (a sublicensee) the right to conduct individual lotteries.

Organization and conduct of gambling in casinos are allowed only in special gaming zones. These are defined as buildings housing four-star or five-star hotels with at least two hundred rooms in Kyiv and at least one hundred rooms in all other settlements and outside settlements, as well as waiting areas in international airports.

The annual license cost for a casino in Kyiv is one million euros, 600 thousand euros in a settlement with a population of 500 thousand people or more; 300 thousand euros in a settlement with a population of less than 500 thousand people and outside settlements. For online casinos the license will cost 1,5 million euros. Bookmaker operations are permitted in bookmaker offices and on the Internet.

Thus, as we can see, Arseniy Yatsenyuk’s government’s legislative initiative is structured in such a way that after legalization the entire gambling sphere in Ukraine will fully pass under the control of Leonid Yurushov’s structures and will contribute to the growth of his business empire, from which the prime minister himself is also fed. However, in its proposed form the bill is intended not to normalize this business so that a balance develops between players’ passions and the structures that profit from their gambling that would protect Ukrainians from sudden impoverishment; on the contrary, the government scheme attempts to entrench all forms of promoting uncontrolled behavior among problem gamblers, with the structures expected to be licensed via clearly corrupt schemes abroad.

Experts conclude that gambling should be legalized in Ukraine, but in a civilized way so that the state and the state budget receive maximum profits from it. For example, legalized casinos should preferably be located scattered across the country, ideally in places remote from regional and district centers, where nature protection and eco-tourism can be promisingly developed. Such a strategy would fill local budgets with substantial financial inflows. Similar projects could be quite successful in Zakarpattia, Lviv, and Volyn-Rivne regions, where citizens from neighboring EU countries could quickly and conveniently reach Las Vegas–type centers. This would give a powerful boost not only to investment but also to infrastructure and the tourism business.

At the same time, locating such gambling centers quite far from populated areas would set a certain financial limit for problem gamblers — money for a long trip would also need to be obtained. In addition, the gambling industry must be strictly controlled by the state so that this huge flow of money does not go to oligarchs’ accounts but is honestly taxed, thereby truly replenishing the budget.

One can assert that positive changes and edits by the government to this bill are unlikely, since the law and the “reform” were developed for a single player — effectively for Arseniy Yatsenyuk’s team in general and Leonid Yurushov in particular. Despite the obviousness of this fact, it is already clear that powerful resources will be used to pass the law on gambling in Ukraine, because the goal and stake in this team’s game are too high to concede.

INFORMATOR reference:

Leonid Leonidovych Yurushov, born 1946, is a Ukrainian entrepreneur of Tatar origin, founder of Forum Bank, owner of the development company Yaroslaviv Val and of TVP Skandynaviya LLC selling seafood, and co-owner of Kremenchuk Steel and Casting Plant. He has significant assets in the woodworking industry. He owns a share of the Kriukiv Carriage Works. In total, L. Yurushov fully or partially owns another 15 companies, including the Unibudinvest fund.

In his youth Yurushov was an associate of the former president of the Shakhtar football club Akhat Bragin, and was part of the “Yenakiieve group,” in which he engaged in currency market operations. After Bragin’s death in October 1995 year, he was forced to leave Ukraine, lived in Vienna for five years, and obtained Austrian citizenship. Later he became close to Viktor Yanukovych’s inner circle.

The businessman pays considerable attention to politics and gets along with all regimes. The media call him the main donor of Arseniy Yatsenyuk. The latter does not deny the information that Leonid Yurushov sponsored his election campaigns. Perhaps the history of their cooperation has banking roots — like Yurushov, Yatsenyuk worked in the banking sector for a long time.

Leonid Yurushov is ranked among Ukraine’s richest people: in 2011 year, in Focus magazine’s ranking he took 22 place with a fortune of $ 978,9 million. In 2013 year Focus estimated Yurushov’s fortune at $ 1,027 billion (17 place in the ranking of “200 richest people in Ukraine”).

Serhiy Vakuad for INFORMATOR