Here’s a twist on urban development and NIMBY/YIMBY that the interwebs love to debate. Dirty money flowing through Ukraine has been all over the news in recent years in connection with American politics, but let us now forget good, old fashioned money laundering continues unabated. Sometimes in places you might not think of.
Cleveland.com has been reporting on the illegal real estate dealings by Ukrainian oligarchs in Cleveland since 2019. Seems a bit surreal. Why should Ukrainian oligarchs be interested in Cleveland real estate and shouldn’t we be happy that someone/anyone is interested in Cleveland real estate?
First, Ukrainian oligarchs are buying property for the purpose of money laundering, as alleged by the FBI, and second, oligarchs are lousy landlords. Optima, the company owned by the charged oligarchs, including Ihor Kolomiosky, does not have a good track record of keeping businesses afloat. The first takeover that got journalists’ attention was the failed Warren Steel Holding purchase north of Youngstown. After Optima bought the company, it neglected its investment and allowed the company to go bankrupt in 2016, losing 150 local jobs, citing “unforeseen business conditions.” In 2020, the FBI charged Optima with a $623 million money laundering offense. Kolomoisky and his associates stole money from a Ukranian Bank in order to buy Warren Steel Holdings with no intention, apparently, of keeping the company alive. In addition to the lost jobs in Warren, long-suffering Ukranians in Ukraine saw their scant reserves pilfered to finance the scheme. Warren was also left with a toxic waste site and a debt of a quarter million dollars in back taxes.
Who is Ihor Kolomoisky? Even Vladimir Putin calls him a crook and there are lawsuits against him in multiple countries. He dabbles in Ukranian politics and was active in attempting to throw the Russians out of Ukraine. But none of these causes appears to have distracted him from massive accumulation of wealth. Even after his disastrous business dealings in the United States, as of 2018, Kolomoisky was paying D.C. lobbyists to obtain an E-2 “investors” visa for him so he could do business more directly in the United States without intermediaries.
How did such a crook come to be the single largest commercial real estate owner in downtown Cleveland? The easy answer is lack of oversight and transparency in Ohio real estate transactions. Clearly, business dictates selling to the highest bidder, but at what cost? And what if the long-term consequences are more costly than the profit derived from the sale?
Cleveland’s real estate agents and developers need to do more due diligence on companies looking to buy commercial property in Cleveland. Optima has been in business for years and it would have taken little more than a Google search to uncover its murky dealings.
I first learned of the massive Ukrainian oligarchical purchases in Cleveland from European diplomatic colleagues. I was a US diplomat for 30 years battling corruption around the world, before retiring to Cleveland. Curious about Cleveland, my foreign friends asked, “Is this your new home?” At first I did not believe the stories, thinking it impossible that Cleveland had been “had” on such a massive scale by a company of crooks.
Cleveland, of course, is not alone in serving as a destination for money laundered by Russian and Ukrainian oligarchs. New York City and Florida, among others, also have been destinations for dirty money. But the lack of due diligence and experience with oligarchs, and fire sale real estate prices compared to other US cities, make Cleveland more vulnerable. Any Russian or Ukrainian company coming to town with big money should raise red flags. There are likely legitimate Russian and Ukrainian investors, but they are rare. Whoever becomes Cleveland’s new mayor should review Cleveland’s real estate transactions with care.
The shame here, as the author of the op-ed goes on to note, is Cleveland and surround area has long had a Ukrainian community that are perfectly respectable citizens. Nothing new about shady money in OH-IO either. Cleveland has a storied history of domestic organized crime activity in its own right. Even jaunting down 422 Youngstown, OH, had its own run of criminal activity. Even as such things waned in the 80s and 90s, there were still parts the married-in Pantone side of the family would remind us visiting hillbilly’s “don’t go there without us.”
Meanwhile, back by the lake, what to actually do about it. Municipalities aren’t going to turn down millions of developmental dollars without some really good reasons. Especially in cities like Cleveland that is trying to reinvent itself and recover from the “rust belt” downturns and economic changes, and is starting to have some success in at least flattening the population lost and revitalizing parts of its community. Which is why questionable money people — both domestic and exotic — probably target them in the first place. Enforcement and investigations are always going to run behind machinations of monied malfeasance. Politicians and officials are always going to have a number at which they will look the other way, if not pocket and profit themselves. And the citizens of cities like Cleveland will be left cleaning up the mess afterwards.
And so it goes.
Note: Pomylka is Ukrainian for “Mistake”, a play off the “Mistake by the lake” moniker tagged to Cleveland, most often referring to their non-LeBron James sports teams lack of success.
