How a Ukrainian Oligarch’s Companies Got Paycheck Protection Program Loans

Ukrainian billionaire Rinat Akhmetov owns four coal mining operations sprinkled across Appalachia that received loans intended to help small businesses keep workers on payroll during the pandemic. They received a total of $21 million in Paycheck Protection Program (PPP) loans, according to a statement Akhmetov’s company provided to the Project On Government Oversight (POGO).

Far from mom-and-pop shops, many of which have reported difficulty obtaining these PPP loans, the oligarch’s United Coal Company and its subsidiaries had estimated sales of $1.5 billion last year. They export high-grade coal to Akhmetov’s overseas steel-making empire, and occupy a segment of the coal industry that is reportedly still strong during the pandemic.

As a growing body of evidence shows that numerous loans went to companies that don’t seem to truly need them, the firms controlled by Akhmetov—who reportedly owns two of the planet’s most expensive homes and who had a cameo in Special Counsel Robert Mueller’s report last year—appear to fit the mold of the less deserving.

The total value of the loans also exceeds the amount of civil penalties United Coal has racked up for federal worker health and safety violations, POGO and the Anti-Corruption Data Collective found.

Since Akhmetov bought United Coal in 2009, inspectors have uncovered 14,030 violations of federal health and safety standards worth $13.4 million in civil penalties across its mines, including some found after five miners died in accidents. One of the oligarch’s largest U.S. mines accused of chronic safety problems also benefited from a controversial act of alleged leniency by the Trump administration.

A string of lawsuits over several years by former employees have also accused United Coal of failing to pay them as entitled, underscoring the importance of ensuring Paycheck Protection Program loan recipients use the funds as intended. The federal government may completely forgive the loans if recipients meet certain conditions, such as using most of the loan funds to pay workers during these tough economic times.

According to the lawsuits, the former United Coal employees had participated in the non-union company’s “loyalty reward plan,” deferring payment of 10% of their compensation to be paid out later if business slowed and they were laid off or if they worked for United Coal for six years. A Kentucky case where six laid-off workers sued appears to have been settled in 2016. The most recent lawsuit POGO and the Anti-Corruption Data Collective identified was filed in West Virginia in 2016 and ended in a settlement the next year.

United Coal’s parent company told POGO that the terms of the settlements are “confidential and cannot be disclosed” and that they “have no correlation with the PPP loans.”

The company also told POGO that its operations were facing financial pressures prior to the pandemic, which have only become worse. “U.S. metallurgical coal producers have struggled as sales prices for their output dropped significantly during the twelve months prior to the start of the pandemic,” the company said in an emailed statement. “Despite the worsening market and the pandemic, which resulted in negative operating cash flow, United Coal Company was able to avoid idling mines in the second quarter of 2020 thanks to the PPP loans.”

“Strategic Decision”

United Coal is among at least 27 companies with estimated revenues exceeding $1 billion last year that received Paycheck Protection Program loans. United Coal and its subsidiaries—Pocahontas Coal, Carter Roag Coal, and Wellmore Energy—reported that they used the loans to help retain a total of 1,044 employees, according to federal data. The company also told POGO the loans were used for rent and utilities.

The Small Business Administration’s (SBA) rules allow loans to go to multiple subsidiaries of a large holding company as long as their total employees or revenues fall under the relevant size standard, which for the coal industry is 1,250 employees. United Coal’s parent company is Metinvest, which also encompasses operations in Ukraine, the United Kingdom, Italy, and elsewhere, with 66,000 total employees, according to its 2018 annual report. Metinvest told POGO that its foreign operations did not count as affiliates of United Coal and thus their employees did not count under SBA’s size standard. “According to the determination of the lending bank, who approved the loan, Metinvest was not considered as an affiliate for the purpose of the PPP loan because they do not have US based employees,” Metinvest said in a statement. The SBA has relied on private lenders to process PPP loan applications.

Unlike past Small Business Administration programs, it does not matter if PPP loan recipients are owned by a wealthy foreign national.

In this case, the foreign national is Akhmetov, who, despite seeing his fortune decline significantly in recent years, remains a wealthy power broker in Ukraine.

Months before the coronavirus led to global lockdowns, Akhmetov bought the Villa les Cèdres, the most expensive mansion on the French Riviera, for over $200 million.

The son of a coal miner himself, Akhmetov also owns what was reputed to be the world’s most expensive home at the time of its purchase, a penthouse at London’s One Hyde Park that he bought for more than $200 million in 2010.

That headline-grabbing acquisition came a year after Metinvest, an arm of Akhmetov’s primary investment vehicle, SCM Holdings, bought United Coal Company.

Citing an SCM official, a 2009 State Department cable made public by WikiLeaks describes the purchase as “part of a strategic decision by Akhmetov’s SCM group to establish a significant presence in the U.S. market. SCM hopes to leverage the purchase to increase its name recognition in the U.S., and to access more U.S. sources of financing for future expansion,” wrote then-U.S. Ambassador to Ukraine Bill Taylor. (Last year, Taylor reprised this diplomatic role for several months and testified during the impeachment proceedings.)

“SCM also wanted to invest in an environment with high corporate governance standards,” citing the “strict health and safety rules for the mines as factors that made the acquisition of a U.S. coal mining company particularly attractive for SCM,” Taylor wrote.

“Dangerous Message”

Yet since Akhmetov’s purchase, United Coal has been anything but strictly adherent to federal mine health and safety rules. Inspectors found 14,030 violations from 2009 through 2020 so far, according to the Anti-Corruption Data Collective and POGO’s analysis of Mine Safety and Health Administration data. Metinvest, United Coal's parent company, has fought the findings of federal inspectors, successfully contesting about 20% of the violations and reducing its fines from $13.4 million to $10 million.

In February 2013, two miners died at one of United Coal’s biggest mining operations, the Affinity mine in Raleigh County, West Virginia. That fall, the federal mine safety agency slapped United Coal’s subsidiary Pocahontas Coal, which operates the mine, with one of its “toughest” sanctions: a pattern of violations, or POV, notice. The notice “is reserved for the mines that pose the greatest risk to the safety of miners,” according to the agency.

Although the Affinity mine was one of just seven ever sanctioned this way, United Coal’s safety director Don Jones said in a 2018 statement that it was the only one “that remained operating while on POV, and did so for almost five years.” During that time, the Affinity mine racked up 265 significant and substantial mine safety violations through August 2018.

That month, the Trump administration lifted Affinity mine’s pattern of violations notice, although the legal standard for removing it was not met. That unprecedented move drew rebukes from Representatives Bobby Scott (D-VA) and Mark Takano (D-CA) on the House labor committee, the United Mine Workers of America, and a federal commissioner who oversaw legal disputes regarding mine safety.

The move “sends the dangerous message that an operator who has chronically disregarded safety ... may nevertheless obtain reprieve from the Mine Act’s heaviest sanctions by the grace of a friendly administration no longer committed to enforcing those sanctions,” wrote Robert F. Cohen, Jr., then a Federal Mine Safety and Health Review commissioner, in August 2018. “That message endangers miners.”

United Coal says the mine has cleaned up its act. “The data clearly establishes that Pocahontas’ Affinity Mine has worked diligently to improve its safety and regulatory compliance record,” Jeff Birchfield, the mine’s manager, said in a 2018 statement. In the two years since the notice was lifted, federal inspectors have found 583 violations at the mine, 59 of which are significant and substantial.

It’s not the only United Coal operation with safety troubles: In 2017 and 2018, two died in accidents at mines operated by another subsidiary.

United Coal’s parent company defended its safety record in remarks to POGO, stating there were no deaths in 2019 and 2020 to date, and saying its rates of incidents and violations this year and last are better than the average rates across the U.S. coal industry. The company also told POGO that “United Coal did not engage in any effort to influence the U.S. government to lift the POV notice” at the Affinity mine.

“The Investor”

Seemingly a world away from the coal mines of Appalachia, Akhmetov and United Coal featured briefly in the investigation of Russian interference in the 2016 presidential election. That episode shows how foreign-owned U.S. assets can potentially give foreign powers sway in American politics.

As Special Counsel Robert Mueller’s report recounts, a decade and a half ago, Akhmetov hired American lobbyist Paul Manafort to support Ukraine’s now-defunct Party of Regions and its leader, Viktor Yanukovych, who would eventually become Ukraine’s president. A leaked 2006 U.S. State Department cable referenced Manafort tapping into Akhmetov’s wealth to successfully transform the party’s image “from that of a haven for mobsters into that of a legitimate political party.”

Mueller’s probe scrutinized Manafort due to his role as Donald Trump’s presidential campaign chairman and chief strategist for several months in 2016. Prosecutors unearthed evidence leading to criminal charges against Manafort for secretly receiving more than $75 million from Yanukovych’s Party of Regions in offshore bank accounts. According to a Senate intelligence committee report published last week, Akhmetov was one of two oligarchs who provided much of that funding.

Previously unreported court records in the case against Manafort show that his close associate Rick Gates proposed leveraging Akhmetov’s ownership of United Coal to protect Akhmetov’s political allies from U.S. congressional pressure in 2012.

A pending Senate resolution aimed to denounce the Yanukovych government for what was widely seen as politically motivated retribution: the imprisonment of former Prime Minister Yulia Tymoshenko. She had opposed Akhmetov’s privatization of a large Ukrainian power company.

Manafort and Gates sought to persuade senators to put a secret hold on that resolution. West Virginia Senator Joe Manchin (D) appears to have been among the targets.

On September 20, 2012, amid a number of emails about Manchin, Gates wrote one with the subject line, “United Coal.”

Seeking to counter the influence of Ukrainian-Americans who supported the resolution, Gates wrote to an unknown person that “the United operations are very big in [redacted] and represent many jobs (I know not Ukrainian) but the investor is and he is making significant investments in the operations.”

Prosecutors denoted the United Coal email as part of a “completed” lobbying effort, but, whatever role United Coal ultimately played, the effort was unsuccessful.

In the end, Gates pleaded guilty to lying to the FBI and conspiracy to commit financial fraud. He testified as a witness against Manafort, who was convicted of eight counts of tax and bank fraud in 2018.

United Coal’s parent company told POGO that United Coal’s “management is not aware of any contacts with Paul Manafort. UCC does not and has not played a part in any attempt to influence the US government or US politicians.” Manchin’s office did not respond to a query.

“This Deadly Circle”

Companies owned by two other Ukrainian oligarchs also obtained Paycheck Protection Program loans, but, unlike Akhmetov’s operations, the Justice Department has accused those entities of being “shell companies.”

The companies are owned by the oligarchs Ihor Kolomoisky and Gennadiy Boholiubov, according to a recent Justice Department court filing, and were used in “an international conspiracy to launder money embezzled and fraudulently obtained” from one of Ukraine’s largest banks. Kolomoisky’s attorney emailed the Washington Post, “Mr. Kolomoisky emphatically denies the allegations in the complaints filed by the Department of Justice.” POGO could not identify Boholiubov’s attorney before publication.

At least five of the companies allegedly involved in the conspiracy received Paycheck Protection Program loans.

It appears to have been within the bounds of the Paycheck Protection Program for these companies, which are the subjects of a federal money laundering lawsuit, to receive loans. Federal loan rules make those under criminal indictment ineligible, but the companies haven’t been indicted.

Ownership by billionaires does not necessarily disqualify companies, although loan applicants have to “certify in good faith that their PPP loan request is necessary.”

The Small Business Administration also eased up on foreign ownership. “Historically, applications for SBA funding would preclude a foreign-owned entity because that goes against the SBA’s purpose to support the growth and advancement of U.S. businesses and entrepreneurs,” wrote Tim Irvin and Erik Skie with CliftonLarsonAllen Wealth Advisors.

The SBA did not comment.

In Ukraine, the oligarchs often inspire outrage. When news of Akhmetov’s French Riviera purchase reached Ukrainian politician Galina Odnorog, she told the Daily Beast, “Oligarchs are running our country, promoting their own ministers, lobbying for laws that suit them … while our people die like flies from pollution, from poverty, and our civil society is too weak to break this deadly circle.”

Here in the U.S., some experts say our own system displays some features of oligarchy. And we still don’t know how much taxpayer-funded pandemic relief efforts are helping regular people rather than propping up the powerful, whether they’re overseas or closer to home.