First on CNN: Giuliani’s associates boasted of US government ties, Ukraine gas executive says

An executive of Ukraine’s state-owned oil-and-gas company said two associates of Rudy Giuliani boasted of their ties to Giuliani and the US government when they pitched a plan to change the gas company’s management and remove the then-US ambassador to Ukraine.

Andrew Favorov, a senior executive with Naftogaz, said he met with Giuliani’s associates Lev Parnas and Igor Fruman during an energy conference in Houston in March. Favorov said it was clear the two men were plotting to pursue natural gas deals in Ukraine to further their own business interests. He said they suggested that their connections to the US government and Giuliani would help them negotiate such deals.

Favorov, who is cooperating in a US Justice Department probe of Giuliani, said Parnas and Fruman tried to recruit him to replace the CEO of Naftogaz, which he described as a “stunning offer.”

“This is completely crazy … I obviously declined this offer right away,” Favorov told CNN in an interview. “It was the first time in my experience when two private actors were offering or discussing the issues that are supposed to be part of US foreign policy.”

He said that Parnas and Fruman “alluded to the fact that they have an ability to meet and discuss Ukraine policy with senior members of the current administration and they have other channels of communication.” They said their contacts included Giuliani, Favorov said.

Favorov, an American citizen, said he did not know whether to take Parnas and Fruman seriously until two months later, when the US ambassador to Ukraine, Marie Yovanovitch, was removed from her post.

“To this day, I find it hard to digest how it’s possible,” Favorov said, referring to Yovanovitch’s removal.

Favorov declined to comment further on Giuliani, citing the ongoing investigation, but he said he never met or discussed anything with Giuliani.

A source familiar with the matter said federal prosecutors in New York are investigating Giuliani’s possible ties to Global Energy Producers, a company purportedly controlled by Parnas and Fruman. The Wall Street Journal first reported prosecutors’ examination of whether Giuliani stood to personally profit from GEP.

Robert Costello, an attorney for Giuliani, recently told CNN, “Mr. Giuliani had no interest in GEP at anytime.” Giuliani previously said, “I don’t know a damn thing about Naftogaz except that it exists.”

Describing the business pitch of Parnas and Fruman, Favorov said they expressed a desire to broker deals between liquefied natural gas suppliers in the US and Naftogaz. But, he said, they clearly lacked the background and experience to know how to properly facilitate such transactions.

Although Favorov said he previously knew Fruman from an overlapping social circle, he said the main reason he agreed to meet with Parnas and Fruman in March was that they were joined by Harry Sargeant III, an oil magnate with whom Favorov said he wanted to discuss energy trends.

Favorov said he did not have the impression Sargeant was working with Parnas and Fruman. An attorney for Sargeant said in a statement that Sargeant attended a dinner with Favorov, Parnas and Fruman but said Sargeant “was not working with Parnas or Fruman” and never participated in any discussions regarding the Naftogaz board or executives.

Favorov’s meeting with Parnas and Fruman during the energy conference CERAWeek was first reported by the Associated Press. Following that meeting, Favorov said he shared details of Parnas and Fruman’s pitch with the CEO of Naftogaz, as well as his former business partner Dale Perry, who previously described the meeting to CNN.

Perry said Parnas and Fruman told Favorov that Trump would soon replace Yovanovitch with an ambassador more amenable to their energy-business interest.

On Perry’s advice, Favorov said he met with representatives of the US embassy in Ukraine to establish a formal record of the meeting and proposal.

The Washington Post reported that Favorov also met with Parnas and Fruman in May in Washington, DC. Asked why he agreed to another meeting, Favorov said he didn’t want to adversely affect his company.

“From this point on, we would listen, we’ll smile politely and move along,” he said, adding that he didn’t think Parnas and Fruman would pass Naftogaz’s compliance requirements.

Parnas and Fruman, who worked with Trump’s personal attorney Giuliani to dig up dirt on Democratic presidential candidate Joe Biden, were indicted in October for campaign finance violations. They have pleaded not guilty. Fruman’s attorney declined to comment on this story and an attorney for Parnas did not immediately respond to CNN’s request for comment Sunday.

Some of the charges against Parnas and Fruman relate to political contributions made through their company, Global Energy Producers.

CNN previously reported that Parnas told potential business associates this past summer that he began receiving payments from the Ukrainian oligarch Dmytro Firtash, who made his fortune selling Russian gas to the Ukrainian government.

A spokesman for the law firm representing Firtash said the firm had hired Parnas earlier this year as a “translator” but denies Firtash had a business relationship with Parnas.

Favorov told CNN that Parnas and Fruman never brought up Firtash during their meetings, but he said Naftogaz has had long-running “commercial tensions” with Firtash’s businesses, which buy gas from Naftogaz and resell it to Ukrainian households at higher prices. Favorov characterized those tensions as a normal dynamic between a buyer and seller.

Favorov said reforms since Ukraine’s 2014 revolution have reduced the corruption that he described as formerly endemic in the country’s natural gas sector, but he said such changes have angered some establishment figures.

“When the government gains, it so happens that somebody loses and obviously these actors are not happy about it because it’s no longer possible to get something subsidized and sell it at a market price,” he said.

He argued ongoing reforms could fuel efforts by those with ulterior motives to “remove the people with honest and transparent objectives from the management roles within Naftogaz.”

In her closed-door congressional testimony in October, Yovanovitch commended Naftogaz’s anti-corruption efforts and said, “we consider it to be one of the success stories in Ukraine,” though she added, “but that doesn’t mean it’s done. I mean, there’s still issues going forward.”

Favorov said Naftogaz continues to move in the direction of transparency and free-market access, but he argued that Russia’s energy giant Gazprom has sought to undermine these efforts in furtherance of Russian President Vladimir Putin’s geopolitical objectives.

He criticized the Nord Stream 2, a new gas pipeline from Russia to Germany that would bypass Ukraine, as lacking the flexibility of Ukraine’s gas transportation system.

He said Ukraine’s energy independence and Naftogaz’s further integration into Western markets would benefit Ukraine society as a whole.

In addition to the efforts of Parnas and Fruman, US Energy Secretary Rick Perry pushed for changes at Naftogaz earlier this year. During his trip to Kiev for the inauguration of Zelensky, Perry shared a list of four candidates to replace the existing American member of Naftogaz’s international supervisory board, CNN previously reported.

An Energy Department official told CNN that Perry was only recommending people who might be helpful for the new government to speak with about reforming Ukraine’s energy sector.

Favorov said he has met Perry “on a few occasions” but said he didn’t know about his recommendations for Naftogaz’s supervisory board until news accounts surfaced.

Favorov said he found it strange that Perry’s proposed leadership change seemed to “coincide” with the efforts of Parnas and Fruman, though he said he has no knowledge of any connection between those efforts.

Speaking to the US-Ukraine relationship, Favorov said Ukraine and Naftogaz have greatly benefited from US aid, though he said the private channel through which Parnas and Fruman sought to promote their own business interests sowed confusion in that relationship.

“I look to the United States to set the standard, to show how things can be done in a moral and ethical and transparent way. And I certainly hope that as a US citizen that this beacon does not lose its value because of some bad actors and because of some greed,” Favorov said.