Moldova’s political crisis crippling race to save key bank

Graham Stack in Berlin
February 19, 2013

Embezzlement on a massive scale uncovered at Moldova’s state-owned savings bank means it will go under by end of March unless decisive action is taken, according to a leaked International Monetary Fund (IMF) report. But political feuding in the governing coalition exploded into open warfare during the week of February 11, minimising the chances of a timely solution.

“The financial situation at the Banca de Economii a Moldovei (BEM) has been deteriorating since mid-2009, as a consequence of apparently fraudulent lending,” reads the apparent rough draft of a report by the IMF filed in January and subsequently leaked to the press and internet. “In fact, if the National Bank of Moldova had not relaxed its provisions for seized assets 1 December 2012, BEM would have already become insolvent and its licence withdrawn… On the basis of subsequent significant provisions and with lack of recovery of major non-performing loans or seized assets or an injection of capital, it is expected that BEM will become insolvent by March 31, 2013.”

A letter also leaked to the press in early February detailing an interim audit by Grant Thornton found that at the end of September 2012, BEM had been in violation of national bank regulations concerning minimum capital requirements, risk-weighted capital adequacy, the ratio of the ten largest borrowers to the total loan portfolio, net exposure to a group of people acting in concert, and the sum of all large exposures.

Both the IMF and Grant Thornton have refused to deny or confirm the authenticity of the leaked documents.

Raport-Grant-Thornton Raport-FMI-Partea-1 Raport-FMI-Partea-2

Social bank

BEM is only Moldova’s sixth largest bank by assets, holding around 13% of total deposits, but its key position in Moldova’s banking system is its monopoly on paying out pensions and other social payments, thanks to its majority state ownership and extensive network of branches, particularly those in villages where a majority of inhabitants live. BEM also holds the deposits of almost all public agencies and institutions, such as hospitals and schools, with a total of MDL707m (€43.65m) in insured deposits, while the state’s deposit guarantee fund contains a total of only MDL134m, reads the leaked IMF report.

This makes it a disaster that the bank has been the centre of massive embezzlement over the last three years, which now threatens to drag it under.

According its declared results for 2012, the bank lost around $25m in 2012 due to provisions for non-performing loans, a huge sum for a Moldovan bank, with the bank’s problems resulting from criminal fraud. And Grant Thornton wrote in December that its discovery of systematic fraud at the bank from 2009-2012 meant it was pointless to continue its audit. The auditors detailed one example of obviously fraudulent loans, just under €10m paid to Moldovan companies that had been secured by fake real estate. The funds were then transferred to accounts offshore. “There is a large probability that there are more such transactions,” read the accountant’s report.

The IMF in its report spoke of the “omnipresent activity of fraudulent crediting” at the bank, implying involvement of all departments of the state-owned bank, and that despite a change in top management at the bank in April 2012, many implicated in the fraud remain in their old positions.

A final straw for the authorities has been growing evidence the bank was used to launder funds embezzled from the Russian budget in the so-called “Magnitsky case”. On February 11, Moldova became the sixth country to launch a probe into the notorious $230m fraud case that involved the death of anti-corruption lawyer Sergei Magnitsky while in Russian custody. Switzerland, Cyprus, Estonia, Latvia and Lithuania are conducting similar investigations, while the US Congress last year adopted the Magnitsky Act, which imposed asset freezes and barred from entry to the US anyone suspected of a role in his death.

According to the IMF report – apparently penned by David C. Parker, an expert on closing down defunct banks – there are now two options facing Moldova’s financial authorities, one of which must be taken in the coming weeks: either Moldova creates a bridge bank or it recapitalises BEM.

The report says both options “would require significant state funds calling for an amendment of the budget.” But, crucially, the bank is only 66% owned by the state, so a capital injection could either see public money benefitting murky private interests, or in the event of diluting the private owners, the certainty of legal action against the move. And given that no one understands the extent of the bank’s losses, “this would be a classic example of sending good money after bad,” warns the report, which comes down on the side of setting up a bridge bank.

Political crisis

Yet Moldovan politics is the last place to turn for a swift solution to a banking crisis, because one party in the governing Alliance for European Integration – the Democratic Party – is widely viewed as a pocket party of the very oligarch accused by opponents of the looting of BEM and numerous other banks.

The coalition’s majority is dependent on the small Democrat Party and this kingmaker position has allowed the party to take control of the crucial law-enforcement offices of General Prosecutor and the Anti-corruption Office. The Democratic Party’s financial backer is its deputy head, reputedly Moldova’s richest man, MP Vlad Plahotniuc, who also has great media clout thanks to his ownership of TV channels.

Thus the growing crisis at BEM has also plunged the coalition into crisis. “Today we witness a campaign of sacrificing the interests of the state in the name of the interests one of single shadowy person, who has purchased a place in politics and now wants to buy the country,” Prime Minister Vlad Filat raged in a TV address on February 13, announcing he was taking his Liberal Democratic Party (PLDM) out of the coalition agreement. “For him notions such as rule of law, democracy, European integration and welfare of citizens are words without meaning… I tell you I am not interested in one individual or another or their identities: I am concerned about the criminal system they have set up.”

And so the unbelievable occurred: Filat’s party entered into talks with its archenemies, the opposition Communist Party of Moldova. As a result, the two largest parties in parliament voted together at the opening session of the Parliament on February 15 to abolish the post of first deputy speaker of parliament – held by Plahotniuc – which then duly occurred, with the second coalition partner, the Liberal Party, abstaining from the vote.

Plahotniuc was not lost for an answer. In the same week, the National Anti-corruption Centre, the head of which was appointed on the quota of the Democratic Party, announced investigations against three Filat allies in the government – the finance minister, health minister and culture minister. On February 15, the day of the crucial vote on abolishing Plahotniuc’s state post, anti-corruption officers in a glare of publicity picked up and charged the head of the tax service, and also raided government buildings as part of the purported anti-corruption campaign.

The official reason for the outbreak of hostilities between the two former allies is the so-called “Huntgate” scandal: a Christmas shooting party held in a nature reserve and involving top officials such as the former General Prosecutor, a Plahotniuc appointee called Valeriu Zubco, who managed to inadvertently shoot one of their own number, young businessman Sorin Paciu. The bigwigs then tried to unsuccessfully hush up the affair, and the ensuing scandal allowed Filat to push successfully for Zubco’s resignation in January – seen as a blow against Plahotniuc’s power.

A first sign of Plathoniuc’s weakening grip on the General Prosecutor’s office was the announcement of charges against former BEM manager Grigore Gacikevici for fraud on February 8. Gacikeviki was removed from the bank in April 2012. And the real context for Filat finally turning on Plahotniuc after three years of tolerating his activities may have been the emergency at state-owned BEM and other banks.

Plahotniuc’s critics have alleged, and gathered some damning proof, that the oligarch has been raiding Moldova’s banking system with impunity over the last three years, protected by his control of prosecutor and anti-corruption offices, and aided by his influence over the economic bloc of the government and the National Bank of Moldova.

While there is no documented link between Plahotniuc and the fraud at BEM specifically, the bank figured in 2010 and 2011 as one of a group of banks where minority share packets were expropriated by dodgy court decisions in Moldova, and transferred to non-resident companies, chiefly in the UK. In the case of one of the other banks affected, Victoria Bank, litigation in London subsequently established that Plahotniuc was now the beneficiary owner of the UK shell company owning the share packet. Plahotniuc says that the UK documents bearing his name are forgeries. Large outflows of funds seem to have taken place from the banks subsequent to the “raids”.

Paradoxically, however, it seems the seriousness of the situation at BEM is such that Filat and his government allies are in fact denying there is an emergency there, to avoid a run on the bank that could spell disaster for the entire fragile economy. Plahotniuc’s party and media, conversely, are hyping the situation around BEM, ran the leaked IMF reports and audit, and are calling for a parliamentary enquiry. This even prompted Filat in his address to the nation to talk of a “dirty campaign” being waged against the bank, created in order to distract attention from “Huntgate”. In a TV interview, Filat said he had never seen the IMF report.

Filat is thus in the unenviable position of having to publicly whitewash the BEM emergency, a fact that Plahotniuc seems to be using to pin the blame on Filat, thus blackmailing the government over a fraud situation he may himself be suspected of creating.

Meanwhile, the future of the governing coalition going into the new parliamentary session looks very black, following the joint agreement between Communists and Filat’s Liberal Democrats last week. Filat has called for the coalition agreement to be renegotiated, but may be forced to try and muddle through with a minority government to avoid pre-term elections. His biggest trump card is the high level of support from the EU and international financial institutions, who have been talking Moldova up as a reform success story and moving swiftly towards the signing of an association agreement. Filat discussed the political crisis with the EU’s commissioner for expansion, Stefan Fule, and Polish Prime Minister Donald Tusk on February 14 by telephone, according to newswires.

But Plahotniuc could also claim some sort of international support on February 15 in his appearance in parliament: brandishing papers he said were confirmation from Italy’s Interpol bureau that he was not under investigation as a member of an organized crime group, as leaked documents and statements by the interior minister had suggested.

Baltic banks at the “Hearts” of Ukraine graft

Graham Stack in Kyiv for Business New Europe

January 23, 2013

There may be fewer bigger followers of Heart of Midlothian FC in Ukraine than Zhitomir local Anatoly Rupeta, but his enthusiasm for the Scottish football club is waning. Rupeta is facing a lengthy jail sentence after being stitched up, as he claims, by a gang of Ukrainian money-launderers operating via Lithuanian bank Ukio Bankas, owned by Vladimir Romanov, who also since 2005 has owned the venerable Edinburgh team.

“Hearts were always my favourite Scottish club because they have the same colours as Zhitomir. I don’t know how directly Romanov himself is implicated in my problems, perhaps he is too involved at Hearts to follow what is going on at his bank, but I call on him to prevent a terrible miscarriage of justice,” Rupeta tells bne in a cafe in his native Zhitomir, a regional centre of 250,000 people about two hours drive from Kyiv.

Rupeta is facing a 10-14 year jail sentence if found guilty on what he says are trumped-up charges. But despite four years of legal proceedings now drawing to a close, the spruce 54-year-old looks younger than his age, and is calm and collected when talking about his case – and curious to see what a Brit makes of it. As befits a former bank manager, he has put together an impressive array of documents and testimony supporting his arguments.

Rupeta’s account raises questions about the real business activities of the East European businessmen who have invested in British football. It also dovetails with a body of evidence that home-grown Baltic banking is linked to dirty money from the former Soviet countries. These questions became more pressing after the arrest of Romanov’s colleague both in British football and in Baltic banking, Vladimir Antonov, on asset-stripping charges in 2012. Lithuanian authorities nationalised Antonov’s bank Snoras due to major regulatory violations in 2011, shortly after Antonov had purchased the English football club Portsmouth. Lithuania also in January became the latest country – following Switzerland, Latvia and Cyprus – to open an investigation into how its banks might have been involved in the “Magnitsky case”. Named after the lawyer who uncovered it but died in prison under suspicious circumstances, this case is a $230m Russian tax fraud that has become a major source of international embarrassment for the Kremlin because of mounting evidence that prominent officials within the Interior Ministry, tax offices and the judiciary were involved.

Press-ganged

Rupeta says he fell foul of the Ukrainian money-launderers in 2007. But he has only now dared to speak up after the alleged ringleader of the group in Ukraine, banker Ruslan Demchak, was arrested on money-laundering charges in September 2012. In January , the National Bank of Ukraine withdrew the license of Demchak’s small lender RD Bank, which is now undergoing liquidation.

Demchak has said his arrest was politically motivated due to his decision to run as an independent candidate in the October parliamentary elections. His press secretary refuted all allegations of money-laundering and any involvement in bringing charges against Rupeta.

Rupeta says his troubles started when he stumbled across the money-laundering operation in late 2007. He says the gang, unknown to him, were using a bank account opened for the small firm where Rupeta held the post of director – with tens of millions of dollars pouring into the account, wired in instalments by a UK shell company from an account at Romanov’s Ukio Bankas.

But when a member of the gang died in a car crash in December 2007, the scheme also skidded off the road, because the widow inherited large amounts of money “belonging” to the money-launderers. Demchak came to Rupeta personally, relates Rupeta, and told him he would use his connections in law enforcement to fabricate a criminal case aimed at freezing the widow’s assets, and this would include bringing criminal charges against Rupeta as well, as director of a company involved in the scheme.

Sure enough, the Ukio Bankas client – Corpmark Impex LLP – filed a complaint to the police against Rupeta, and the police immediately brought charges. The complaint alleged Corpmark Impex, despite having signed no contract, had wired $6m to Rupeta’s firm as 100% advance payment on a shipment of granite he had promised to deliver, but then failed to.

Rupeta says he admires British justice as much as he does British football, but that Corpmark Impex LLP, registered in the sleepy Hertfordshire village of Elstree, snuggled between parish church and vicarage, may as well have been a resident of the murkiest Caribbean tax haven, such was its disregard of the law.

Experts agree. “It does look like the case was stitched up. The complaint itself is nonsense and facts cited have been clearly tortured to force the semblance of a criminal allegation,” says lawyer Valery Fedichin of Kyiv law firm OMP, who examined the complaint independently. “The pattern of payments looks instead like a classic money laundering scheme, using the Ukraine company as part of a complex scheme of shell companies,” says anti-money-laundering expert Saskia Rietbroek of AML Services International, who examined payment documents connected with the case.

The wheels of justice in Ukraine grind slowly but inexorably. Rupeta is expecting sentencing this year on charges of major fraud, which brings a prison sentence of 10-14 years. Ukraine courts convict in 95% of cases. This despite the fact that the mysterious Ukio Bankas client, Corpmark Impex, that brought the charges against Rupeta has since been dissolved. Demchak and his top managers – the people who Rupeta claims stitched him up – are themselves now in custody facing money-laundering charges. “I don’t know who was the mastermind behind the scheme – the Baltic banks or Ukrainians – but I believe Romanov might help if he wanted,” says Rupeta.

Romanov’s investment company Ūkio banko investicinė grupė (ŪBIG) had not responded to a request for comments at the time of going to press.

In and out…

Rupeta, a former bank manager, has had plenty of time during the years of legal proceedings to analyse what exactly had been going on. According to his enquiries, backed by documents seen by bne, the scheme functioned thus: Three non-resident shell companies – Corpmark Impex from the UK, Geraldic SA from Panama and Bridgemax Ltd from New Zealand – channelled hard currency funds to several small local Zhitomir firms, including Rupeta’s. Both the British company and the Panamanian company had accounts at Romanov’s Ukio Bankas, while the New Zealand company had an account at Latvia’s Trast Komercbanka.

The small local companies stood as guarantors for a $2m credit line at a local bank, held by the bank’s own head of foreign currency operations – the man killed in the car crash in December 2007. As the manager drew down the funds in cash apparently for his “personal needs”, the guarantor firms topped up the account using the funds they were receiving from abroad. The cash funds drawn down by the bank manager were then in fact distributed by road to the clients of the money-laundering platform.

In Ukraine such an operation is called a “conversion centre”. The term refers to the conversion of booked company funds to off-the-books cash. Companies wire payments under fictive contracts to firms run by the “conversion centre”, and get the money returned in cash, minus commission, on average 10%. The goal of the operation for its clients is tax evasion, by reducing profit tax through inflating company expenses while creating fraudulent VAT credit, and then using the cash received in return to pay salaries off the books, thus avoiding payroll taxes. As such, “conversion centre’ is often shortened to convert, the Ukrainian word for “envelope”, the medium for such payments. The total annual volume of the market in such “conversion” is around $7bn, according to an analysis by Ukraine’s security service SBU that was leaked to the press in 2010.

According to Vladimir Lysenko, professor at Ukraine’s national tax service university, “conversion centres are mostly directly organised by Ukrainian banks.” Baltic banks play a key role in such operations by circulating hard currency funds in and out of Ukraine via shell companies. According to Rupeta, a total of $57m in cash was transferred from the Baltic banks and paid out in cash via the scheme over a period of one and a half years. “The operation was completely illegal,” points out Rupeta, “since there were no foreign trade contracts to back the hard currency transfers from abroad, as is required by law.”

But the money-launderers’ contacts in law enforcement ensured a blind eye turned, alleges Rupeta.

Demchak’s scheme is not the only one where funds channelled from and to Ukio Bankas feature prominently. According to legal proceedings brought in 2012 in Ukraine, over the space of four months from September to December 2010, another New Zealand shell company, Anglo Stand Ltd, wired a breath-taking €100m and $30m to a small firm in Kharkiv, Ukraine from its bank account at Ukio Bankas. The funds were wired on the bizarre basis of an “agreement on non-refundable financial assistance” – ie. a generous Christmas present from the New Zealand firm to the Ukrainian. The director of the Kharkiv company then cashed the entire sum from its account at small regional bank Akta Bank, ostensibly for purchase of agriculture produce.

While court records only detail this single transaction, the scale of this operation may have been tenfold greater. According to documents leaked to the press by Ukrainian National Bank officials in 2010, the same small regional bank, Akta Bank, had already converted over $1bn of hard currency funds into cash between January and September 2010, making the total for 2010 close to $1.5bn. It is not clear how much of this total was transferred through Ukio Bankas.

According to Ukio Bankas, “As far as we know Ukrainian laws currently don’t include ‘tax crimes’ as a predicate offence [for money-laundering]. Ūkio bankas is neither claimant nor respondent in these cases.”

“We assure that Ūkio bankas strictly follows the law (including anti-money laundering laws) of the Republic of Lithuania and EU Directives in its everyday operations. The bank‘s operations are regularly supervised by the authoritative state institutions. We also cooperate with state law enforcement authorities as required,” Ukio Bankas added.

… and round about

There is also visibility on the reverse side of the operation – moving funds back out of Ukraine to the Baltics, and then on into the international financial system. In 2009, the head of Ukraine’s security service SBU accused another small Dnipropetrovsk bank, FS Bank, of hosting conversion centres that had moved over $2.5bn out of the country illegally in preceding years, including to Ukio Bankas.

According to the corresponding court case documents, between January 2007 and August 2008 three UK shell companies – Technoline Service, Winsboro and Dreamlux – wired over $1bn from their accounts in FS Bank to accounts at Ukio Bankas, Trast Komercbanka and Kyrgyzstan’s Asia Universal Bank – the latter a bank that Kyrgyz authorities nationalised in 2010 due to money-laundering suspicions and balance sheet holes.

The UK companies declared the funds to be the repatriation of investments. The “repatriation of investment”, however, came from the sale at face value of what in fact were worthless local securities – a notorious scam for shifting funds from one company to the next. The securities were sold to a cluster of other UK, US and Ukrainian companies all with accounts at FS Bank, where it is to be assumed the wired payments from clients of the conversion centres had accumulated.

What happens to the dirty Ukrainian funds after reaching the Baltics? Luckily in 2010 the Belgian Financial Intelligence Processing Unit (CTIF), Belgium’s anti-money-laundering watchdog, flagged up suspicious money flows that had passed through a “Belgium bank” from a “East European” bank. Two respected Belgian media outlets quoted sources in CTIF that the banks in question were Belgium’s ING and Lithuania’s Ukio Bankas. Ukio Bankas in turn confirmed at the time that it had been queried about the payments.

According to the CTIF report, the “East European bank” had two accounts at the Belgium bank for correspondent banking. “They were used to transfer money from various offshore companies, customers of this bank, to various counter parties across the world.” Around €1.4bn was transferred via the correspondent accounts in 2008-2009 to a variety of tax havens across the world, in an operation involving a total of 475 shell companies.

“There was little or no information available on the articles of association or these companies‟ activities… CTIF’s analysis showed that several of these companies were known for serious and organised tax fraud, corruption, embezzlement, fraud and organised crime,” reads the report.

The money was transferred in such a way using a series of intermediary companies and alternately regrouping and splitting the funds to make it difficult for the bank in Belgium to determine their origin. “The bank made sure they could conceal the nature of the money,” concludes the report.

From grey to black

The phenomenon of conversion centres may account for the bulk of the dirty money between Ukraine and Baltic banks on an annual basis. Tax evasion sounds a victimless crime, considering the high tax rates and bureaucracy in Ukraine. But the enormous grey international financial flows generated create a channel perfect for laundering the proceeds of crime and corruption.

Moreover, on a local level the work of conversion centres involves billions of dollars in cash buzzing around Ukraine’s pot-holed roads – and none of it recoverable by legal means. This makes their activity the preserve of serious organised crime. And given the improved technologies at the disposal of Ukraine’s tax police, none of this would be possible if law enforcement agencies were not paid off or cut in. Thus conversion centres are a key intersection of the state and mafia.

A number of high-profile contract killings are also linked to the work of conversion centres, such as the savage slaying in 2006 of top cop Roman Erokhin, who was tasked with cracking down on conversion centres by former prime minister Yulia Tymoshenko. But such killings may be only the tip of the iceberg of routine violence and intimidation – as is indicated by Anatoly Rupeta’s case.

Latvia to probe controversial supplier to Ukraine’s Naftogaz

Graham Stack in Zhitomir, Ukraine for Business New Europe (www.bne.eu)
January 17, 2013

Latvia has officially confirmed that it opened a criminal investigation into Highway Investment Processing, a UK shell company that controversially sold a $400m drilling rig to Ukraine’s energy giant Naftogaz Ukrainy in 2011 after purchasing it for only $248.5m from Norway’s Seadrill.

The criminal case could cause a major headache for Naftogaz and officials linked to the deal, just as the national gas company enters into a potentially crucial year with mounting pressure from Russia and a tightening domestic budget situation. And bne enquiries point to things being even worse than they first appear.

In 2011, Highway Investment sold an offshore drilling platform to Ukraine’s largest company, state-owned energy giant Naftogaz, for $400m, having purchased it for $248.5m from Norway’s offshore driller Seadrill. The huge mark-up prompted widespread allegations of corruption domestically and internationally, but Latvia is the only country until now to have launched a criminal investigation, prompted by Highway Investment having a bank account at Latvia’s Trasta Komercbanka.

bne in June quoted sources in Latvia’s economic crime department that an investigation into Highway Investment had been opened. Now there is official confirmation: according to Latvia’s police spokesman on December 12, “in connection with the purchase by Ukrainian company (Naftogaz subsidiary) Chornomornaftogaz of a jack-up drilling platform on March 1, 2011, on May 16 2012 the economic crime section of the main directory of criminal police of Latvia’s state police initiated criminal investigation N11816009312 into the legalisation of funds obtained by criminal means.”

Back in March 2011, the Highway Investment deal kicked off a Naftogaz spending splurge ostensibly aimed at increasing Ukraine’s energy security by tapping reserves on the Black Sea shelf – but which may have achieved exactly the opposite: by saddling the strategically crucial, but financially challenged company with huge debts and mounting due-diligence questions.

The conclusions of the Latvian investigation as to the rights and wrongs of the initial March 2011 tender will thus bear on appraisal of all the company’s subsequent procurement for the Black Sea drilling campaign – now at over $2bn and rising. Ironically, for a project that aims to secure energy independence from Russian gas supplies, the only international funding to date has come from Russia: in November, Russian state-owned bank Sberbank announced it had opened a $58m revolving credit line for Chornomornaftogaz.

While expecting the worst, Latvian investigators may still be surprised by what they find on the Highway Investment books. According to bne enquiries, Highway Investment was not just a special purpose vehicle for the Naftogaz and Seadrill deals, but was already operating as a full-blown money-laundering platform at the time of the March 2011 tender.

Further, bne can reveal that the Latvian investigation is not the only criminal investigation with a bearing on Highway Investment. Ukraine has launched a crackdown on the activity of “conversion centres” – money-laundering operations that “convert” booked company funds into “black cash” via fictive contracts with fictive companies – and in doing so it has unwittingly spilt the beans on some of the forces behind Highway Investment.

Highway robbery

Highway Investment was set up in December 2008, with a certain Pavel Dvulichanskii as its director (holding power of attorney) and a bank account at Latvia’s Trasta Kommercbanka, a bank that has been linked to Ukraine’s former energy minister Yury Boiko.

Despite the company looking like a special purpose vehicle set up for the Naftogaz tender, bne was able to track down one payment made to Highway Investment completely outside of the Naftogaz-Seadrill deal: a small Zhitomir printing company Skerzo paid Highway Investment €270,000 for a second-hand offset press in November 2010. Skerzo subsequently took Highway Investment to court in 2011 when Highway failed to deliver the printer despite the money having moved abroad – violating Ukraine’s foreign currency regulation laws.

Skerzo is owned by Oleg Karpeka, CEO of Zhitomir Cardboard Plant (ZKK). Karpeka co-owns ZKK with Lugansk mining magnate Igor Lisky. A bne reporter, posing under cover as a British businessman, spoke to Dmitry Karpeka, brother of Oleg, about the payments made to Highway Investment.

To suspicious minds, the failed ZKK transaction looks like a typical fictive contract designed to move money abroad. But according to Dmitry Karpeka, the company really did order a printing press from a German company. Highway Investment, he explains, was used as a payment vehicle for the printer “to avoid the excessive Ukrainian paperwork and taxes”. When the Germany company failed to deliver the goods, the money was returned to ZKK minus 20%, which the German company retained for having processed the order. According to Karpeka, the subsequent court case with Highway Investment in Zhitomir was a mere formality required by Ukraine’s foreign currency regulations – accounting for the fact that Highway Investment was represented at the Zhitomir court by ZKK’s own chief engineer, Oleksandr Ergidzei, as shown in the document below.

Karpeka said that the Highway Investment director Pavel Dvulichanskii was a businessman from Lugansk, and when shown a photo from the Facebook page of a businessman of that name from Lugansk, he positively identified him. Karpeka said that Dvulichanskii was a connection of Lisky’s and that the Highway Investment payment arrangement was Lisky’s idea.

Lisky, however, told bne that this was not the case. “The transaction with Highway Investment was made by the printing company Skerzo, which is wholly owned by Oleg Karpeko, and to which I have no relationship at all,” he told bne. Lisky said, however, it seemed to him that Highway Investment had indeed been a “platform for black market transactions.” Lisky denied knowing anything about Dvulichanksii.

Janus-faced Dvulichanskii

But bne established that the Zhitomir cardboard plant (ZKK) had other relations with Dvulichanskii besides the non-resident company Highway Investment. Dvulichanskii – an unusual name which literally means “Janus-faced” – is not only the director of the UK company Highway Investment, but of another of ZKK’s counterparties, this time a Ukrainian one.

According to a case brought against the company by the tax police in 2012, ZKK purported to have purchased paper waste and chemicals in 2010-11 from a Lugansk private company Oriens PP, of which Dvulichanskii has been director since 2010. According to the tax police, these contracts with Oriens were fictive and solely for the purpose of tax evasion through reducing profits.

The tax service alleged in court that Dvulichanskii’s company Oriens is “a member of a single financial-industrial group that was created for the provision of tax minimisation services, for the conversion of funds (into cash), and for the creation of VAT credits to reduce VAT payments.” According to the tax police, Oriens is a fictive company with no staff, office or storage premises, and is one of tens of Lugansk fictive companies used in the conversion centre. Court records show that ZKK made payments to other companies alleged to be involved in the conversion centre as well. The tax service ordered ZKK to pay over $1m in back taxes. ZKK is contesting the claim in court.

Lisky told bne that the tax charges resulted from his support for the opposition party ‘Front Zmin’. However, according to the tax police, the conversion centre’s customers comprise scores of industrial companies concentrated in East Ukraine, including for instance mines owned by the Sadovaya Group, listed on the Warsaw Stock Exchange. Court records show alone Dvulichanskii’s Oriens to be accused of fictive transactions with over ten other plants besides ZKK.

The fact that tax police name a Ukrainian company headed by Dvulichanskii, and receiving payments from ZKK, as part of a conversion centre points to Highway Investment also being part of the conversion centre – and likely receiving payments from other clients of the conversion centre besides ZKK.

The Interfax Spark database shows that Dvulichanskii has had ownership stakes in two other companies – Ukrmagistral-2008 and Ukroptmagistralnik. Both companies are registered at the same Lugansk address and telephone number as Oriens.

Dvulichanskii himself denied any knowledge of the Ukrainian or UK companies to bne. His day job is as a broker of fencing and weightlifting equipment for Lugansk producer Dynamoblade. However the phone number provided for the Lugansk “fictive” companies in the state register matches the mobile number provided for Dvulichanskii’s work at Dynamoblade, indicating he may indeed be an employee of the conversion centre rather than a mere “strawman”. Ukraine’s tax service is prosecuting the directors of other companies it claims were part of the same conversion centre, but it is unclear whether there are proceedings against Dvulichanskii himself.

Akta Bank and the Baltics

Interestingly, all the three Lugansk companies where Dvulichanskii has figured as director and/or owner, including Oriens, have had bank accounts at the same tiny Dnepropetrovsk-based bank, Akta Bank, according to court cases and bankruptcy announcements. This suggests Akta Bank’s links to Dvulichanskii and to the conversion centre uncovered by the tax police – as well as potentially to the UK company Highway Investment.

The Akta Bank connection to Highway dovetails with evidence pointing to Akta Bank’s interaction with other non-resident companies with bank accounts at Baltic banks.

Akta Bank was established only in 2008 by Dnepropetrovsk businessman Vadim Ermolaev, owner of Alef Corporation, which has interests in real estate, agriculture and alcohol. Within a year of it being founded, then head of Ukraine’s security service SBU Valentin Navailachenko named the bank with five others as being involved in large-scale money-laundering in the form of conversion services. According to the findings of a National Bank of Ukraine (NBU) inspection of the bank in 2009, as leaked to weekly Zerkalo Nedeli in 2010, the bank had been selling around $10m and €5m in cash on a daily basis to the same four “individuals”.

Akta Bank both now and in the past has denied any connection to the activities of conversion centres and money-laundering, and says all such reports are the result of paid smear campaigns launched by competitors.

In 2010, there were further revelations about Akta Bank. When in September 2010 the hryvnia suddenly slipped against the dollar, the NBU publicly said this was due to a spike in purchases of hard currency “by the population”. But NBU officials leaked documents to weekly Zerkalo Nedeli in late September 2010, apparently showing that Akta Bank – which had at the time only ten branches – had apparently sold a staggering $1.2bn of hard currency to the population for hryvnia in the first nine months of the year – which would make it astonishingly the second largest seller of hard currency to the population, after the country’s largest bank, Privatbank, despite being only 60th largest in terms of assets.

If the Zerkalo Nedeli figures were true, where could Akta Bank have sourced the hard currency funds? Ukrainian court records suggest Akta Bank is linked to massive money flows from Baltic banks. From August to December 2010, according to court records, a New Zealand company Anglo Stand Ltd transferred €100m and $30m to a Ukrainian brassplate company in Kharkiv region, as “non-refundable financial assistance”. The New Zealand company transferred the funds from its account at Lithuania’s Ukio Bank, to the Ukrainian company, Global Distribution AG’s account at Akta Bank. According to the court records, the Akta Bank branch in Kyiv then paid out the entire €100m and $30m in cash to the director of Global Distribution over a period of four months, ostensibly to purchase agricultural produce. The tax police investigators identified this as a money-laundering operation.

Given that the NBU documents obtained by Zerkalo Nedeli show Akta Bank selling $1.2bn in hard currency for cash January-September 2010, the Anglo Stand Ltd. transfer may have been only one of over ten such transfers in the course of 2010.

Akta Bank’s press officer said it was too early to comment on the ongoing Global Distribution court case and too late to comment on the 2010 Zerkalo Nedeli report.

The Baltic connection is used by major operators of conversion centres to hide from law-enforcement the link between the clients’ wired funds to the conversion centre and the off-the-books cash that clients receive in return, minus commissions.

Friends in high places

Akta Bank’s owner, Vadim Ermolaev, is the business partner of a powerful Ukrainian political clan with links to the Naftogaz deals, which may account for Highway Investment being used as the vehicle for the controversial Naftogaz tender.

The clan was headed by Vassily Dzharti, a confidante of President Viktor Yanukovych and long-serving Party of Regions natural resources minister. Yanukovych made Dzharti governor of the Crimea – home of Chornomoreneftagaz – in 2010. Dzharti died suddenly in August 2011. Dzharti’s protege Eduard Stavitskii held the post of natural resources minister – until being made energy minister with oversight of Naftogaz in December 2012.

In late 2010, early 2011, at the same time as the Naftogaz-Highway-Seadrill deal was in the making, Ermolaev was in talks with the Dzharti group over the privatisation of the assets of Nikopol Pipe Plant, a key supplier of non-rusting pipes for the nuclear power and aerospace sector, which had defaulted on a loan agreement with Akta Bank. In February 2011 – the same month as the Naftogaz tender – the Kyiv commercial court acknowledged Ermolaev’s claim to the pipe plant assets and ordered their transfer to Ermolaev’s structure Oskar. Dzharti’s daughter Viktoria sits as deputy chairman of the court. Viktoria Dzharti’s husband, Valery Omelchenko, then  took a 25% stake in Oskar via his Austrian vehicle Wellmind Investment, as detailed by a Forbes Ukraine investigation.

According to Esa Ikaheimonen, the former CFO of Norwegian offshore driller Seadrill, the company which sold the drilling platform to Highway Investment in April 2011, the deal could proceed very quickly – with talks starting in December 2010 and the deal announced April 2011 – where the purchasing company could show it had the necessary funds at the ready. This , together with the fact that the initial funds on the Highway Investment accounts may have been effectively untraceable since they originate from a multitude of transactions similar to the ZKK transaction, may account for using the company as a vehicle for the deal.

The investigation points to Highway Investment being a sibling of other notorious platform companies run by Baltic banks and Ukrainian counterparties, such as Tormex Limited, which a US court named as a laundering-money outfit for Mexico’s Sinaloa cartel. This makes Highway an unusual choice of business partner not only for Naftogaz, but especially for a $19bn US-listed company like Seadrill.

Fishy eastern business flourishes in murky UK and Irish waters

Graham Stack in Kyiv for Business New Europe (www.bne.eu)

December 6, 2012

The British media are following in bne’s footsteps in trying to track down the people who set up UK companies to hide beneficiary ownership – and in doing so are picking up plenty of leads on dodgy Eastern European businessmen.

Picking up on a 2011 investigation by bne, the Organised Crime and Corruption Reporting Project, and Latvia’s Rebaltika, the UK’s Private Eye in November reported on the “thousands of Ukraine-controlled limited liability partnerships created under British company law and subject to near non-existent regulation” that are engaged in “very dubious operations indeed.”

The “Eye”, a British national institution for satire and investigation, visited an empty Cardiff corner shop where 700 abuse-prone limited liability partnerships (LLPs) are registered – with nary a sign of life to be seen. All that a peek through the letterbox revealed was a letter on the doormat from a Ukrainian bank addressed to an obscure UK company Datlux Contracts LLP – a small limited liability partnership that’s exempt from independent auditing, according to Companies House, and with no paper trail besides the forlorn envelope.

But in Ukraine Datlux does have a paper trail, according to bne enquiries – pointing to the umbilical cord between the Cardiff corner shop and Kyiv’s gilded elite. Ukrainian Ministry of Economy records indicate that Datlux has an outstanding debt of $0.25m due to a Ukrainian counterpart TOV Magistral Full, on a contracted consignment of fish that apparently never arrived. Perhaps due to Datlux’s failure to deliver fish consignments paid for, Magistral was bankrupted by a consortium of small banks from which it had raised a total of $5m, according to court records.

Closer examination indicates something smellier than just fish. Magistral is registered at the same address near Kyiv as a branch of Zlato Bank, believed controlled by shadowy oligarch banker Leonid Yurushev (the bank is formally owned and run by one of his top managers). Yurushev, who could not be reached for comment, indeed openly owns a chain of fish supermarkets in Ukraine called Skandinavia.

But the bank address is suggestive that the transaction may have been more about exporting money than importing fish. Fictive import contracts that are paid but never delivered are a classic Ukrainian scam for moving money tax-free out of the country, and the small round sum of $250,000 may look like a classic ‘smurfed’ payment – perhaps the only such payment of a much larger total sum to have got flagged up by the system. British LLPs that are secretly controlled by Ukrainian “importers” are a beloved counterparty for such tax dodges. As a first-world jurisdiction, UK companies do not ring tax inspectors’ alarm bells as do black-listed Caribbean offshores.

Tax evasion may seem run-of-the-mill, but another LLP registered at the same Welsh corner shop triggered a nationwide scandal in Ukraine in 2011 when it was linked to alleged grand corruption put at hundreds of millions of dollars. “Massive corruption by top officials is taking place involving Ukrainian budget funds where money is siphoned off to fictive companies in UK,” claims Ukraine’s jailed former prime minister and leader of the opposition Yulia Tymoshenko, in a report she filed from her prison cell to the Financial Action Task Force, the global anti-money laundering watchdog, in May 2012.

According to Tymoshenko’s report, Ukraine’s government in 2011 paid anonymous intermediaries around 60% over market prices for a drilling platform and supply vessels intended for use in the Black Sea – purchased from a UK intermediary Highway Investment Processing LLP, registered at the Cardiff corner shop. The report argues that Ukraine’s state energy company Naftogaz bought a drilling rig from Highway Investment in 2011 for $400m that Highway Investment itself sourced for just under $250m from Norwegian offshore operator Seadrill. The UK company reported just under £300,000 profit for 2011 to the UK authorities.

Under the regulatory radar

While this corner shop address may be in Wales, the man pulling the strings to set up the UK LLPs registered at the address has been based in Dublin, Ireland for the last two decades, as described by Organised Crime and Corruption Reporting Project and the Baltic Center for Investigative Journalism in 2011.

According to documents seen by bne, it was a certain Philip Burwell and his company International Overseas Services that set up the companies at the Welsh address, including Highway Investment in 2008, using Latvian nominee directors Erik Vanagels, Stan Gorin and Danny Bangers. “Irish businessmen are the Ukrainians’ conduit into the UK,” writesPrivate Eye, with reference to the 2011 investigation. In fact, the “Irishman” is actually a blithe Antipodean: Burwell was born in Ireland and moved back in the late 1980s when Ireland was itself an offshore zone.  Irish nationality allows him to alternate between the English spelling of his name and the Irish Pilib Boireil.

Burwell denies having a top role at IOS.  ”IOS in Riga was never my company and I have never had any control whatsoever over Vanagels or any of the other Nominee Directors.” Documents obtained by bne show that he he signed as president of the IOS Virginian holding company in 2010, and that in 2008 he set up UK company Highway Investment with nominee directors Stan Gorin and Danny Bangers.

ios virginia 2010 burwell president

Burwell and  IOS were also pinpointed in November 2012 by a massive joint investigation by theGuardian and BBC Panorama programme into the people setting up anonymous UK companies for dodgy businessmen using nominee directors. But in Dublin regulators are looking the other way. “The Anti-Money Laundering Compliance Unit has no record of company service provider International Overseas Services,” says Ireland’s Department of Justice.

International Overseas Services flies below the radar in Ireland, but not so in Ukraine. Until exposed by journalist investigations in 2011, the company’s Kyiv office was located a stone’s throw from Ukraine’s notoriously corrupt parliament and government, making it easy for officials to do business there.

While the Ukrainian clients have included tax dodgers and embezzlers for two decades, most worrying is that Burwell has established numerous UK companies on behalf of Ukraine arms traders – such as a shipment of Ukrainian tanks to South Sudan in 2008 on the MS Faina that was seized by Somali pirates – as well as traders of nuclear equipment, according to documents seen by bne.

Burwell’s connections to Ukraine’s notorious arms export operations stretch right back to the 1990s, when Ukraine supplied and transported much of the weaponry that fueled the horrendous civil war in Democratic Republic of Congo (DRC), that cost over five million lives. Burwell was and is co-director of Irish company East/West Alliance Ltd, set up in the 1990s by Ukrainian air cargo magnate, Anatoly Liovin (Lyovin), as an offshore adjunct to Liovin’s cargo airline ATI.

accounts 2010

The records of Uganda’s Porter Commission that investigated the plundering of DRC during the 1990s civil war – with arms flown in and precious minerals exported – show Liovin’s ATI to have been one of the main aviation operators flying between the war zone and Entebbe in Uganda.

But in 2009, thanks to his Irish company co-directed by Burwell, Liovin persuaded Member of European Parliament Gay Mitchell to file a parliamentary question to the European Commission on his behalf: pressuring Ukraine’s government to return planes confiscated from him in a domestic tax dispute. Liovin has denied any involvement in illegal activities.

Burwell also denies systematic involvement in the arms trade. “There’s always going to be one or two bad ones,” Burwell says of his Ukrainian clients, while averring he does background research on all his clients “on the internet”.

Lavo, lavare, Latvia

The crucial link between Ukraine and the UK/Ireland is Latvia, with banks in the small Baltic country laundering dirty post-Soviet money looking to move west. Burwell’s IOS set up business in Dublin in the year that the Soviet Union collapsed in league with Latvia’s first and largest commercial bank Parex – a bank which became synonymous with money-laundering across the former Soviet Union until it went to the wall in November 2008 under the impact of the world financial crisis.

In an interview in 2011, Burwell acknowledged “being close” to the former owners of the bank, Valerijis Kargins and Viktors Krasovickis. The network continues running flawlessly even after the demise of Parex, indicating both that the Parex network is still active but now simply using other Latvian and Lithuanian banks to channel dirty funds.

Irish regulators are also in denial about the Latvian link. “We have no information about money-laundering activities by Latvian banks in Ireland,” says the Department of Justice.

At least one Irishman disagrees. Michael J. Bourke was head of Latvia’s Rietumu Bank, in which Irish magnate Desmond Dermot holds a stake, for over ten years. Now he is in charge of Latvian efforts to retrieve assets owned by Parex, including from the former owners. “Burwell is the director of companies that received loans from Parex that we believe were hidden loans to the former owners of Parex,” Bourke says.

Ireland’s very own asset recovery bank- the Irish Bank Resolution Corporation – is hurting over failure to gain control over Kyiv’s Ukraina shopping mall, now it seems controlled by top Ukrainian politicians. But when it comes to missing assets, Ukraine – and Latvia – have plenty reason of their own to complain about Ireland.

Yanukovych ‘family’ muscle in on Quinns’ Ukraine mall

Graham Stack for Business New Europe (www.bne.eu)

While Sean Quinn Sr, once Ireland’s richest man, goes to jail in Dublin for diverting assets placed under court injunction, bne enquiries indicate that one of the assets in question, Kyiv’s Ukraina shopping mall, has been pulled into the orbit of the family of Ukrainian President Viktor Yanukovych – and out of the reach of Ireland’s authorities who claim it.

Ireland has been following on tenterhooks the slow motion fall of tycoon Sean Quinn Sr, formerly Ireland’s richest man but now a bankrupt jailbird. Part of the action has been set in Ukraine, including the drama’s top-rating “episode”: a hidden camera showing secret talks in Kyiv in January between Quinn family members and shadowy off-camera Ukrainians, which was leaked to press in July. The talks centred on the fate of the Ukraina shopping mall in the heart of Kyiv, which Sean Quinn owned, and which Ireland’s state-owned bank that was set up to try to clean up the mess of bad loans caused by the financial crisis is trying to recover, in lieu of Quinn’s $3.5bn debt.

This so-called “bad bank”, Irish Bank Resolution Corporation (IBRC), even used the video recording in court to prove that the Quinns still controlled Ukraina mall, and had thus diverted assets in defiance of court orders. The Quinns argued the video showed that on the contrary they had lost control of the mall, and were begging for payments.

Shopping for assets

The saga started in 2011, with the Quinns facing bankruptcy and attempting to shift ownership of real estate assets across Central and Eastern Europe away from their creditors, as they have admitted. Quinn Holdings Sweden AB held 92.75% of the Ukraina mall. But as acknowledged by the Quinns, they assigned a $45m debt claim against Ukraina to shell companies as a means of asset stripping. The Ukraina shopping mall brings in around $10m in rent per year, and is valued at around $78m.

But the Quinns, while admitting initial intent to divert assets, say that in the course of the tangled machinations, they were double-crossed and lost control over the mall to local partners due to questionable court decisions in Ukraine.

The IBRC argues, however, that the Quinns are still calling the shots – and thus in contempt of court injunctions, a criminal offence. A Dublin high court sentenced Sean Quinn Sr to a nine-week prison sentence on November 2, following three-month sentences handed down to Sean Quinn Jr and his cousin Peter Quinn in the summer.

In December 2011, a Kyiv court recognised the debt claim against the Ukraina mall of Cyprus offshore Lyndhurst. In the following months after the decision, a complex chain of securities transactions saw the Ukraina debt transferred first to an obscure Kyiv brokerage Zenit, and then onto an equally obscure Kyiv brokerage Elegant Invest. In July, a Kyiv court ordered that Elegant Invest be recognised as the successor to Lyndhurst, in the court decision of December 2011 legitimising the $45m debt claim against Ukraina.

President of mall Ukraina?

According to bne enquiries, the Elegant Invest transaction shows that the Ukraina shopping mall has indeed been swept away from Ireland’s reach and into the arms of the extended “family’” of Ukrainian President Viktor Yanukovych.

Elegant Invest is an affiliate of an equally mysterious, but far more famous company, TOV Tantalit, which owns the 130-hectare estate and palatial villa in Mezhyhirya near Kyiv that is the extravagant private residence of Yanukovych. Formally, Tantalit only leases the formerly state-owned property to Yanukovych, but media have widely speculated that the arrangement is simply a smokescreen to hide the president’s ownership of the enormous property.

The link between Tantalit and Elegant is the man who bought Elegant in 2009, and then obtained for Elegant its brokerage licence: Dmitro Nikiforov. Nikiforov and Tantalit are linked by their joint ownership of investment fund Dominanta. According to Interfax Spark, Nikiforov owned Elegant until March, when ownership passed to a certain Oleksandr Mashtepa, who has no public profile and may be a straw man.

But while the Mezhyhirya connection points to the Ukraina shopping mall being now controlled by the extended family of Yanukovych, the trail does not lead to the president’s younger son Oleksandr, who manages most of the core family business. Instead, the trail points to 40-year-old Yanukovych confidante Eduard Stavitsky, minister of natural resources and environment as of April, and previously since 2007 (with short interruptions) the head of Ukraine’s state agency for natural resources, Ukrnadra. It was Ukrnadra under Stavitsky’s direction in September 2007 – the last days of Viktor Yanukovych’s second spell as prime minister – that divested the Mezhyhirya estate to Tantalit, according to documents leaked by the successor Yulia Tymoshenko government in 2009.

Stavitsky’s press secretary did not respond to attempts to contact the minister.

Interestingly, Elegant Invest and Tanatalit are affiliates of one more company that has recently been the subject of journalist investigations: according to investigations by Ukrainskaya Pravda and tender watchdog Nashi Groshi, obscure company TOV Premier Leasing, set up by the same Dmitro Nikoforov and ‘Styling’ law firm as set up Elegant, in August won tenders held by state railway operators to lease 3,000 freight cars for a total contract volume of UAH5bn (around $700m).

Further clues point to Elegant’s Stavitsky connection: The investment fund Dominanta features as co-owners – along with Tantalit and Elegant’s Dmitro Nikiforov – a company registered in Makeevka, Donetsk region, called Kross Kapital. Kross Kapital is located at the same address as a local company, Makeevskii Kombinat Kommunalnykh Predpriyatii (MKKP), which Kross Kapital owns jointly with Maksim Shishlov, formerly chief accountant and member of the board of Stavitsky’s Nadra Ukrainy. According to a Forbes Ukraine investigation published in September, Shislov features as head of Nadra Olesska, a newly-created gas exploration company that was mysteriously cut in on a monster production sharing agreement for Black Sea gasfields signed between Ukraine and Chevron earlier this year – with Ukraine’s chief negotiator being Eduard Stavitsky.

Another pointer to Stavitsky may be that the brokerage Zenit – the company that passed the debt claim from Lyndhurst to Elegant Invest – is, on paper, owned and run by a Stavitsky connection called Artem Basmadzhan. Basmadzhan in 2009 was made acting head of Ukraine’s only gold producer, state-owned Zakarpatopolymetally, as the company went into bankruptcy. In an eerie parallel to the story with Ukraina shopping mall, the gold producer was bankrupted in 2009 by a monster debt claimed out of the blue by an offshore company, Cengard Financial, of unknown ownership. Cengard Financial then appointed Dmitro Zaitsev head of the creditors’ committee for the gold producer, and Volodymyr Hurtovoi as the administrator. Both Hurtovoi and Zaitsev are now lawyers for Lyndhurst – and apparently present at the Kyiv January “candid camera” meeting with the Quinns. A clue as to the real owners of Cengard may be that, since becoming natural resource minister, Stavitsky has proposed rebooting Ukraine’s gold production – via purchases by the National Bank of Ukraine (NBU) to boost the country vanishing gold reserves.

Banking arrangements also point to the Ukraina mall moving into the Yanukovych orbit. According to court records, Elegant Invest banks with Bank Globus, a bank that was set up in 2009 and run, and is believed owned, by 37-year-old Valery Prokhorenko, deputy head of the NBU as of 2011, a Yanukovych appointee. Ukraina shopping mall itself changed its bank in December 2011 to Zlatobank, believed owned by Leonid Yurushev, a shadowy banker who grew up with Yanukovych.

Finally, one of the judges on the Kyiv arbitration court that has been handling the court cases connected to the Ukraina mall 2011-2012 is Viktoria Dzharty, daughter of deceased Donetsk businessman and politician Vassily Dzharty. It was while Dzharty was Minister of Natural Resources and Environment in the second half of the last decade that Stavitsky was made head of the Natural Resources Agency (Ukrnadra) and he was widely regarded as Dzharty’s creature.

Sky Mall up in the air

Ukraina is not the only major Kyiv shopping mall whose ownership is in dispute. The Sky Mall – which on completion of its third phase will be Ukraine’s largest, and boast rental income of around $50m per year, compared with Ukraina’s estimated $10m – is also the object of bitter court room disputes, ranging from Ukraine to New York and London, Cyprus and British Virgin Islands.

The original developer of Sky Mall was Estonia’s richest man Hilar Teder, co-founder of one of Russia’s largest supermarket chains Okei. In 2010, to raise funds needed to push on with the third phase, Teder sold a 50% + 1 share in Assofit, the Cyrus company that owned the development, to Stockman, an investment group linked to Donetsk businessmen running the oil trader Oledo Petroleum. Teder, however, retained a call option to repurchase the stake by February 2011. As a step towards raising the needed funds, in September 2010 investment bank Dragon Capital took a 30% stake in Teder’s Cyprus ownership vehicle Arricano Trading.

But when the time for the call option came round, Teder and Dragon got an unpleasant surprise: Stockman successfully challenged the call option both at the London Court of International Arbitration and at the UN International Trade Tribunal, apparently arguing that Arricano had breached confidentiality agreements, leaving Teder’s Arricano Trading with only a minority stake in the development. In August, Stockman changed management at the mall in a surprise move.

Teder may now find it difficult to even hold on to his blocking stake in Sky Mall: according to court records, Dniprovsk Pristan, the Ukrainian ownership vehicle for the Sky Mall, in turn owned by Assofit, was declared insolvent in late August, with a Kyiv court appointing a temporary administrator and freezing assets, which may be a move to squeeze out minorities by transferring assets. The parties involved refused to comment on the story.

At the same time, litigation is going on in British Virgin Islands between the Donetsk businesmen behind Stockman. Igor Fillipenko, a name closely linked to the Yanukovych family, is suing Andrei Adamovsky, the name closest linked to Stockman, according to court documents seen by bne.

Fillipenko and his business partner Andriy Malitsky are suing for $71.6m, due to the “wrongful appropriation” of Oledo Petroleum and breach of fiduciary trust, perhaps indicating that Adamovksy was originally fronting for Fillipenko in Oledo, but then took things into his own hands. Fillipenko and Malitskiy are claiming for $71.5m, or the Assofit shareholding that holds Sky Mall.

Fillipenko shot to prominence in Ukraine when he appeared in 2012 as majority shareholder of Khlib Investbud, now the country’s largest grain trader, which was only set up in 2010 as a state company. Khlib Investbud rose meteorically thanks to wide-reaching formal and informal preferences to displace established global traders such as Bunge and Töpfer on Ukraine’s lucrative grain export market. Journalist investigations have established that Fillipenko is close to Yury Ivanyuschenko, Party of Regions MP and reputedly a close associate of Yanukovych on the make.

So Sky Mall would seem to have been pulled into at least the outer reaches of the Yanukovych orbit as well.

Структуры, близкие к Януковичу, заподозрили в захвате универмага “Украина”

http://economics.lb.ua/trades/2012/11/26/180239_yanukovicha_zapodozrili_zahvate.html

 

Здание в центре Киева отобрали у ирландских собственников.

Среди новых владельцев киевского универмага «Украина» появилась структура, которая обслуживает интересы Президента Виктора Януковича и близких ему людей.

Об этом в издании Business New Europe пишет британский журналист Грэхем Стэк.

Он отмечает, что универмаг «Украина», который оценивается в $78 млн с годовым доходом $10 млн, получил финансовое требование уплатить $45 млн долга в пользу неизвестной структуры Lyndhurst Development Trading SA. Произошло это после того, как владелец универмага (92,75%) – ирландский миллиардер Шон Куин – был признан банкротом, и его активы начали арестовываться кредиторами, в том числе ирландским банком IBRC.

На судебных заседаниях Шон Куин утверждал, что из-за сомнительных решений украинских судов он потерял контроль над собственностью в пользу украинских партнеров. Одним из шагов, который привел к потере контроля, стало требование уплатить $45 млн.

Между тем киевские хозяйственный и апелляционный хозяйственный суды признали, чтовладелец «Украины» – Quinn Holdings Sweden AB - должен все же выплатить Lyndhurst Development Trading $45 млн. Впоследствии в результате сложной цепочки с ценными бумагами этот долг был переуступлен таинственной брокерской компании «Зенит», а потом – не менее загадочной – «Элегант Инвест».

Оказалось, однако, что «Элегант инвест» является аффилированной структурой с ООО «Танталит», на землях которого находится резиденция «Межигорье». Связью между этими структурами является Дмитрий Никифоров, который приобрел в 2009 году «Элегант инвест».

Никифоров и «Танталит» связаны общим владением инвестиционным фондом «Доминанта». Согласно данным «Интерфакс-СПАРК», Никифоров владел «Элегант Инвестом» вплоть до марта, когда его заменил некий Александр Маштепа, данных о котором в публичном пространстве нет, и который может быть подставным лицом.

Другие связи новых владельцев универмага «Украина» выводят на одного из ближайших друзей Януковича – министра охраны окружающей природной среды Эдуарда Ставицкого.

Фонд «Доминанта» вместе с «Танталитом» и Никифором являются совладельцами макеевского «Кросс капитала». Находится «Кросс капитал» по тому же адресу, что и «Макеевский комбинат коммунальных предприятий». Владельцами последнего являются «Кросс капитал» и экс-бухгалтер «Надра Украины» Максим Шишлов. Сейчас Шишлов возглавляет «Надра Олесска».

Путь к Ставицкому можно проследить и через брокерскую фирму «Зенит». Ею владеет и управляет Артем Басмаджан. В 2009 году он был и.о. руководителя государственной компании «Закарпатполиметаллы». Эта компания обанкротилась в связи с огромным финансовым требованием со стороны никому не известного офшора – Cengard Financial. Комитет кредиторов тогда возглавил Дмитрий Зайцев, администратором комитета был Владимир Гуртовой. И Зайцев, и Гуртовой теперь являются адвокатами Lyndhurst Development Trading, которая и инициировала проблемы в универмаге «Украина».

В декабре 2011 году, сразу после решения украинского суда, «Украина» сменила банковские счета. Теперь она их держит в «Златобанке», принадлежащем одному из давних соратников Януковича Леониду Юрушеву.

Наконец, «Элегант Инвест» и «Танталит», согласно расследованиями в Украине, аффилированы с еще одной теперь известной структурой – ООО «Премьер-Лизинг», которая выиграла на тендерах «Укрзализныци» $700 млн.

Achilles Heel of the “Ukrainian Stolypin”

 Graham Stack in Kyiv

Party of Regions MP Eduard Prutnik sees the need for a Ukrainian Stolypin – both a Kyiv statue to the last reforming prime minister of the Russian empire, as well as a real-life statesman for Ukraine’s troubled present: “erecting a statue to the great prime minister-reformer will create a striking symbol for the need for a course of reforms that will make the people masters of their destiny.”

 

Perhaps there is one man Prutnik believes has what it takes: Sergei Arbuzov, 36 year old head of the National Bank of Ukraine, and a protege of Prutnik at the turn of the century, when Prutnik was manager of Viktor Yanukovych’s family assets. Arbuzov and associated officials visited Washington DC in October 2012, and positioned themselves, according to their US interlocutors, as a team of “young reformers with a clear if undisclosed plan”, says Sonya Koshkina of Levy Bereg: “like people who have no doubt they will soon be at the very heights of power and don’t have any hesitation to say this. Soon meaning after the October 28 elections.” “I am actively involved in planning and carrying out economic reforms initiated by the president,” Arbuzov acknowledged for his part, in an English-language interview, despite the NBU’s formal independence from the executive.

 

Arbuzov’s pedigree certainly speaks for him: his mother, Valentina, is CEO of the All-Ukrainian Development Bank (VBR), a fast-growing bank owned by the Oleksandr Yanukovych, the younger son of President Viktor Yanukovych.

 

One ambitious Ukrainian politician has already lost to Arbuzov’s meteoric rise from regional obscurity: Oligarch Valery Khoroshkovsy was fired from his post as head of Ukraine’s security service SBU in January 2012, and moved to the finance ministry. After only six weeks he lost that job to an Arbuzov man, Yury Kolobov and was kicked upstairs to the post of first deputy prime minister, which is prestigious but lacks real levers of power. Humilliatingly for Khoroshkovsky, on November 2, Yulia Nosacheva, a close ally of Arbuzov and Kolobov, took Khoroshkovsky’s place on the supervisory boards of the state-owned banks Oschadbank and Ukreksimbank, distancing him further from state financial flows.

 

One other man is afraid for his job: white-haired prime minister Mykola Azarov, whom it is rumoured could be replaced by Arbuzov in the coming weeks. But he will not go without a fight, and is positioning himself with the rising Arbuzov faction against Khoroshkovksy. In comments made internally, but reported by Germany’s most respected daily, Frankfurter Allgemeine, Azarov savaged Khoroshkovsky October 29 for deliberately ruining Ukraine’s relationships with the West by jailing Yulia Tymoshenko, and thus blocking Ukraine’s access to IMF funds.

 

Khoroshkovsky’s poison pill

 

But while Khoroshkovksy may now be bound for a seat on the largely decorative National Security Council, during his last weeks as head of the SBU in November 2011, he left a poison pill for his young rival Arbuzov: an arrest warrant for Arbuzov’s former employer and colleague, Pavlo Borulko, in connection with SBU accusation of large-scale money laundering and even murder.

 

In November 2011 the SBU issued an arrest warrant for Pavlo Borulko, prompting the latter to flee Ukraine for Belarus. In April 2012, the SBU then went public with extraordinary charges against Borulko together with MP Oleksandr Shepelev, another well-connected 40-something Donetsk banker, whom they called Borulko’s accomplice: charges of massive fraud 2008-2010, and allegations linking the two to contract slayings that covered their tracks.

 

“The central investigative directorate of the SBU has uncovered the theft by the owner of the banks Evropeiskii, National Standard and Volodomyrskii, Pavlo Borulko and other individuals, of UAH 620m ($76m) from the Guaranteed Deposit Fund,” read the dry press release. “In 2009-2010, offcials at these banks on the day before their licenses were withdrawn, opened 1339 deposit accounts in the names of fictive individuals. Using the accounts of companies they controlled they transferred non-existent money to the accounts of these fictive individuals.” When the bank was liquidated, the Guaranteed Deposit Fund paid out the fictive deposits.

 

The SBU also accused Borulko of conspiring with MP Oleksandr Shepelev to steal repo funds disbursed from the NBU to the value of UAH 315m ($39m) and a further UAH 223m ($27m) in funds from Rodovid Bank, using fictive collateral to obtain the funds.

 

That was not all: “In February this year, a witness to the inner circle of Borulko provided the investigation with incriminating testimony against Borulko and an MP, and also mentioned that the the accused had threatened him. In the evening, after questioning, the witness was found dead in his own office. (…) An investigation of premeditated murder has now been opened. On one other witness, who gave investigators important testimony, there was attempted murder using automatic weapons.” In addition, according the SBU, another witness in the investigation fell to his death from a high-rise window.

 

Arbuzov’s Achilles Heel

 

The close Borulko connection could still prove be Arbuzov’s Achilles heel in his meteoric rise and his enemies such as Khoroshkovsky will seek to make the most of it: Borulko was the man who gave Arbuzov his big break, after their careers had started together in the late 1990s in the small Donetsk town of Konstantinovka, population 100,000, at the same bank, the local branch of Privatbank. Arbuzov’s mother Valentina, was head of the Donetsk division of Privatbank 1994-2007.

 

Despite Borulko’s apparently criminal career, It is not clear that Arbuzov ever severed ties with him. Arbuzov refuses to comment on his earlier ties to Borulko.

 

According to the Spark Interfax database, in 2002-2003, Borulko, his patron Prutnik, and their business partner Dmitro Goncharov, together with wives and associates, acquired the tiny Donetsk bank, Donechinna, later renamed as Ukraine Business Bank (Ukrbiznesbank). Borulko himself moved to head Donetsk bank Donechinna in June 2002, the year the bank installed its first autoteller.

 

But in November 2002, governor of Donetsk, Viktor Yanukovych, was made prime minister, and took with him to Kyiv his ‘manager’ Prutnik, who became head of the board of the state savings bank Oschadbank. Prutnik in turn took with him to Kyiv his own team, including Borulko who became deputy head of the treasury at the bank, and Yury Kolobov, now finance minister, who became head of the treasury, Borulko’s direct boss. Kolobov and Borulko then took responsibility among other things for disbursal of compensation sums to citizens who had lost their savings in Oschadbank after the collapse of the Soviet Union. Borulko left the bank in 2005, but his continued closeness to the Yanukovych family meant he was made adviser to then prime minister Yanukovych in 2007.

 

Borulko replaced himself at Bank Donechhinna in 2003 with Sergei Arbuzov, his colleague from Konstaninovka’s Privatbank, who stayed at the bank until 2009. Borulko and Goncharov were listed among the bank’s owners alongside Prutnik until September 2008, when structures formerly run by Prutnik, but already passing under control of Oleskandr Yanukovych, took complete control of the bank.

Thus bankers Borulko and Goncharuk were Arbuzov’s employers for six years, while also running a number of other small regional banks.  What was Borulko up to in these years? Already in April 2007, Anatoly Brezvin, head of the Ukraine’s tax administration, at an Interfax press conference detailed a massive money-laundering and conversion operation centred on the Donetsk division of Avtokrazbank, closely associated with Borulko, and headed by a close Borulko and Arbuzov associate, Konstantin Krivenko, according to the bank’s public disclosures.

 

Money-laundering and murder

 

Borulko and Arbuzov’s employment in the Konstantinovka branch of Privatbank overlapped with Oleksandr Medvedko, like Borulko a native of the town, heading the prosecutor’s office. By 2002 Medvedko had become Ukraine’s deputy prosecutor general, and from 2007 to 2010 he was the country’s prosecutor general. Konstantinovka is a small place and Medvedko is widely reported to be married to the aunt of Borulko’s wife. In an interview in 2009, Borulko’s business partner Dmitro Goncharov confirmed the two women “were close friends”.

 

In 2004 came the Orange Revolution, and the appointment of anti-corruption campaigner Yury Lutsenko to the post of Interior Minister. Lutsenko quickly put together a special unit under police major Roman Erokhin to investigate money-laundering by a network of Donetsk banks. Erokhin was then murdered by hired killers in June 2006. The ensuing investigation linked both Borulko and Shepelev to the killing.

 

Judgement was pronounced on the killers December 6 2010. http://www.reyestr.court.gov.ua/Review/12906450. According to testimony cited in the verdict, Erokhin’s brother, also a top police officer, had been informed by the security service of Arbuzov’s Ukrbiznesbank that Shepelev ran ‘financial groups’ across a number of banks, and was for this reason in conflict with Erokhin. Other testimony said the network was based on Bank Perspektiva, later Unikombank, a bank the SBU has publicly linked to Shepelev.

 

According to the verdict, the group of killers was initially briefed at premises owned by Shepelev, apparently to plan the kidnapping of Dmitro Goncharov – close business parter of Borulko and also co-owner of Ukrbiznesbank – whose contact details were found with the group. The killers claimed they backed out off the Goncharov kidnap attempt due to the fear of armed resistance. “A few days later”, they were approached by an “unknown party” with the proposal to take Erokhin, which they then implemented, kidnapping and then shooting him in leg, head and stomach, and burying the corpse.

 

Considering the prosecution’s case was overseen by Borulko’s associate Medvedko, it may be that prosecutors invented the implausible Goncharov kidnapping story to separate Shepelev, Goncharov and Borulko from implication in ordering Erokhin’s murder, after the original Lutsenko-influenced investigation had obtained such evidence. One of the defendants retracted his testimony about Goncharov’s planned kidnapping, saying there had been no such plan and that it had been suggested to him by investigators in return for promised favours that never materialised.

 

In June 2012, another notorious contract killing was brought to trial, linked to Shepelev and Borulko: that of Sergei Kirichenko, chairman of Avtokrazbank, disembowelled in a frenzied knife attack January 2003. http://www.reyestr.court.gov.ua/Review/25031391. The defendant, a native of Konstantinovka who was directly involved in organising the killing, was found guilty, but given a light sentence of 9 years backdated to 2009. According to the verdict, the killing was ordered by one of the owners of Donkreditinvestbank, likely to have been Shepelev, who has publicly disclosed his ownership of this bank. Analogous to the Erokhin murder case, the prosecution case included a curious preliminary incident in the run-up to the murder: the defendant testified that the same owner of Donkreditinvestbank who ordered Kirichenko’s slaying (Shepelev) had previously paid him for stealing a car from a second co-owner of Donkredinvestbank, indicating the two owners were in conflict with each other. The identity of the second owner whose car was allegedly stolen is unclear, but may have again been Borulko or Borulko’s associate Goncharov, who earlier headed Donkreditinvestbank’s foreign currency department. So the incident may again have constituted an attempt by prosecutors to separate Borulko and Goncharov from implication in the killing.

 

Privat doubts

 

Although Oleksandr Medvedko left the prosecutor general’s office in 2010, the Konstantinovka connection is still strong and even growing in top state posts: Yulia Nosacheva, head of the Kyiv tax inspectorate, started her career with Arbuzov and Borulko at Konstantinovka’s Privatbank, and current interior minister, previously head of the tax service, Vitaly Zakharchenko, headed the town’s police at the time.

 

A further cluster of current top officials worked at other Privatbank branches in the 1990s in Donetsk region, where Arbuzov’s mother Valentina ruled the roost, and also Kharkiv: finance minister Yury Kolobov, his close associate Aleksandr Dubikhvost, head of the NBU’s hard currency reserves department, Roman Maguta, head of Ukraine’s state audit chamber, Viktoria Kononikhina, deputy CEO of state-owned Ukreksimbank, and Konstantin Krivenko, member of the board of Ukraine’s National Securities and Stock Market Commission, where he heads the Committee on Monitoring, Reporting, Disclosure and Prudential Supervision.

 

Surprisingly, despite this proliferation of former employees of the Privatbank Donetsk division in top state positions today, Valentina Arbuzova’s then bank enjoyed a far from spotless reputation in the late 1990s when these figures started their career.

 

According to media reports from the time, at a meeting in 1997, the Donetsk regional administration’s committee for combating organised crime, in the presence of top regional and national law enforcement officials, including two deputy heads of the SBU, singled out Valentina Arbuzova for her bank’s money laundering activities, in particular the creation of fictive companies, abuse of loro accounts and hard currency transactions. The regional prosecutor said that criminal cases had been opened against Privatbank officials for implementing money transfers, up to $200,000 dollars per day, on fictive contracts.

 

In 1998, in an article published in the government announcer, Golos Ukrainy, Ukraine’s then prosecutor general Mikhail Potrebenko singled out Valentina Arbuzova’s bank as having laundered funds for a major organised crime group, using eleven fictive companies with accounts at Donetsk’s Privatbank division.

 

Things do not seem to have improved after the turn of the century. The Mariupol branch of Donetsk Privatbank was wracked by scandals 2002-2003, when its head, Tatiana Kudina, was first accused of stealing depositors’ funds, and then of running a huge fraudulent VAT reimbursement scheme.

 

Internet scam

 

The first Internet data communication networks were rolled out through Ukraine in the 1990s by a German joint venture with national telecom fixed line monopolist Ukrtelekom. The joint venture, Infokom, installed the ‘Ukrpak’ network initially for corporate clients, especially banks.

 

Uniquely in Donetsk region, however, Infokom operated through a local partner ZAO DORIS, founded in 1996, co-owned and run by Olesandr Shepelev, represented on paper by his grandmother Maria Shevchenko, and a local strong man, Party of Regions MP Nurulislam Arkallaev, represented on paper by his wife. Infokom and DORIS rolled out a nationwide data network for corporate clients, primarily banks linking up to global payment systems, large companies and government bureaucracies. DORIS faded in importance after the turn of the century, as Ukrtelekom started expanding its own network, but in the 1990s DORIS had a monopoly on internet communications for corporate clients in Donetsk region. Thus Shepelev and Arkallaev effectively ran Donetsk banks’ payment systems around the turn of the century.

 

Privatbank was one of DORIS’ clients, and a pioneer in using internet for data transfer. Around 2000, Privatbank in Donetsk introduced the first special payment centres handling households’ payment of utility bills, together with billing the state for the accompanying subsidies, that reached 100% for some classes of consumers, such as impoverished pensioners. Such centres thus controlled data for all local households, including personal data, and handled large financial flows. The first such centre was installed in Konstantinovka, where Arbuzov headed the town’s Privatbank branch.

 

In 2002, in the last year of Arbuzov’s employment as head of the branch, media reported a fraudulent scheme apparently run through the bank since 2000, involving the utilities billing datacenter: the scam was based on the centre not reporting deaths of consumers as required by contract, and thus continuing to claim state subsidies for utilities bills of pensioners, frequently as much as 100% of the bill,  for years after their death, effectively the classic ‘dead souls’ scam known since Gogol’s times.

 

The fourth bank

 

Borulko and associates may have continued as Achilles heel for Arbuzov even after the latter’s move to Kyiv in 2010. One of the figures closest connected to Borulko’s banks 2008-2009, former chairman of the supervisory board of Borulko’s National Standard, and CEO of his Evropeiskii Bank, Konstantin Krivenko, also originally from the Donetsk Privatbank division, was made adviser to Arbuzov in 2010, immediately before he took over at the National Bank. According to unconfirmed sources quoted by Ukrainskaya Pravda, Krivenko and Arbuzov are godfathers to each others’ children. Krivenko is now a member of the National Securities and Stock Market Commission.

 

While the ‘bank robberies’ that the SBU publicly attribute to Borulko and Shepelev took place 2008-2009, in fact the scheme went into overdrive in 2010, after the Party of Regions came to power and were effectively calling the shots at the National Bank even before the resignation of long-serving head Volodymyr Stelmakh in December 2010.

 

The SBU in press communications in 2012 named three banks used in the deposit compensation scheme, but also mentioned a fourth unnamed bank. That bank was Dialogbank, a tiny Dnipropetrovsk bank put under temporary administration by the NBU in 2009. In 2010 extraordinary things happened at the bank. Still under temporary administration of the NBU at the start of 2010, in January 2010, Dialogbank was readmitted to full membership of the GDF, meaning that new deposits would be fully insured. In April 2010 a new investor injected UAH177.5m (22m)  into the bank’s capital, and in July 2010 the NBU withdrew administrators.

 

By October 2010, the tiny bank’s loan book had grown from UAH 219m ($27m) in April 2010 to 826m ($101m), almost entirely loans made to legal entities. At the same time, deposits expanded from UAH 111m ($14m) in April 2010 to UAH 1092m ($134m) in October 2010, i.e. almost tenfold in 6 months. http://www.bank.gov.ua/control/uk/publish/category?cat_id=84853. While the loans went to legal entities, almost all the new deposits were owned by natural persons, according to NBU data.

 

In November 2010, the NBU reintroduced temporary administration. In May 2011, the bank’s licence was withdrawn and it was liquidated – and the process of the Guaranteed Deposit Fund paying out to the ‘depositors’ initiated.

 

Examination of a number of law suits accompanying the liquidation of Dialogbank 2011-2012 shows that investors acquired the bank in April 2010 using a vehicle, Spetstroiproject-2007, whose owner on paper, was the CEO of Voskhod. Voskhod, a development company that builds and runs the Obzhora shopping mall chain in Donetsk, was co-founded in 2000 by none other than the wives of Oleksandr Shepelev and Vyacheslav Sobolev, former deputy mayor of Donetsk, according to Spark Interfax. Party of Regions MP Nurulislam Arkallaev, Shepelev’s partner in data network operator ZAO DORIS, took a stake in the company in 2006, and in fact is regarded by local sources as its guardian angel from the very beginning.

 

One week prior to recapitalisation of the bank in April 2010, Dialogbank had provided loans to five small companies roughly equivalent to the funds then injected into the bank’s capital. The loans thus apparently used to buy the bank in April 2010 were collateralised by a building owned by Arkallaev, at Universitskaya 36a in Donetsk, and the mortgage agreement was drawn up by public notary Victoria Soboleva, ex-wife of Vyacheslav, according to court records. After withdrawal of the bank’s license May 2011, the outstanding loans were settled against the capital injection, which had been declared invalid by the NBU, freeing the collateral from claims by the bank.

 

Arbuzov later claimed that the NBU had cracked down on the scheme. “We understand what happened in this bank and introduced a number of restrictions that prevented implementation of the planned scheme by its organizers,” he told Zerkalo Nedeli in February 2011.

 

In fact, court records shows that it was not the NBU, but Khoroshkovky’s SBU which had intervened November 2010, opening a criminal investigation into theft of funds from the DGF in the cases of Dialogbank, Volodmyrsky, Evropeiskii and Nationalny Standard, according to court records. http://www.reyestr.court.gov.ua/Review/25773909, 

 

Additionally, according to information provided by the DGF, it paid out a total of UAH 93m to 927 depositors / natural persons after the liquidation of Dialogbank in May 2011. But a court ruling of 14 December 2011 details that a suspiciously similar number of individual depositors, 920, had transferred their deposits to a Donetsk company Triumf – Servis, one of the five companies receiving loans in April 2010 prior to acquisition of the bank.

http://www.reyestr.court.gov.ua/Review/20268729

 Thus apparently a payout was made after all to the organisers of the scheme, despite intervention by SBU and assurances by NBU.

 

While Borulko has fled to Belarus, which appears to refuse to extradite him, Shepelev in October 2012 was still in Ukraine, fighting a parliamentary election as an independent. While it was clear that he would lose, and thus lose his immunity from prosecution, he was playing it cool in an interview he gave to RBK Ukraine in October: “Mr Derevyanko (SBU press secretary) made his announcement seven months ago. Since then, there has been enough time for investigative proceedings. If any criminal investigation was in progress, they would at least have invited me for an interview. (…) For three years rumours have circulated about my implication in various investigations, but if they really wanted to remove my deputy’s immunity, believe me they would have done it along time ago.”