The head of the Poltava Mining and Processing Plant was accused of cosmic losses to the state and is being held in custody. But the company claims that they simply effectively used associated materials from the ore mining and beneficiation process.
In September, the National Police announced suspicions against the chairman of the board of the Poltava Mining and Processing Plant (PGOC) for illegal mining and abuse of power by prior conspiracy by a group of individuals. The Office of the Prosecutor General clarified that we are talking about the period from 2013 to 2021, when the Mining and Processing Plant, having permission to mine ferruginous quartzite, allegedly illegally mined and sold other minerals. The prosecution believes that they should have been “simply stored” in special places; instead, they were used to produce crushed stone for further sale. The prosecutor's office claims that from 2015 to 2021. The plant received more than 20 million cubic meters. m of such secondary materials, and losses for the state were estimated at a cosmic amount - more than 157 billion UAH (more than $4 billion at the current exchange rate). Therefore, now the courts are choosing record bail amounts for the chairman of the board of the enterprise, Viktor Lotous, which essentially means for him to remain in custody. However, there are many weak points in this case; a detailed analysis of it is published by the business publication Expert.
How does mining actually work?
In fact, the process of mining and beneficiation of iron ore is more complex than law enforcement officers describe. The mining and processing plant produces not only useful raw materials, but also a significant amount of related materials of various types and mineral composition. All iron ore mining and processing enterprises try to use these materials for further processing. For example, various building materials are produced from related materials. This not only enables the company to operate more efficiently, but also reduces its environmental footprint in the form of waste.
Specifically, the Poltava Mining and Processing Plant produces ferruginous quartzites, during the processing of which the so-called non-fractional screening (or “tails”) of dry magnetic separation is formed. This screening is not a mineral at all, which is confirmed by experts from the National Scientific Center “Institute of Forensic Expertise named after. honorable prof. M.S. Bokarius" and the State Service of Geology and Subsoil. In fact, this material is a mixture of crushed stone and metal dust, which is then used to produce building materials. And, importantly, this screening does not require licensing. In other words, waste from magnetic separation (the process of separating iron ore from bulk rock) is not included in the list of minerals of national and local importance approved by Decree of the Government of Ukraine No. 827 of December 12, 1994.
Space pledge
This information casts doubt on the conclusions of the prosecutor's office that the state could have suffered and suffered losses. After all, PGOK has a special permit for subsoil use and has been extracting only iron ore raw materials for half a century. The company intends to prove in courts that the charges are false.
At the same time, the courts have recently considered the issue of a preventive measure for Viktor Lotous. At the end of September, the Pechersky District Court of Kyiv decided by judge E.S. Khainatsky. took him into custody with the right to post bail of almost... 1 billion UAH. This is the equivalent of more than $25 million (at the current NBU exchange rate) or more than 200 years of work as the chairman of the board of PGOK. On October 30, at the appeal court hearing, Lotous’s bail was reduced to UAH 400 million (this is approximately 80 years of work). However, he was left in custody.
Such a large amount of bail is probably explained by the amount of losses claimed by the prosecution (UAH 157 billion). However, according to the lawyer of the chairman of the board of YuGOK, Alexander Ruzhitsky, the conclusion about such a volume of allegedly caused damage was based on only tax reporting, which does not confirm the fact of illegal use of subsoil. And the expert conclusions, according to him, are not supported by real measurements of the volumes of mined or sold ore and were drawn up in violation of the methodology for conducting such research, approved by the relevant ministry. The lawyer notes that among the specialists involved in these calculations there was not a single expert economist.
It is significant that at the very beginning the investigator and the prosecutor generally demanded a bail of the same 157 billion UAH (more than $4 billion at the current NBU exchange rate). This is the equivalent of either 30 thousand years of Lotus’s work in his position, or... several IMF tranches for Ukraine.
“Of course, 400 million UAH is significantly less than 157 billion or 999.99 million UAH, but this amount is still illogical and amounts to more than 80 working years even in peacetime, not to mention during war, and the decision made by the court is illegal. The court actually ignored the norms of the Criminal Procedure Code of Ukraine, which determine the amount of bail, depending on the severity of the criminal offense committed, and should be up to 300 times the subsistence minimum. Only in exceptional cases can the amount of bail exceed the upper limit provided for by the Code of Criminal Procedure, but the exclusivity was not in any way justified. The court also ignored the thesis that the amount of bail should not provide compensation for losses, but only guarantee the person’s appearance when summoned to court, as well as numerous decisions of the European Court of Human Rights, which has repeatedly expressed its position that the amount of bail should be determined taking into account property the person’s position and the fact that it cannot be obviously exorbitant for him,” say the lawyers of the chairman of the board of the Poltava Mining and Processing Plant.
Destabilization of production
The company considers this case an attempt to destabilize production, which is of national and international importance and is part of the international company Ferrexpo, one of the largest investors in the Ukrainian economy.
Lawyers for the Poltava Mining and Processing Plant have already sent relevant complaints against the actions of the judges of the Pechersky District Court of Kiev to the High Council of Justice, the Human Rights Department of the Verkhovna Rada of Ukraine, the Business Ombudsman of Ukraine and other Ukrainian and international institutions. They also plan to file a submission to the European Court of Human Rights.
But who could be interested in attacking the enterprise? They claim that the matter is either in attempts to seize the asset with the help of law enforcement officers or in the incompetence of government agencies. And they emphasize that in any case, this threatens the well-being of the entire region and the state as a whole, because the Poltava Mining and Processing Plant is a large taxpayer to budgets of all levels and one of the country’s largest exporters. The defense forces may also be left without the support from the PGOK, which it provides during enemy aggression. Both the above-mentioned and other attacks on the plant are considered illegal attempts to disrupt its normal operation.
