Seven years since PrivatBank was nationalized, a bitter battle continues between the state and former shareholders through hundreds of lawsuits. According to data obtained by LB.ua, judges spend thousands of hours in courtrooms, during which oligarchs allegedly use various tricks and tricks to avoid responsibility for withdrawing funds from PrivatBank.
Seven years ago
In December 2016, PrivatBank was nationalized. Employees of the Deposit Guarantee Fund entered 33 branches of the country's largest private bank at that time, and a temporary administration was introduced in the institution. In Kyiv, the then head of the National Bank Valeria Gontareva and Finance Minister Alexander Danilyuk spoke to reporters and for the first time officially announced the scale of the problem.
“More than 97% of the bank’s corporate loan portfolio (about 150 billion hryvnia as of November 1, 2015) are loans to companies associated with shareholders,” Valeria Gontareva said then.
Most of these funds were never returned to the company, which left a hole in the bank's capital. To keep the bank afloat, the government had to issue approximately $5.5 billion in debt. Moreover, 5.5 billion is only the amount of additional capitalization, the total loss is much greater, and the bank is still calculating and determining it. The former shareholders have still not compensated the state, that is, taxpayers, for these losses. Moreover, they are trying, if not to regain control of the bank, then at least to get away with it.
Where did the money go
In January 2018, the National Bank presented the findings of the Kroll detective agency based on the results of an investigation that cannot be made public due to bank secrecy. The researchers said PrivatBank was “the target of large-scale and coordinated fraudulent activity for at least ten years prior to nationalization.”
Detectives also came to the conclusion that ex-shareholders, through proxies, withdrew funds from the bank to buy assets and finance businesses in Ukraine and abroad. To hide these transactions, they used a cyclical on-lending scheme. That is, old loans were, as it were, repaid with new credit money, and so on in a circle. A scheme very similar to a financial pyramid.
Here is one example that the lawyers of the now state-owned PrivatBank discovered and which they described in their lawsuits against former shareholders (the text of the lawsuit is in the editorial office). This case is being considered in the Chancery Court of the State of Delaware at the suit of PrivatBank and the US Department of Justice.
In 2011, ferroalloy and mining and processing plants controlled by the owners of PrivatBank (Zaporozhye and Nikopol ferroalloy plants, Marganets and Stakhanovsky ferroalloy plants) received loans for 187 million US dollars. According to the documents, they were supposed to finance their activities with these funds, but after 5 hours, in the course of 24 operations, the funds were sent to the accounts of Bogolyubov, Kolomoisky and related companies. Subsequently, using these funds, the American company Optima Acquisitions, close to Privat shareholders, bought a ferroalloy plant in Kentucky.
To get these and other loans back into the bank, state-owned PrivatBank filed lawsuits against former shareholders and related companies in the United States, Israel, Cyprus and other jurisdictions.
Since the beginning of the fraud trial in the United States, the mentioned enterprises have filed about 200 identical lawsuits (combined into 15 proceedings) in Ukraine. They are demanding that Ukrainian courts confirm the legality of the fictitious loans that are the subject of PrivatBank's international lawsuits. Ukrainian courts are asked to recognize that loan obligations have been properly fulfilled and that the borrower has repaid the loans.
Of all 15 proceedings, Ukrainian courts are currently considering only two NZF cases - No. 910/12559/20 and No. 910/14224/20. The remaining 13 were stopped or ended in favor of the bank without a decision being made on the essence of the dispute. The court's verdict in these cases may affect others.
Ukrainian judges against American ones
The ex-owners of PrivatBank deny that they are involved in any fraudulent schemes and are defending their position in the courts. And not only them. Companies associated with them are also filing hundreds of lawsuits in Ukrainian courts against the now state-owned PrivatBank.
They do this in a sophisticated way. For example, the Nikopol Ferroalloy Plant, where Kolomoisky and Bogolyubov have minority stakes through companies they control, is trying to obtain a decision from the Ukrainian court (cases No. 910/12559/20 and No. 910/14224/20) to recognize all obligations under five loan agreements as terminated, money of which went through a chain of transactions for the purchase of assets in the United States and other countries. This decision may affect the prospects for prosecution of former PrivatBank shareholders in the United States and Israel.
“By decisions of Ukrainian courts, they are trying to justify the alleged impossibility of considering claims initiated by the US Department of Justice in the US, to interfere with the criminal investigation against former owners in the US, and also to try to sabotage the consideration of the PrivatBank case in the US ($685 million plus interest) and Israel ($600 million plus interest) ),” PrivatBank’s lawyers note.
Now NZF and other companies from the orbit, read Kolomoisky and Bogolyubov, managed to temporarily suspend the consideration of the case in the States. For two years now, the American Themis has been waiting for a decision from the Ukrainian courts. Meanwhile, in Ukraine, the case went from the courts of first instance to the Supreme Court and returned to the court of first instance.
NLF's position is that all obligations under these loan agreements were fulfilled properly and in full. At the same time, PrivatBank did not make any claims regarding these transactions, but NFP itself initiated legal proceedings in Ukraine. Probably to cut off this first chain of a complex scheme for withdrawing funds from PrivatBank.
Let us recall that, according to Kroll detectives, Privat’s ex-shareholders used a system of cyclical on-lending until its nationalization in 2016: credit lines were opened, closed, opened again and repaid with new loans. And so many times in a row.
That is, the recognition or non-recognition of the absence of NPF’s obligations to the bank for several separate transactions does not as such indicate that there is no large-scale and complex scheme for transferring money abroad - this is just a piece of a much larger puzzle. But such recognition of the absence of NPF’s obligations to the bank for specific transactions could significantly affect PrivatBank’s foreign claims for noticeably higher amounts.
Miracles in some Ukrainian courts
The Kolomoisky-Bogolyubov business empire is famous for its ability to resolve issues in Ukrainian courts. Is it any wonder that the procedure for considering a case regarding NZF loans looks specific. We are far from indiscriminately accusing all Ukrainian judges of working in the interests of the oligarchs, but some courts behaved strangely, to put it mildly. Judge for yourself:
The judges did not check or investigate whether the transactions for which the loans were allegedly used were real, as well as the further movement of funds.
They did not require additional primary documents to confirm payment not only of the loan body itself, but also of the associated payments: commissions and interest.
Some courts “studied” several thousand pages of documents in 20-30 minutes, which is physically impossible.
Often the decisions themselves were made in “turbo mode” - they were made on the same day when the consideration of the case on the merits began.
The court of first instance “wrote” the full text of the decision in just a few hours, which is physically impossible without its advance preparation.
LB.ua will follow the development of the Nikopol Ferroalloy Plant case and the strange decisions of Ukrainian judges. And not only for this matter. Now, in hundreds of lawsuits, there is a struggle between the Kolomoisky-Bogolyubov business group and the state-owned PrivatBank, that is, Ukraine. We will also try to tell you about the most interesting court stories.
