BY
This entry has bumped its way up the
“should write a few lines about that” list due to further deterioration of the
situation as of yesterday when yet more assets were illegally stripped from the
Mriya Agro Holding entity that has become something of an international
nightmare for the Ukrainian authorities – despite Mriya meaning “Dream” in
Ukrainian.
Where to start this nefarious tale, and which names on
the periphery to include or exclude is somewhat subjective. What happens
next is far from clear either. Whatever the case, there will be many
readers left with the perception that the authorities grip upon the rule of
law, even with this high profile case involving numerous foreign investors, is
more than a little questionable despite innumerable historical and very recent
assurances by the authorities to pay special attention to the rights and
circumstances surrounding those committing to FDI into Ukraine.
Perhaps most aggravating
(aside from an absence of rule of law enforcement) is the fact that this
incident is in agriculture – a sector that the Ukrainian authorities view as a
leading economic sector to drive and sustain economic growth.
First however, a little
historical glossary is required to bring a reader to the present day.
Sometime around
1992/1993 from within the leaderless and lawless rubble of post-Soviet Ukraine
Mriya Agro Holdings was created by Ivan and Klaudia Guta. It went on to
become a major agricultural holding in Ukraine – among the top 5 in terms of
land under management.
The Guta family, Ivan,
Klaudia, Andrei and Mykola remained 80% majority share holders even after a
successful IPO on the Frankfurt Stock Exchange in 2008.
Investors such
as BNP Paribas SA, Credit Agricole SA and UniCredit SpA, while bondholders
include Argentem Creek Partners, CarVal Investors, DuPont Capital Management,
Pioneer Investment Management and T. Rowe Price Group Inc piled in, the World
Bank and EBRD provided loans for expansion. Why not? Mriya Agro was
reporting wonderful annual results ($660 million per annum) and reportedly had
a truly enormous 320,000 hectares of land under management.
Quite where the due
diligence was in all of this is unclear, for Mriya Agro Holdings had within its
set up a number of obvious shell companies. There is nothing wrong with
shell companies per se as far as doing business in Ukraine is concerned. Whilst
they may be synonymous with tax evasion and dodgy dealings they also provide
Ukrainians with multiple jurisdictions beyond the ruinously corrupted court
system that can insure property rights are far from inviolable.
What reader would have
left multi-million/billion dollar businesses at the mercy of a thoroughly
corrupted Ukrainian judicial system where rights for such entities historically
have been temporary in the hands of a suitably selected judge?
Off-shoring is akin to insurance therefore.
Suffice to say that the
entirety of the Guta family were shareholders in (at least) 5 off-shore
companies, including HF Asset Management Limited which owned the 80% of Mriya
and which was subsequently wound up in December 2014 when the company CFO was
the infamous Alexander Cherniavsky (see below).
The summer of 2014 found
Ukraine with empty cupboards following the Yanukovych regime grand theft, a war
with Russia, and the inevitable crash of the Ukrainian currency. Mriya
Agro Holding could no longer service its $ denominated bonds. (The total
debt portfolio across more than 20 lenders exceeded $1.2 billion.)
By December 2014 it was
clear to shareholders of the 20% of Mriya not owned by the Guta family, and
also Mriya’s lenders that the Agro Holding was being systematically asset
stripped with assets being illegitimately re-registered (often back dated) to
other companies, whilst other assets were being stolen, hidden and/or sold off
with the proceeds disappearing. A process requiring dodgy lawyers and “black
notaries”.
The Guta family and the
senior management left Ukraine swiftly when awkward questions began to be
asked.
The remaining
international shareholders were then faced with acting swiftly not only to deal
with the international creditors, but also to prevent the continuing illicit
stripping of Mriya Agro Holding.
It swiftly became clear
that the accounts of Mriya audited by Ernst & Young (Kyiv office) were
hardly a true reflection of Mriya Agro Holdings. Aside from the
ubiquitous VAT scams associated with agriculture in Ukraine, the asset
stripping, fraud, accounts manipulation and cash skimming swiftly became
apparent.
Indeed the 320,000
hectares of land reportedly under management turned out to be 220,000 – prior
to further nefarious reductions. In short $ hundreds of millions have
been misappropriated
The minority
shareholders won control over Mryia Agro Holding in the courts, struck deals
the creditors, installed new management and began proceedings in Ukraine (and
other jurisdictions), leading to former senior employees being declared wanted.
(Indeed Mykola Guta the former CEO had an Interpol Red Notice raised
against him, currently sitting under house arrest in Switzerland.) Legal
process is underway to reclaim about 60,000 hectares of land bought with stolen
cash from Mriya under the names of other companies.
Mryia Agro Holding today
operates with about 180,000 hectares of agricultural land under management with
a storage capacity of about 600kt. It is now profitable, remains one of
Ukraine’s largest agro-holdings, is servicing its restructured debts, has an operating
capital of over $40 million, and should head to another IPO sometime around
2018 – 2020.
Bravo the much
criticised legal system and law enforcement institutions of Ukraine?
Not exactly.
There have been recent
“raider” attacks involving companies in one way or another related to the old
Mriya management – FID Global Ltd, Global Health FID, FID Global LLC, Dream
Leasing, OOO Bud M Haulage, OOO Bud M ATP, Global Feed Ltd etc.
Over the past month the
following has occurred – 21st September 2016, the Kyiv Appeal Court lifted a
freezing order on 142 units of agricultural equipment worth around $3 million
that was illegally removed from the company by the previous management of Mriya
when they defaulted on their debt obligations in August 2014.
The Appeal Court’s
decision overturned the freezing order imposed by the Pechersk District Court
on July 6th 2016 as part of the main criminal case against Mriya’s
previous management and owners. That freezing order had returned the
equipment to Mriya under its current management.
On October 4th, the
former management began removing the equipment from a Mriya storage site and
did once again on 10th October 2016 (prompting this “should write about one
day” entry).
In response to the
Appeal Court’s decision, the Special Anti-Corruption Prosecutor’s Office (SAPO)
has prepared a request for a fresh freezing order. However, bureaucratic
inaction by NABU is preventing SAPO’s request from going to court since NABU
has (so far) not registered the fact that it is leading an investigation
of/within the main criminal case against the former owners and management of
Mriya.
The fact that SAPO and
NABU are now involved can only mean that those individuals that fall within
their legislative remit are involved. The Category A and B public figures
– the political class, judiciary, senior civil servants and SOE executives.
(The $ value of criminality certainly demands an investigation by an
organisation perceived as having integrity.)
Nevertheless few such
within that elite class would have the influence over the Appeal Court
regarding such a highly visible on-going case with international complainants
acting within a very sensitive economic sector for Ukraine.
Somebody with very
serious clout is behind the above mentioned rulings less than one week ago –
but who? Undoubtedly the door to the Presidential Administration will be
getting kicked down (once again) by numerous diplomats connected to the nations
of shareholders and creditors – and rightly so. Thus somebody who considers
themselves “untouchable” by the Presidential Administration seems most likely
to be behind the ordering of the Appeal Court decision.
Is there anybody in the
Mriya Agro Holdings history capable of wielding such influence on such a
sensitive case? Do any such figures stand out from the others as having
previously displayed the “right experience”?
From its inception in
1992/3, along the way the Mriya Holding certainly came into contact with
numerous infamous names renowned for their less than stringent adherence to
matters relating to the law.
For example, during
2003/4 it was associated with Yuri Karmazin who was something of a celebrity
lawyer/parliamentarian at the time associated with questionable activities –
among which land regularly featured.
Mriya’s association with
Mr Karmazin seemingly came via Elena Berezhnaya, an “enabler of privatisation”
granted numerous permanent and surprising legal abilities having done the
“legal” for Party of Regions head office in Luhansk during
post-Kuchma/pre-Orange 2004/5 elections.
Ms Berezhnaya’s
daughter, Irina, miraculously found a role within the Verkhovna Rada in 2002 as
an “assistant adviser to Yuri Karmazin and headed the Verkhovna Rada
Sub-Committee for Synchronisation of Legislation in Ukraine.
While Elena Berezhnaya
stayed in Luhansk and built a dubious but exceptionally profitable legal
practice, her daughter Irena became something of a star within the Verkhovna
Rada. That stardom was not founded upon her legal qualifications or wily
understanding of legislature, but rather that she was the first to bring
cleavage to the VR coliseum, the first to bring tits to the theatre of the
absurd, the first to bring admirably presented bare bosom to the most elite and
feckless business club of Ukraine.
In short, womanliness was first displayed through
fashionable “working apparel” within the corridors and halls of the Verkhovna
Rada by Irina Berezhnaya, where conservative female dress code had otherwise
prevailed.
To be honest, even as a
“leg man”, the 2002 (onward) daily fun-pillow displays Irena presented to
parliamentarians certainly caught the eye. However, neither association
with the then power of Mr Karmazin, nor Irena’s rather splendid boobs were her
only attractions. She was also associated with a very dubious notary
service (black notary service) called Astra-Service.
By 2004 the illicit
practices of this dubious (black) notary service had acquired clients such as
VAB Bank, Ukrsotsbank and Mriya Agro Holdings. To be blunt, such a notary
service is rather useful when it comes to acquiring agricultural land rights by
hook or by crook.
In 2006 Mr Karmazin lost
his parliamentary position and was duly traded in by Irena Berezhnaya for one
of Ukraine’s most infamous characters, Boris Fouksman.
Mr Fouksman is long (and
strongly) rumoured to have made a fortune smuggling antiques and icons out of
the USSR prior to its collapse, for having been involved in gun-running and
having close Russian mafia connections – notwithstanding significant influence
within Party of Regions at the time.
It therefore follows
that the buxom Ms Berezhnaya became a Party of Regions Deputy within the
Verkhovna Rada in 2007 under such patronage (collecting numerous honours and
awards along the way both within Ukraine and an Honorary Professorship from the
International University of Economics Vienna), until 2014 and the aftermath of
the Yanukovych regime flight whereby she lost her parliamentary mandate.
It is rumoured that the
daughter of Irena Berezhnaya is fathered by Boris Fouksman – though this has
not been confirmed or denied. The godfather of the child is known – the
almost universally despised Nester Shufrych.
During her parliamentary
period Ms Berezhnaya became “known” for supporting “raids” on corporate
entities – for example Tochmash and Sinbias Pharma among several that had
dealings with VAB Bank (behind which sat Boris Fouksman). VAB Bank being
one of the first VIP clients of Ms Berezhnaya’s (black) notary service
Astra-Service along with Mriya Agro Holding.
Since losing her
Deputy’s immunity, she has, perhaps unsurprisingly, having facilitated so much
nefarious activity within the elites, not been subjected to any repercussions
as far as the rule of law is concerned. No doubt “insurance policies” of
historical transactions exist should she fall under the eye of the law.
She is however, hardly
powerful enough to have caused the latest Appeal Court judgement.
What seems most
prominent in the history of Mriya Agro Holdings prior to its unsavory
revelations of 2014 is the very short term appointment of the
infamous Alexander Cherniavsky as CFO between September to December 2014 –
the time when Mriya Agro Holdings then defaulted on $1.2 billion of bonds and
land and assets where illegally re-registered in alternative company names.
Mr Chernaivsky is
associated with Rinat Akhmetov, Sergei Liovochkin and Artem Ershov and in
particular to the dodgy dealings surrounding the purchasing of Ukrtelecom many
years ago.
A reader may possibly
perceive that Mr Chernaivsky was deliberately installed for a specific (and
nefarious) purpose considering such a short tenure as CFO and what occurred
during that time. Questions perhaps regarding Mriya’s interaction with
Rinat Akhmetov’s FUIB bank may be asked? (Rumours also circulate
regarding Alpha Bank involvement.)
Is Mr Akhmetov the
“untouchable”? If a reader believes that the occupied Donbas will return
to Ukrainian control, then it will surely be stewarded by Rinat Akhmentov as
the biggest employer in that region.
That said, the vast
majority of illicit money channels from scams and schemes did not flee with the
Yanukovych regime. The names of the end recipients simply changed.
Some of those surrounding President Poroshenko have hardly displayed
morality or integrity since he came to power. It is well within the
realms of possibility (maybe even probability) that for a large enough fee, the
desired Appeal Court decision would be reached upon their nod despite serious
and numerous negative implications for the Ukrainian State.
Whether a Ukrainian
journalist will attempt to discover the puppeteer behind the Appeal Court
ruling, or ascertain exactly who among the ruling elite is playing “roof” for
the Guta family and their on-going schemes remains to be seen. Perhaps in
the next few days a name will become apparent.
In the meantime
international shareholders and investors continue to get shafted in Ukraine
despite favourable court rulings and the instigation of criminal proceedings,
whilst criminal proceedings and court rulings thus far have put nobody in jail
almost 2 years after they were instigated.
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