IDS Group Ukraine, a local subsidiary of the Netherlands-registered bottled water producer IDS Borjomi International, claims to be under a raider attack led by government tax officials on behalf of unknown people.
To defend itself, the company is threatening legal action internationally if it fails to find justice in Ukraine.
The tax administration denies any wrongdoing and dismisses the allegations. Authorities say they are investigating large-scale tax evasion by the company.
However, the case is viewed as yet another example of rough and uncivilized treatment that businesses working in Ukraine experience from tax authorities, underlining a hostile business climate.
The alleged attack took place some two months after the company, one of the biggest mineral water producers on the Ukrainian market, announced that it was for sale.
“Our company is under raider attack, which is directed with the hands of tax police and the prosecutor’s office. Almost simultaneously criminal cases were launched against all the (top) managers of our production facilities,” said Marko Tkachuk, general director of IDS Group Ukraine, during a press conference in Kyiv on Nov. 12.
After obtaining a court order in Lviv, tax authorities froze the company’s assets in Ukraine. In its decision, the court referenced a Moscow court, which took a similar decision to freeze the Borjomi group assets in Russia on suspicion that Boris Berezovsky, a onetime Russian oligarch who fled to London more than a decade ago, might have a stake in it. The Lviv court’s decision was made following a request for legal assistance by Russian law enforcement officials digging into Berezovsky’s activities.
Separately, following a claim by the local tax authorities, a court in Poltava froze bank accounts of the Myrhorod mineral water plant, which is also part of the IDS Group, in Poltava Oblast. As a result the plant halted production.
The tax police accuse Myrhorod mineral water plant officials of failing to pay nearly Hr 3 million ($375,000) in profit taxes by lowering the price of their mineral water and, thus, the plant’s gross income. The company dismissed the charges as untrue and called the investigations “fabricated.”
Anna Derevyanko, executive director of the European Business Association, to which the IDS Group Ukraine belongs, said she doesn’t know whether the incident is a raider attack or a legitimate investigation into tax cheating. But Derevyanko called it wrong “to drive the thing to the point of stopping the plant (from operating).”
“Conflicts like that should be solved in a more peaceful manner,” Derevyanko added.
According to Tkachuk, the company is losing Hr 3 million ($375,000) daily because of the stopped production at their Myrhorod plant. “We will not be surprised if tomorrow (our) Morshyn plant stops working (altogether),” he added.
Tkachuk points out that criminal cases against the plant’s top managers were launched without the required pre-investigation measures and in violation of proper legal procedures. Numerous violations also took place during the searches in the offices and houses of the plant’s managers, he added.
The company’s management and shareholders deny any connection to Berezovsky and say he doesn’t have and has never had any interest in the company.
Tkachuk instead said that speculation on the company’s connection to Berezovsky was used as a pretext for an alleged attack on the company, connected with the company’s announced sale. Tkachuk added he doesn’t know who could be behind it.
The company maintains that it is transparent and pays its fair share of taxes. It is owned by shareholders in Europe and the U.S. with a majority stake belonging to the Georgian family of the late Badri Patarkatsishvili who once was Berezovsky’s business partner.
Berezovsky did not respond to the Kyiv Post’s phone calls.
Peter Nagle, who represents the Patarkatsishvili family on the board of IDS Borjomi International, firmly stressed they “will find out who is (behind the attack)” to defend their interests.”
IDS Group Ukraine also addressed President Viktor Yanukovych, Prime Minister Mykola Azarov, and head of the Tax Administration Oleksandr Klymenko in an open letter to help them sort out the issue. “We believe they will help (us),” said Tkachuk.
The company also is working through the European Business Association on the issue. The company board members are planning to meet the ambassadors of France, the UK, and U.S. in Ukraine and have already met with the EU Delegation in Kyiv to communicate their concerns regarding the situation.
Jacques Fleury, a minority shareholder of the company, threatened the company will file lawsuits in European courts to defend itself.
While the IDS Group has yet to see whether such measures could help, lawyers have advised them to involve their respective embassies, maintain good business practices and a transparent ownership structure, and also go public to either minimize the risk of another attack or do proper damage control once it takes place.
However, one lawyer points that the ownership structure of the IDS Group hasn’t helped its cause.
“It is hard to foresee a raider attack,” said Bertrand Barrier, partner at Gide Loyrette Nouel law firm in Kyiv.
The lawyer believes that the company would be safer from any attempts of infringing on its property rights if its ownership structure was developed properly. Yet, Barrier remains cautiously optimistic regarding the prospects of a business experiencing an attack – either by authorities or competitors – in Ukraine.
“All hopes shall not be abandoned since there are examples in Ukraine, where companies obtained a favorable decision from the court,” Barrier points out, but wouldn’t disclose the names of these companies.
Kyiv Post staff writer Yuriy Onyshkiv can be reached at [email protected].
