An American resident clashed with a bank in Ukraine over a Hr 210 million ($26 million) deposit that the bank is refusing to return.
Clients claim that Kreditprombank failed to pay out both the interest and the body of the deposit, offering instead just 20 percent of the money. The bank, which calls the case “a commercial dispute,” says it will be ready to return the money after a court order.
The increasingly notorious case is swiftly becoming a case-study of how commercial agreements fail to work in Ukraine, while supervisory bodies turn a blind eye to such disputes.
Kreditprombank is a large, but troubled Ukrainian bank that ranks 20th in the country by assets, according to central bank figures as of April. In March 2013, Delta Bank owner Mykola Lagun bought Kreditprombank for $1 and is currently merging the two. In recent years Kreditprombank suffered from a conflict between co-owners and crisis-related losses that devalued its assets.
The investor involved in the dispute with the bank, Yuri Kaplun, is an American resident who decided in 2009 to invest in Ukrainian bonds, the prices of which had begun to fall heavily. Finally, his choice fell on Kreditprombank bonds, which he bought through a Ukraine-registered investment vehicle.
Several months later, in 2010, over 20 companies and institutions, including giants like Cargill and the European Bank for Reconstruction and Development, decided to invest about $700 million into the same bank in the form of loans and bonds. But they had one condition: Kreditprombank was obliged to pay off its debt.
Since the bank was short on cash, it offered creditors the chance to deposit money for two years. This led Kaplun to open a deposit in Kreditprombank through the Kyivshchyna 1 venture fund, managed by the Praktyka asset management company.
The tactic worked for a while.
“Until March 2013, all payments were made on time without any problems. But when Lagun bought the bank, it was announced that they would not pay,” Kaplun told Kyiv Post.
Since then, he met with Lagun and Delta Bank’s First Deputy Chairman Vitaliy Masiura. They offered to repay Kyivshchyna 1 investors 20 percent of deposited funds. The offer had a deadline attached.
“We were told: there are three or four months (to receive the 20 percent), and after that we can get nothing,” Kaplun said. “We appealed to the National Bank, but they say they do not engage in resolving disputes between private companies.”
Kaplun claims Lagun is trying to make everything look like a dispute between commercial entities and then bankrupt the bank to avoid payments.
Kreditprombank, on the other hand, said in a written statement that they had an argument with a single company “based on documents that were issued by previous management, before Lagun’s acquisition of Kreditprombank.”
But Kyivshchyna 1 was not alone in being offered 20 cents on the dollar. Business daily Kommersant recently reported that in December-January the EBRD and other creditors got money back for their shares in Kreditprombank. In March, the new bank’s owner Lagun paid them back just 20 percent of credit lines.
The EBRD could not comment by the time Kyiv Post went to press.
Now, the conflict between the American investor and Kreditprombank is moving through courts. On June 25, the bank challenged a contract with Praktyka asset management company worth Hr 135.9 million in Kyiv’s Commercial Court.
In response, Praktyka sued Kreditprombank in the same court, demanding to terminate the contract and to exact Hr 217 million from the bank. On July 1 the court ruled to freeze Hr 217 million on Kreditprombank’s accounts and assets worth the same amount to prevent their sale.
In the meantime, the American investor has been running a public relations campaign to get his money back. The U.S. – Ukraine Business Council sent letters at the end of June to the president, the foreign ministry and the National Bank of Ukraine asking for protection of the investors’ interests.
U.S. Ambassador to Ukraine John Tefft sent letters to central bank governor Ihor Sorkin and Deputy Prime Minister Serhiy Arbuzov. “In light of President Yanukovych’s stated determination for Ukraine to improve its business climate, it is my sincere hope that the National Bank of Ukraine will assist in ensuring that Ukraine’s banking system operates transparently, with equitable treatment for all,” he wrote.
Morgan Williams, the head of the U.S. – Ukraine Business Council, said in his letter that he was concerned Kreditprombank’s assets were being transferred to Delta Bank, also owned by Lagun, which would decrease the chances of any sort of settlement.
“These actions appear to be consistent with the aforementioned preparation for an artificial bankruptcy,” Williams wrote in his letter to Ukraine’s top government institutions. “Actions like those described above effectively negate all your efforts and should, in our opinion, receive an appropriate response.”
Kyiv Post staff writer Kateryna Kapliuk and editor Katya Gorchinskaya can be reached at [email protected] and [email protected], respectively.
