Ukrsotsbank CEO Boris Timonkin has accused the owners of development company Kyiv Donbass Development (KDD), who he says are the real owners of Ukraine’s low-budget restaurant chain Puzata Khata, of trying to defraud Ukrsotsbank of $70 million by means of fictitious bankruptcy.
“As a result of manipulations and fictitious bankruptcy, the owners of the restaurant chain have openly stated that their goal is to steal the money they loaned from the bank,” said Timonkin.
According to Timonkin, the operating company TOV Puzata Khata owes Ukrsotsbank a total of $69.3 million on a ten year credit line, plus $595 million in overdue interest. Interest payments on the credit line ceased in February 2010, and the company representatives Ukrsotsbank had been dealing with stopped responding. “The leading figures disappeared and no money was forthcoming,” said Timonkin. Repeated requests for meetings were turned down with reference to the fact that the general director and formally main shareholder Vladislav Guliy was ill.
But this was only the tip of the iceberg, said Timonkin. Investigations revealed that all the Puzata Khata subsidiaries had been declared bankrupt over the course of February-March. “It is a classic case of huge fictitious debts created to dilute the real debt during the bankruptcy process,” said Timonkin. He said a process of asset stripping was underway, which would leave the original company, and Ukrsotsbank counterparty, TOV Puzata Khata an empty shell.
Documents showed, for example, that the subsidiary operating the prominent Puzata Khata branch at Kontraktova Ploscha in Kyiv, where the head office is also located, had taken out a $44 million loan from a third party, with only $16,000 pledged as collateral. Similar loans with risible pledged collateral exist for all other subsidiaries in the restaurant chain, said Timonkin. Total debt accumulated by TOV Puzata Khata subsidiaries to third parties had reached $152 million. The bank also discovered that three restaurant premises pledged to Ukrsotsbank as collateral for the credit line had been illegally sold to other parties.
Timonkin produced cash-desk receipts from a Puzata Khata restaurant bearing a new company name TOV PKh Group instead of TOV Puzata Khata, proving that business operations were now in the hands of a different structure, PKh Group. Timonkin said the Puzata Khata business is in fact in reasonable health, with its restaurants full despite the crisis. “It is a going concern,” he said.
According to Timonkin, although the bank had been dealing with TOV Puzata Khata’s top managers, who are its formal shareholders on paper, the company’s real owners are the shareholders of Kyiv Donbass Development (KDD), the Konstantinovskie twins Vyacheslav and Oleksandr, Alexander Levin, Olena Topolov (the wife of the former minister fuel and energy Viktor Topolov) and Petro Slipets. Slipets, KDD CEO and owner of a 11 percent stake in KDD, was one of Ukrsotsbank’s main contact partners and the executive director of TOV Puzata Khata, according to Timonkin. But earlier this year he seemed to have been “sidelined” from TOV Puzata Khata due to disagreement with the other shareholders, and lost any real control over the company, Timonkin said.
Oleh Rybachuk, non-executive director of KDD, and former head of the presidential secretariat under President Viktor Yushchenko, confirmed that the KDD owners were also the real Puzata Khata owners, but said he was not acquainted with current details of the business. KDD’s brochure for investors on the Alternative Investment Market (AIM) of the London Stock Exchange names Puzata Khata a “project conducted by the group.”
But Petro Radchuk, KDD’s vice president, said in emailed comments that Puzata Khata "is not KDD’s project." "KDD has nothing to do with Puzata," he added. "This is our official position."
Ukrsotsbank is also a major creditor of the KDD group. The bank restructured a $10.8 million loan to KDD Jan. 20. KDD redeemed only $2.7 million of the loan, agreeing to pay the remainder in 2011 and 2012. The problems with Puzata Khata started almost immediately after the bank had agreed to restructure the KDD loan in January, but Timonkin said he does not see any connection between the two events. Moreover, he says Ukrsotsbank is happy to continue working with KDD.
Ukrsotsbank is majority-owned by Italian / Austrian banking giant Unicredit. Speaking for Unicredit bank, Ukrsotsbank’s head of credit operations Giovanni Guidi called on Ukraine’s new government to take action to protect foreign investors and improve Ukraine’s international image.
Timonkin said that the bank was preparing to meet top state officials to discuss the situation, and that it was ready to use the full force of the law against the perpetrators. But he also said that primary importance for the bank was to get its money back. He underlined however that the situation would have no negative influence on the bank’s finances.
Evgenny Lososkii, who is representing TOV Puzata Khata in talks on restructuring its debt to Ukrsotsbank, refused to say who the TOV Puzata Khata shareholders currently are, or to comment on the state of talks. Timonkin said that the TOV Puzata Khata representatives, and the negotiations on debt restructuring are merely a facade to mask the ongoing process of moving the company’s assets to OOO PX Group and defrauding Ukrsotsbank of $70 million.
In a statement provided to Interfax-Ukraine June 15, TOV Puzata Khata head Guliy said he would publicly request Ukrsotsbank to restructure the debt, which he said the company was unable to service because of the crisis, devaluation of the hryvnia, and an interest hike by Ukrsotsbank from 13.5 percent to 16 percent. He accused Ukrsotsbank of trying to seize a controlling stake in the company.
Timonkin said Ukrsotsbank parent bank Unicredit had in 2009 offered to help Puzata Khata find a minority portfolio investor for the purpose of financial stabilization, but the company had refused.
Two KDD shareholders, twin brothers Vyacheslav and Oleksandr Konstantinovskiy, who together own 45% of KDD, last hit the headlines in 2006. In March 2006, a joint sting operation by the FBI and Ukraine’s anti-organized crime squad UBOP led to the arrest and jailing of a U.S.-based post-Soviet mafia boss Monya Elson, who had taken out a contract on the Konstantinovskiy twins’ lives. The sting operation faked the murder of Vyacheslav to then entrap Elson, who offered the sting operatives a second contract on Oleksandr’s life. As a result, Elson is now serving a jail term in the U.S.
