Editor’s Note: The following is an investigation by the Organized Crime and Corruption Reporting Project (OCCRP), which is based in Washington, D.C., a Kyiv Post partner. Kyiv Post staff writer Vlad Lavrov coordinated this project. The author Anna Babinets is a Kyiv-based Ukrainian journalist working for the investigative bureau Slidstvo.info.
Apart from the $1 billion in losses to the state treasury caused by Serhiy Kurchenko’s allegedly illegal schemes, the nation is in danger of losing some of his property that could have been retrieved as compensation for some of the losses.
Kurchenko used to be a high-flying billionaire tycoon,
making his fortune by the age of 28 for reasons nobody could explain. Now he is
a fugitive from justice, seen as the front man for overthrown President Viktor
Yanukovych. He disappeared on Feb. 19, just two days before Yanukovych fled office
and end up in exile in Russia.
Now the state is trying to retrieve the ill-gotten
gains left behind by Kurchenko, who always denied wrongdoing.
One major asset in question is the Odesa Oil Refinery, which Kurchenko bought in 2013 for $125 million. Later in the year,
the plant was used as collateral to receive a loan from a Russian bank. But the
procedure for getting this loan, as well as its conditions, had enough substance
to show fraud with the am of taking assets out of Ukraine’s reach,
investigators say.
Law enforcers now hope that their investigation will
give Ukraine an opportunity to challenge the transfer of Kurchenko’s assets to the ownership of Russia’s VTB bank
On April 7, 30 workers of Odesa Oil Refinery came to
Kyiv to be questioned by the general prosecutor’s office about Kurchenko, who
could face up to 12 years in prison and confiscation of his property if
convicted of embezzlement and misappropriation of property.
But getting control of the property is presenting a
real challenge for the state.
Kurchenko received two loans from Russia’s VTB Group worth $300 million, while the refinery shareholders approved the credit line from VTB to reach $370 million. Odesa Oil Refinery was used as collateral for the loans. In addition, oil
products that belonged to Kurchenko’s offshore company were used in one of them, worth
$270 million.
Several of Kurchenko’s offshores were involved in the chain for
receiving a loan, involving the oil refinery. According to a Dec. 23 meeting
of shareholders of the plant, the scheme for receiving the loan looked like
this: Cyprus-based offshore company, Swisspro Capital Ltd and its affiliates Prosperity Development S.A., Soprema Trading Ltd. and Empson Ltd. could borrow up to $370 million from Russian VTB. Odesa
Oil Refinery guaranteed the loan because 99.5 percent of it is owned by one of
them, Empson Ltd, according to the state register Smida.gov.ua.
Interior Minister Arsen Avakov on March 31 said that Kurchenko’s holding transferred the
ownership rights for the oil refinery to VTB via a dubious scheme. But the
Russian bank denied any controversy in this operation, and threatened the
Ukrainian government with a tough response if the property is nationalized.
“Such unlawful decisions can generate a series of
actions in response from the Russian side, and ruin trade and economic
relations between our countries,” VTB’s statement said on April 1.
Russia’s government owns 60 percent of the bank.
But Serhiy Kuyun, head of A-95 consultancy, says it’s
a little too early for the Russian government to consider the property their
own.
“The Ukrainian law enforcers have to study if the loan
agreement between the offshores and the Russian bank was in line with Ukraine’s
legislation — for example, whether the state duty was paid to the budget of 1
percent of the loan (about $3.7 million). If it wasn’t, the agreement can be
challenged,” Kuyun says.
Another one of Kurchenko’s loans, which is well-documented in the database www.investigativedasboard.org , also raises many questions. It
features the same core set of offshore firms.
On Aug. 28, 2013 VTB issued a $220 million loan to the
Cyprus firm Swisspro Capital. On Dec. 27, size of the loan was increased to $270 million. The
guarantor of this loan was a BVI-registered company, Soprema Trading.
This means in case of failure to pay, Soprema Trading had to give away its property
used as collateral – thousands of tons of oil products sitting in the oil
terminal of Odesa commercial port and being transferred by tankers that belong
to United Oil (BVI) Group Limited.
The $270 million loan was issued by one of VTB group
banks at 18 percent interest rate, plus 3 percent commission. Kurchenko and his offshores agreed to return this money in
October 2014.
But the oil products that feature in this agreement were
seized by Avakov’s ministry, triggering a conflict with VTB, which also claims
the goods.
Andriy Hrynchuk, a managing partner of Hrynchuk, Mazur
and Partners law firm, says that the whole scheme with oil products looks
suspiciously like it was created to move Kurchenko’s assets out of reach of Ukraine’s law enforcers.
“There is a high probability that this is a part of a
chain (Odesa Oil Refinery-Swisspro-Soprema-VTB) to move the assets of the oil
refinery away from its (original) ownership to the ownership of the bank and
other structures,” says Hrynchuk.
