Editor’s Note: The following investigation into Euroterminal, a mysterious private firm that has taken over much of what was previously state-run customs clearance of imports, was conducted by the Washington-based Organized Crime and Corruption Reporting Project, a Kyiv Post partner. The project was coordinated by Kyiv Post staff writer Vlad Lavrov. The authors are Kyiv-based Ukrainian journalists working for the investigative bureau Slidstvo.info. On Feb. 28, the OCCRP published online two sidebars that examine more closely how Euroterminal operates and some of the people that are linked to the enterprise.
The three stories (including the main story) can be found here:
Operators of cargo terminal raise questions
ODESA – A stretch of dried-up swamp on the outskirts of Odesa is where probably more cash change hands daily than anywhere else in Ukraine. The 50-hectare site is known as Euroterminal, a cargo and customs clearinghouse with a murky ownership structure that has support from Ukraine’s President Viktor Yanukovych, who helped get it started.
Soon after the new private terminal was built in 2011, government officials created a new state Southern Customs branch at Euroterminal. A growing share of the country’s imports of food, consumer goods and other essentials, delivered through Ukraine’s largest sea terminal, now goes through this private business.
Ukraine’s state customs service, notoriously corrupt and cumbersome, has long been a sore point for businesses. According to the World Bank’s latest Doing Business ranking, the customs service is among the most difficult to deal with in the world, scoring a dismal 145th out of 185 economies surveyed for ease of trade across borders. Importers who tried to go through the state port could wait months for customs clearance, unless they paid expensive brokers connected to port management to expedite the delivery.
Valeriy Lokaychuk, the Odesa Oblast Council member and deputy head of its organized crime and corruption commission, said Euroterminal has effectively replaced the old system. However, at present, it is not clear if importers still can use the state-owned sea terminals for clearing their cargo. OCCRP reporters called the office at the sea port and were told all customs must now be cleared through Euroterminal. The website, however, still indicates customs can be done at the sea port.
Many importers, however, complain privately that they are pressured by customs officers into using Euroterminal.
The new terminal, while eliminating the need to hire well-connected brokers to expedite customs clearance, introduces new and higher fees. Under the old or new system, this is revenue that could have gone to the state. In the past, the money went to privileged brokers that Lokaychuk says were connected to high-ranking politicians. Now the money goes to Euroterminal.
Lokaychuk estimated that billions of dollars in revenues bypassed state coffers under the old system, in which each type of good had two corresponding entries: customs duties paid to the budget and the unofficial cash payments collected by chosen brokers.
How much revenue the state stands to lose because of Euroterminal remains to be seen, but it already appears to be substantial and growing.
According to Yuri Vaskov, the director of the state-owned Odesa Commercial Sea Port, Euroterminal has already received millions of dollars in fees. The seaport’s current annual turnover has reached 20 million tons of cargo, but now an estimated 15 to 30 percent of the containers daily go through the new private terminal. And this revenue is set to increase, according to state terminal director Vaskov, as Euroterminal is undergoing a major expansion to boost its capacity.
Euroterminal management wouldn’t provide any financial information, although customs brokers estimate that one container going through customs via Euroterminal brings around $100 to $500 in revenue to its owners in unloading, weighing, storage and other fees. Currently, Euroterminal processes around 300 containers daily, meaning that Euroterminal’s annual revenues could easily reach $20 million.
Dmytro Gambeev, head of an Odesa-based firm that trades ceramic tiles, chose the state-owned sea terminal to undergo customs clearance procedures because it was cheaper than the privately owned alternative. But it wasn’t easier or faster.
Clearing customs formalities recently took Gambeev two days, instead of the four hours as required by law. The businessman filmed his interaction with officials of the Southern Customs office, which blocked his cargo. He says they suggested that he complete his paperwork at the Euroterminal. Only after the video was posted on YouTube and Gambeev complained directly to the customs’ main office in Kyiv was his shipment cleared.
“At Euroterminal, you pay $100 just for them to open the gate. Then you pay $400 to transport your cargo from the port to the terminal,” Gambeev said.
The corresponding fees, according to an investigation by reporters for OCCRP, end up in the bank accounts of the offshore firm that controls Euroterminal. Its beneficiary owners, however, remain unknown, hidden behind a wall of lawyers and proxies.
The decision to award a private company the right to clear imports through customs was made by Yanukovych.
On April 8, 2011 the president instructed former head of Ukraine’s Customs Ihor Kaletnyk to assist in the opening of such a terminal, according to the presidential administration. Seven months later, Kaletnyk personally showed off the newly built terminal to the president.
In response to an OCCRP request to explain why the president would give such instructions for the benefit of a privately owned company, Oleksandr Khorolsky of the president’s administration refused to comment because the issue “does not fit the norms of the law on access to public information.”
All this prompts the question: How did this business get lucky enough to win the support of the president in capitalizing on huge revenue from cargo?
The winners
Euroterminal’s ownership structure is opaque. Officially, Russian businessman Pavel Lisitsin is the president of Euroterminal. He is the brother of Sergey Lisitsin, the terminal’s director.
When asked about the real owners of their company, Sergey Lisitsin, required that journalists from the OCCRP submit their questions via conventional mail. After no response was received for more than 45 days, OCCRP again contacted Euroterminal. Oleh Pedan, a representative for the terminal, said a response was sent. Asked for a copy of the letter, Pedan said: “We don’t care what you think. We won’t send a copy!”
The former head of Ukraine’s Customs Service, Kaletnyk, likewise, avoided answering directly. “I don’t know who are the owners,” Kaletnyk said. “It’s not really our responsibility to check owners. The company is registered according to the law – that’s enough for us.”
Asked about the owners of his competitors, Vaskov from the Odesa Commercial Sea Port, said the ownership likely lies in Russia and the United Kingdom but would not provide details.
According to the official company registry, more than 99 percent of Euroterminal is owned by Cyprus-based Northington Holdings.
Northington is the first link of a long chain. Northington Holdings Limited is owned by Cyprus-based Westrend Trading Limited, which, in turn, is co-owned by Chanteclair Management Limited, which is the property of Themis Professional Services Limited. The beneficiary of this chain, according to the Cyprus company registry, is the local Cyprus law firm of Georgiades & Pelides LLC.
This firm was established by Marcos Georgiades and Phivos Pelides, Cyprus-based lawyers. According to their biographies, they got their diplomas and started legal practice in the United Kingdom, but then moved to Cyprus. From time to time, they tour ex-Soviet republics to promote the use of offshore companies in managing corporate rights.
However, when contacted by OCCRP reporters, Georgiades said he had no connection to the company and that the company had been set up and controlled by another Cypriot lawyer, Evros Evripidou, a former member of the firm. Georgiades said their names should have been taken out of the company’s documentation, but that hadn’t been done.
A week later, Georgiades in an email to OCCRP said “Georgiades & Pelides has no involvement with these companies at all, and the shares in Westrend Trading Ltd have been transferred away from our nominee companies and I now understand that Mr. Evripidou has updated the filings at the companies registry showing the change in shareholders. As I have already told you we have no record of these companies in our law firm.”
When contacted by OCCRP and asked about the ownership of Euroterminal, Evripidou told reporters “Are you expecting me to tell you who is the owner of the company? This is a silly question.” Evripidou responded to further questions on ownership by saying “I am sorry I cannot be of any assistance.”
The Cyprus registry does not yet show new owners.
Support for the terminal comes from high up, says Lokaychuk. “The terminal couldn’t be opened for a long time after being completed. Who would give permission to open it? Who would give you access to one kilometer of the border?” exclaimed Lokaychuk.
A customs official, speaking on the condition of anonymity for fear of losing his job, said Euroterminal’s preferential treatment hides another beneficiary who likely will never show up on any paperwork.
