Yet another bank went bankrupt in Ukraine: Misto Bank. It was not in the top of the market and was mainly involved in servicing the owners’ related business.
The Dec. 14 news about Misto Bank’s insolvency was buried under other events — such as the confrontation between Prosecutor General Iryna Venediktova and the National Anti-Corruption Bureau of Ukraine and President Volodymyr Zelensky’s face-off with the Constitutional Court.
However, behind the headlines of Misto Bank’s collapse is a whole web of connections. And if you can get through it, you have a chance to better understand Ukraine’s corruption.
Firtash’s role
The case of the Odesa-based Misto Bank is complicated, but it is worth looking into.
Earlier this year, the bank lost control of one of its primary assets — a soybean processing plant in Kherson Oblast worth Hr 271 million ($9.5 million), almost 17% of the bank’s total assets. The National Bank of Ukraine said this is the main reason for Misto Bank’s insolvency.
But I know this story from a different angle.
When I was a lawmaker I was asked to intervene in the scandal with the illegal seizure of this soy-bean processing plant. This plant was established by Vadym and Ilya Segal, Ukrainian-American twin brothers, who come from the southern city of Kherson. They are former owners of another Ukrainian bank that famously collapsed — Nadra Bank.
The key figure in this story is exiled oligarch Dmytro Firtash, co-owner of RosUkrEnergo and Group DF, who now lives in Vienna. For the past six years, Firtash has been fighting extradition at the request of the U. S. Department of Justice, which is investigating him as a founder of a “criminal group.”
But there were times when Firtash was riding high. In 2008, his pockets were full of money earned by his company RosUkrEnergo, an unnecessary gas trading intermediary between Ukraine and Russia. To make his financial transactions quick and low-key, the oligarch bought Nadra Bank from several groups of owners.
Those former owners went on to have different fates. One ex-owner, a member of parliament, died after falling from a horse. Another fled from Ukraine to Russia, escaping prosecution. And the third party that owned Nadra Bank was the Segal brothers.
When he bought Nadra Bank, Firtash also took over the Segal brothers’ newly-built soybean plant in Kherson Oblast — which was collateral on a loan. The brothers claimed that they paid out the loan to the bank, but the bank both kept the money and seized the factory. The brothers accused Firtash of a raider attack and sued.
After the EuroMaidan Revolution that ended Viktor Yanukovych’s presidency, Firtash — with the help of the still-unreformed Security Service of Ukraine (SBU) — created problems for the Segal brothers.
Then-SBU head Valentyn Nalyvaichenko stepped in to help the oligarch. When one of the Segal brothers arrived at Kyiv Boryspil International Airport in 2014, the border guards denied him entry to Ukraine without giving a reason. And when the lawyers began to inquire regarding their client’s ban on entering Ukraine, the SBU refused to name the reason, calling it a state secret.
This American citizen was denied entry because Firtash seized one of his businesses, and the SBU helped the oligarch eliminate a competitor by blacklisting the Segal brothers. Later, Firtash even managed to bring charges against the Segals and put them on the international wanted list, which didn’t last long. To secure his ownership of the soybean factory, Firtash transferred it to an affiliated company, which then pledged it to Misto Bank as collateral, and finally the bank became the owner of the soybean factory.
But the Segal brothers didn’t intend to give up and fought for the factory that they built.
They filed a lawsuit against Firtash in the U.S., and they got lucky with their Kyiv lawyer Andriy Bohdan, who would later become chief of staff for President Volodymyr Zelensky. With the help of Bohdan, the Segal brothers won back their plant and made Bohdan a partner in their business.
The 10-year fight for the plant ended in November, when the plant formally changed ownership. Since it constituted 17% of the bank’s total assets, it led to the bank going bankrupt in December.
But that’s not the whole story of Misto Bank. Let’s look at who is behind it. It shows how power and business are intertwined in Ukraine, and how corruption grows at their junction.
Trace of Lovochkin
Misto Bank is owned by Ivan Fursin, a former lawmaker and Firtash’s partner in RosUkrEnergo.
But it is no secret that Fursin is a business partner and close ally of Serhiy Lovochkin, the former head of Yanukovych’s administration and now one of 44 lawmakers with the pro-Russian Opposition Platform — For Life.
Informally, in political and business circles, Lovochkin and Fursin are perceived as the same entity. Their friendship dates back to the 1990s, when Fursin and Lovochkin worked in the same financial institution. And Lovochkin’s sister, also a member of parliament from the Opposition Platform, worked under Fursin’s leadership at Misto Bank 15 years ago as deputy head of the investment business.
Lovochkin is extremely careful — he always ties up loose ends. For example, it is not him, but Fursin who was listed as lending $10 million to Paul Manafort. It was Fursin, not Lovochkin, who officially owned 5% of Firtash’s RosUkrEnergo gas trading company. And it was Fursin, not Lovochkin, who was listed as a de-facto owner of the Latvian Trasta Komercbanka, which is featured in the famous Russian Laundromat investigation of money laundering schemes.
It was through Trasta Komercbanka that $400 million was stolen from Ukraine with the purchase of “Yuriy Boyko’s drilling rigs,” a grand corruption scheme that took place under Yanukovych involving the former energy minister and current member of parliament, also with the pro-Russian Opposition Platform. And the notorious Trasta Komercbanka was also a shareholder in the bankrupt Misto Bank.
Bank fraud
This story is a typical example for Ukraine of an alliance of oligarchs, politicians and law enforcement agencies. If this knot is not cut, a decent investment climate will never be created in the country.
There are many such stories.
One of those concerns a lawmaker from ex-Prime Minister Yulia Tymoshenko’s party — Kostyantyn Bondaryev. The management of the central bank linked him to scams carried out by the bankrupt bank Veles. Just think about the scale of the fraud.
In 2015, while clearing Ukraine of phantom banks, the NBU discovered a strange transaction. Through this bank, Bondaryev tried to transfer $460 million from Ukraine on fictitious documents, allegedly to repay a debt. When the NBU began an inspection, it turned out that the entire documentary database was forged as well as the source, the residence permit and property documents. The money was to be transferred to a company with an office in Latvia, which was founded by a Chinese citizen.
The National Bank sent an inspection to Bondaryev’s bank. It turned out that more than 90% of the bank’s operations were to transfer capital from Ukraine. The National Bank decided to liquidate the bank, which at that time employed three people. But then miracles happened — the liquidators simply didn’t find the bank at its declared location. They were told that, just the day before, the bank terminated the lease agreement and left with all the equipment, servers and documents.
The investigation yielded no result. This spring, the notorious Pechersk District Court in Kyiv ordered the NBU to reimburse the former owners of the phantom bank about $4 million in “property damage.” Later, the National Bank successfully appealed the ruling.
Another notorious case is that of agrarian oligarch Oleh Bakhmatyuk, whom NABU accuses of stealing the stabilization loan issued by the NBU to his VAB Bank. NABU has twice unsuccessfully asked to send the documents necessary for Bakhmatyuk’s extradition from Austria — but the Prosecutor General’s Office is of no help.
Similarly, no one has been charged in the case of the alleged theft of $5.5 billion from PrivatBank by its previous owners Ihor Kolomoisky and Hennadiy Boholyubov.
The only news there is that Prosecutor General Iryna Venediktova has recently included herself in the group of prosecutors overseeing the case. It is not clear whether she did it to speed up the investigation or to sabotage it.
In Ukraine, the bank industry clean-up resulted in eliminating two-thirds of all banks in the past six years. Most of the banks were a tool for either pumping funds abroad or laundering them. But the only result was the sale of assets of bankrupt banks at a minimum price and the absence of any penalties, which makes any talk of an expected investment boom in Ukraine an illusion.
Sergii Leshchenko is a Kyiv Post columnist, investigative journalist, and former member of the Verkhovna Rada, Ukraine’s parliament.
