He’s been heading PwC’s Ukraine branch almost for a year and already has a $3-billion lawsuit to contend with.
Richard Pollard says that’s his biggest challenge: Defending PwC against PrivatBank, Ukraine’s largest commercial bank, now state-owned.
PwC audited the bank for years under its previous owner, billionaire oligarch Igor Kolomoisky. The government nationalized PrivatBank in December 2016 after $5.5 billion in losses. The National Bank of Ukraine, or NBU, blamed it on insider trading among companies closely tied to Kolomoisky and his partner, Gennady Bogolyubov.
The central bank also accused the oligarchs of embezzling money from PrivatBank through loans to shell companies backed by shaky collateral.
Soon after, PwC was banned from auditing banks in Ukraine.
The nationalized bank sued PwC through a Cyprus court for failing to uncover fraud. PwC said it still doesn’t know the details of the case against it.
PrivatBank and the Cyprus court “now have to go through a process of expanding that claim into details of what they are actually claiming,” Pollard told the Kyiv Post in an interview on April 19. “We haven’t seen that, so we don’t know, we haven’t seen anything at all.”
The firm says it hasn’t heard from the bank for more than a year now.
PwC audited the bank for many years. But in 2016, the bank was restructured, based on an agreement with the central bank.
“We were not part of that,” Pollard said. “That was a restructuring that the NBU was overseeing, and that PrivatBank was implementing.”
PwC then asked if the central bank had any plans to take action against the bank. “The answer was no, so the team took a lot of comfort from that,” Pollard said.
Most of the restructuring happened in the two months before the December 2016 nationalization. Right after that, all of the debt was written off.
The bank’s 2016 audit was done by PwC’s competitor, EY.
“So in the restructuring all of the borrowers were changed, new terms were put in place, apparently new collateral was assigned, but we don’t know what that was… because we were not the auditors in 2016.”
Richard Pollard, managing partner of PwC in Ukraine, speaks to the Kyiv Post on April 19. (Kostyantyn Chernichkin)
EY’s management prepared their accounts for 2016 and didn’t change any of the 2015 numbers, Pollard said. “So if the 2015 numbers were wrong, they should have changed them, or could have changed them. They didn’t.”
PwC hasn’t found anything wrong with its auditing of PrivatBank. Critics of PrivatBank say that the bank’s new administration should be blaming the bank’s former shareholders, and not PwC.
The ban on bank audits in Ukraine hasn’t caused much damage to the auditor. The sector is a relatively small part of its overall portfolio, but still stings.
“We were an important player in that market, we’ve done a lot of work with the NBU over the years, we’ve done a lot of work with the banking sector here, not just auditing, but other work as well.”
In addition to its problems with the PrivatBank case, PwC is also finding difficulty in attracting investors to the country.
The West has so far found greater opportunities in more stable markets.
“Inward investment is probably the biggest challenge,” Pollard said. A lot of the Big Four’s work involves international businesses and donors such as the World Bank, United Nations, European Bank of Reconstruction and Development and The Global Fund.
“Those international donors are less motivated to give money to the country if the environment doesn’t seem right,” Pollard said.
The government doesn’t help by stalling on reforms in the judiciary and fight against corruption.
“We talk to investors who want to invest into Ukraine,” Pollard said.
They ask about government pressure and whether they will be treated fairly in contract disputes.
“It’s hard to answer those questions positively in the current environment. The facts speak for themselves in terms of the reform agenda and reform plans, and the country has only gotten so far in many of those, and is not where it wants to be,” Pollard said. “Things aren’t moving quickly enough.”
Despite the bad environment, PwC’s 400-person Ukraine team recently opened a branch in Lviv and has one more in Dnipro. Its office in Russian-occupied Donetsk has been closed.
The auditing market is seeing positive changes. Ukraine has enacted new laws requiring companies to prepare financial statements in accordance with international standards. That should mean more work for auditors.
In addition to private companies, the firm also works with state bodies, such as oil and gas monopoly Naftogaz, the National Anti-Corruption Bureau of Ukraine and the Finance Ministry through the United Kingdom-funded Good Governance Fund.
Pollard has been working for the audit firm for the past 35 years across the globe. While Ukraine has its challenges, it’s not his most difficult posting, he says.
“From a personal perspective I love working here,” he said. “I was expecting some challenges having lived in Russia for five years… but I find it much easier here.”
Name: Richard Pollard
Title: Managing partner of PwC in Ukraine
Age: 56
Nationality: British
How to succeed:
“This is a country with so much history, and it has always sat in between ‘Do we go East or do we go West’… And just understanding that and what that means for the people living and working here, businesses trying to operate here – I’ve found it has had a big impact on me.”
