The administration of Ukrainian President Volodymyr Zelensky has attempted to clarify its position on the fate of state-owned PrivatBank, affirming that it opposes the bank being returned to its former shareholders regardless of court decisions.
On October 23, presidential Chief of Staff Andriy Bohdan and his deputies issued a statement following a meeting with the G7 ambassadors to Ukraine. The document appears designed to send a message to Ukraine’s international backers, notably the International Monetary Fund (IMF), and allay concerns that it will allow the bank’s 2016 nationalization to be undone.
It may also be a move to distance the presidential office from oligarch Ihor Kolomoisky, who previously co-owned PrivatBank and has long-standing business ties to Zelensky and Bohdan. Before he was elected president, Zelensky’s comedy shows were broadcast on Kolomoisky’s 1+1 channel. Bohdan was formerly the oligarch’s personal lawyer.
The October 23 meeting with the G7 ambassadors took place on the instructions of Zelensky, the President’s Office said.
“Having made a decision on nationalization, the state invested Hr 155.3 billion ($6.2 billion) in PrivatBank, which allowed (us) to save the funds of Ukrainians. We believe that regardless of the decisions of the courts, there is no reason to return the state-owned PrivatBank to its former shareholders,” reads the statement’s conclusion.
PrivatBank was founded in 1992 by Kolomoisky and his business partner, Gennadiy Boholyubov, and was the country’s largest lender when it faced insolvency and collapse in 2016, shortly after forensic auditors discovered a $5.5-billion hole in its ledger. The former co-owners allegedly embezzled billions from PrivatBank in a fraudulent, Ponzi-like scheme.
The state saved the bank by nationalizing and recapitalizing it. The IMF supported the nationalization of PrivatBank, undertaken by the National Bank of Ukraine and Ministry of Finance. The IMF and Ukraine’s other major partners strongly oppose any return of PrivatBank to its former shareholders. It would threaten future financial cooperation and loan agreements, multiple experts have told the Kyiv Post.
Kolomoisky and Boholyubov have strongly denied all wrongdoing and sought the return of the bank, their former shares or compensation for their alleged losses, launching multiple court cases in Ukraine to achieve this and challenge the legality of PrivatBank’s nationalization.
Zelensky himself has been accused of giving mixed signals over the fate of PrivatBank, and not expressing a concrete position.
During an Oct. 11 press conference, he said that the question of PrivatBank’s nationalization was an issue for the courts to resolve, but also said his administration would prevent “a single kopek” being returned to the bank’s former shareholders.
Some Ukraine watchers have already suggested the October 23 statement isn’t strong enough and is too ambiguous in its wording, as well as open to future interpretations.
“Still not enough from the Presidential administration on Privatbank,” wrote Timothy Ash, a London-based markets analyst focused on Ukraine. “So they are not going to return the bank to former shareholders, but ‘notwithstanding’ the court decision, this could all change if the courts rule against Privatbank.”
“The statement is misleading. The line about ‘notwithstanding the decision of the courts’ reverses the meaning and needs changing,” Ash added.
A spokesperson for PrivatBank did not immediately respond to a request for comment.
U.K. fraud proceedings
In London, PrivatBank is seeking to recoup $3 billion in alleged fraudulent losses from its former owners. Interest continues to accrue at $500,000 per day.
Also on Oct. 23, PrivatBank said the London courts had ordered Kolomoisky and Boholyubov to pay the bank $14 million in legal costs.
The bank’s former owners are set to face hearings at the High Court of Justice next year over the $3 billion civil suit brought by PrivatBank, alleging that a significant portion of the $5.5 billion embezzlement took place through three English companies and three more connected to U.K. jurisdiction.
The Court of Appeal of England and Wales has ruled that PrivatBank has a “good arguable case” against its former owners, while a December 2018 ruling from the High Court recognized that “fraud on an epic scale” had taken place.
