These are again trying times for PrivatBank. Ukraine’s largest bank was nationalized in 2016 after investigators discovered a $5.5 billion hole in its books, allegedly due to a decade of mismanagement and fraudulent insider lending.
The now state-owned bank blames its former owners, Ihor Kolomoisky and Gennadiy Boholyubov, for the huge shortfall that nearly crippled it. Both businessmen deny all wrongdoing and Kolomoisky wants the bank returned.
In the U.S. and the U.K., Kolomoisky and Boholyubov have been on the defensive, bombarded by civil suits from a confident PrivatBank legal team that is trying to recover alleged losses.
But here in Ukraine, the bank and its supporters appear to be on the back foot.
Kolomoisky has rallied his supporters and gone on the offensive against Ukraine’s central bank while tightening the lasso around PrivatBank, seeking to bring it back under his ownership.
Experts and economists have repeatedly said that outcome would put foreign direct investment and Ukrainian cooperation with the International Monetary Fund at serious risk.
Raising further concerns are the increasingly credible accusations that Kolomoisky’s counterattack is backed by elements of law enforcement, the courts, and perhaps even the office of President Volodymyr Zelensky, who is Kolomoisky’s former business associate.
Losing ground
PrivatBank executives claim the bank is being unfairly scrutinized and harassed in Ukraine by law enforcement and the courts. Multiple experts have said this is due to pressure from Kolomoisky.
Back in April, a Kyiv district court ruled that the nationalization of PrivatBank was illegal, even though it was backed by the government, civil society, independent experts and Ukraine’s international partners at the time. Kolomoisky and his supporters welcomed the ruling, but the National Bank of Ukraine (NBU) appealed the decision.
Since then, the central bank said that its former and current employees are facing reprisals and harassment in relation to PrivatBank.
On Sept. 11, police in the eastern Ukrainian city of Dnipro raided PrivatBank headquarters there. A Dnipro court had ordered an investigation into
PrivatBank’s senior executives there, in relation to their hiring of foreign advisers and consultants.
Kolomoisky is from Dnipro — he formerly served as governor of Dnipropetrovsk Oblast and still has significant influence throughout the city of 1 million people located 480 kilometers southeast of Kyiv.
In a statement, PrivatBank alleged that the police raid has less to do with concerns about foreign advisers, and more about seizing strategically valuable data. “It is worrying that, under the justification of an alleged ‘illegality’ in recruiting companies, the district police department and prosecutor’s office are trying to seize all documents related to the legal protection of the bank,” a PrivatBank spokesperson stated.
In an earlier interview with the Kyiv Post in London, PrivatBank executives said they were “confident in their legal strategy” and had a solid plan for tackling Kolomoisky in foreign courts, such as in London and the U. S. State of Delaware, where the bank is suing to recover billions in losses.
But in Ukraine, the bank is starting to sound less confident.
“The bank strives to comply with laws and regulations and always cooperates with law enforcement agencies… but we are concerned about the position of some law enforcement agencies regarding the bank,” Yuriy Sak, a spokesperson for PrivatBank told the Kyiv Post.
“We have to admit that more and more often the actions of law enforcement look like attempts to harass and discredit the bank,” he said, adding to an earlier PrivatBank statement that warned police action against the bank was illegally preventing it from normal operation.
Olena Savchuk, an independent legal expert and senior associate at the Integrites law firm in Kyiv, warned that the development in Dnipro was “disturbing” but still part and parcel of “Ukrainian realities.”
“It is doubtful that… state-owned PrivatBank would allow illegal dealings or grey schemes that could become reason for this raid,” the lawyer said.
“We hope… that state authorities will act within the law to not give rise to a negative precedent,” she added.
NBU reprisals
Valeria Gontareva, former head of the NBU, says that it is not only PrivatBank being targeted by Kolomoisky and his supporters. She, her family and other NBU staff are all under threat from the oligarch’s campaign to get his bank returned, she says.
Gontareva is still recovering in a British hospital after an Aug. 26 hit-and-run on a pedestrian crossing in central London left her badly injured. On Sept. 12, she learned that masked, armed men raided her apartment in Kyiv, less than twenty-four hours after the Dnipro police raid on PrivatBank.
Gontareva, who no longer lives in Ukraine, suggested that the men were law enforcement officers of some sort but a police spokesperson in Kyiv declined to comment.
“Today, ten unknown people with masks and machine guns intruded in my Kyiv apartment and did not even call me or my lawyers,” Gontareva told the Kyiv Post.
The former NBU executive and her supporters allege that cases and reprisals against her and PrivatBank executives are politically motivated and designed to help Kolomoisky. She also alleges that the Ukrainian oligarch and his supporters’ threats against her are now evolving into a campaign of legal and physical reprisals.
The NBU stated that Gontareva has become the target of “psychological and physical pressure” that the central bank regards as “a real threat to the personal safety” of NBU officials, and an attempt to derail “its mandate” and its reforms.
On Sept. 5, a family car belonging to Gontareva’s son and daughter-in-law was torched in Kyiv, in an apparent arson attack. The vehicle is registered to the wife of Gontareva’s son, who is also named Valeria Gontareva.
“These are all links in a chain of brutal events… the terror is increasing,” Gontareva said on Sept. 12.
“I do not know what to expect next from the Devil,” she told the Kyiv Post, in reference to Kolomoisky. “He is even worse than criminals, who never attack the children of their enemies.”
“I am very concerned by recent attacks on Ms. Gontareva, which appear to target her for her previous role as Chairwoman of the NBU,” said Michael Carpenter, a Ukraine expert and head of the Penn Biden Center for Diplomacy and Global Engagement in Washington. “These attacks should be thoroughly investigated.”
Kolomoisky did not answer multiple calls from the Kyiv Post and did not respond to messages requesting comment. There is no evidence that Kolomoisky or his associates are responsible for any attack against the Gontareva family.
Presidential protection?
Zelensky has repeatedly said that he would not assist Kolomoisky in taking back control of PrivatBank, and has attempted to distance himself from some positions held by the oligarch.
However, not everyone is convinced. One day before the police raided the PrivatBank HQ and two days before the search at Gontareva’s apartment, Kolomoisky held his first meeting with President Zelensky since his May inauguration.
The two men had long-standing business ties. Their relationship has faced constant scrutiny and accusations that Kolomoisky has influence over Zelensky, something that both men deny.
“President Zelensky won a huge, popular mandate in part because of his pledge to take on Ukraine’s oligarchic system. His success in this arena would truly revolutionize Ukraine and make it an example for the whole world,” said Carpenter.
“The fate of PrivatBank is crucial in this regard, as is the influence of Mr. Kolomoisky… any attempt to reverse the nationalization of PrivatBank would be a huge red flag, as the IMF and others have made clear,” he added.
Ukraine observers are also concerned about the appointment of Kolomoisky lawyer Andriy Bohdan to the position of Zelensky’s chief of staff and the appointment of other Kolomoisky-linked people to sensitive positions in government. Following this week’s events, observers’ concerns about Kolomoisky’s influence have only grown stronger.
“What is going on here?” said Timothy Ash, a London-based Ukraine analyst. “Zelensky is pushing on with key reforms — like land reform, privatization, and seems to be making all the right noises.”
“Meanwhile, he meets with Kolomoisky, then police raid the headquarters of PrivatBank, presumably taking information related to the bank’s nationalization, and now we hear former NBU governor Gontareva’s apartment is raided, this comes after her family car was torched last week, and she was somehow ‘run over’ in a freak ‘accident’ in London a few weeks back. For me, any hint at backtracking around the nationalization of PrivatBank is a deal-breaker for the International Monetary Fund — and quite rightly.”
