PrivatBank’s U.S. lawsuit of its former owners, Ihor Kolomoisky and Gennadiy Bogolyubov, and their business associates, has been largely put on hold on Aug. 23.
The Delaware Chancery Court has decided that it would be best to wait for Ukrainian courts to make key rulings about PrivatBank’s 2016 nationalization and its attempts to recover loans from borrowers.
“Were this Court to move forward with this case now, it would be forced to adjudicate these issues of Ukrainian law…The risk of inconsistent judgments is high,” Vice Chancellor Joseph R. Slights III concluded. Some procedural matters will move forward.
In a more positive development for the state-owned bank, the court quashed Kolomoisky and Bogolyubov’s motion to dismiss the case.
“While there is a possibility that the Ukraine cases could impact PrivatBank’s Delaware case, it will be up to the Delaware Court to decide what, if any, impact they will have in due course,” PrivatBank told the Kyiv Post in a statement.
“By its recent decision, rejecting the defendants’ motion to dismiss PrivatBank’s case, the Delaware Court has clearly confirmed that it will consider the case, including the associated Ukrainian law matters.”
PrivatBank, Ukraine’s largest lender, is suing Kolomoisky and his business associates for more than $600 million in Delaware, alleging that this money was laundered into the U.S. after being stolen from the bank through Ponzi-like insider lending schemes.
The laundered money has allegedly been pumped into a series of companies with the name Optima, according to the U.S. Justice Department that seeks to confiscate some of these properties in Cleveland, Louisville and Dallas. PrivatBank has accused Kolomoisky’s American business partners Mordecai Korf and Uriel Laber of helping organize the scheme.
Mark Ressler, a lawyer for Korf and Laber, issued a statement saying that his clients are “pleased” that Slights “stayed PrivatBank’s baseless claims pending ongoing developments in Ukraine.”
PrivatBank was nationalized in December 2016, after a $5.5 billion hole was found in its ledger, as a result of the oligarchs’ alleged looting.
Ukrainian decisions
The Delaware Chancery Court is waiting for several key decisions in Ukrainian courts before deciding how to proceed with the case.
One concerns the legality of PrivatBank’s nationalization, which Kolomoisky and Bogolyubov have challenged.
“The Nationalization Action will determine whether the Ukrainian government lacks standing to bring an action through PrivatBank in the first instance,” Slights wrote.
In April 2019, the Kyiv District Administrative Court ruled that the nationalization of PrivatBank was illegal. The bank appealed. The hearing of the case has repeatedly been postponed.
Another issue concerns PrivatBank’s attempts to get money back from its borrowers — companies linked to the oligarchs. These companies claim that the debts have already been repaid.
According to Slights, roughly 75% of the loans mentioned in the Delaware case are being disputed in Ukraine. Much of this litigation revolves around Kolomoisky’s Nikopol Ferroalloy Plant, which is suing PrivatBank in the Economic Court of Kyiv.
“Nikopol claimed in each suit that PrivatBank’s Delaware lawsuit failed to recognize that Nikopol fulfilled all of its obligations under the loan agreements when PrivatBank alleged that Nikopol misused loan proceeds,” Slights wrote.
A Ukrainian court has already ordered PrivatBank to repay some money to the plant.
Twisting the facts
A public relations firm hired by Korf and Laber on Aug. 25 emailed journalists a statement that Slights put the case on hold because Ukraine’s court determined Kolomoisky’s companies’ loans to be legitimate.
In fact, Slights never wrote that anywhere in his decision. There has also been no such determination by Ukrainian courts.
The PR firm, Mercury, is infamous in Ukraine for whitewashing the reputation of the country’s fugitive ex-president, Viktor Yanukovych.
While working for Yanukovych, Mercury failed to declare the cooperation with the U.S. Justice Department, as it was legally required to do.
