The Irish Bank Resolution Corporation’s (IBRC) effort to seize the Ukraina shopping mall in Kiev has involved some of the most powerful political figures in the huge eastern European country, but as yet to no avail.
The property was formerly owned by the Seán Quinn’s family and was part of the international portfolio it set out to put beyond the bank’s reach last year after it concluded the bank was about to seize it.
The series of bizarre developments since then, concerning control of the mall, have received widespread coverage in Ukraine where they are recognised as being part of a common type of fraud called corporate raiding.
The government has an anti-raiding committee which has twice reviewed the Ukrainian case. The existence of corporate raiding, where shareholders are stripped of their assets, is seen as a disincentive to foreign investment in Ukraine, one of the most corrupt countries in Europe.
Frustrated
In May the first vice-prime minister of Ukraine, Valeriy Khoroshkovsky, instructed the local judicial council to investigate judgments by the Kiev courts that have frustrated the IBRC’s efforts to assert control over the mall.
Khoroshkovsky is a former head of the Ukrainian intelligence service and one of the country’s richest business figures. He heads the Interdepartmental Commission on Countering Illegal Mergers and Takeovers of Companies and is charged with heading Ukraine’s integration with the European Union.
A senior source in Kiev who has had dealings over the Ukraina matter at the highest levels, said figures such as Khoroshkovsky would have avoided getting involved if they had not wanted to resolve the situation.
“He has described it as a scandalous situation which he is determined to sort out. Senior political figures such as he do not make such statements unless they intend to take action. I believe that he tried. It is a matter for him of his standing,” said the Kiev source, who did not want to be named.
The fact that such a powerful figure has failed to ensure control of the mall was wrested from the current management, has led some to conclude that players of even greater power in Ukraine are supporting those who have retained control of the asset.
Univermag, the operating company that runs the mall, is still believed to be controlled by Larysa Yanez Puga, who ran the mall when it belonged to the Quinn family.
Double-crossed
A meeting in a Kiev restaurant in January this year between Yanez Puga, Seán Quinn jnr, Peter Darragh Quinn and some Russian speaking men, was secretly filmed and the footage leaked to the media. In the video the two Quinns appear unhappy that they are not getting amounts of money they believe are due. They also discuss $100,000 in cash being offered and how they might store the cash in a bank safe deposit box.
Some parties involved believe the video supports the view expressed by the Quinns in the Irish courts that Yanez Puga, while having initially worked for them, may now have different backers.
The Quinn family has told the Irish courts it believes Yanez Puga has double-crossed them. The Kiev source says such a scenario is logical and fits with the fact of the video and its content.
“Maybe it is more complicated. Maybe there is still some connection with the Quinns. We don’t know.”
The Quinn family’s international property group included intergroup arrangements whereby companies in Russia and the Ukraine owed money to a company based in Derrylin, Co Fermanagh, called Demesne Investments Ltd. The structure facilitated the movement of cash back to Ireland.
At the time the family first embarked on its effort to place its foreign assets beyond the reach of the IBRC, Demesne’s right to a Univermag debt of $45 million was assigned onwards, ending up with a British Virgin Islands (BVI) company called Lyndhurst Development Trading SA.
The movement of the debt to the BVI company was challenged in the courts in Belfast and the BVI. However, the Lyndhurst rights were then moved on to a Ukrainian company called Elegant Invest and its right to the debt has been recognised by the Kiev courts.
“The move to Elegant Invest is very important,” according to the Kiev source. “They obviously felt they cannot win outside Ukraine. It was a strategic decision to move it into Ukraine and put it out of the reach of western justice.”
Recently, articles in a Ukrainian publication, The Left Bank, and a publication specialising in business and politics in central and eastern Europe, Business New Europe, have raised the possibility that parties associated with Ukrainian president Viktor Yanukovych may be linked to Elegant.
A request for a comment from the president’s spokeswoman met with no response.
In Kiev the involvement of parties with links to Yanukovych is seen as possible. However, it is also noted that the most recent article appeared soon after the announcement that the IBRC was discussing going into a partnership with the Russian Alfa Group in an attempt to seize former Quinn property in Russia and the Ukraine.
A second possibility being discussed in Kiev is that someone in the courts system is continuing to co-operate with whoever is controlling Elegant, knowing that it is politically difficult for politicians to interfere with court decisions.
Asset recovery
Either way the Kiev source believes the bank’s decision to partner with Alfa is a good one.
The group is owned by a number of very powerful Russian oligarchs, two of whom were born in Ukraine. The plan is that Alfa Group’s asset recovery arm, A1, would recover the assets with the spoils then being split between the bank and A1 according to an agreed formula.
“Alfa is a very powerful player. The move by the bank is a very smart one that I think creates a good chance of recovery. They [Alfa] have the ability and they have the reputation. Many people would not be comfortable to mess with them. Just the fact of the name itself could prevent some of these hostile actions.”
The source was certain that Alfa would have assessed the financial and reputational risks involved before going into any deal over the Ukrainian property. It will not want to be seen to fail.
“The coming few months will be fascinating.”
