You're reading: An overview of alleged recent raider attacks

As of Sept. 1, Ukraine had a net outflow of $600 million in foreign direct investment, according to local investment bank SP Advisors. Widespread corruption is the key deterrent, including raider attacks that often involve dubious court decisions and disrespect for property rights.

“In practice, hostile takeovers threaten private enterprises, real estate, land or any (other) valuable assets that are locally or foreign owned, thus, they have extremely negative effects on Ukraine’s investment climate and sets back the inflow of foreign direct investment as well,” reads a Transparency International report on the phenomenon.

The EuroMaidan Revolution was supposed to change all of this. In March, less than a month after the popular uprising ousted the disgraced presidential administration of Viktor Yanukovych from power, a special law was passed to prevent the fraudulent practice.

Yet raider attacks don’t appear to have subsided, Andriy Semydidko, head of the Anti-Raider Union of Entrepreneurs, told the Kyiv Post.

First, marauding took place against property and valuables that belonged to the former ruling elite tied to Yanukovych, he said. As law and order deteriorated in late February when the former president and his cronies fled, masked protesters pillaged office centers, luxury residences and other properties.

“We got rid of the reign of racketeers to fall under the reign of marauders,” said Semydidko.

After relative order was restored, the more classic raider attacks appear to have resurfaced, involving fishy court decisions and mysterious entries in the government-run registry of businesses.

In late September, Interleaseinvest, the nation’s second largest privately owned rail cargo handler based in Dnipropetrovsk Oblast, was taken over by an obscure company registered in the British Virgin Islands. Bringing in some $40 million in yearly revenues, the company received $100 million in loans from the European Bank of Reconstruction and Development. Unknown to the management at the time, the State Registry of Legal Entities on Sept. 26 registered a 19-year-old as the new CEO, including a change in ownership, without actually recording any sale of shares, Kostyantyn Misakov, the former company chief, told the Kyiv Post.

“Clearly, this deterioration in investor trust is driven by not only a poor judiciary, but also all-permeating corruption,” said Anna Derevyanko, executive director of the European Business Association, whose in-house investment attractiveness index is at its lowest since 2008. “This should have troubled the government for a long time already. Corruption is rife in Ukraine…And this results in dangerous raider attacks, takeovers, job losses and budget difficulties.”

The following are updates on new or existing cases of company takeovers:

AP Securities

Investors at local securities brokerage AP Securities are under risk of losing access to their assets when, on or about Sept. 23, the company transferred without prior notification the cash of its clients from its custody bank account at Kontrakt Bank to Bank Standard under an account belonging to a company called Reivod. That company, according to the state company registry, consults on commercial activity and market research among other interests.

In July, American citizen Dorian Foyil sold his Ukrainian-based securities brokerage to AP Securities, belonging to Oleksandr Smaliy at the time, according to a letter Foyil wrote on Oct. 10 to AP Securities’ clients as a fellow investor.

Reivod does not have a company website or publicly available contact information. The shares of AP Securities, meanwhile, were transferred to the account of an unaffiliated third party and then on to a custody account at the securities company ProCapital, Foyil’s letter alleges.

When the investors stopped receiving expected dividends in violation of the signed custody agreement, between Sept. 27 and Oct. 8, they took legal action to prevent the money and shares from being permanently alienated. They acquired a court order to freeze the new bank and custody accounts, met with high-ranking executives of the National Depository and State Securities and Exchanges Commission and convinced the Cabinet of Ministers to investigate the situation.

The General Director of AP Securities until Sept. 23 was Oleksandr Smaliy, member of the supervisory council of the Ukrainian-based investment bank Sokrat. Mr. Smaliy did not return repeated calls for a comment.

Swissport Ukraine

 

Swissport has a conflict with Ukraine International Airlines over a local subsidiary they once owned together and lost an appellate court hearing in September. It is now preparing for a cassation court hearing.

Geneva-based Swissport International, a leading global airport ground and cargo handler, has since early 2013 been trying to regain its local subsidiary worth then an estimated $25 million. The alleged raider the company named is the nation’s flagship airlines, Ukraine International Airlines, and which Swissport senior vice president Mark Skinner said is owned by billionaire Dnipropetrovsk governor Ihor Kolomoisky.

UIA has never acknowledged that Kolomoisky owns the airlines.

Swissport and UIA jointly owned the local subsidiary called Swissport Ukraine before the takeover happened. The Swiss company owned a 70-percent stake. But UIA alleged its minority shareholders’ rights were in violation because its erstwhile partner had allegedly threatened to dilute its stake with a cash infusion. It subsequently won a court case to purchase the majority stake for just $400,000.

Swissport fought back in courts but lost the main case on Sept. 25 in an appellate court. The case was being heard anew after the Higher Commercial Court last year sent it back to the lowest court for another hearing. Now, Swissport is heading back to the court of cassation to resolve its fate.

Corum

Kremlin-backed insurgents on Aug. 28 took over coal and ore mining equipment maker Corum Donetskgormash in Donetsk. Its owner, Rinat Akhmetov’s System Capital Management, said in an Oct. 16 news release that it has not been responsible for the plant since its takeover.

Members of the self-styled Donetsk People’s Republic are repairing military equipment on the plant’s site, media reports say.

SCM stated that Corum’s equipment was moved to other production sites of the company elsewhere. Plant employees were offered to move to those sites as well.

Unirem- Oil &Agro

Possibly a success story in the making, Ronald Derrickson, a Canadian citizen and honorary Indian grand chief, is on the verge of restoring his ownership rights in a farming enterprise in Dnipropetrovsk Oblast in which he invested some $20 million.

The business includes rights to over 8,000 hectares, a $13 million grain elevator made with Canadian technology and $7 million worth of New Holland machinery. Derrickson alleges that his erstwhile partner Viktor Fesun and Dnipropetrovsk Oblast regional lawmaker Oleh Kryshyn swindled him by orchestrating fraudulent bankruptcies and conducting an illegal shareholders’ meeting that took over Derrickson’s stake.

The Canadian’s land eventually ended up part of Warsaw-listed KSG Agro, which belongs to former member of parliament and ex-Dnipropetrovsk governor Serhiy Kasianov.

Kryshyn and Kasianov both rigorously denied involvement in the takeover in April 2013 telephone interviews with the Kyiv Post. Kasaniov furthermore denied Derrickson’s farming assets are a part of KSG-Agro and maintained that whatever assets he bought from Kryshyn were done legally after conducting proper due diligence. Kryshyn also had threatened to sue the Canadian for slander, which he hasn’t.

Two Higher Commercial Court rulings, in November 2013 and January, reversed the bankruptcies of Derrickson’s former companies, thus paving the way for him to restore his ownership rights to the assets.

On the criminal side, authorities have twice so far closed a case to prosecute Fesun on grounds that “no crime had taken place.” Responding to a letter that Derrickson wrote to President Petro Poroshenko, the head of state on Oct. 18 said he sent the criminal case to the prosecutor’s office for review.

Derrickson said that if the guilty aren’t prosecuted, including Kryshyn and Kasaniov, he will sue the Ukrainian government in Strasbourg’s European Court of Human Rights for violating a 1994 bilateral treaty between Canada and Ukraine that guarantees each side’s investments.

GerMedTech

Molecular genetics researcher GerMedTech was founded by German citizens Alexander Appelhans and Wladimir Stuckmeister in 2008. They invested $480,000 in the Odesa-based company and expected to profit from conducting analyses of genetically-modified organisms, medicine and hypersensitivity.

Its turnover last year reached $1.6 million, of which about $400,000 was paid in value-added tax, and $80,000 through the fixed tax rate. In the same year, GerMedTech was certified by the National Accreditation Agency of Ukraine to become “in fact, the only laboratory in Ukraine that can do GMO analysis of grain and food,” as stated in the founders’ letter to the European Business Association in March 2014.

Upon receiving accreditation, the laboratory, which employed 25 people, became subject to a wave of probes from the Department for Organized Crime Control and Department for Combating Economic Crimes, according to their letter, which resulted in allegedly fabricated cases. Afterward, Appelhans was allegedly pressured to sell the company to Maksim Kaufman of FinInvest Group, whose younger brother is millionaire Boris Kaufman.

Named by Appelhans as a person close to Fininvest group although not working there officially, Oleksandr Diorgiyev told the Kyiv Post that the German investor received all the money he was owed and added that there’s no documents to prove that Fininvest group has anything to do with this deal. Fininvest group was not available for an official comment, as none of its phone numbers were working as of Oct. 21.

Appelhans furthermore told the Kyiv Post that before signing the deal he reached a verbal agreement with Kaufman that the medical part of the company would stay in Appelhans’ control since a large part of its equipment was bought together with a charity organization in Odesa. This agreement, however, has not been respected, and Appelhans claims to have never received the full payment from the buyers.

Diorgiyev countered by saying that “there was no deal about splitting the company into medical and non-medical parts.”

A lawsuit is being prepared against the new owners of GerMedTech.

McDonald’s

On April 26, 2013 a Kyiv commercial court ruled that McDonald’s was illegally sold a building in 2006, where it subsequently opened a restaurant at 4 Draizer St. in the Troyeshchyna neighborhood. The reason stated was the absence of Radosyn’s – the  Draizer Street building’s seller – supervisory board quorum when it voted to sell the building. This case is connected to another lawsuit started in autumn 2011, when Radosyn was undergoing bankruptcy proceedings. McDonald’s insists it is the legal owner of the building and “has been defending its right in court since 2008,” the company said in a statement.  “We completely disagree with any attempts to deprive McDonald’s Ukraine Ltd. of the ownership of this property. The (McDonald’s) company considers this situation as such that may produce a negative impact on investment climate in Ukraine in general and worsen Ukraine’s reputation in the eyes of foreign investors.”

At present the eatery is conducting normal business operations.