A Kyiv high court on March 13 upheld a Ukrainian company’s right to collect on a $45 million debt claim against the lucrative Ukraina shopping mall. The ruling was a severe blow to a state-owned Irish bank that controls nearly 93 percent of the mall, and which only two weeks ago installed its appointed director there, following drawn out legal battles that started in April 2011.
Lawyers at Egorov
Puginsky Afanasiev and Partners, who represent the bank, said they will appeal
the decision.
For nearly two
years, the state-owned Irish Bank Resolution Corporation has been in a standoff
with the mall’s former management led by Laryssa Yanez Puga and her associates
through Ukraine’s notoriously corrupt courts for control over the property.
The legal battles
have been part of a larger struggle to recover over $2 billion in debt from
former Irish billionaire Sean Quinn Sr. and his family and re-claim a $500
million international property portfolio that once belonged to them, of which
the Ukraina mall is a part.
As a result, IBRC
hasn’t been able to access the mall’s estimated yearly $10 million rent roll for
nearly two years. On Feb. 25, the bank’s appointed director, Rostyslav
Levinzon, finally gained access to the mall’s management office to assume
control over Ukraina’s finances.
Quinn Sr. filed
for bankruptcy in November 2011. He, his son Sean Quinn Jr. and nephew Peter
Darragh Quinn, have subsequently been found in contempt of Irish courts for
interfering in their former businesses in violation of court injunctions, and
for shifting assets, including the estimated $78 million Ukraina mall, beyond
the reach of IBRC. All three were given prison sentences.
Possessing 21,000
square meters of leasable space with nearly 150 tenants, the fight for control
over the mall has been at times tense and dramatic.
Police armed with
Kalashnikov rifles once interrupted a children’s birthday party in the mall’s
bowling alley to prevent a confrontation between two security firms hired by the
mall’s former and current management.
Hidden camera
footage of shady million-dollar discussions taking place in Kyiv’s posh Fellini
restaurant have been leaked to the press. They involved Quinn Jr. and Peter
Quinn, and their erstwhile Ukrainian partners.
Unknown minority
shareholders in the mall have filed numerous court complaints challenging the
bank’s appointment of Levizon as mall director.
And on Feb. 7,
debts due to IBRC were transferred to a similar body in Ireland called the
National Assets Management Agency.
$45 million debt claim
A Ukrainian company,
Elegant Invest, currently has the rights to a $45
million debt claim over the mall that
originates at Demesne Investments Ltd. in Northern Ireland, of which Quinn Sr.
was a director.
A Belfast court has ruled that Demesne’s claim belongs to IBRC because
it had taken over the Quinn family’s business empire, adding that the transfer
of the debt rights was illegal.
But the right to
the debt was subsequently transferred to Lyndhurst Development
Trading in the British
Virgin Islands that involved Ukrainian Dmytro Zaitsev who was allegedly present at Fellini
restaurant on Jan. 21, 2012 in a meeting with Quinn Jr. and his cousin, Peter
Darragh, together with Yanez Puga and associates, when the Quinn family decided to put its $500
million foreign properties portfolio beyond the Irish bank’s grasp.
Next, the debt was
transferred to Elegant Invest using another Ukrainian firm, Zenit, as a
conduit, whose right to the debt was recognized by Kyiv courts last summer.
And Zenit, the Ukrainian
conduit company that transferred the debt claim from Lyndhurst to Elegant
Invest, is headed by Artem Basmadzhan who in 2009 headed Ukraine’s only gold
producer, state-owned Zakarpatopolymetally, when the company was heading into
bankruptcy.
Uncertain fate of Ukraina mall
Ukraina director
Levinzon told the Kyiv Post in his office on March 7 that it will take at least
a month to assume full control over the mall’s finances.
Arsen Miliutin,
EPAM senior associate who represents IBRC, told the Kyiv Post that $5 million
was illegally transferred from the mall’s accounts in November.
“This isn’t the
only case, we’ve found many similar cases, but it’s too early to specify what
exactly, and first of all, all this should be forwarded to the police, but
definitely, the situation is that nearly every month which they were able to
transfer from the company, to strip the company’s account and transfer
elsewhere, it was done,” Levinzon told the Kyiv Post.
He added that he
discovered that “more or less (we) saw zero balances on bank accounts.”
Miliutin said that
the $45 million debt claim ruling will be appealed with the Kyiv Appellate
Commercial Court.
Separately,
IBRC has retained A1, the asset recovery unit of Russia’s Alfa Group, to
protect and recover assets belonging to the Irish bank located in Ukraine and
Russia.
Kyiv Post editor Mark Rachkevych can be reached at [email protected].
