A battle has broken out in Kyiv for control of two prime commercial properties.
The dispute is triggered by an Irish state-owned bank’s attempt to recover assets once belonging to that country’s former richest man and his family, whose company recently became insolvent.
The struggle of the Irish Bank Resolution Corporation to assume control of a shopping mall and a business center has cast a spotlight on the underhanded tactics used in Ukraine to fight for control of businesses – from court decisions to burly security teams.
But this time there is a novel twist: The Irish company says the machinations to block them from taking control of the properties are being orchestrated not by Ukrainian groups, but by Sean Quinn, an Irish former billionaire, or his family.
A spokeswoman for Quinn Group denied any involvement in the dispute, which was even raised during talks between President Viktor Yanukovych and Irish Prime Minister Enda Kenny when the two met in Warsaw on Sept. 29, according to an Irish diplomat.
The Irish Bank Resolution Corporation’s pains to secure control over the lucrative Ukraina shopping center and Leonardo class A business center in the last month have been met by an array of raider-style tactics.
These include counter-lawsuits that led to the seizure of properties whose shares had previously been used as collateral, refusal of management to acknowledge the decisions of a shareholder meeting and appointment of the same judge to hear five cases in a court where cases are supposed to be randomly allocated.
But in keeping with Ukrainian tradition, it’s still far from clear how the dispute will end, who will ultimately end up with control over the prized assets and their profits.
On the surface, the tussle appears to involve Irish Bank Resolution Corporation and former billionaire Sean Quinn, who filed for bankruptcy in a Northern Ireland court on Nov. 11.
The bank, which is now owned by the Irish government, is trying to recoup nearly $4 billion in alleged losses from the Quinn Group, a manufacturing, insurance and international property empire formerly owned by Quinn and his family.
Just three years ago, Forbes magazine ranked Quinn as Ireland’s richest man with a fortune estimated at $6 billion. But his fortune swiftly dissipated in the wake of the 2009 global economic recession.
Although the Irish Bank Resolution Corporation controls much of the Quinn Group’s assets through bankruptcy receiverships, it has faced difficulty recovering much of the group’s international property in Sweden, Russia, Cyprus and Ukraine worth some $675 million.
In Kyiv, its efforts to secure control of Ukraina shopping center have so far been frustrated. The mall was bought in 2006 for $59 million and later Leonardo business center was purchased for $95 million. Shares in both assets were used as collateral.
Now Quinn Finance, the ultimate holding company of the international properties now controlled by the Irish government, has accused Quinn family representatives of using raider tactics to thwart its attempt to install a new director and assume control over the property.
A subsidiary, Quinn Holdings Sweden, owns 92.75 percent shares in Ukraina shopping mall, which made about Hr 1 million profit in 2010.
Robert Dix, the Irish-based appointed chairman of Quinn Finance, said he suspects Quinn and his family are “using every legal tactic to frustrate the rule of law.”
Mona Bermingham, Quinn Group public relations officer, claims that the “Quinn Group has no involvement with these assets.”
Security guards prevent Rostyslav Levinzon (L), the newly appointed acting director of Ukraina department store, from entering the management office of Ukraina department store while the head of the U.B.B. security firm (far right) speaks with him. (Andriy Semenyuk)
Although Dix admits that he has no proof of personal involvement of the Quinns, he says other properties once belonging to the family in Russia, Ukraine, and Cyprus are being “kept beyond the reach of creditors.”
“We’ve witnessed consistent actions albeit slightly different styles by the Quinn family to frustrate our attempts to take control of these (property) assets,” Dix told the Kyiv Post.
In Ukraine, the company has been unable since Nov. 7 to install a newly appointed acting director following an extraordinary general shareholders meeting that day.
Meanwhile, the security firm guarding the shopping center was changed and beefed up on the eve of the shareholders meeting.
“The security change is very strange. It appears to be a preemptive move,” said Rostyslav Levinzon, the new acting director of Ukraina appointed by the shareholders.
Quinn Holdings Sweden had called the shareholders meeting because “management wasn’t acting in the interests of shareholders.”
The police, meanwhile, have refused to open a case in the matter, said Magisters lawyers and Levinzon, the newly appointed acting director of Ukraina. Levinzon said that the police have taken no action after giving a police statement each time after being refused entry to the Ukraina management office.
Troubles with the newly appointed director were compounded when Quinn Holdings Sweden learned that its 92.75 percent shares in the shopping mall had been arrested because of two lawsuits filed this year in Kyiv’s economic courts.
One of them was against IBRC, the other against Quinn Holdings Sweden. Both lawsuits are still pending, and are preventing IBRC from foreclosing on the building.
One lawsuit was filed by Larysa Yanez Puga, the former director of Ukraina now removed by the shareholders. She is currently on medical leave and unavailable for comment.
She challenged the validity of the nearly $80 million mortgage agreement that had enabled the purchase of the shopping center.
The other case saw a law firm, Yurbusinessconsulting, sue Quinn Holdings Sweden for an alleged debt over legal services worth $226,000 – roughly the monetary equivalent of the nominal value of shares in the company.
According to the invoice seen by the Kyiv Post, a lump sum was submitted for payment – not the usual itemized bill listing lawyer fees for each service provided.
Sean Quinn was listed as the representative of Quinn Holdings Sweden on the legal services contract dated Oct. 1, 2010.
Yurbusinessconsulting lawyers Vitaliy Makhinchuk and Volodymyr Bobryk have also featured in the takeover of the capital’s largest developer Kyivmiskbud and the Saivo bookstore with a prime location on Khreshchatyk, Kyiv’s main thoroughfare, according to news reports by Delo and Ekonomichna Pravda online papers.
Makhinchuk was unavailable for comment and Bobryk wouldn’t comment.
Moreover, the legal firm in question, Yurbusinessconsulting isn’t located at the address it lists in Kyiv, according to information obtained from the government’s State Enterprise Information Resource Center, as of Nov. 8.
But the string of bizarre circumstances does not end here.
The five lawsuits around Quinn Group’s properties in Ukraine are all heard by the same judge, Serhiy Stanik, despite the fact that cases are supposed to be randomly allocated to judges by a computer program. There are 79 judges in the Kyiv economic court, according to a Jan. 17 decree by the State Judicial Administration.
Three of these cases are related to the shopping center, and two related to the business center. The Leonardo property is currently under arrest, pending further legal hearings.
A similar pattern exists in Cyprus and Russia.
Dix alleged the Quinn family has used court injunctions in Cyprus to stop directors from taking control of assets there while in Russia assets were liquidated through companies friendly to the family.
In one case IBRC alleges the interests in Russian companies with assets worth $304 million were wrongly transferred for the benefit of Quinn family members for $1,500 and a laptop computer worth $473.
And Dix said two Quinn family members were seen at Leonardo business center in August.
Asked about the possibility that a local entity might be behind the actions at Ukraina department store, Dix said: “No, I don’t believe this. I believe this is the Quinn family.”
Kyiv Post staff writer Mark Rachkevych can be reached at [email protected].
