To foreign investors, the following scenario is all too familiar.
A Western firm buys an asset in Ukraine, makes millions of dollars of upgrades, and then loses the business in court to a local entity or erstwhile partner.
It happened this year to Zurich-based Swissport, a
leading airport cargo handler, which lost its $25 million local subsidiary to
Ihor Kolomoisky’s Ukraine International Airlines.
It happened in 2004 to Canada’s Northland Power, owned
by Ukraine-born businessman James Temerty of Toronto, who was forced to give
up Kyiv’s Darnytsia Heat & Power
Plant.
And it happened in 2010 to Ukraine-born Yuri
Leshchinsky of New York when he and his American partners were ousted from
candy maker Zhytomyr Sweets.
And it is happening now to France’s third biggest
spirits producer, Marie Brizard – formerly Belvedere Group until July 1.
It lost its Cherkasy Distillery, where it made €5
million in upgrades and produced its famous Sobieski vodka brand. And lawmaker Georgiy Logvynsky of Prime Minister Arseniy
Yatsenyuk’s People’s Front Party is accused of involvement, a charge he denied
in a written response to the Kyiv Post.
Belvedere was the first foreign company to buy a plant
in Ukraine to produce its vodka domestically when it purchased the distillery in
December 2007 for an estimated $5-8 million, according to investment house
Dragon Capital. It employed almost 100 people at the end of 2013, according to
Belvedere company data.
Like all corporate takeover cases in Ukraine, the
Cherkasy Distillery, which the French company values at Hr 65 million, is
complicated.
A series of court rulings starting in July 2011
enabled the asset to be sold at auction at 265 times less than its estimated
value.
In July 2011, Rafinad Media LLC, an
advertising service provider, started bankruptcy proceedings in court over an
unpaid debt of Hr 9.7 million that Belvedere owed. This represented 15 percent
of the company’s outstanding debt at the time. Eighty-five percent of the local
unit’s debt was secured by the French parent company.
Kyiv’s Commercial Court subsequently declared
Belvedere Ukraine bankrupt and ordered the assets to be auctioned, including
the Cherkasy Distillery which had a daily capacity to produce 32,500 bottles.
In November 2014, Avigal, a company that was originally founded by lawmaker Logvynsky, successfully bid Hr 244,495 ($15,713)
for Belvedere’s Ukrainian assets.
The two companies that Avigal purchased for Belvedere’s corporate rights, as a result, had
been used by the parent company to secure 85 percent of its local unit’s loans.
Logvynsky would only confirm that he had been a “member,” of
Avigal, without elaborating, while the company register lists him as the
company’s founder.
A trained lawyer, Logvynsky criticized Belvedere for
what he says was the way it sheltered itself from debt obligations through
other firms.
“I am aware of this case from my legal practice,”
Logvynsky wrote the Kyiv Post on Aug. 6. “The way how this enterprise
(Belvedere Ukraine) built the scheme allowing it not to pay its creditors, state
budget and Ukraine’s Pension Fund was widely discussed in professional
circles.”
Marie Brizard CEO Jean-Noël
Reynaud told the Kyiv Post that Logvynsky is the mastermind of the asset
takeover.
“We know who is behind Avigal,” Reynaud added. “This is a politician …
Logvynsky. This information has been public already through the Ukrainian
media,” Reynaud said by phone on Aug. 5. “It
is not acceptable that … corrupt politicians can technically take advantage of
a foreign company in Ukraine.”
Two of Logvynsky’s unpaid parliamentary aides, Maria
Shvets and Serhiy Topchiy, are also tied to the case, a circumstance that that
the lawmaker dismissed as coincidence.
Shvets is an attorney of Rafinad Media that took
Belvedere to court for the unpaid debt. Topchiy is the current co-owner of
Avigal to which the Cherkasy Distillery belongs.
“It is wrong to
identify (the) lawmaker with his assistants,” Logvynsky said, noting that many young
lawyers, driven by the desire to protect human rights, have joined his team
when he was elected a member of parliament.
Logvynsky’s assistant Shvets said the value of
Belvedere Ukraine’s assets did not amount to Hr 65 million. Otherwise, it would
have paid its debts already.
“Despite numerous negotiations and promises, in seven
years Belvedere Ukraine did not find a possibility to pay its multi-million
hryvnia debts,” Shvets said. “That is why its property went under the hammer at
the auction (block).”
Meanwhile, Belvedere’s attorney, Anton Polikarpov,
maintains the opposite. He said “Belvedere Ukraine would be able to right a
wrong in this case, despite obvious violations made by the local court and
illegal actions of the liquidator officer.”
The only thing he is afraid of is that the assets get
resold, which will make it more complicated to recover in court.
The French Embassy in Ukraine has been monitoring this situation alongside the European Union delegation
and hopes that justice will eventually be served.
“At a time when Ukraine is crucially
looking for foreign investors, this kind of situation cannot be tolerated,” the
French embassy told the Kyiv Post on Aug. 5 in an
emailed statement.
There’s still a glimmer of hope. Belvedere has
challenged the previous court ruling and secured a favorable decision in the
appellate court. However, on July 21, the High Commercial Court sent the case
back to the lower court for more fact finding.
Waiting for litigation to conclude,
Reynaud said he is ready to resume production at the plant which is standing
idle.
“Our intention is to push for our brand Sobieski,” Reynaud said. “But first we have to figure out how
much damage was done to the brand while it was out of (our) control.”
Kyiv Post staff writer Yves Souben
can be reached at [email protected] and Mariana Antonovych at antonovych@kyivpost.com. Kyiv Post editor Mark Rachkevych
contributed to this report.
