You're reading: Bankrupt Irish tycoon jailed over Ukraina mall, Russia’s Alfa Group to go after disputed asset

The plot has thickened in the fight over the lucrative Ukraina shopping mall in Kyiv between a state-owned Irish bank and that country’s once richest man, Sean Quinn Sr., and his family.

A high court in Dublin on Nov. 2 sentenced Quinn
Sr. to nine weeks in jail for stripping the assets of Kyiv’s Ukraina shopping
mall and other foreign properties worth up to $430 million that once belonged
to his family.

The state-owned Irish Bank Resolution
Corporation is after some $500 million in foreign properties, including the $78
million Ukraina shopping center, as part of a debt recovery plan over the Quinn
family.

Sean Quinn Sr., 66, was jailed based on an
Irish judge’s findings in June that he, his son Quinn Jr. and his nephew Peter
Quinn were in contempt of court for failing to stop moving multimillion dollar assets
beyond the reach of the bank.

IBRC recently presented new evidence in
Irish courts that showed the three had continued to keep the foreign
properties, including Ukraina, beyond the reach of the bank
while under June and July 2011 restraining orders and exercised control over
some assets up until July of this year, even though they had maintained the properties
were no longer under their control.

According to the Irish Times, Quinn Sr.
told reporters following the sentence that he will go to jail but intends to
appeal the ruling.

At the height of his success, Quinn Sr. was
the 12th richest man in the United Kingdom and Ireland’s richest in 2008 with
an estimated $6 billion net worth. He employed thousands, mostly in the
previously job-starved areas bordering Northern Ireland. However his and his
family’s business empire dissipated in the wake of the global financial crisis.

The IBRC has been trying to take control
over the international properties since April 2011. Quinn Sr. filed for
bankruptcy that same year and owes the bank an estimated total of $3 billion.

On July 20, a Dublin judge found that Quinn
Sr., his son, and a nephew, Peter Darragh Quinn, hid millions in assets from
the bank. Quinn Jr. and Peter Quinn were given three-month jail terms.

In Ukraine, IBRC has met stiff
resistance in courts since April 2011 to install its manager at Ukraina and
access the shopping center’s estimated $10 million yearly rent roll. The bank
said it has exhausted all legal options available to it in Ukraine despite
taking the legal battle to the highest levels of government.

IBRC nominally controls nearly 97
percent shares in the Ukraina shopping mall. However, IBRC has been stalled in
numerous litigation battles.

In a Nov. 1 affidavit taken by IBRC senior
executive Richard Woodhouse obtained by the Kyiv Post, an allusion was made
towards Ukraine’s notoriously corrupt legal system.

“IBRC have been involved in extremely
complex and detailed litigation in numerous jurisdictions and have been
continuously and unlawfully been frustrated in obtaining any tangible return on
their efforts,” the Nov. 1 affidavit reads.

The Kyiv Post has been unable to reach
Laryssa Yanez Puga – who worked for the Quinns and still manages Ukraina – for
comment via personal visits to the management office at the mall and repeated
phone calls.  A message left as recently
as Oct. 5 with her office went unanswered. Her deputy, Volodymyr Hurtovy, has declined to comment in numerous phone conversations with the Kyiv Post.

In August 2011, Irish court documents show the
Quinns had given Yanez a $500,000 “golden parachute” payment, when they were
under court orders not to shift the Kyiv mall’s assets.

Affidavits received this summer by the Kyiv
Post submitted by Quinn Jr. and Peter Quinn, said that Yanez Puga had retained
a Moscow law firm for some $1 million on behalf of the Quinns to strip the
assets of Ukraina and that she had retained much of that money. The affidavits
also showed that an Irish company established by a trust set up for Quinn  Sr.’s grandchildren had received $650,000
stemming from a service contract with the mall’s Kyiv-based management company.

 “I
sanctioned the initial strategy last year (in 2011) to frustrate [the bank],”
said Quinn Sr. in his affidavit, reported the Irish Times. “I take full
responsibility for the consequences of that strategy”, which are that the
family is not able to do as the court has ordered.

A chain of what IBRC has called fictitious loan assignments has led to Univermag Ukraina’s asset stripping.
Lawyers for IBRC on July 4 discovered that the rights to a $45 million debt
claim over the Ukraina shopping mall was on June 22 transferred to a Ukrainian
company.

The supplemental loan agreement belonged to
Lyndhurst, a British Virgin Islands company, that the Dublin High Court found
was actually controlled by a member of Sean Quinn Sr.’s family. It formerly
belonged to a Northern Ireland company where a Quinn family member was a former
director. In April 2011, the debt was transferred to Innishmore Consultancy,
another Northern Ireland company run by Peter Quinn.

However, in June a Kyiv city commercial
court successfully allowed for Lyndhurst’s debt claim to be substituted by
Elegant Invest in Kyiv.

Elegant Invest’s director Ruslan Horbyk
declined to answer questions when contacted over the phone on July 5 by the
Kyiv Post. 

Lawyers for IBRC argued that the transfers
amounted to further attempts to place the multi-million dollar asset beyond its
reach. The Irish Times reported that two Ukrainians representing Lyndhurhst
could face jail time in Northern Ireland for their role in alleged asset stripping:
Oleksandr Serpokrylov and Dmytro Zaitsev. IBRC alleges the two ignored an
injunction against any transfer of debts surrounding the mall.

Zaitsev was caught on video that was posted
online that showed him in a meeting at a posh Kyiv restaurant in January with
Quinn Jr., Peter Quinn together with Yanez Puga, Voldymyr Hurtovy, Ukraina’s
deputy director, and an unidentified Mr. Orlov. The Ukrainians discussed
repaying the Quinns $100,000.

IBRC
retains Russia’s Alfa Group to go after Ukraina shopping mall

Separately, in a Nov. 1 affidavit obtained
by the Kyiv Post submitted by Richard Woodhouse, a senior executive IBRC,
states that the bank has retained the asset recovery arm of Russia’s Alfa
Group, called A1 Group Limited.

A1 Group will try to recover 11 properties
worth more than $315 million in Russia and Ukraine, including Ukraina shopping
mall.

In the affidavit, Woodhouse stated that
IBRC “has exhausted all available legal remedies open to it  to
recover the security on its own both in this jurisdiction (Republic of Ireland)
and in the Russian Federation and Ukraine.”

Woodhouse continued: “…entering into a
cooperation agreement with a commercially strong local partner is now the only
viable means of recovering a significant proportion of the assets for the
state.”

Alfa Group belongs to three Russian tycoons
with links to the Kremlin and President Vladimir Putin.

Mikhail Fridman, German Khan and Alexei
Kuzmichov, all of whom together are worth an estimated $33 billion, according
to Forbes, are Alfa’s three main shareholders.

Khan is a native of Kyiv.

According to Alfa’s 2010 audited accounts,
the company had $60 billion in assets, equity of $28 billion and a profit of
$2.8 billion, making it one of Russia’s largest privately-owned conglomerates
with interests in natural resources, telecommunications, retail, finance and
leisure.

One of Fridman’s key partners in Alfa
Group, Peter Aven, has known Putin since 1991.

IBRC and A1 will form a joint venture to go
after the disputed assets. A1 will bear all the costs of the recovery process,
including litigation costs.

They will, however, split the recovery
proceeds.

A1 will get the rights to the first $35
million of any recovered assets. IBRC will have the right to 80 percent of the
next $100 million, and 70 percent of the following $100. Thereafter, IBRC and
A1 split the proceeds of any recovered assets 50-50.

The Russians, according to the Nov. 1
affidavit, will also try to recover the estimated $45 million in rental income
that the properties produced over the past year, and which IBRC believes in
under the control of the Quinn family.

“…any individual or organization will be
wary about being in conflict with such an influential player in the market (as
A1),” read the affidavit.

A1 spokesperson in Moscow Andrey Kocherov
declined to comment when the Kyiv Post reached him by telephone on Nov.
6.

Kyiv Post staff writer Mark Rachkevych
can be reached at
[email protected]