The enterprise at the heart of the
dispute consists of an iron ore enrichment plant and iron ore mines located in and
near the southeastern Ukrainian industrial city of Kryvyi Rih. It has been a
profitable enterprise, producing iron-ore ingots for Ukraine’s steel industry,
the money-spinning sector of the country’s economy.
Pinchuk claimed
he had paid $143 million for KZhRK and accused the defendants of forcibly
seizing it on March 3, 2005: “Individuals believed to have been acting on the
instructions of the defendants forcibly entered the premises of KZhRK” and took
control of the plant. “Since that time, the defendants have exercised
management control over KZhRK to the exclusion of the claimant.”
Pinchuk also brought
Ukraine’s top billionaire, Renat Akhmetov, into the dispute. He claimed that
the defendants had no right to sell some of the KZhRK shares to Akhmetov.
In September,
in their counter-submissions to the High Court, the two defendants rejected
Pinchuk’s claim that they owe him compensation for KZhRK. They claimed that he had
no legal rights under Ukraine’s laws to the plant or its profits. Kolomoisky
added that, as Pinchuk has no legitimate claim to KZhRK, the shares could be
sold to Akhmetov or anyone else.
The two
defendants defended their representatives taking over KZhRK as the seizure was carried
out with a court order.
The two
defendants didn’t deny that in 2004 Pinchuk had paid them $143 million. They
asserted the money was not to buy KZhRK as the claimant attests, but their
share of profits from Nikopol, “the largest ferroalloys producer in Europe.” The
defendants stated that Pinchuk, Nikipol’s majority shareowner, owed them $400
million from plant’s profits, as they were its minority shareowners.
The defendants
in their submission accused Pinchuk of obtaining the control or ownership of state
enterprises at less than their market value because of nepotism, i.e. because
he was ex-President Leonid Kuchma’s son-in-law. They cite Nikopol and
Kryvorizhstal (Ukraine’s largest integrated steel company), as examples of state
properties sold to Pinchuk at below market value.
They assert
that in 1999, Pinchuk received the state’s 50 percent + 1 shares in Nikopol to
manage, not because of his experience in operating a ferroalloy plant, but
because of his relationship with the president’s daughter since 1997.
Furthermore, the defendants state that “shortly after the claimant [Pinchuk] married
the president’s daughter,” he was able to purchase the majority share at below
the market price.
They make the
damning accusation that Pinchuk took for himself $100 million from Ukrnafta
(the largest company involved in extracting oil and gas in Ukraine with the
majority shares initially owned by Naftogaz Ukraine). As minority owners of
Ukrnafta, the defendants had set aside $100 million of Ukrnafta to fund Kuchma’s
re-election in 2004. After Kuchma decided not to run for president, they accuse
Pinchuk of not returning the money to them and keeping it for himself.
The High Court
has not yet set a date for the trial, assuming the protagonists do not settle
out of court. The appointed English judge will have to decide if Pinchuk was
entitled to the shares and profits form KZhRK, as well as nepotism, corporate
raiding, inside dealing, illegal election donations and many other criminal
aspects of capitalism in Ukraine. This might prove to be beyond the
understanding of even an English high court judge.
In his
submission to the High Court, the defendant Kolomoisky wrote: “The regime of
President Kuchma was characterised by corruption, nepotism and ties to
organised crime.”
It would be of great interest to the
public, how Kolomoisky characterizes President Viktor Yanukovych’s regime?
Jaroslav Koshiw is the author of “Abuse of Power: Corruption
in the Office of the President,” published by Artemia Press 2013 (ISBN
978-09543764-1-3). He is a former editor of the Kyiv Post.
