At issue are shares in two western Ukrainian oil refineries: Naftokhimik Prykarpattya and Halychyna Oil Refinery. Both Privatbank affiliates and Watford Group have shares in these companies, and have in recent years jointly coordinated their business and strategy. But now the British firm, founded by Michael Watford, a businessman born in the Soviet Union who later married a British citizen and changed his name, is accusing Privatbank of pilfering its shares in the refineries.
In a statement issued Nov. 4, Watford Group announced that a regional Cyprus court had ruled in its favor against Privatbank, bringing to end a suit filed more than one year ago.
The Watford Group claimed that Privatbank mismanaged a joint venture, Watford Petroleum Ukraine Holdings Limited, registered in Cyprus, which is a shareholder in the refineries. Privatbank, an influential banking group rated one of Ukraine’s largest financial institutions, serviced the joint venture.
Specifically, Watford Group alleged that Privatbank withheld information about the joint venture’s activities and engaged the firm in dubious financial transactions.
According to Watford Group’s statement, the court ordered Privatbank to reveal all financial records for transactions it completed involving Watford Group assets.
During a telephone interview from London, Michael Watford told Interfax-Ukraine on Nov. 6 that the core of the conflict involves his company’s ownership rights to the two western Ukrainian refineries.
“We owned a 42 percent share in Naftokhimik Prykarpattya and 10 percent of Halychyna Oil Refinery, but then [our shares] disappeared,” he said. British, Ukrainian and Cypriot authorities are investigating the matter, Watford added.
Through an affiliated group of companies, Privatbank controls a diversified range of assets in Ukraine, which, in addition to oil refineries, includes shares in oil drilling company Ukrnafta, gasoline stations, iron ore mining pits and telecom firms.
Watford Group said that it sent a letter to Ukraine’s prosecutor general in November 2002, calling for an investigation of a transaction in which its shares were illegally handed over to another company, but received no response from prosecutors.
It’s not clear which company the Watford Group’s shares were handed over to. However, on Nov. 19, Privatbank spokesperson Oleh Serha told the Post that the Cyprus-based joint venture was 51 percent owned by Moscow’s Inter Oil Trading. Serha did not say who stands behind the Moscow firm, but said that Privatbank services them.
Meanwhile, Watford Group said it recently sent another letter to prosecutors with new evidence against Privatbank, including evidence that the bank forged documents, utilized deceptive methods to acquire assets, evaded tax payments, performed illegal currency transactions and laundered money for Ukrainian individuals and companies.
Privatbank responded to Watford Group’s statements with accusations of its own.
The bank said that it intended to file suit in an international court, seeking compensation for what it described as defamatory and false remarks by Watford Group. The bank said it would continue to fully cooperate with any investigations, and comply with court rulings.
“The provocative announcement by Watford Group alleging Privatbank’s involvement in illegal activity is part of a planned provocation that is outright defamation,” reads a statement issued by the bank on Nov. 13.
“The real reasons for the conflict with Watford Group lie in their unwillingness to return a large loan issued by Privatbank to Watford Petroleum Ltd., a subsidiary of Watford Group. [The conflict is also connected to] suppression of the bank’s attempts to eliminate [Watford’s] Russian partners from management control of the finances of the company,” the statement reads.
“Results of an investigation conducted by competent authorities show that the bank has encountered monetary fraud connected with Michael Watford, a businessman with a criminal past. [His real name is] Mikhail Tolstosheya. He is a citizen of the Russian Federation; he has a Greek passport and lives in Great Britain. He has been found guilty of money-fraud crimes under laws of the Russian Federation,” the statement continues.
The bank also said that Watford Group’s public campaign against Privatbank is an attempt to blackmail the bank and its management, and force the bank to take responsibility for systematic violations of British law committed by Watford Group.
In response to Privatbank’s allegations, Watford Group issued another statement on Nov 17. The company said that Privatbank’s allegations concerning Michael Watford’s past are unfounded. The company also called upon the bank to cease its manipulation of Ukrainian mass media through dissemination of defamatory allegations.
The statement described the president of Watford Group as an “honest businessman with an immaculate reputation.”
“Official documents from the Russian Federation show that Mr. Watford was falsely indicted and a Russian court has proven his complete innocence,” the company said.
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