It’s been six months since the Ukrainian government nationalized PrivatBank, leaving Ukrainian taxpayers on the hook for $5.6 billion in losses — much of it because of insider loans and bank fraud, central bank officials acknowledge.
Ex-National Bank of Ukraine Governor Valeria Gontareva has repeatedly accused the bank’s ex-owner Ihor Kolomoisky of embezzling the deposits through fraudulent transactions, including insider loans to associates.
“On the last night (before nationalization), they conducted fraudulent transactions amounting to more than Hr 16 billion ($612 million),” Gontareva said in an April interview. She called on the General Prosecutors’ Office to investigate fraud at the bank, which remains Ukraine’s largest lender with 36 percent of deposits.
But there doesn’t appear to be an active criminal investigation into the former owners, Kolomoisky and his business partner Gennadiy Bogolyubov.
Prosecutor General Yuriy Lutsenko, the National Anti-Corruption Bureau of Ukraine, the National Bank of Ukraine — which is now run by acting governor Yakiv Smolii — and the Presidential Administration, did not reply to requests for comment on June 8.
Mustafa Nayyem, a lawmaker with the dominant Bloc of Petro Poroshenko in parliament, called for prosecutors to open fraud and organized crime investigations against PrivatBank executives who signed the loan documents. Nayyem said the executives should also be called to testify on who ordered them to lend the money.
“The National Bank was apparently observing this process,” Nayyem said. “And if it was observing it, why didn’t they start investigations or inspections? Apparently Gontareva or other National Bank officials got orders not to open cases.”
The central bank had a curator in place at PrivatBank from the time it received recapitalization loans in 2014. The curator would have been able to see all the operations going in and out of the bank.
But, as one NBU official who wished to remain anonymous due to a lack of authorization to speak publicly said, the central bank only has “ex-post facto authority.” It can only act after it observes misconduct and, at that, only as a civil regulator, and not as a criminal prosecutor.
According to Nayyem and Anti-Corruption Action Center executive director Daria Kaleniuk, Kolomoisky hasn’t been prosecuted because of a political agreement with President Petro Poroshenko. Kolomoisky may have been granted de facto immunity because he controls at least 20 votes in the 423-member parliament and has vast media holdings in which he can block criticism of the president.
“If Privatbank’s former shareholders got guarantees from those who could have given them — and this could have only been the head of state — then it’s obvious why neither the Interior Ministry, nor the Prosecutor General’s Office, nor the National Bank investigated this,” Nayyem said. “Kolomoisky received a certain political indulgence.”
Kaleniuk said that PrivatBank took capitalization loans from the NBU from 2014 to 2015, and then lent $1.8 billion to offshores, without totally repaying the NBU loans.
The Anti-Corruption Action Center asked the Prosecutor General’s Office to investigate the loans, but prosecutors have been unwilling to open criminal cases, she said.
Kaleniuk suspects that the transactions could have involved fraud, money laundering and embezzlement of public funds.
Bank fraud in plain sight
From the moment that the NBU learned of the extent of PrivatBank’s issues, Kolomoisky was in negotiations for a settlement.
Oleksandr Zavadetsky, the NBU’s first-ever related party loans monitoring unit chief, who took part in the verification of PrivatBank’s loan portfolio, said that the central bank knew about the depths of the problem as early as December 2015.
From there, the NBU and government engaged Kolomoisky in negotiations surrounding the bank’s recapitalization and subsequent nationalization. The oligarch visited the NBU more than 30 times in the year before the nationalization, giving him months to strip assets from the bank.
Political analyst Volodymyr Fesenko spoke of “rumors” in December that Kolomoisky had already “withdrawn the tastiest parts from the bank.”
Kolomoisky dismissed an investigation by the Organized Crime and Corruption Reporting Project, a Kyiv Post partner, that PrivatBank made more than a $1 billion in loans to business associates in the run-up to nationalization.
Kolomoisky called the OCCRP investigation “nonsense” in a written reply.
He has denied that the government forced the nationalization and instead said that he and his fellow shareholder, Gennadiy Bogolyubov, requested the government takeover after a coordinated attack in the press which caused a run on the lender.
When the bank was nationalized, the government hired EY to audit the past two years of PrivatBank’s activity in an effort to account for the massive losses at the bank.
The NBU promised that the audit would be released publicly by March, providing final details of everything that happened at the bank until it fell under state ownership. PrivatBank is now under the control of Ukraine’s Ministry of Finance, which has yet to make the audit public.
