Busi­nesses re­port more pres­sure as raider at­tacks get more com­plex


Los­ing land or a com­pany to raiders in Ukraine is still com­mon in 2018, just as it was in the law­less 1990s, when crim­i­nal gangs vied with the state to take con­trol of busi­nesses.

But the mod­ern-day seizure of as­sets and cor­po­rate rights uses much more so­phis­ti­cated tech­niques than phys­i­cal force and in­tim­i­da­tion.

To­day’s crooks ex­ploit loop­holes in leg­is­la­tion, abuse flaws in state reg­istries of own­er­ship rights, and take ad­van­tage of per­va­sive cor­rup­tion in state bod­ies and courts — all with the same aim: to wrest a prop­erty or busi­ness from its le­git­i­mate owner.

Brazen raiders even use for­mally le­gal war­rants to gain lever­age in dis­putes be­tween par­ties such as com­pet­ing en­trepreneurs, cred­i­tors and debtors, landown­ers and ten­ants, for­mer own­ers of busi­nesses and their new own­ers, and busi­nesses and lo­cal or­ga­nized crime groups.

All of these dis­putes have one thing in com­mon: they thrive in Ukraine’s weak, of­ten cor­rupt law en­force­ment en­vi­ron­ment.

Seized by force

On the evening of June 1, a large group of ath­letic men in black t-shirts and bal­aklavas stormed the Mag­el­lan shop­ping mall in Kyiv’s Teremky dis­trict. They sur­rounded the build­ing and blocked its en­trances with mini­vans. Af­ter a scuf­fle with the mall’s se­cu­rity guards, the in­vaders — wit­nesses said there were about 120 peo­ple — man­aged to get in­side.

Mage­lan’s owner Ana­toliy Yurkevych blamed its cred­i­tor Sber­bank, a Ukrainian sub­sidiary of the Rus­sian state bank, for hir­ing the thugs in an at­tempt to seize his prop­erty by force.

The bank claimed that it had a court or­der stat­ing that it was the new owner of the mall, as Yurkevych’s com­pany Kray Prop­erty had failed to re­pay a $67.6 mil­lion debt to Sber­bank. But the busi­ness­man re­fused to give his prop­erty away and filed coun­ter­claims in court, he told the Kyiv Post.

In an­other in­ci­dent, Ay­tac Ocakli, who had been fired from his po­si­tion as the di­rec­tor of Vic­to­ria Gar­dens mall in Lviv, gath­ered two dozen men and tried to re­gain con­trol of the mall. Their first at­tack was in June 2017. Ocakli showed a fake ex­tract from the state registry of le­gal en­ti­ties and en­trepreneurs as proof of his own­er­ship. The mall’s own­ers weath­ered three sub­se­quent raider at­tacks in the fol­low­ing year.

In both cases, busi­ness own­ers com­plained about the in­ac­tion of po­lice.

Over the last five years, the Gen­eral Pros­e­cu­tor’s Of­fice -- which did not re­spond to re­quests for com­ment for this story -- has reg­is­tered 1,690 cases of raider at­tacks.

More in­tel­lec­tual

Those 1,690 cases min­i­mize the prob­lem, lawyers say. First, not all raider at­tacks get re­ported to the po­lice and in­ves­ti­gated. Sec­ond, pros­e­cu­tors reg­is­ter these at­tacks un­der two ar­ti­cles of Ukraine’s crim­i­nal code: Im­ped­ing a le­gal busi­ness ac­tiv­ity and il­le­gally seiz­ing prop­erty.

But as raider at­tack schemes have evolved, they have started to hap­pen through dif­fer­ent mech­a­nisms, and so to fall un­der dif­fer­ent cat­e­gories of crime — like forgery, unauthorized change of records in state reg­istries, and abuse of power. Lawyers es­ti­mate some 3,000 to 7,000 raider at­tacks on busi­nesses oc­cur ev­ery year across Ukraine.

Even the im­pre­cise sta­tis­tics of the Gen­eral Pros­e­cu­tor’s Of­fice show an alarm­ing ten­dency: the num­ber of at­tacks on busi­nesses is con­sis­tently grow­ing and very few cases go to court. For in­stance, out of the 315 raider at­tacks reg­is­tered in 2017, only two reached a judge’s desk.

“Mod­ern-day raider at­tacks have be­come, so to say, more in­tel­lec­tual,” Yevhen Mirosh­nikov, a part­ner at the Dic­tum law firm, told the Kyiv Post. “Raiders of­ten sub­stan­ti­ate their crim­i­nal ac­tions with le­gal pa­pers and court de­ci­sions, which might have been ob­tained law­fully. In other words, an ag­gres­sive takeover or in­va­sion is for­mally le­gal.”

As a re­sult, when po­lice ar­rive at the scene of a raider at­tack they can see it as a legally sanc­tioned act, he added, or qual­ify it as “a con­flict of busi­ness in­ter­ests.”

Un­law­ful ac­tions

Some­times busi­nesses have to fight those who are sup­posed to en­force the law.

“There are le­gal ways to pres­sure busi­nesses,” law­maker Vadim Ivchenko said at a meet­ing at the Verkhovna Rada, Ukraine’s par­lia- ment, on July 3. Law en­forcers will find ways to open a case against a busi­ness, for ex­am­ple through ex­ploit­ing un­clear tax rules.

“Then any en­ter­prise can be­come guilty, and they have the right to search them, and open crim­i­nal cases,” Ivchenko said.

One ex­am­ple of this is claimed to have hap­pened at the Mar­i­upol-based oil ex­trac­tion plant Satel­lit, which is go­ing through a le­gal bat­tle with the State Fis­cal Ser­vice and the Gen­eral Pros­e­cu­tor’s Of­fice. In April 2017, the state agen­cies launched a crim­i­nal in­ves­ti­ga­tion into a large-scale tax eva­sion scheme al­legedly run by the plant’s di­rec­tor and chief ac­coun­tant.

The com­pany, how­ever, calls the al­le­ga­tions a ground­less at­tempt to pres­sure a for­eign in­vestor. Satel­lit be­longs to COFCO Agri, the Ukrainian sub­sidiary of China’s largest food trader COFCO, which also owns sev­eral el­e­va­tors and a grain ter­mi­nal in south­ern Ukraine.

“We as­sume that ini­tially law en­force­ment agen­cies iden­ti­fied Satel­lit as a Ukrainian busi­ness, although the registry of le­gal en­ti­ties shows the ul­ti­mate ben­e­fi­ciary be­ing China’s COFCO In­ter­na­tional. Per­haps, it was an at­tempt to in­duce the com­pany into tak­ing un­law­ful ac­tions,” the gen­eral di­rec­tor of COFCO Agri, Vladimir Osad­chuk, told the Kyiv Post.

“It’s hard to say who is be­hind the at­tacks, but we have an of­fi­cial doc­u­ment prov­ing that the group of pros­e­cu­tors for our case was formed by the pros­e­cu­tor gen­eral him­self,” Osad­chuk said.

The com­pany’s lawyers claim that Satel­lit doesn’t have any tax debts, and the tax po­lice ex­ceeded the lim­its of the pow­ers granted top it by law. They also re­ported a num­ber of vi­o­la­tions by tax po­lice of­fi­cers and in­ves­ti­ga­tors dur­ing the search of Satel­lit’s of­fice in Kyiv last Au­gust.

But their com­plaints of ir­reg­u­lar­i­ties in the crim­i­nal pro­ceed­ings have been ig­nored, and the probe con­tin­ues, the com­pany’s lawyers say.

“First of all we have to im­prove the re­sponse to low-qual­ity in­ves­ti­ga­tions,” said law­maker Ivchenko. “Hun­dreds, thou­sands of com­plaints against in­ves­ti­ga­tors and pros­e­cu­tors aren’t be­ing re­viewed.”

In De­cem­ber, Ukraine passed a law aimed at stop­ping abuses of power by law en­force­ment and re­duc­ing il­le­git­i­mate searches of busi­nesses. How­ever, there’s no data on the num­ber of such raids and wheth- er any in­ves­ti­ga­tors who ini­ti­ated such searches, or judges who is­sued search war­rants for them, were ever held to ac­count, Ivchenko said.

Backed by the Busi­ness Om­buds­man Coun­cil and busi­ness as­so­ci­a­tions, COFCO Agri has filed mul­ti­ple com­plaints and pleas to stop pros­e­cu­tion to Pros­e­cu­tor Gen­eral Yuriy Lut­senko, but got no re­ac­tion. Alerted by COFCO, the Chi­nese em­bassy in Ukraine tried to ar­range a meet­ing with Lut­senko, to no avail. Lut­senko two years ago asked en­trepreneurs to give him no­tices if their busi­ness as­sets were seized. Per­haps, it is time for him to check his mail.

Mag­el­lan shop­ping mall in Kyiv’s Teremky dis­trict was raided by dozens of men in bal­aklavas on June 1. Mag­el­lan’s owner Ana­toliy Yurkevych blamed its cred­i­tor Sber­bank, a Ukrainian sub­sidiary of the Rus­sian state bank, for hir­ing the thugs in an at­tempt to seize his prop­erty by force. (UNIAN)

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