Ukrainian prosecutors raid ex-PrivatBank execs and firms suspected of €9bn fraud

Ukrainian prosecutors raid ex-PrivatBank execs and firms suspected of €9bn fraud
By bne IntelliNews May 25, 2017

The Ukrainian Prosecutor General’s Office (PGO) has conducted raids at the homes of former officials of PrivatBank, which was nationalised in December, as well as the offices of related parties suspected of a UAH267bn (€9bn) fraud.

The main investigative department of the PGO is conducting a pre-trial investigation of possible embezzlement by PrivatBank’s former management, according to a statement released on May 24. No persons affected were named.

Prosecutors believe the lender provided multi-billion credits to related parties in 2008-2016, including at the expense of refinancing funds obtained earlier from the National Bank of Ukraine (NBU). bne IntelliNews investigations ahead of the bank’s nationalisation in December 2016 found that a massive 97% of the bank’s loans had been made to shell and related-party companies that were believed to be owned or controlled by the bank’s oligarch owners.

When the government announced the nationalisation of PrivatBank after it had failed to fulfill a three-year recapitalisation plan, the bank was found to have a UAH148bn (€5.1bn) hole in its balance sheet as of early December, which at the time was said to be almost entirely due to related-party financing.

On April 10, NBU governor Valeriya Gontareva told journalists that the post-nationalisation audit of the bank found that not 97% but 100% of the corporate portfolio was issued to related parties. Privatbank’s former owners Ihor Kolomoisky and Hennady Boholyubov have consistently denied any wrongdoing.

To cover the capital shortfall, the Ukrainian government injected capital of UAH117bn (€4.1bn) and bailed-in PrivatBank’s non-deposit unsecured creditors for UAH29.4bn ($1.1bn), including bondholders for the amount of $595mn.

Earlier, Gontareva accused Kolomoisky and Boholyubov of performing more than UAH16bn (€561mn) in fraudulent transactions on the night before the bank was transferred to state hands.

“It was established during the raids that in most cases the related parties cannot be found at their mentioned [official] addresses, and the same for any signs of [their] business activity,” the PGO’s May 24 statement said.

Earlier in May, Gontareva said Kolomoisky and Bogolyubov had failed to show progress in fulfilling obligations to restructure the bank’s corporate credit portfolio.

The two businessmen had committed to carrying out a restructuring programme by the middle of 2017. If they are able to successfully restructure 75% of the portfolio, the NBU will consider the possibility of extending the restructuring for the remaining 25% until late 2017, NBU officials told bne IntelliNews.