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 parliament, 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 whether 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. n
