LONDON – A crucial phase in Ukraine’s attempts to recover billions of dollars allegedly stolen through massive bank fraud will begin later this month in London’s High Court of Justice.
The state of Ukraine is battling billionaire Ukrainian oligarchs, Ihor Kolomoisky and Gennadiy Boholyubov, who cost taxpayers nearly $6 billion during their ownership of Ukraine’s largest bank, PrivatBank. The bank has belonged to the government since December 2016.
Kolomoisky and Boholyubov are accused of scams and insider lending with depositors’ money. The Ukrainian government nationalized the bank in late 2016 and lent it $5.6 billion to keep it afloat.
PrivatBank’s new owners have been trying to recover some of that money for the treasury. And last December the bank took legal action in the London court to freeze the two men’s worldwide assets and demand they pay $1.9 billion plus interest on that sum – so far a total of $2.5 billion.
At the hearings later this month, Kolomoisky and Boholyubov’s lawyers will challenge the right of English courts to have jurisdiction over the case and argue for the lifting of the asset-freeze order.
If they lose the challenge, the assets will remain frozen until the dispute is finally resolved, thereby preventing the oligarchs from moving the money beyond Kyiv’s reach.
Success for Kolomoisky and Boholyubov, however, would mean a huge setback for PrivatBank and Ukraine. Kyiv would be forced to revise its strategy for trying to recoup the missing billions.
The new management alleges that Kolomoisky and Boholyubov fraudulently lent billions of dollars, much of it effectively to themselves, via individuals and business entities they controlled.
The nationalized bank also sued Big Four auditor PwC through a Cyprus court for failing to uncover fraud. PwC audited the bank for years under its previous owners. Richard Pollard, who headed PwC’s branch for only a year, retired in June being replaced by Ago Vilu.
PrivatBank has lawyers acting for it from British legal firm Hogan Lovells.
A precise starting date for the proceedings at the court had not been set yet but was expected to be around July 25 and could take up to 10 days.
The proceedings are expected to be conducted in open court and PrivatBank is expected to reveal in detail how it alleges that a web of some 46 business entities, including shell companies, was used to siphon off money.
If the judge upholds the asset freeze, then a trial will be held to decide if Kolomoisky and Boholyubov are responsible for the missing money and how much they should repay Ukraine.
But the wheels of English justice can grind slowly and the judge in the forthcoming hearing may not announce a ruling until weeks after the two sides present their arguments, possibly in the fall. The main hearing is unlikely to begin much before 2020 because of the complexity of the case.
PrivatBank chose the English courts (England’s justice system includes Northern Ireland and Wales but Scotland has its own legal system) in which to pursue Kolomoisky and Boholyubov because English court rulings are trusted throughout the world.
Britain also has the necessary agreements with many of the countries where Kolomoisky and Boholyubov have parked their assets. Thus, if PrivatBank wins in London, any financial awards against the two men will be enforceable in other countries, including Switzerland, where the two men often reside.
Kolomoisky and Boholyubov deny any wrongdoing and say they are victims of politically-motivated allegations.
They have hired two separate heavyweight law firms to represent them in the London proceedings: Fieldfisher LLP for Kolomoisky and Skadden, Arps, Slate, Meagher & Flom LLP for Boholyubov.
One of Skadden’s (now former) lawyers, Alex van der Zwaan, was jailed earlier this year in the U.S. for lying to Robert Mueller, the special counsel investigating Russian meddling in the U.S. election and possible Trump-Russia ties.
Van der Zwaan worked at Skadden’s London office where Boholyubov’s lead lawyers are based. He admitted he gave misleading information to Mueller’s FBI team about Skadden’s work for Ukraine’s ousted President Viktor Yanukovych, and connections with Yanukovych’s former adviser Paul Manafort. Manafort later became Donald Trump’s presidential election campaign manager and has been indicted on money laundering and tax evasion charges as part of Mueller’s investigations.
The lawyers representing both oligarchs did not respond to requests for comments on the case. The Kyiv Post specifically asked Skadden whether van der Zwaan ever had any connection to client Boholyubov.
Apart from the two Ukrainian oligarchs, the court proceedings name six companies that PrivatBank alleges were involved in scams to siphon off the money. PrivatBank will allege that these entities received large loans for fraudulent business deals that were, in essence, designed to fail, thus producing an explanation for why money disappeared. Under cover of these business deals gone wrong, huge amounts of cash were written off from the bank’s books.
The companies are Treamtrend Limited, Trade Point Agro Limited, Collyer Limited, Rossyn Investing Corp, Milbert Ventures Inc., and ZAO Ukrtransitservice Ltd.
Kolomoisky and Boholyubov are not expected to make personal appearances at the hearings as they might face legal proceedings in other matters should they enter the U.K. The PrivatBank case is one of several court cases against Kolomoisky and Boholyubov in London.
One involves the two men’s former business partner, Vadim Shulman, who accuses them of defrauding him of up to $500 million.
The freezing orders, in fact, allow Kolomoisky and Boholyubov very limited access to their assets. A person familiar with the complexities, speaking on condition of background, said the defendants can still exploit them but only with the permission and supervision of Privatbank, which would only allow changes only in the interests of the Ukrainian taxpayers.
