Ukraine’s central bank blames Kolomoisky for campaign of intimidation

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By:
Lucy Fitzgeorge-Parker
Published on:

Reformers in Kyiv and Dnipro come under fire as the battle for PrivatBank heats up.

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The National Bank of Ukraine headquarters in Kyiv


Ukraine’s central bank has issued an unprecedented statement accusing local oligarch Ihor Kolomoisky, the former owner of nationalized lender PrivatBank, of orchestrating a campaign of intimidation against the institution and its staff.

The National Bank of Ukraine (NBU) has been targeted by protesters accusing the bank’s management of corruption and demanding the resignation of governor Yakiv Smoliy and deputy governor Kateryna Rozhkova.

On Monday, a group of protesters broke into the bank’s premises.

“We believe that this pressure on the NBU comes from Ihor Kolomoisky,” the NBU said on Wednesday. 

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Yakiv Smoliy,
NBU

The central bank believes Kolomoisky and fellow former PrivatBank owner Gennadiy Bogolyubov siphoned off $5.5 billion from the lender before nationalization, an allegation that received backing from a 2018 report by US investigators Kroll.

In this week’s statement, the NBU said the protesters included employees of the Nikopol Ferroalloy Plant and other companies controlled by Kolomoisky, Ukraine’s most powerful oligarch. 

It also named Ukrainian MP Oleksandr Dubinsky as the “main driver” of the protests and of a barrage of “negative statements and slander” in the local media.

Dubinsky, a former presenter on Kolomoisky’s 1+1 TV channel and a vocal supporter of the billionaire, was elected to parliament in July.

He is a member of the Servant of the People party of new Ukrainian president Volodymyr Zelensky, another 1+1 alumnus whose links to Kolomoisky have come under scrutiny since his move into politics at the start of this year.

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Kateryna Rozhkova,
NBU

In articles in local media and on his own website this week, Dubinsky denied organizing the protests, but repeated allegations of corruption against current and former NBU managers involved in banking sector reform and the nationalization of PrivatBank.

He also called on Zelensky to dismiss the chief executives of all Ukrainian state-owned banks, including PrivatBank, as well as Vladyslav Rashkovan, a former NBU employee and now Ukraine’s representative at the IMF.

'Chaos of information'

The NBU said the purpose of Kolomoisky’s campaign was to create a “chaos of information” to discredit the central bank, avoid returning the money taken from PrivatBank, and “interfere with Ukraine’s cooperation with international partners and, above all, the IMF”.

Ukraine’s government is seeking a new three-year extended fund facility from the IMF, but fund officials have made it clear that any further funding will depend on the vigorous pursuit of claims against PrivatBank’s former owners in the local courts.

A delegation from the IMF visited Kyiv this month, but left on Saturday without agreeing a deal. The previous day, Kolomoisky had told the Kyiv Post that the IMF “knows that PrivatBank will be returned to me in the near future”.

The Ukrainian government and PrivatBank are currently appealing a ruling from April by a Kyiv district court that the state takeover of the bank was illegal. A decision is expected on December 19, the third anniversary of the nationalization.

Meanwhile, PrivatBank has also come under intense pressure from its former owners in recent months.


Kolomoisky is a badly wounded cornered animal. There are very few options for him. He could look for a settlement, but it would have to be one where he becomes much poorer and significantly less influential 
 - Ukrainian banker

In September, police raided its Dnipro headquarters after obtaining a court order in a criminal case purportedly investigating the dealings of the bank’s management with consultants and advisers.

Those familiar with the situation say the sole purpose of the raids appeared to be to obtain documentation relating to legal action for fraud being pursued against Kolomoisky and Bogolyubov in various international jurisdictions.

Various members of PrivatBank’s management and supervisory board have also been summoned for questioning by Ukrainian law enforcement agencies.

Most recently, the bank’s headquarters have been the target of weeks of disruptive protests, again by workers from Kolomoisky’s Nikopol Ferroalloy Plant, which obtained a year’s lease on a parking lot in front of the building.

The plant was pledged as collateral for a loan made by the NBU to PrivatBank before the latter’s nationalization in December 2016. The company paid $875,000 in September to regain control of its property and subsequently instructed workers to demand compensation from PrivatBank for arrears in their salaries.

The protests have been characterized by high levels of noise, with demonstrators banging sticks and drums continuously.

“PrivatBank has had to move a couple of hundred people to other premises due to the noise and stress caused by protesters,” said a person familiar with the situation.

The situation may also have taken a toll on the bank’s chief executive Petr Krumphanzl, who was hospitalized on Monday. A spokesperson for the bank denied reports that the Czech banker, who moved to PrivatBank in January 2018, had suffered a heart attack, attributing his condition to overwork.

Legal pressure

Supporters of the NBU and PrivatBank link the recent surge in activity against both institutions to mounting legal pressure on Kolomoisky outside Ukraine.

On October 15, the Court of Appeal in London ruled that PrivatBank can pursue a fraud claim for $2.6 billion against Kolomoisky, Bogolyubov and six companies associated with them, overturning a previous ruling in December 2018 that English courts had no jurisdiction in the case.

Kolomoisky has appealed to the Supreme Court, which is expected to give a ruling by the end of March. Meanwhile, a worldwide freezing order on $2.6 billion of assets belonging to him and the other defendants will remain in place.

If the appeal is unsuccessful and the case goes to trial, lawyers say Kolomoisky will likely have to testify – something he has avoided in previous London court cases – or risk being found in contempt of court.

Mukhtar Ablyazov, the chairman of failed Kazakh lender BTA Bank, and Russian oligarch Sergei Pugachev, former owner of Mezhprombank, were handed prison sentences of 22 months and two years respectively by courts in London for contempt.

PrivatBank has also opened fraud cases against Kolomoisky and Bogolyubov in Delaware.

“Kolomoisky is a badly wounded cornered animal,” says a Ukrainian banker. “There are very few options for him. He could look for a settlement, but it would have to be one where he becomes much poorer and significantly less influential.

“I don’t think for him that trade-off is possible. He’s not that kind of guy.”