HOLE WITHOUT THE TIRE State-owned block of shares sell at 4% of face value
For quite a long time the fathers of privatization have not received such a resounding slap in the face. The attempt to illegally change the owner of Ukraine’s largest tire producer, the Bila Tserkva-based Rosava Plant, succeeded. On the other hand, can we possibly call this operation illegal or shadow if journalists had been writing about it almost daily, warning the State Property Fund (SPF) of the danger? In addition, this happened well after fund chairman Oleksandr Bondar made a victorious public statement, “Rosava has been saved for the state.” While the SPF was heaving a sigh of relief, a 49% share of the Rosava Ukrainian-Irish Joint Venture was quietly sold at the Ukrainian Universal Commodity Exchange as settlement for debts. As was to be expected, the buyer preferred to remain anonymous.
What is strangest is that the shares were privatized on behalf of a court officer representing the Ministry of Justice. Shortly before, the fund had twice requested the Ministry of Justice to ban the dubious sale. But, obviously, the unknown buyer was not sitting in the lotus position either. For the commodity exchange tender was carried out as fast as possible and in a most proper juridical way. The exchange chief manager Mykola Bezruk is convinced that all the necessary formalities were fully observed.
It will be recalled that shortly before this a similar auction to sell the same 49% share was canceled at the last minute in the First Stock Exchange Trade System (PFTS), this country’s most popular stock exchange. PFTS supervision group manager Bohdan Verkhovodov said then that the bid was withdrawn by the Alpha Capital Brokerage Company. This company’s brokers confessed they had been cautioned by the Prosecutor General’s Office. They refused to name the buyer, explaining that this was by far the most important condition set by the mysterious bidder. Similar words ran through the answers given to journalists by the management of the Tekt Co., which represented the buyer during the auction at the Ukrainian Universal Commodity Exchange (UUTB).
The State Property Fund’s information on the buyer also raises doubts, for fund Deputy Chairmen Mykhailo Chechetov and Yuri Hryshan show a far less knowledge of the details than the journalists they talk to. The Prosecutor General’s Office is now trying to discover the real buyer’s name. All participants of the operation have already been called in for questioning. But, whoever this Artful Dodger might be, we should note not only his resourcefulness but also unheard-of boldness.
Brazenness was the first word that occurred to all observers when they knew that almost half of Rosava had been sold for a mere UAH 4.2 million. A few days earlier, the same block of shares was offered for PFTS auction at a starting price of UAH 103.9 million. Feel the difference? Thus the whole tire plant was bought for a song. For 49% of shares is precisely the value of Rosava’s basic production facilities. The remaining 51% belong to the Irish company Tabistron. Incidentally, the latter has already announced it had nothing to do with the sale.
On Monday May 21 the State Property Fund again requested the Prosecutor General’s Office and Ministry of Justice to annul the sale of 49% of Rosava stock. But now it can be done only through a court of law. As of now, the fund practically has no juridical grounds for bringing the shares back into state ownership. Although Rosava is this country’s fifth largest tax debtor, the state is not the privileged creditor under Ukrainian legislation. In other words, the right to take over the plant was exercised by an entity which was smart enough to document its claims before others did. What can now quash the auction results is only the finding of violations committed during the sales, a quite unlikely thing.
In addition, the privatized shares are most likely to have changed owners several times before any trial. As soon as Monday night some brokerage companies received suggestions that they conduct an out of stock exchange sale of small blocks of Rosava shares. The Cabinet of Ministers is now looking — unsuccessfully so far — for somebody to blame.
It cannot be said that the cabinet is doing nothing to stem the tide of privatization affairs. For example, it recently put the National Chain of Auction Centers on the list of companies authorized to sell industrial property to creditors. This in fact overruled Ukrspetsiust, which had allowed Donbasenerho to be privatized unofficially or, to be more exact, three of its thermal power stations to be sold to settle its debts. On May 16 the cabinet also endorsed a new regime for managing state-owned shares, which bans state enterprises from going to other firms without government approval.
But, in general, The Day’s recent forecast is beginning to come true: the government’s obviously indecisive reaction to attempts at shadow privatization has caused a blossoming of shady schemes. Large enterprises are being denationalized for a song. And this only seems to be the beginning. From the juridical standpoint, Rosava was privatized irreproachably. It is just a question of time for all and sundry to start taking advantage of this legal loophole. And it is not difficult to make a state-run business owe any conceivable amount of money to a commercial entity.
