What the Mines Are Silent About, or New Patterns of Management
The Central Ore Dressing Mill (CODM) has hit the headlines again.
As is known, CODM shareholders held a general meeting on October 28, 2003, despite fierce resistance of the then management, and elected Deputy Minister for Industrial Policy and Chairman of the Ukrrudprom Company’s supervisory board Anatoly Fediayev as head of the CODM supervisory board, and Oleksandr Vikula as general manager. The right to keep the register was handed over from Privatbank (Dnipropetrovsk) to OKNAD PLC (Kyiv). Some time later, Donetsk’s Voroshylovsky District Court confirmed that the CODM had convened and held the general meeting on quite legal grounds, that all the agenda items were within the meeting’s competence, and the decisions made were compulsory for all shareholders. The court ruling took effect at the end of last year, Interfax-Ukraine reports.
It will be recalled that the Central Ore Dressing Mill’s controlling shares belong to the state- run Ukrrudprom Company (50%+1 share). The CODM’s almost 38% stake belongs to the Donetsk-based System Capital Management Inc. managing company.
It became known last week that CODM shareholders’ fears over their property (which was in fact the reason why an extraordinary general meeting was held last year) not only were confirmed but even surpassed the worst expectations.
In particular, the media revealed the scandalous details of “special relations” between the former CODM’s registrar and management.
On June 30, 1999, the CODM took out a $5.9-million loan from Privatbank, news agencies, including Ukrayinski novyny, report. More than three years later, on October 1 and 23, 2003, the mill’s then management and the bank concluded two supplementary agreements to this loan deal. They stipulated, among other things, that the discount rate be raised by more than three times — from 29% to 99% from the time the loan was issued.
In an interview with the Lviv- based newspaper Postup of January 10, 2004, a Privatbank employee, who chose not to disclose his identity, said it is absolutely illogical if a customer accepts an increased loan discount rate because this means he will have to make additional payments. Such things occur very seldom, the banker said. In general, the loan rate varies with the market situation, and, in his words, a bank can only suggest to the customer that he can have the rate changed by signing a supplementary agreement to this effect. If the customer does not agree, the rate remains unchanged as long as the loan is valid. The interviewee also added that discount rates had been on the decline last year — much to the pleasure of customers. All we have to do is guess how the bank managed to cajole the CODM management.
Yet, the financial activities of the mill’s former management was not confined to signing strange loan agreements. For example, on August 26, 2003, they issued ten bills of exchange worth a total UAH 27.5 million as payment for penalties and fines, Interfax-Ukraine reports. The mill’s current lawyers think those liabilities were legally dubious. Still, the former management fully paid on September 24, 2003, the bills drawn by... Dnipro-96 soccer club.
As of today, the Dnipropetrovsk Police Department and Kryvy Rih prosecutors have opened several criminal cases against the Central Ore Dressing Mill’s former management.
Interfax-Ukraine quotes Kryvy Rih Chief Prosecutor Vasyl Kravets as saying that on December 26, 2003, his office opened a criminal case under Article 364, part 2, of the Criminal Code. “This includes both the Privatbank loan and the soccer club — we are handling it as one case,” the prosecutor said. Another prosecutor told Ukrayinski novyny this is a matter of more than UAH 80 million. Ukrayinski novyny points out that Article 364, part 2, “Abuse of Power or Office,” carries a five to eight-year prison term.
The prosecutors also suspect the CODM’s former executives of misappropriating the enterprise’s property and unlawfully handling the property that is on the CODM’s balance sheet but belongs to the State Property Fund. This involved building community facilities worth about 28 million hryvnias, Ukrayinski novyny reports.
However, it is unlikely that all the former management’s misdeeds will be made public. As The Day has stated earlier, a report the former management signed three days before it was dismissed claims that a part of the mill’s documents got soaked on October 25 last during a heating system accident. Those papers were immediately destroyed because they “presented the danger of infecting the whole archive with fungi.” The Dnipropetrovsk Police Department’s investigative division told Interfax-Ukraine that they had instigated criminal proceedings in late 2003 against CODM executives for destroying documents, which is punishable under Article 357, part 2, of the Criminal Code. It may well be supposed that last fall’s fire consumed documents that could have shed light on such details that a three-year prison term or a fine worth seventy untaxed wage minimums (which the above article carries for destruction of documents) would seem just a gnat’s sting to the initiators of the “disinfection.”
