Bankrupt bank’s property already on sale

It is quite possible that some points in the work of the Bankruptcy Agency as the liquidator of Bank Ukrayina could arouse the interest of law enforcement authorities, Viktor Suslov, deputy chairman of the Verkhovna Rada ad hoc commission on the Ukrayina bankruptcy, told The Day on January 11. At first glance, the lawmaker’s assumption can be hardly considered as something new: shadow schemes by debtors at what once was one of this country’s largest commercial banks have long been in the focus of the media and made it possible for the Prosecutor General’s Office to open a number of criminal cases. Prime Minister Anatoly Kinakh seemed clairvoyant when he told The Day last July that the economic and political consequences of the Ukrayina bankruptcy would make themselves felt in time.

As for the political side of the matter, everything is by and large clear: the persons politely referred to as accessories to the bankruptcy have been named and exposed to public censure. Incidentally, Prosecutor General Mykhailo Potebenko promised at a press conference that he would not resign until the guilty had been brought to account. Conversely, the likely economic consequences, except for governmental guarantees to pay compensation to Ukrayina’s individual depositors, are mostly unclear. Probably the bank’s property, including that of more than 500 regional branches, will become the object of fierce struggle. Asked by The Day in July if the very process of Ukrayina bankruptcy will become a matter of business, Mr. Kinakh said, “We have no right to make a mistake.” Time has proven that the absence of a right does not guarantee at all the absence of a mistake. As reported earlier, chairman of the parliamentary investigating commission Viktor Korol, addressing people’s deputies on December 14 last year, revealed that Bankruptcy Agency Chairman Kostiantyn Rusalin had had a conflict of interest with Ukrayina. In particular, he “headed a firm which was served by and borrowed from the bank, and even sued the latter on some disputable points of loan repayment.” Meanwhile, Verkhovna Rada voted overwhelmingly (274 for) on January 10 to recommend National Bank (NBU) Governor Volodymyr Stelmakh take to task its executives for failure to exercise control over the liquidator of Ukrayina and for delaying proposals about he destiny of the bank’s property. For the same reason, the people’s deputies advised the Cabinet of Ministers to take measures against Minister of the Economy Oleksandr Shlapak, the actual supervisor of the ongoing liquidation of Ukrayina, and to cancel the contract with Bankruptcy Agency Chairman Kostiantyn Rusalin “in view of his lack of fitness for the office.”

“The investigating commission has found that the liquidator is not independent of the people who contributed to the Ukrayina bankruptcy,” Mr. Suslov thus told The Day of one of the indications of Rusalin’s “lack of fitness.”

These statements of parliamentary investigators, in contrast to their “accusatory speeches” against Viktor Yushchenko, Ihor Mitiukov, Viktor Pynzenyk, and other notable figures of national politics, have been taken seriously by the state. According to NBU deputy governor Volodymyr Krotiuk, whom The Day asked to clarify “failure to exercise control over the liquidator,” National Bank executives learned about a “conflicting” fact in Mr. Rusalin’s life story only during the Verkhovna Rada session and, naturally, immediately hastened “to take measures.” “We demanded on December 19 that the minister of the economy suspend Mr. Rusalin from liquidating the Ukrayina bank, which was in fact done,” Mr. Krotiuk says. “But none of the commission investigators examined the way the NBU exercises oversight over the Bankruptcy Agency. It is a moot point whether or not this oversight is adequate. We signed a contract with the liquidator on June 27, 2001, undertaking a commitment to make sure that the contract be fulfilled. The agency submits a monthly report to our department for the liquidation and reorganization of banks. We have sent a total of sixty instructions and recommendations to the liquidator during the whole period. In addition, we sent a letter to the Ministry of the Economy on November 26, in which we pointed out some drawbacks in the liquidator’s work and asked the ministry to take appropriate measures,” the NBU deputy head emphasized.

But this is not at all the main thing. Few know that the first lot of Ukrayina’s property has already been officially put up for sale. “We decided today to coordinate with the liquidator the procedure and conditions of selling some of the bank’s property, such as an apartment in Kyiv, another apartment, a two-story cottage in Sviatoshyn district, an office building in Vinnytsia, and a business center and a hotel in Cherkasy,” NBU Deputy Governor Krotiuk told The Day on January 11. According to him, the National Bank refused to allow the liquidator, which is legally obliged to coordinate with the NBU all sales agreements, to sell one of these facilities because the property was evaluated “in violation of the normative requirements.”

And, although Mr. Krotiuk did not consider it necessary to clarify the nature of this “violation of requirements,” it is quite easy to do: according to the results of an inventory, the liquidator valued Ukrayina’s assets at a mere UAH 1.888 billion, while the government’s promise to conduct an open tender to find an “evaluator” expert still remains merely a promise. “Bank Ukrayina’s property was inventoried on the basis of the residual balance value, which is considerably below the market value,” Mr. Suslov told The Day. The people’s deputy thinks new financial machinations can be disclosed as Ukrayina will redeem its liabilities to creditors (according to the NBU, more than 100,000 depositors not guaranteed expect to be paid UAH 1,162,114,000).

Incidentally, about the creditors... The agency handed over the roster of depositors to the NBU quite late, on December 13, 2001 (the Ukrayina affair was debated in parliament the next day, perhaps a coincidence?). Solicitude for the creditors forced the liquidator to start its work by suing the National Bank in an attempt to recognize as invalid the collateral agreements under which a sizable part of property is at NBU disposal. As The Day learned from Mr. Krotiuk, the liquidator refused to lease Ukrayina’s real estate to commercial banks as originally planned, insisting that “the main thing is to sell the property.” And, finally, as far as Mr. Suslov knows, it is this same solicitude for creditors that helped the agency “divert for its own needs” three-fourths of the 50 million hryvnias returned by Ukrayina debtors.

“The facility to be liquidated was very unusual. We had never liquidated a bank with such a developed structure. We have no experience in liquidating banks like this,” Mr. Krotiuk tries to somehow play down the agency’s “accounting errors.” He suggests that The Day calm the bank’s creditors: “Bank Ukrayina’s assets are sufficient to settle accounts with all depositors.” It will be recalled in this connection that under law this process could last as long as three years, while attempts to speed up payments to the liquidator, which seems to be still hoping that twenty universally-known “agribusiness” enterprises will return Ukrayina a billion in debts) by selling the bank’s property, have failed. Since the agency’s lawsuit against the National Bank was dismissed as groundless, it became necessary to invite experts to evaluate the bank’s moveable and real property because Ukrayina’s authorized capital included a 0.07% government interest. Incidentally, following this, the Bankruptcy Agency dropped for the time being the idea of selling Ukrayina’s property.

Yet, the situation is not quite clear. Mr. Suslov claims, for example, that “the state-owned shares were transferred to certain commercial elements” under the patronage of “certain political figures.”

“Sell any shares?!” Mr. Krotiuk objects. “Nobody needs them now. Shareholders are the last to gain anything after a liquidation.” According to the NBU, Ukrayina’s state-owned shares “are not subject to sale” and, accordingly, could not have found any new owner. “Even if the shares had been put up for sale, perhaps nobody would have paid even ten kopecks for them,” he believes.

This might be true if the question is of a bankruptcy sale, but when it comes to the opportunity of selling its property, the situation is different. So far, Mr. Krotiuk says, any sales of Ukrayina property have been postponed for at least six months, the time the experts need to appraise its value. And a month later, as the NBU deputy governor said optimistically, there will be an open tender, the second attempt to lease out the bank’s real estate. “Just the other day Mr. Strukov (acting chairman of the agency - Ed.) announced this in a letter to all commercial banks,” Mr. Krotiuk emphasized.