Volodymyr FILIPCHUK: “To me, honesty is determined by one’s attitude to state property”

How do you see the logic of this scandal?

It all started a while ago (reaching into his drawer, Filipchuk produced a fat dark file). In late June 1994, the Eksimnaftoprodukt Company was founded. In seven years, in the place of an old oil base, we created an advanced enterprise. And all because the government allowed us to spend one half of our profits on reconstructing and modernizing our assets. There’s no point in describing the technological matters. I think it’s quite enough to see our recreation rooms, our clinic, or ask the people if they are satisfied with their pay.

Of course, our financial performance is important for the state. So here are the figures: in all these years we have paid UAH 126.5 million [$22 million] in taxes and duties. We have never owed any debts to the budget or the Pension Fund. We are believed to be the most accurate taxpayer in the [Odesa] city and oblast.

The government let us work, it trusted our team’s professionalism, and it didn’t lose. I’ve mentioned the financial aspect, but the increment in the statutory fund also matters a lot to the shareholders. It grew from under two million in June, 1994 to UAH 348.5 million [$66 million] by January 1, 2001.

I must tell you I was awfully happy to see Eksimnaftoprodukt listed by the Cabinet of Ministers among the enterprises of strategic importance to the nation’s economy and security.

And you thought this was a kind of insurance against its privatization being led off course?

Now I understand how naive I was. Everything changed in late January 1998, when the State Property Fund, by the government’s decision, handed over the controlling parcel of our joint stock company to the Ukrnaftoprodukt Holding Company. I believed then and still do that this was a wrong decision. The holding company was losing money and had serious debts. When it got hold of the controlling parcel, it got an opportunity to solve its own problems at the expense of profit-making enterprises. The leadership of Ukrnaftoprodukt ceded its rights (a 51% interest!) to Bevalo Investment Ltd. The latter resold them for a song (some UAH 924,000 [$176,000]) to the Swiss Medis Holding SA.

You know what’s the worst thing? Ukrnaftoprodukt had no right at all to make those transactions, because it didn’t own the controlling block of stocks! I’m sure of this because I’ve got these two documents. Look (Filipchuk took his file). This one is a report by an NSDC ad hoc commission which was set up on President Kuchma’s order. Its experts found that Ukrnaftoprodukt’s activity had seriously damaged the nation’s economy and security. And later, when our conflict with the holding company started, there were two court verdicts: one by Kyiv’s Starokyivsky District Court in April of this year and another, more recent verdict when our dispute was heard by the Kyiv Economic Court. The NSDC and lawyers were unanimous — and it was main thing for us! — that the holding company’s activity was not just illegal but also economically harmful. A profitable business mustn’t be given to strangers.

Doesn’t your statement have some elements of jingoism? After all, is it that bad when experienced foreign management comes to Ukraine?

If only it had happened like that! We handled more than 10 million tons of transit crude oil in 1997. In three years, the transshipment totaled slightly over two and a half million tons. The rest of the volume was tackled by foreign companies. Eksimnaftoprodukt lost more than $40 million on that! It’s up to the tax police now to calculate how much was underpaid to state budgets at various levels and how much pension arrears grew. Consequently, the losses were felt by the municipal and regional budgets.

You are also accused of reluctance to work with the company’s board of directors and of freezing the payment of dividends.

Nothing of the kind! When Ukrnaftoprodukt Holding started to manipulate the controlling parcel, and we resisted it, its leadership naturally decided to replace the members of the board of directors who supported the Eksimnaftoprodukt position. A young man came, showed a warrant for the management of votes equal to 51% and announced: now the board has other members. As I understand, flexible and obedient ones. Thus the members of the board elected for five years and the shareholders also were replaced without being asked.

And there are also 25,000 shareholders who do care about who will manage their money and how. And I’m responsible not only to my employees, but to these people as well. That’s why we went to court and became enemies.

I guess that was when the information cropped up about so-called oil baron Volodymyr Filipchuk who allegedly stole ten million hryvnias from the state?

I can’t remember exactly when the first publications appeared. I don’t want to delve into that. The idea is quite clear: the shareholders were supposed to believe that Filipchuk and the other board members are thieves.

Let me cite some figures. In nine months of our work, without the board’s control, we managed to meet last year’s indices. Of course, deductions to the budget and the Pension Fund increased, along with wages and salaries. And as for the dividends, they are frozen in bank accounts, are working for the company, and consequently for every shareholder. We are ready to pay the people to the last penny!

Could you give more details about the stolen ten million? Are the criminal proceedings against you closed?

Seven years ago, the government and parliament amended the law On the Taxation of the Profits of Enterprises. The amendments allowed entrepreneurs and industrialists to transfer 1.5% of the profit tax payable to the budget to special accounts through the Treasury. Why was it done this way? The government realized that there was no money to build dwellings for military servicemen, and some help was needed from outside.

We were among the first in Odesa to take up this problem. We concluded contracts and transferred the money. In a word, we helped in every way we could. Of course, both we and the military were checked very thoroughly and in detail. I remember how in May this year two district tax administrations combed not only us, but also construction companies in Odesa, Kherson, and Mykolayiv.

Just take a look (Filipchuk then produced a large sheet filled with figures and tables). Everything matched exactly: the money matched the bricks, and they matched the apartments. I was even told, “It couldn’t have been any other way with you! You’re our most diligent taxpayer.”

Just six months later, in November, men from the City Tax Administration came to confiscate the documents on our investment in housing construction for the military. I asked on what grounds, and they said, A criminal case has been filed. I was amazed: just look at how quickly a Hero of Ukraine can be made a criminal!

I thank the Regional Prosecutor’s Office (they studied the case and ruled it groundless and illegal) and the Defense Ministry for their support. I can understand the army: if the businessmen who build apartments for officers’ families are harassed like this, the housing problem will never be solved!

Are there any attempts to involve you in politics? You’re an advantageous figure in every respect: a Hero of Ukraine, a rich joint stock company, now there’s even some notoriety. Do you want to have a try in a new field?

I read a big article in a Kyiv newspaper about the situation surrounding Eksimnaftoprodukt. Every thing was completely laid out: what political party contracted the Filipchuk scandal, what and who stood behind it. But I’m not an expert in politics, in campaign technologies. I succeeded in the business I’ve been doing for years.

Everyone should mind his own business. You see, we’re not Russia with its gas and oil gushers. Ukraine is a transport country. Many countries live very well on the transshipment of cargoes, and oil products are a kind of cargo, too. Both the employed and the retired enjoy complete social security there. Why can’t we do it? Are we worse than, say, the Baltic countries which build successfully their welfare on rendering services to third nations?

And we, Ukrainians, are able to demonstrate high-class work. I know it: my employees do it.

But you will go to the polls in March 2002, won’t you? You’ll have to make your choice.

I’ll have to. I’ll vote for the politicians who respect property — not just their own, but the state’s as well. Because if one hasn’t learned to respect what doesn’t belong to him, he won’t ever treat his employees properly. Such fellows are good for the second-hand market — buy low, sell high — the difference goes into their pockets. I’m sure my position is shared by most of Eksimnaftoprodukt’s 25,000 shareholders.

PS

The Kyiv Economic Court has ruled to nationalize 51% of the shares of Eksimnaftoprodukt, 50% plus one share of Kyivnaftoprodukt, and 50% plus one share of Krymnaftoprodukt, which earlier belonged to Bevalo Investments Ltd. The latter had obtained shares of the three companies mentioned as collateral for a delinquent loan given the Ukrnaftoprodukt Holding Company, which these company are part of. The court invalidated the security agreements whereby these enterprises’ shares were acquired by private owners.

Under the agreement with Bevalo, Ukrnaftoprodukt received a $3 million loan for the period of September 29 to October 27, 2000, an Eksimnaftoprodukt source told Ukrayinski Novyny. To secure pledges under this loan, the holding company transferred to the Cypriot firm the controlling shares of these enterprises, which own Ukraine’s largest oil transshipment terminals and oil storage and filling station chains. The secured shares were valued at $3.05 million.

President Leonid Kuchma has welcomed the court ruling to renationalize 51% of Eksimnaftoprodukt. Addressing regional journalists, he said this decision serves the national interest and expressed hope that it would not be revised.

It will be recalled that Eksimnaftoprodukt privatization by means of a loan/debt scheme was foiled owing not only to the efforts of company director Filipchuk but also to the intervention of Leonid Kravchuk, Yevhen Marchuk, and President Kuchma.