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100 out of 800 million UAH out of “Kurchenko’s oil products”, or the second big fake confiscation by Prosecutor General Lutsenko

800 million UAH, confiscated by Prosecutor general Yuriy Lutsenko are to be seen only on paper, and only a small part of the sum at best will end up in the state budget.

On November 13, the Prosecutor General’s Office reported on the special confiscation of more than 800 million UAH worth of oil products in their investigation of “the Serhiy Kurchenko criminal scheme”.

WTF!? was the first thought of anyone who remembers the fuel embezzlement story: dubious legality of the oil products arrest and their subsequent sale, without auction and underpriced, to business people associated with Serhiy Pashynskyi of “Narodnyi Front”.

The state incurred 250 million UAH worth of damage, according to the SSU. Several criminal cases were opened, and they are still being investigated. All of them started as practically completed and then came to a dead end. Due to the court decision on the special confiscation, losses, incurred by the state, are automatically negated, as well as corpus delicti in actions involving the oil products misappropriation.

This, however, was not the only reason the decision was needed at this time.

We learned that the Cypress company “Empson Limited”, owner  of Odesa Refinery Plant since 2013, started the procedure of international investment arbitrage concerning illegal expropriation of their property.

According to the off-shore shell company, the state of Ukraine violated their right to protect their investment via “appropriation, confiscation and further unlawful sale of the oil products of Odesa Refinery Plant, appropriation, arrest and further special confiscation of assets, movable and immovable property of Odesa Refinery Plant…” – quote from the document we had the chance to see.

The verdict on special confiscation was fashioned by Prosecutor General Lutsenko post-factum and, we believe, with the single purpose for Ukraine to have at least some proof of the criminal origin of the property to present at an international court.

Oh, and for publicity, of course.

Confiscation of a big steamy pile of nothing

800 million UAH, confiscated by Prosecutor General Yuriy Lutsenko are to be seen only on paper, and only a small part of the sum at best could end up in the state budget, or, maybe, nothing at all.

We remind the readers that the fuel was arrested as evidence and then given to the State Enterprise “Ukrtransnaftoproduct” for storage and selling. As the evidence had a “short shelf life”, it was decided to sell most of it before the court’s verdict on confiscation. The money was to be deposited to the treasury account – it was not to be spent before the court’s decision on confiscation.

“UkrTransNaftoProdukt” sold 94.5 thousand tons of oil products without holding an auction and at a significant discount to a certain firm, controlled by businessman Serhiy Tyshchenko.

Part of the money from the sale – about 433 million UAH – was spent on their own activities, other part – deposited to the State Enterprise accounts in Serhiy Tyshchenko’s very own bank “Fortuna”. By the way, the sum of 396 million UAH was never paid by the buyer, as, by the contract, he got two years of deferring payment.

The rest of the money was used by “Ukrtransnaftoprodukt” for its activity.

In the end, only the money deposited to Fortuna Bank remained, about 102 million UAH. The exact sum that could find its way to the budget after the Odesa court verdict. Not 800 million, as the Prosecutor General had claimed, just one-eighth of them, and their return to the budget seems unlikely.

Since February 22, 2017, Fortuna Bank has entered the в liquidation process. Therefore, the demand of the state to recover the debts is just seventh in line to meet the demands of the creditors.

At the time when the temporary administration was put into place, the bank was 431 million UAH in debt to its depositors, and its liquidation value is estimated at 595 million UAH. With all that, there may be no money left for the creditors who are seventh in line.

A few words on the actual legality of confiscation

The oil products were confiscated based on the verdict of Kyivskyi district court of Odesa by agreement with investigation.

The said verdict convicted three people – director and dispatcher of “Lahuna-Reni” LLC (the company that was supposed to execute oil products transit) as well as one of Kurchenko’s “organizer”. The whole “Kurchenko’s criminal scheme” was about “Lahuna-Reni” importing oil products to Ukraine as transit. In fact, there was no transit or re-export, the oil products were sold on the territory of Ukraine without paying the necessary taxes, duties and other fees.

A quick google search reveals that the convicted persons were nothing but pawns of the lower level and have no criminal or business history to speak of. All three of them got 5 years of suspended sentence and a fine of 4500 UAH.

Витяг з реєстру

There were no convincing arguments in the verdict for directly linking the criminal activity of the accused persons with the particular oil products that were confiscated by the special procedure.

The court’s argumentation as to the special confiscation is quite unorthodox.

The special confiscation was executed not as sanction for committing the crime, but by the special motion of the prosecutor in the court hearing.

The Criminal Procedure Code does not foresee such possibility. Instead of arriving to the verdict on the grounds of appropriate and sufficient evidence and decide on the special confiscation, the court “listened” to the opinions of the parties in the case, “considered motion” of the prosecutor and decided on the special confiscation.

The court “listened” to the opinions of the parties in the case, considered motion and enclosed materials used by the prosecution to prove grounds for its granting, studied the criminal proceedings materials, evaluated the circumstances in total – and the panel of judges came to the conclusion.

Клопотання

Interestingly, judges of another court were reluctant to commit such legal “anarchy”. For instance, in September of 2017 Suvorovskyi district court of Odesa refused to ratify the similar deal with another accused person due to numerous procedure violations.

Apparently, prosecution found the more sympathetic judges in Kyivskyi district court of Odesa, who reached the verdict required of them.

This is a tried and true “scheme” of the Prosecutor General’s Office, used for two confiscations: 1.5 billion USD of “Yanukovych’s coffers” in April and Odesa Refinery Plant in June of this year.

The sheer simplicity and convenience of the “scheme” is due to the fact that the court reaches the verdict on the grounds of confessions and promise of sincere testimony from the suspected persons, thus judges do not have to evaluate the evidence of guilt gathered by the investigation. In addition, the third parties cannot appeal the confiscation verdict based on such deal, as only the parties of the agreement have this right under the Criminal Procedure Code.

The aftermath of it all is just one big violation of Law, which will enable the “affected owners” to appeal the confiscation in European courts and demand compensation from Ukraine.

In the end, that’s what they will do.

Daria Kaleniuk, CEO of the Anti-corruption Action Center