Kyiv’s lucrative Ukraina shopping mall is on the verge of forever falling out of the reach of foreign shareholders following a court ruling on Dec. 23 that could render it bankrupt.
An Irish bank’s attempt to collect on debts by taking control of Kyiv’s landmark Ukraina shopping mall is being frustrated at every turn by a mysterious company whose representatives evidently wield strong influence in Ukraine.
On Dec. 23, a Kyiv court granted a $45.2 million claim filed by a British Virign Islands-registered firm against the property, putting the shopping mall on the verge of bankruptcy.
The ruling was just the latest move in a grueling battle over control of the 45,000 square-meter property.
One player is the Irish Bank Resolution Corporation, a state-owned Irish financial institution which had lent money with the mall used as collateral. Some say that another group involved is Irish citizen Sean Quinn and his family, the former beneficiary owners of the estimated $50 million shopping center, who seem to be attempting to halt the transfer of properties to the lender.
Their legal duel is being fought in Ukraine’s notoriously corrupt judicial system, among other places.
Quinn and his family had borrowed heavily from IBRC – formerly known as Anglo Irish Bank – to amass a global business empire that included concrete factories, hotels, wind farms and the Ukraina department store, as well as other international properties.
Just under four years ago, Forbes magazine ranked Quinn as Ireland’s richest man with a fortune estimated at $6 billion. But his riches dissipated in the wake of the 2009 global economic recession.
And when Quinn’s conglomerate collapsed, his banker, IBRC, began collecting what remained of his assets.
Yet IBRC’s global fishing expedition has largely come up short in trying to recover Quinn’s $675 million worth of far-flung properties in India, Russia, Cyprus and Ukraine.
Quinn’s bankers suspect he and his family are still in control of these assets and are keeping them beyond their reach, including the Ukraina shopping mall.
Altogether, IBRC is trying to recoup $4 billion in alleged losses from Quinn Group, now in bankruptcy receivership, the holding company once controlled by Quinn and his family.
On Jan. 10 a Northern Ireland court denied Quinn's recent bankruptcy application.
Thus far, it appears IBRC has the weaker position, at least in its attempt to seize and access the estimated $10 million annual rent roll of the Kyiv property.
Just days before the New Year, Kyiv Commercial Court Judge Maria Litvinova granted a $42.5 million claim against Ukraina by a mysterious company named Lyndhurst Development Trading, which is based in the British Virgin Islands,
The amount is remarkably close to the estimated market value of Ukraina, which was built in 1963 and refurbished in 2003.
The shopping mall has more than 50 shops and an entertainment complex that includes bowling, a nightclub, cafes and movie theaters.
IBRC called the ruling “legalized robbery” and an unprecedented “cynical deprivation of property.”
A spokeswoman for Quinn Group denied any involvement in the dispute, which was even raised during talks between President Viktor Yanukovych and Irish Prime Minister Enda Kenny when the two met in Warsaw on Sept. 29.
However, The Irish Times reported that Quinn’s 30-year old daughter, Aoife, has said in an affidavit that the family is seeking to protect its international properties from being seized by IBRC and that the family disputes the bank’s right to the properties.
Since April, Ukraina’s former Quinn-backed management launched at least seven court cases in Kyiv courts, all of which have successfully thwarted IBRC from seizing the shopping mall. The mortgage loan’s validity is in dispute.
The 92.75 percent shares in Ukraina that belong to a Quinn Group subsidiary in Sweden have been frozen, and successive court injunctions have delayed the installment of a new company director, amid additional litigation.
To add a bizarre twist to an already complicated court fight in Ukraine, the shopping mall was represented in the Dec. 23 hearing by Larysa Yanez Puga, the director who had been ousted earlier by a newly appointed supervisory board.
The newly appointed director, Rostyslav Levinzon, was barred from participating in the legal proceeding.
In addition, the ousted supervisory board members -- on which Sean Sr. and Peter Quinn sat – miraculously reinstated Puga as director on Dec. 19 with the government registrar. Peter Quinn’s signature, as head of the former supervisory board appears in the registration file, a lawyer with Magisters, which is representing the Irish bank, told the Kyiv Post.
IBRC now expects the Quinn-backed manager of the Ukraina shopping mile to file a bankruptcy application that would deny the state-owned financial institution money owed to it.
The Irish bank’s efforts to claim and manage other foreign properties that formerly belonged to the Quinn family have also been met with stiff resistance.
The scope of the effort involves a portfolio that stretches over 70 companies in 14 countries. IBRC has so far failed to gain control of a $5 million site for a hotel in India, according to a recent news report. A court injunction there blocked the bank and the company behind the move is based in the United Arab Emirates, where registered corporate directors are kept confidential.
In another strikingly similar scenario, the $180 million Kutuzoff Tower in Moscow has also been kept out of the hands of IBRC. It has an estimated rent roll of $19 million. Courts in Moscow recently recognized a debt claim worth $100 million against Finansstroy, the company that operates Kutuzoff. The company behind the debt claim is registered in Belize.
The Irish Times recently uncovered an apparent link between the Belize and British Virgin Islands companies with Quinn’s nephew and son-in-law.
“We have no idea who the brain is,” Robert Dix, director of Quinn Holdings, Sweden told the New York Times.
His company is the nearly 93 percent shareholder in Ukraina. It was established by Quinn in order to minimize taxes and enable his five adult children to control his global portfolio. “But it has to be somebody very clever because it’s very consistent,” Dix told the newspaper.
After the court hearing in Ukraine on Dec. 23, IBRC swiftly moved to counter-attack. The High Court in Belfast has barred the debt claim against the Ukraina shopping mall and Kutuzoff Tower in Moscow. IBRC also secured mirror orders from the courts in the British Virgin Islands and Belize, a person with knowledge of the case said.
The Irish bank has also launched a public campaign and has called on Prime Minister Mykola Azarov to look into the situation.
According to The Irish Times, the court injunctions prohibit the Belize and British Virgin Island offshore companies from spending any money remitted to them as a result of the loan agreements.
IBRC has also threatened to disclose evidence of fraud as part of its efforts to seize the Kyiv and Moscow properties. The bank has already secured a court order in Belize to uncover the beneficiary owners of the company there and is seeking a similar order in the British Virgin Islands