Smart-Holding's Statement on Bringing to Court Indictment Against Smart Maritime Group's Officials


Smart-Holding considers the reference of the indictment to court by the Prosecutor General's Office of Ukraine in the criminal case of alleged entry of false information by officials of the State Property Fund of Ukraine, by senior executives of Kherson Shipyard and Chernomorsky Shipyard (ChSY) into the final audit report on compliance with the conditions of the contract for sale of shares in Chernomorsky Shipyard, as the next phase of the campaign to re-privatize ChSY in the interests of businesses close to those in power.

Seizure of assets, production capacities and shares in ChSY initiated by PGO's officials, as well as unjustified audits of the enterprise by controlling authorities, are links in one chain and are intended to paralyze the work of the plant and create conditions for its transfer to "the right" hands.

The criminal case was registered by the PGO upon a claim from a People's Deputy of Ukraine, faction member of Petro Poroshenko Bloc, Andrey Vadaturskiy, who, the same as the leader of the same name party, has his interests in the shipbuilding sector. Nibulon LLC, which is actually co-owned by A. Vadaturskiy, is a direct competitor of ChSY in the area of shipbuilding and cargo transhipment.

It is telling, with regard to the PGO's weak legal position and lack of convincing evidence, that the indictment is not taken to the court at the place of the alleged offence, i.e., in Nikolayev city, but to the Pecherskiy District Court of Kiev that is more predictable in terms of making "the right" decisions for the PGO.

What else attention should be paid to is the PGO's clear wording of no damage caused and no victims identified, which is contained in the indictment.

As to the essence of the charges put forward by the PGO, we consider it necessary to reiterate the following.

Kherson Shipyard (KhSY) purchased the shares in ChSY in the secondary market in December 2007 in strict accordance with the requirements of the Ukrainian legislation and under the supervision of the State Property Fund of Ukraine. At the same time, the scope of the investment commitments did not decrease in general and in several clauses of the Contract (payments to the Pension Fund of Ukraine and to budgets of different levels) was even increased. Moreover, all these commitments have been fulfilled, as evidenced by the relevant documents and the Final Verification Act itself. We have already publicly stated our detailed position, which can be found on Smart-Holding's web site.

However, through manipulation, substitution of notions and blatant speculations prosecutors attempt to make it look like a criminal offence committed by officials of the SPFU and shipbuilding enterprises for subsequent use of artificially created evidence with a view to terminate the contract of sale of ChSY shares to KhSY.

It is also to be recalled that attempts to "re-privatize into the right hands" were made earlier under different regimes. The PGO has already been used as a tool to invalidate the effect of the contract on sale of ChSY shares. On 16 September 2010, the Kyiv Court of Appeal by its decision, which entered into force, refused to satisfy unjustified demands of the prosecution office.

At the time when Kherson Shipyard purchased shares in ChSY, the latter practically ceased its core business activity, the number of employees was reduced, assets were alienated, and debts to the budget and the Pension Fund were growing. In March 2007, the SPFU committee documented this. With the arrival of the new owner, efforts were taken to regain control over the key assets, to restore ties with counterparts, to fill the portfolio of contracts and to retain the pool of core specialists. Since the acquisition of its shares by KhSY, ChSY’s production output was constantly increasing (up to UAH 154 million in 2011), and the value of its fixed assets was constantly growing – 25-fold in 2008 only. Today, despite the crisis in the world shipbuilding, ChSY is one of the leaders among Ukrainian shipyards.

The company hosted dozens of visiting meetings of inter-agency commissions, of the SPFU, including the participation of trade union organizations, where implementation of investment obligations was considered, as well as amendments to the Share Purchase Agreement. Proposals of Nikolaev regional administration, of the city council and the trade unions were taken into consideration. Minutes of each meeting were drawn up in accordance with all provisions of the Ukrainian legislation.

Introduction of amendments to the Share Purchase Agreement is a standard procedure that hundreds of companies went through and are going through. For example, on 14 May 2009, ArcelorMittal Duisburg GmbH and the SPFU entered into an Agreement on amendments to the Sales and Purchase Agreement; in this case, the scope of the investment commitments was significantly reduced.

Over the past 4 years, Smart-Holding has been exposed to constant pressure from law enforcement and controlling authorities, as well as from special services, on our businesses. There is every reason to assert that once again the Prosecutor General's Office of Ukraine has become the current authorities' tool for persecution of their political opponents and, in particular, the opposition MP Vadym Novynskyi, a shareholder of Smart-Holding.

At the end of the last year, the government submitted a draft law on the privatization of strategically important state companies in the hope of attracting strategic investors. However, the above-described practices of the PGO lead to the fact that in 2016 privatization brought only UAH 189 million instead of the expected UAH 17 billion. Not a single foreign investor will come to the country where private property is threatened because of the actions of law enforcement agencies in the interests of the incumbent authorities.