The bankruptcy trustee believes that $40 million in bank assets were transferred to foreign banks and encumbered with loans, not without the participation of Ukrainian businessman Nikolai Lagun.
Banking experts agree that the bankruptcy of Delta Bank CJSC is unprecedented in Belarus's recent history. Previously, banks in the country have closed on a much smaller scale, and their bankruptcy was not accompanied by such a significant criminal trail or aggravated by hostile actions by the owners against their own property.
Alexander Pedko, the anti-crisis manager of Delta Bank CJSC, which is undergoing liquidation proceedings, and Deputy General Director of the Agency for Guaranteed Placement of Bank Deposits, spoke in an exclusive interview with Sputnik about the reasons behind the bank's bankruptcy and responded to accusations leveled at the Belarusian authorities by the bank's beneficial owner, Ukrainian businessman Nikolai Lagun.
How the money was withdrawn
March 2016 marked a year since the National Bank revoked Delta Bank's license on March 18. By October of the previous year, the Investigative Committee, which had opened criminal cases against the bank's management in May 2015, reported that the bankruptcy was the result of the illegal withdrawal of funds and capital from the bank.
According to the Investigative Committee, between 2012 and 2014, the bank's top managers, using fiduciary lending mechanisms through banking institutions in the Kingdom of Liechtenstein and the Republic of Austria, as well as securities accounts in a Latvian bank, orchestrated loans to an offshore company totaling over $12 million. The investigation also established that the bank acquired securities of the same company worth over $16 million under unfavorable terms. This information was not reflected in Delta Bank's financial statements.
To analyze these transactions, the crisis manager engaged an independent company with experience in litigation on similar transactions.
"Delta Bank assets totaling approximately $40 million were placed in three foreign banks, entirely legally. Subsequently, without the bank's involvement and, we believe, with the active and direct participation of Nikolai Ivanovich Lagun, these assets abroad were encumbered," the source told Sputnik.
According to him, when the repayment deadline arrived and refund requests were submitted, foreign banks informed them that these assets were encumbered by loans issued to an offshore company, and, accordingly, Delta Bank's funds were written off. Pedko noted that the amounts of the loans received against this collateral were approximately equal to the funds withdrawn.
According to the crisis manager, it actually turned out that the people behind all this were concealing documents from accounting and distorting bank reports.
"Loans worth virtually the same amount were obtained against these assets, which subsequently ended up in an unknown location. Whether there was an initial intention to return this money to Delta Bank, I don't know; I can't comment on that. But the loss of $40 million in assets is an illegal act, and the beneficial owner's involvement is clearly visible," Pedko said.
He noted that the withdrawn and lost assets constituted approximately a quarter of the bank’s total assets, and this could not but affect its future operations.
In response to Sputnik's question about whether the Belarusian authorities could have prevented this situation or stopped it earlier, Pedko noted that it was unlikely the state was aware of it.
"And the bank didn't know because all transactions involving the encumbrance of assets placed in foreign banks were conducted outside the republic, and no documents about these transactions were received for reflection in the bank's accounting records," he added.
"We eagerly await Lagun's lawsuit against the Belarusian authorities."
Last week, Forbes Ukraine published an article about the fate of Lagun's assets in Belarus. The article quoted a Ukrainian businessman as saying that his "business was simply torn apart by a decision from above" and that he intended to sue the Belarusian authorities.
Deputy Director General of the Agency for Guaranteed Placement of Bank Deposits Alexander Pedko
"To put it mildly, this is very far from reality; it is a very distorted reality," Pedko commented on these statements.
According to him, the state has provided the bank with significant support, including financial, at the businessman's request since December 2014.
"The main reason for the bank's bankruptcy is the $40 million capital hole mentioned earlier," the crisis manager added. He emphasized that he considers it groundless to claim that the Belarusian authorities were inactive in this regard.
Commenting on Lagun's intention to sue the state, Pedko emphasized that the trustee in Delta Bank's bankruptcy case is extremely interested in this. If the lawsuits are filed, it will be possible to establish his ownership of many assets. "We assume that he is the beneficial owner of certain assets, but we must understand that this is quite difficult to prove legally. If he files lawsuits, he will himself provide this chain of ownership, and this will allow us, among other things, to consider holding him liable for subsidiary liability. Therefore, as strange as it may sound, we are interested in these lawsuits," Pedko said.
According to him, the state is not at fault in the situation. "If Nikolai Ivanovich claims that one of his partners committed illegal actions against him, well, let him deal with those partners himself. But we are also interested in this, because his partners are borrowers from the bank, and their loans are considered problematic," the Sputnik source continued.
He noted that since even the subject of the claim remains unclear, it is impossible to determine which court—Belarusian, Ukrainian, or international—has jurisdiction to hear them.
"But I want to draw attention to one more point. If this person, as he claims, lost significant resources as a result of illegal actions by government agencies and commercial entities against him, and this loss, as he says, began on March 12, 2015, why is he only now talking about this, instead of taking any legally significant actions?" the crisis manager asked.
How much does a Delta Bank office cost?
Delta Bank recently began selling its assets. Its primary asset is an office building located on Timiryazev Street in Minsk. The first auction to sell the building as a property complex was scheduled for February 26, but was declared void due to a lack of bids. The building was listed for auction with a starting price of 132 billion Belarusian rubles (approximately $6,1 million).
Meanwhile, several experts have stated that the building is being sold at an inflated price. Nikolai Lagun shares this view.
In response to these claims, Pedko noted that the building's assessment was carried out by independent Belarusian appraisers in full compliance with the law.
"The question of an objective valuation is a matter of fact—creditors probably think we're trying to sell something cheap. Those who want to buy think we're selling it high. In the same article, Nikolai Lagun says the price of $6,1 million—the price for this 4,2-square-meter building—is too high. In a phone conversation with me, he once said the minimum price was $10 million," the source told Sputnik, noting that here we need to "be guided more by reality than by sentiment."
He noted that Delta Bank has no plans to lower the price of this lot for now. Furthermore, Pedko believes that the commercial real estate market is currently going through difficult times. Therefore, he emphasized, the later the building is sold, the better. However, the crisis manager suggested that a repeat auction could take place as early as a month later.
Furthermore, an auction for the sale of two golf courses owned by Golf Club is scheduled for March 23. They are valued at 200 billion rubles. It should also be noted that Golf Club, in which Lagun once invested, has not maintained these properties for a long time, and Delta Bank is now guarding the courses as the mortgagee.
"We will not forgive anyone's loans."
Delta Bank's interim manager emphasized that real estate and the bank's assets in general are not the primary source for fulfilling obligations to creditors, the agency, and legal entities. According to him, the primary source is, first and foremost, the loan portfolio of individuals and legal entities, with the bulk of this being loans to individuals.
"We continue to service these loans and continue to collect them, despite the fact that the portfolio's quality is gradually deteriorating due to its lack of renewal, and the share of bad debts is increasing. However, the bank's existing services are quite effective, and our collection rates are quite good," Pedko said.
According to him, thanks to the professionalism of the collection service, the bank collects about 25% of even bad debts within a year.
"As for legal entities, at present, out of just over 200 billion rubles, almost all loans are problematic—at least 90%," he added. As for the individual loan portfolio, experts estimate that problematic debt accounts for approximately 35%.
"We will continue to operate and will not forgive or write off anyone's debts, and as a result, we hope to fulfill all our obligations to creditors. The bank will operate until the last borrower pays off," he said.
Pedko noted that the bank might subsequently transfer the loan debt to another creditor or try to sell it to another bank.
However, the loan portfolio sales market is currently underdeveloped, and banks are uninterested. "But if we partner with someone to sell a loan portfolio, they offer us a discount that naturally won't allow us to fulfill our obligations. Even though our portfolio is profitable, and in a normal market, outside of a crisis, it would probably be more effective to buy it," he said.
The accuser may end up the accused
Pedko reported that prior to the Forbes Ukraine publication, Lagun was in constant contact with Delta Bank's crisis manager. However, the bank did not receive "a single dollar or ruble" from the businessman, despite fairly active negotiations and contacts.
"We're currently trying to implement some projects to satisfy the bank's creditors' demands to the maximum extent possible. Let's be honest: we're fulfilling Nikolai Ivanovich's obligations, and yet, a year after the temporary administration was appointed, he publishes an article blaming us," Pedko said. In fact, Sputnik's source asserts, the only entity in Belarus currently working in Mr. Lagun's interests is the state-owned Agency for Guaranteed Compensation of Bank Deposits.
He noted that, by law, Delta Bank is obligated to fulfill its obligations to the Deposit Guarantee Agency. These obligations arose after the Agency paid out deposits to individual depositors. This amount, in ruble equivalent, currently amounts to 2 trillion 42 billion rubles. Currently, the Agency's obligations to the tune of 1 trillion 519 billion rubles have been fulfilled.
According to Pedko's forecasts, the bank will fully fulfill its obligations in the second half of 2016, and only then will it begin fulfilling its obligations to other creditors. Liabilities to legal entities amount to approximately one trillion rubles. "Creditors include Nikolai Lagun's entities and several Belarusian companies, none of which have been removed from the register," Pedko noted.
He explained that if Delta Bank is unable to fully fulfill its obligations to creditors, “for Nikolai Ivanovich, this poses a threat of being held liable for subsidiary liability and criminal prosecution, because direct damage will result.”
Responding to Sputnik's question about whether Lagun could potentially face a repeat of the story of Uralkali CEO Vladislav Baumgertner, who was detained upon arrival in Minsk, Pedko said: "I don't know the details of that story, and I don't know what legal grounds there were for the detention. I believe there are legal grounds for a substantive conversation between Belarusian law enforcement and Nikolai Ivanovich."
Speaking about the factors that allow the transfer of assets outside of Belarus to be considered criminal, Sputnik's interlocutor noted that the primary and determining factor here is whether capital transfer operations comply with national legislation.
"I wouldn't like to comment on the criminal cases currently being opened because it's not my area of expertise," he said. But the main problem is that entities often attempt to transfer capital that doesn't actually belong to them. "If we're talking about capital withdrawal by an entity 'up to its neck in debt' in the Republic of Belarus, and they're withdrawing capital not their own, but that of their creditors, then this is probably still an illegal act," said the Deputy Director General of the Deposit Guarantee Agency.
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