How Igor Lutsenko became the main "Robin Hood" of defrauded investors
Every November, Ukraine is gripped by the premonition of another revolution. Yulia Tymoshenko was the first to announce that she was raising the banner of struggle on her armored train, and the main front of her declared "economic anti-terrorist operation" is a crusade for the rights of defrauded depositors of bankrupt banks. Yulia Tymoshenko modestly remains silent about the contribution of her longtime ally, Kostiantyn Zhevago, to the suffering of depositors. Using the Finance and Credit bank, he extracted citizens' savings, lent his companies 22 billion hryvnias, and when the bank collapsed, he passed on the entire debt to depositors (17 billion hryvnias) to the state budget (which will bear it all). But Yulia Tymoshenko's supporters are undemanding, forgiving the inconsistencies and obvious lapses in her repertoire—such as the promise to develop farming in Ukraine coupled with a complete rejection of private land ownership, reports open-ua.net.
The key to the success of any revolution is a sufficient number of people who no longer want to live the old way, ready to rebel against those who cannot live in the new. So, who is Yulia Volodymyrivna relying on in her revolution? If we consider the entire army of depositors who suffered as a result of the 2014-15 "bank collapse," the interests of most of them, whose deposits did not exceed the state-guaranteed amount of 200 hryvnias, have already been satisfied by the state through the Deposit Guarantee Fund for Individuals. The Deposit Guarantee Fund has either already fully repaid the funds of small depositors or continues to do so. Consequently, the interests of wealthier depositors, whose deposits exceeded 200 hryvnias and who kept their savings in foreign currency (and whose compensation from the Deposit Guarantee Fund was significantly lower due to exchange rate fluctuations), have been harmed. Of course, Yulia has no intention of leading these people to storm the residences of, for example, Nikolai Lagun and other "luminaries of the banking sector," who shamelessly destroyed their banks and faced no punishment. Because the goal of the revolution must be simple and achievable. The bastille that must be destroyed so that everyone can be happy immediately is, of course, the National Bank.
Finding leaders for the "anti-National Bank" movement was problematic. It's hard to find anyone in parliament who isn't involved in shady schemes and whose ears aren't stuck in the ruins of failed banks. And when you only have 19 faction members at your disposal, it's a real nightmare: wherever you point your finger, you're sure to hit a comrade with a history. It's no surprise that Ihor Lutsenko, the stepson of the former NBU governor, has emerged as the main "Robin Hood" of defrauded depositors from the Batkivshchyna faction. Vladimir Stelmakh and, concurrently, a holder of large deposits in the bankrupt Ukrinbank.
Little was known to the public about the financial background of Ihor Lutsenko, a former journalist and social activist. Neither was his relationship with former NBU Governor Volodymyr Stelmakh. Therefore, the activist's electronic declaration, with its reputation for being selfless, surprised by the large sums in his deposit accounts at UkrInBank: $100,000, UAH 700,000, and EUR 14,000. The activist-MP hastened to explain that the millions weren't just yesterday's, declaring even larger sums in his accounts back in the 2012 elections, but that the war and crisis had sharply worsened his financial situation. But the new Robin Hood is being disingenuous. According to his declarations for 2013-15, the social activist and MP lives the lifestyle of a typical rentier. The lion's share of Ihor Lutsenko's income over these three years consisted of interest on bank deposits: UAH 668,321, or 81% of his income. Interest on deposits provided him, now a member of parliament, with 69% of his annual income in 2015, amounting to 343,602 hryvnias. Ironically, or perhaps coincidentally, the deposit that provided this champion of justice with a comfortable life was held at Ukrinbank, to which his influential stepfather had a direct connection. Ukrinbank is one of the oldest banks in Ukraine, founded in 1989. According to the National Bank of Ukraine (NBU), before the introduction of the provisional administration, it ranked 31st among 123 financial institutions operating in the country by assets. Ihor Lutsenko's stepfather, Volodymyr Stelmakh, was said to be one of its owners, although he was not officially listed as an owner. However, until mid-2015, he served as an advisor to the chairman of Ukrinbank's supervisory board. Stelmakh is linked to a corporate conflict within the bank that occurred in 2010, leading to the resignation of Serhiy Meshcheryak, who had headed Ukrinbank since 2002. Meshcheryak, who fled Ukraine fearing for his life, accused Stelmakh and former deputy head of the Security Service of Ukraine (SBU), Gerasimenko, of a corporate raid on the bank: allegedly, a group of officials and associated individuals became the owners of Ukrinbank, using the National Bank as a tool for racketeering. The controlling stake in Ukrinbank was transferred to proxies, and Stelmakh's "overseer"—Volodymyr Klymenko, a co-owner of Avtokrazbank—was appointed. The NBU then arranged refinancing for the bank. The bank generously issued loans (some, such as a UAH 50 million loan to Olenergo LLC, were granted without verifying the actual location of the collateral).
True, since 2014, the regulator, the National Bank, had periodically pestered the bank with questions about how it planned to recapitalize. Ukrinbank got away with promises, first of British and then of Israeli investors (who, in fact, never existed). But in 2015, the situation went out of control: the new National Bank, no longer under Stelmakhovsky, tightened requirements for disclosing the bank's real shareholders, and the scheme, whereby odious politicians could hide under the guise of "foreign investors," no longer worked. On December 24, 2015, the NBU declared Ukrinbank insolvent due to non-fulfillment of obligations—its debt to clients had reached UAH 52 million. The financial institution also violated NBU regulations, including the instant liquidity ratio, which as of December 1, 2015, was zero, while the required value was at least 30% of capital. 70% of depositors’ funds – UAH 1,84 billion – were subject to compensation from the Deposit Guarantee Fund.
But in April 2016, the Kyiv District Administrative Court (case No. 826/5325/16) invalidated the NBU's decision to declare UkrInBank insolvent. And on July 13, the Kyiv Administrative Court of Appeal upheld the decision, effectively overturning the bank's liquidation. The piquant aspect of the situation was that by that time, the Deposit Guarantee Fund had already paid out UAH 1,8 billion to its depositors. This represented more than 96% of the guaranteed amount owed to individuals. Consequently, those who were initially outside this "circle of care" had no interest in a peaceful ending to the bank's history—for example, MP Ihor Lutsenko, whose hryvnia-denominated deposits at UkrInBank amount to UAH 3,351 million. The legally required compensation of UAH 200 represented only 6% of his deposits.
The Deposit Guarantee Fund (DGF), according to Andriy Olenchik, Deputy Director and Managing Director of the DGF, is currently challenging the court's decision and attempting to preserve the financial institution's assets. Even if the Supreme Administrative Court orders the regulator to reinstate the bank's license, the DGF plans to recover depositor payments from its shareholders through the courts, appeal to law enforcement agencies, and file civil lawsuits against the owners who drove the financial institution into insolvency. But while the court case was pending, Ukrinbank's owners made a bold move: overnight, Ukrinbank received a new name and moved to the Luhansk region. On July 13 (the day of the court's decision), a private notary amended the Unified State Register of Legal Entities, and the bank is now called PJSC "Ukrinkom" and is located in Severodonetsk, Luhansk region. The ultimate owner listed in the register is the head of the supervisory board, Vladimir Klimenko, who is also the owner of a significant portion of the bank’s capital (as of January 1, 2016, he owned 66,9862% of the shares).
Re-registration allows large borrowers, including many affiliated with the bank's shareholders, to avoid repaying their loans. The Deposit Guarantee Fund has already filed criminal complaints with the Prosecutor General's Office, the National Anti-Corruption Bureau, and the Security Service of Ukraine. It's surprising that Ihor Lutsenko, one of Ukrinbank's largest clients, hasn't made these sweeping claims. However, the MP is eager to lead a movement of defrauded depositors and promises to hand over to law enforcement a petition signed by members of parliament demanding that NBU Governor Valeria Gontareva be punished for "illegal decisions by bankers." He calls his performance "a public action aimed at improving the investment climate in Ukraine and restoring the health of the banking system." He hasn't commented on Ukrinbank's fate in as much detail as on the actions of the NBU, limiting himself to calls for the license to be reinstated.
Who will benefit if, for some reason, a bankrupt bank's license is suddenly reinstated? There are zero prospects for a return to the market. There are no assets to speak of (they've been transferred to the Luhansk region). But there will be full compensation, at the state's expense, for all deposits for those with over 200 rubles. As Sherlock Holmes said in "The Hound of the Baskervilles," anyone would take a risky gamble for such a jackpot! Without the income of a rentier, "Robin Hood" Ihor Lutsenko will have to tighten his belt and live on his salary alone, as the hero of the famous film was kindly and quietly advised. Even his own party will be of little help. Batkivshchyna doesn't provide cash envelopes (according to sources). And the registered bill to increase parliamentary salaries (co-authored by Batkivshchyna faction colleague Ivan Krulko) failed to pass, encountering fierce public obstruction.
The difference between the Decembrist revolutionaries of 1825 and the Bolsheviks of 1917 was that the Decembrists fought for the abolition of poverty, while the 1917 revolutionaries fought for the abolition of wealth. The current Ukrainian revolution is unique because those who refuse to pay have united with those who want to take, and they are all turning against the state, blackmailing it by demanding payment for everyone. Yulia Tymoshenko She wasn't being blunt when she said her "ATO" was economic. The goal is to help some save money, and others continue to grow it. And ordinary taxpayers will pay the price. And many already know this. So, no matter how hard the "revolutionaries" try, so far their high-profile protests have turned out to be nothing more than a fart in a puddle, not an Aurora strike.
Dmitry Pakharenko
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