NABU may declare Bakhmatyuk suspect in VAB Bank case

The National Anti-Corruption Bureau of Ukraine (NABU)
provided more details on its investigation of the VAB Bank misappropriation
case under which it detained a former deputy central bank governor on Nov. 11.
In its Nov. 12 statements, NABU clarified that eight persons have been named as
suspects in a conspiracy to misappropriate UAH 1.2 bln in funds raised by VAB
Bank from a stabilization loan of the National Bank of Ukraine (NBU). It also
clarified that over 15 persons were involved in the conspiracy, and NABU is
working to declare suspects all of them, including the former beneficiary owner
of VAB Bank. Recall, the key shareholder of VAB Bank was Oleg Bakhmatyuk, the
owner of Ukrlandfarming (UKRLAN) and majority owner of Avangardco.

VAB Bank applied to the NBU for a UAH 1.2 bln stabilization
loan in October 2014 by submitting an incomplete package of documents, which
made it ineligible to get the loan, according to NABU. The NBU provided the
stabilization loan, which did not prevent the bank from becoming insolvent 40
days afterwards. Also, by applying for the loan, VAB Bank provided falsified
evaluation reports of collateral that it intended to pledge under the loan,
estimating its value at UAH 1.8 bln, while NABU asserts its true value was no
more than UAH 0.07 bln.

NABU also stated that NBU officials were aware of
overestimates by many times the value of the collateral. NABU also stressed
that a top NBU official decided to provide the loan after a meeting with VAB
Bank owners and top managers, and he informed his subordinates on the decision
to provide the loan before the bank applied for it.

Commenting on NABU allegations, Oleg Bakhmatyuk told
the epravda.com.ua news site that his bank had provided a complete package of
documents to apply for the loan in 2014. He also denied allegations of
overestimating collateral, bringing as an example that he pledged an
alcohol-producing facility that generated annual profit of UAH 50-60 mln, among
other collateral. He confirmed that he met with a deputy NBU governor to
discuss the loan, but the meeting involved other NBU officials as well. He also
denied allegations that the bank used the loan to withdraw money to related
parties, stating that VAB Bank had paid the entire loan amount to individuals.
Bakhmatyuk also reported that he is currently in Switzerland were he is
discussing attracting financing for his farming business, and the NABU’s
allegations are harming his ability to reach that goal.

Alexander Paraschiy: We can
believe that in autumn 2014 – amid the Russian aggression against Ukraine, a
sharp worsening of economic output and currency shock, which put most banks on
the verge of insolvency –  decisions to support banks could have been made
without a thorough study of documents and collateral. The NBU’s decisions at
that time (either on supporting the banks or declaring them insolvent) could
have easily contained some procedural violations, but the speed of such
decisions – during the conditions close to war – was much more important for
saving Ukraine’s financial system.

For these reasons, such NBU officials could become
easy prosecution targets for the decisions made in those days. However, such
prosecutions do not add to the reputation of the NABU or any other law
enforcement body, and can be easily treated as politically motivated.

Whatever is
motivating the NABU to suspect former NBU and VAB Bank officials, the entire
situation looks risky for Bakhmatyuk, and therefore, for the future of his
assets, including Ukrlandfarming (UKRLAN) and Avanagrdco (AVINPU, AVGR LI). If
Bakhmatyuk loses the ability to control such assets, the risk that they will
fall apart and creditors get nothing from them will escalate. This only
confirms our negative view on UKRLAN and AVINPU bonds.