Ukraine suspects Ferrexpo CEO of embezzlement, social media report

Kostyantyn Zhevago, the CEO and majority owner of
Ukraine’s largest iron ore pellet exporter Ferrexpo (FXPO LN), was served ad
absentia on Sept. 27 with a notice of suspicion related to the embezzlement of USD 113 mln from the Finance & Credit
(F&C) bank in 2015, according to a Sept. 27
post on the Facebook page of Olha Varchenko, the deputy director of Ukraine’s
State Bureau of Investigations (DBR).

Zhevago was not present to receive the notice because
he is undergoing medical treatment abroad, according to a Sept. 27 report by
epravda.com.ua, a news site that cited Zhevago’s press service.

Zhevago has informed Ferrexpo’s board that he has not
received a notice of suspicion in accordance with Ukrainian law, according to a
Sept. 30 Ferrexpo news release entitled “Response to allegations made on social
media.” The public dissemination of untrue information regarding Zhevago
jeopardizes the future implementation of major investment projects in Ukraine,
Ferrexpo’s release said, adding that Zhevago strongly denies any allegations of
wrongdoing.

Dmytro Khoroshun: It is very
worrying to see Ferrexpo acknowledge risks to major investments in Ukraine
(presumably including some of Ferrexpo’s own projects) from allegedly fake
social media posts. As powerful as social media is nowadays, fake posts cannot
be expected to influence the long-term strategy of a company.

We expect Ferrexpo’s board will turn out to be as
protective of the owners of Ferrexpo’s 49% minority shareholders as it seems to
be of Zhevago. And considering that the subpoena for Zhevago’s Sept. 27
questioning,
which was posted on Ukraine’s Prosecutor General’s website, looked genuine and
not fake, we expect the company’s board should be ready for dealing with a
variety of scenarios.