Conflict of interest and damages: lawyer tells how ARMA manages seized assets

The Asset Recovery and Management Agency is supposed to manage seized assets in order to preserve or increase their economic value. However, the reality does not always coincide with the desired - two seized CHP plants in Lviv region became unprofitable and lost value after being transferred to ARMA. This was stated in a comment to UNN by Volodymyr Bohatyr, a lawyer, Honored Lawyer of Ukraine.

These are the Novorozdilska and Novoyavorivska CHP plants, which were arrested on charges that they received natural gas from Naftogaz of Ukraine at a reduced rate in 2013-2017. Profitable enterprises that provided heat to districts in Lviv region and paid taxes turned into unprofitable assets after being transferred to ARMA. Over four years, total losses amounted to 558 million hryvnias.

The ARMA, which by law was supposed to ensure effective management, transferred the CHP plant to a private manager who did not even have licenses for energy production, distribution and supply. This resulted in disruption of preparations for the heating season, increased gas debts, and the threat of disconnection.

"Where were ARMA officials looking? They are the ones who are supposed to constantly monitor the effectiveness of asset management. And if the agency finds facts of mismanagement during inspections, it is obliged to report them to law enforcement agencies for verification and response. Measures should also be taken immediately to change the manager. Why hasn't this been done?" - Bohatyr said.

After the failure with the first manager, the agency did not hold a tender for a replacement, but resorted to a simplified procedure, involving the state-owned Naftogaz Teplo LLC. However, Naftogaz Teplo is part of the structure of Naftogaz of Ukraine, which the investigation had previously recognized as a victim in the case. The lawyer emphasized that this created an obvious conflict of interest.

To protect his interests, the CHP owner appealed to the NABU to check the actions of the ARMA leadership. However, the anti-corruption officials initially refused to consider it, claiming a lack of evidence, but the HACC sided with the applicant and ordered the bureau to launch an investigation.

"From this document (the HACC decision - ed. ) we can see that officials (the management of the ARMA, Lviv Regional State Administration, asset managers - PE Garant Energo M, LLC Naftogaz Teplo, and Naftogaz of Ukraine) are accused of committing a whole bunch of criminal offenses, starting in 2018: Abuse of power or official position; official negligence; misappropriation, embezzlement or seizure of property through abuse of office; intentional damage to electricity facilities; illegal actions in relation to seized property, pledged property or property that is described or subject to confiscation," the lawyer explained.

The story of the CHP plant in Lviv region is just one of numerous cases that call into question ARMA's ability to effectively manage assets. Inefficiencies, conflicts of interest, and non-transparent decisions may be a reason to reform the agency's work.

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Statements about the non-transparent and ineffective work of the ARMA and its head, Olena Duma, have been made repeatedly. A petition  calling for the dismissal of Olena Duma from her position due to her alleged ties to pro-Russian politicians and ineffective management of seized assets has even appeared on the website of the Cabinet of Ministers of Ukraine.

In recent weeks, ARMA has come under a new wave of criticism for announcing a tender to select a manager for the Gulliver shopping center. The building of the mall is pledged as collateral for a mortgage loan from state-owned banks, including Oschadbank. However, among the criteria set out by ARMA, there is no mention of the need to repay the loan.

Oshchadbank has repeatedly stated that the decision to transfer Gulliver to ARMA is detrimental to the interests of the state-owned bank, as it will deprive it of loan payments from the company that owns the capital's complex. Oschadbank's losses due to the termination of loan payments could reach more than UAH 20 billion.

After the announcement of the tender, Arsen Miliutin, deputy chairman of the board of Oschadbank in charge of NPLs, said in a commentary to UNN that the state-owned bank plans to recover the building of the capital's Gulliver shopping center in its favor if ARMA transfers it to management. He expressed outrage that instead of paying the loan to state banks, Gulliver's earnings would be given to an "incomprehensible manager."