Alliance for a billion

During the last few weeks, the judges of the Kyiv Economic Court and the Pivnichny (Northern) Economic Court of Appeal actually froze the chances of Ukrenergo to recover UAH 1.13 billion. This is part of the funds that United Energy, affiliated with Ihor Kolomoisky, at the beginning of the full-scale invasion of Ukraine received from electricity resale without paying to the state. The firm's debt was to be covered by the guarantor – Bank Alliance. However, it also refused to fulfill its obligations. The amount equivalent to the cost of 14,000 Mavic drones, 57,000 FPV drones or 7,000 155mm shells for the Defense Forces hung in the air. At the same time, the National Anti-Corruption Bureau of Ukraine (NABU), which investigated the case, is not involved as a party to the court proceedings.

The scheme with the guarantee

The full-scale war, which has been going on for the third year, does not stop large-scale corruption schemes in Ukraine. At the beginning of January 2024, the National Anti-Corruption Bureau and the Specialized Anti-Corruption Prosecutor's Office announced the disclosure and completion of the investigation into the stunning deal with the participation of the Ukrenergo state-run power company, the United Energy trading firm and the commercial Bank Alliance, which, at the start of the full scale invasion of Ukraine, caused losses to the state amounting to over a billion hryvnias. Despite the fact that all the participants are known and their participation in the scheme is obvious, a number of legal processes related to this criminal case make us assume that the corrupt officials are going to emerge unscathed.

According to the case file, chronologically this story began in the fall of 2021. Then Alliance - a small bank – issued a guarantee to United Energy. This company is affiliated with Ihor Kolomoisky. According to the documents, the bank guarantees payments for the electricity purchased from Ukrenergo.

Nevertheless, the presence of such a document (which confirmed that the bank "insures" this client) allowed the company to negotiate and receive electricity in fact on credit. The head of the department of Ukrenergo, who should have stopped such energy supply, taking into account the debts, but did not do so, ignored United Energy's problems. As a result, Kolomoisky's company resold the energy received from Ukrenergo, withdrawing money to a related company. Taking into account fines, the total debt of this counterparty amounted to UAH 1.7 billion, of which Ukrenergo has already managed to recover UAH 600 million.

In the NABU case, everything is simple and clear: the employee of Ukrenergo, the chairman of the bank's board and Kolomoisky's partner Kiperman, who is responsible for United Energy, were put on the wanted list. The detectives indicated that all three persons actually colluded in the deal.

However, a criminal case with such a plot is not yet a court decision. The High Anti-Corruption Court will have to consider this story and pass a fair sentence to the participants.

Ukrenergo timely forwarded a number of the bank's demands for the fulfillment of guarantee obligations for the debts of United Energy. The financial institution fulfilled them partially. As part of the economic dispute, the state-owned company is now trying to recover from the guarantor bank the funds due to the state for UAH 1.13 billion, which the company actually borrowed and did not return. However, the bank refuses to be responsible for these debts.

Not a participant in the scheme, but a victim?

A lengthy interview of beneficial owner Oleksandr Sosis appeared on the website of Bank Alliance, where he claims that the guarantee should have been fulfilled only if all parties followed the rules of the game in the electricity market. Since Ukrenergo - contrary to internal rules - continued to supply energy to United Energy, the financial institution in this story is a victim of circumstances. Prior to being put on the wanted list, Yulia Frolova, head of the bank's board, said in a comment to mind.ua that the requirements of Ukrenergo were improperly drafted, that's why they were not subject to satisfaction. Ukrenergo denied this, because the bank still satisfied part of the demands formulated in the same way. In support of such a point of view, the bank even - probably - engaged several "opinion leaders" who, in unison with the owner, expressed their opinions on a narrow-profile topic.

"The presumption of rightness of the beneficiary (Ukrenergo) consists in the fact that, provided the beneficiary behaves conscientiously, the very fact of presenting a claim to the guarantor bank indicates that the debtor (United Energy) has not fulfilled the main obligation and that the bank has the obligation to pay the amount of the guarantee," Arzinger lawyer Yevhen Diadiuk commented on the issue to mind.ua.

Ukrenergo says that it is ready to cooperate with the NABU to find out what actually happened. The main line of defense is that the responsible employee was working in evacuation conditions, so production processes were partially slowed down. Therefore, - probably - he had no evil intention in supplying "free" energy to United Energy. Kolomoisky's company is the only one that actually does not deny its guilt of participating in the scheme.

In two parallel lawsuits, Bank Alliance defends its right not to pay the debt of Kolomoisky's company. In December 2022, the Kyiv Economic Court, by ruling in case No. 910/3268/22, obliged the institution to fulfill its guarantee obligations for UAH 1.13 billion, while the bank appealed against this decision. Court hearings in the Northern Court of Appeal, in violation of all procedural terms, last more than a year. According to mass media, judges were sick, they were on sick leave, on vacation, recused themselves, referring to the media's attention to the case, postponed the court hearing, not being able to make a decision on the merits.

Ultimately, on April 25, 2024, the judges of the Court of Appeal, namely Hennadiy Korobenko, Karolina Tarasenko and Alla Tyschenko, issued a decision to stop the proceedings. The reason was another decision made a week before by the Kyiv Economic Court, within which Bank Alliance has already decided to contest the legality of the bank guarantee itself. In case No. 910/1479/23, judge Rostyslav Stashkiv recognized the guarantee as unenforceable. So now, Ukrenergo will have to appeal against this decision as well. Until all stages are completed, there will be no return to the suspended proceedings in the main case. Interestingly, judge Stashkiv actually investigated the circumstances of the case, which were already investigated by his colleagues in December 2022 and based on which the guarantee was deemed acceptable. However, he did not want to involve the NABU on the side of Ukrenergo as a victim in this case.

Another detail that the media drew attention to was the size of the court fee determined for Bank Alliance. Since judge Stashkiv decided that the subject of the lawsuit was non-property relations between the financial institution and Ukrenergo, the court fee was set at UAH 5,368. In fact, taking into account the amount of liabilities recognized by the court, when filing a lawsuit, the bank had to pay a court fee of at least UAH 1 million. Such a position of the court regarding the determination of this category of dispute as immaterial generally contradicts the established judicial practice.

All these actions on the part of the bank and the court actually lead to a new circle in this story, gaining time for the participants to delay the payment under the guarantee of Bank Alliance.

On the verge of withdrawal from the market

The National Bank of Ukraine (NBU) responded to the request of the NV.Business publication that it was monitoring the situation concerning Bank Alliance and would take measures if necessary. The financial institution's failure to fulfill guarantee obligations may raise the question of its withdrawal from the market. After all, the bank's own capital is under UAH 1 billion, therefore the guarantee payment in the amount of UAH 1.13 billion can significantly impact its financial stability. In parallel with the processes regarding the bank, Ukrenergo is trying to collect funds not only from the financial institution, but also directly from United Energy. The next court in this dispute is scheduled for May 8.

Journalists have already drawn attention to the fact that it is rather unusual for a third-tier bank to take on obligations of billions of hryvnias that exceed its financial capabilities. Moreover, even a cursory look at the balance sheet figures shows that Bank Alliance did not have the right to issue guarantees of this size. As of Sept. 1, 2021, the financial institution had regulatory capital of UAH 610 million. This means that the guarantee under the contract with United Energy could not exceed UAH 152 million (25 percent of regulatory capital). However, taking into account the agreements between the company and the bank, the amount of the guarantee reached almost UAH 1.9 billion. This is 12.5 times more than the regulatory limit. This should attract the attention of the regulator (the NBU) in the first place. According to the results of the inspection of Bank Alliance in December 2023, it became known that the bank deliberately submitted non-reliable financial statements to the NBU. The question arises again: where is the NBU's position?

Nevertheless, Bank Alliance issued other guarantees (as of September 2023, they exceeded UAH 7 billion) and is involved in a number of court cases related to refusal to satisfy the guarantee requirements of creditors, in particular the Ministry of Defense, the National Health Service of Ukraine, the Gas Transmission System Operator of Ukraine, Naftogaz Trading, and the Ukrainian Sea Ports Authority. In addition, the bank appears in the materials of criminal proceedings No.  42017000000000445 dated Feb. 17, 2017, which indicate that through the bank in 2017−2018, the management of the regional gas companies of Dmytro Firtash could illegally withdraw funds, which led to a significant increase in the debt to Naftogaz.

Thus, it is obvious that invalidating guarantees in all cases is not the best way to position the financial institution on the market. Unless this is what the business model is all about. But then the National Bank - as well as the NABU - should take a closer look at it to minimize the risks borne by depositors, as well as business that still works with the financial institution.