“Yanukovych’s helicopter pad,” Odesa airport, property owned by inner circle of former minister Klymenko. These seized assets should bring revenue to the national budget. At least, that is was the reason why the Asset Recovery and Management Agency was created in 2016.
The law obliges the ARMA to trace the property of individuals involved in criminal proceedings. After the court makes the decision to seize their property and transfer it to the Agency, it manages these assets.
Yet, the owners use various legal loopholes to block ARMA’s work and keep control of the property. They use courts for this: economic, administrative and local general-jurisdiction courts.
The existing legislation is imperfect, both when it comes to transfer of seized assets under the ARMA’s management and when it comes to the management process in itself. The judicial practice is only being accumulated. Owners of seized property and other individuals with vested interest in this use these imperfections.
We regularly observe how individuals involved in criminal proceedings try to take control over their property through the court. Here are a few common ways.
Option 1. Contest the seizure or the transfer under management as part of a criminal proceeding.
Back in June 2016, the NABU and the SAPO started investigating possible abuses committed by Odesa city council officials in the course of disposition of Odesa international airport.
According to the information available to the NABU, the city council and one LLC created TOV International Airport Odesa, whose authorized capital incorporated the property of the local community. Yet, 75% of the stock was actually transferred to private ownership.
On 29 March 2018, investigative judge of Solomianskyi District Court of Kyiv Viktor Fomin transferred two terminals of the international airport and 75% of the stocks of the owner company to Asset Recovery and Management Agency. In violation of the effective legislation, on 1 November, another investigative judge of the same court Maksym Vyshniak overruled his colleague’s decision to transfer the property under the management of the ARMA.
It should be noted that such contesting violates the criminal procedural law.
Option 2. Prohibit the ARMA to manage the seized assets
After Yanukovych and his colleagues escaped, the Prosecutor General’s Office started a number of criminal proceedings, including one concerning former minister Klymenko. Judges of Pecherskyi District Court decided to seize his assets and transfer them under the ARMA’s management as part of the criminal proceeding.
These assets include over 40 high-end apartments in Kyiv and Odesa, over 30 parking spots, 20 land plots, a number of corporate rights, and 5,000 sq.m of office facilities in Gulliver shopping mall, among other things.
On 21 March 2018, judge of Kyiv Administrative Court K. Pashchenko decided to prohibit the ARMA to take any action in the context of management of the seized property, which means the Administrative Court judge prohibited execution of rulings of Pecherskyi District Court investigative judge.
This is technically interference with the activity of an investigative judge and a significant violation of court jurisdiction rules.
At that moment, the Agency did not have the right to manage “Klymenko’s assets,” which means this property could not bring revenue to the national budget.
Option 3. Prohibit the manager to fulfill the management agreement conditions.
On 3 August 2017, Kyiv Appellate Court seized a group of assets commonly known as “Yanukovych’s helicopter pad.” A year later, these assets were transferred under the management of the ARMA, which in its turn selected a manager for these assets. According to information available in the media, in December 2018 alone, these assets brought over UAH 800,000 to the national budget.
But in February 2019, judge of Holosiivskyi District Court Oleksandra Koldina cancelled the seizure, which means another profitable asset was lost.
In another example, in 2018, investigative judge of Holosiivskyi District Court seized certain property and transferred it to the ARMA as part of a criminal proceeding on possible misappropriation of loan proceeds of AT Ukrsybbank. Later that year, a judge of Kyiv Economic Court prohibited the ARMA to take any action to execute agreements concluded between the Agency and the temporary manager of assets.
In this case, we can speak about interference of the “economic” judge with her colleague’s activity. That is, the judge basically provided her assessment of the actions and decisions of the investigative judge by blocking the consequent activity.
These situations attest to the fact that asset owners involved in criminal proceedings are very inventive when it comes to preserving their funds. Certain judges help them with this by approaching legislation creatively.
Because of this cooperation, the ARMA cannot fulfill its functions and the management process is threatened.
To minimize abuse of judicial power, we need to amend the Ukrainian legislation comprehensively in the sector of seized asset management, including the specialized law on the ARMA, the Criminal Code, the Civil Code, the Economic Procedural Code, etc.
In 2018, Transparency International Ukraine, its international partners and ARMA representatives prepared a draft of such amendments. As of March, this document is somewhere in the maze o the Cabinet of Ministers, waiting for some political will.
If this draft law is adopted, the ARMA will become a full-scale participant of the criminal investigation and will be able to take a stance in court. It will also prevent suspected individuals from blocking the ARMA’s activity through courts of other jurisdictions.
Kateryna Ryzhenko, for Ukrainska Pravda
This publication has been prepared with the financial support of the European Union. Its content is the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of the European Union.
Transparency International Ukraine works with the National Agency within the project Enhancing the Role of Civil Society in Public Finance Oversight, financed by the European Union. The project aims at empowering civil society and journalists with effective anti-corruption, asset recovery and anti-money laundering tools to perform the public finance oversight, support the launch of Asset Recovery and Management Agency (ARMA) and to update the list of Politically Exposed Persons. Find out more at https://goo.gl/Jgr9ic