NBU on the defensive in war against Kolomoisky as deputy governor accused of embezzlement

The National Bank of Ukraine (NBU) is trying to defuse a scandal in which the First Deputy Governor of the National Bank of Ukraine (NBU) Kateryna Rozhkova and some other senior staff are being investigated for embezzlement and treason in connection with the decision to nationalise the country’s biggest bank, PrivatBank, in 2016, the Kyiv Post reported last week, citing documents leaked to the paper.

The investigation has been “revived” by either the Governor of the National Bank of Ukraine (NBU) Kyrylo Shevchenko or the office of Ukrainian President Volodymyr Zelenskiy, the Kyiv Post reported, without giving more details.

Investigators are looking into how the NBU shared information with corporate sleuths Kroll and other companies, hired by the NBU, which investigated how an estimated $5.5bn was fraudulently whisked offshore from PrivatBank using multiple loans to related parties and shell companies.

The regulator played down the press report in a comment emailed to bne IntelliNews.

“The NBU has always supported, and will continue to support, the legal strategy of PrivatBank, which aims to protect the bank’s interests and return the deposits illegally siphoned from the bank before its nationalisation,” Yaroslav Matuzka, Deputy Governor of the National Bank of Ukraine, said in a statement. Shevchenko is currently suffering from the coronavirus (COVID-19) and is unavailable for comment, according to an NBU spokesperson.

“Almost every week, the NBU’s team of lawyers participates in four or five court hearings related to the nationalisation of the country’s largest bank. And every week, we continue our fight to keep the bank in state ownership, save the taxpayer money, and ensure that our financial sector remains stable,” Matuzka added.

Rozhkova told Bloomberg that she was “astonished” to hear of the probe after the initial reports, which has since been confirmed by security services, but no details have been released.

The accusation appears to be the latest instalment in a running battle between the NBU and Kolomoisky, who has been lobbying to have his bank returned to the former shareholders or for a $2bn compensation payment. In the last year the staff of the NBU have come under personal attacks. The house of former NBU governor Valeriya Gontareva, who oversaw the nationalisation of PrivatBank, was burnt in an arson attack and she was also hospitalised after being knocked down by a car in London in what police called “suspicious circumstances.” The NBU branded attacks on its staff and Gontareva as a “terror” campaign and accused Kolomoisky by name of being behind them.

“We firmly believe that those guilty of abuse should be held accountable for bringing Ukraine’s top bank to bankruptcy. Our international consultants from Kroll have played a significant role in uncovering all of the circumstances and facts of the large-scale, co-ordinated fraud that took place at PrivatBank,” Matuzka said in the statement. “In early 2018, Kroll unveiled the results of a sweeping investigation that confirmed that the bank had suffered at least $5.5bn in losses. Our international partners, including the IMF, have praised the NBU’s co-operation with Kroll. This independent investigation was also stipulated in the memorandum of co-operation between Ukraine and the International Monetary Fund.”

The tug of war over PrivatBank, which has been put back into profit by the state appointed management team, has contributed to the IMF’s decision to suspend Ukraine’s $5bn stand-by agreement (SBA) and the fund has said that weakening the independence of the regulator or giving PrivatBank back to its former owners is a red line. The investigation into Rozhkova, who spearheaded the high successful campaign to clean up the banking sector, would also make the resumption of the SBA even more unlikely.

Matuzka says the NBU has been co-operating with the security services and meeting its legal obligations. “The law enforcement authorities were informed of the results of the [Kroll] investigation. The NBU has always co-operated with the work of the investigators, acted in accordance with the law, and provided access to the evidence and documents they needed. To safeguard the secrecy of these criminal proceedings, we do not have the right to comment on their progress and status,” Matuzka said.

Ukrainian President Volodymyr Zelenskiy has flip-flopped on the issue of Kolomoisky, who has never been charged with embezzlement nor investigated for his role in the stripping of assets from the bank. However, after four years of inactivity the state has suddenly made its first moves to hold the former management to account.

The former CEO of the bank was named as a suspect in a related fraud investigation on February 22. Prosecutors have named former PrivatBank CEO Oleksandr Dubilet along with his first deputy, Volodymyr Yatsenko, as suspects in the embezzlement of UAH136mn ($4.8mn) in 2016 before PrivatBank was nationalised. Ukraine’s general prosecutor also forced a private jet carrying Yatsenko to land after the latter had tried to flee the country the same day. He has now been taken into custody. The local media reported that Dubilet is in Israel. The identity of a third person facing charges remains unknown.

Matuzka assures that Rozhkova should not be in any danger from her relationship with Kroll, although Maruzka did not mention Rozhkova nor the other staff members reportedly under investigation in her statement.

“The legality and viability of the NBU’s co-operation with Kroll is not being questioned in any way. The NBU will continue to work with international partners and law enforcement authorities to protect the interests of the state and Ukraine’s taxpayers and bring to justice those responsible for wrongdoing,” Matuzka said.

“PrivatBank is an important part of a stable and transparent banking system. The NBU believes that PrivatBank should continue to focus on resolving its NPL problems and press forward with efforts to return the misappropriated deposits. These tasks are currently faced not only by PrivatBank, but also by the entire banking system, which must redistribute financial resources effectively and support economic growth,” Matuzka concluded.