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The PGO (eventually) gains access to PrivatBank audits

June 13, 2017

As any reader that has investigated organised crime and/or been responsible for the collecting and collation of evidence for the seizure and confiscation of criminally obtained assets will be aware it is a long, slow, bureaucratic legal process – even if you know where to look and what you are looking at.

Quite rightly, financial institutions are particularly strict about what they can provide and in how much detail, unless there is a judicial warrant/order that expressly requires the production of sensitive, often contractually otherwise confidential matters that are subject to non-disclosure.

Even with a court issued warrant/order they can, on occasion, still be somewhat “obstructive”.

Further a Learned Judge when visited in chambers, must be convinced by the applying law enforcement agency that there is a genuine suspicion of criminality and while the law enforcement institution will generally seek the widest possible parameters in any warrant application, the Judge will generally pursue a far narrower search and seizure/production limitation upon any such warrant/order if and/or when persuaded of the need for a warrant.

It is thus a time consuming, often prickly, very bureaucratic and a particularly exact science when seeking evidence and (hopefully) gaining profit confiscation results.  It can take years to reach conclusion – and this with an unbiased and ethical judiciary and reasonably well functioning justice system.

Long has the Prosecutor General’s Office in Ukraine sought to poke around in the grubby ledgers of PrivatBank – recently nationalised having been prized from the grip of Ihor Kolomoisky and Gennady Bogolyubov.

Despite the numerous journalistic investigations that have exposed by way of “leaked ledgers” etc (what everybody has known, certainly since the summer of 2014) and the management misuse of the bank solely for the interests of other commercial ventures of the banks owners (and their associates), law enforcement agencies and the PGO are duty bound to gather such evidence from the bank rather than a pdf file adrift in a Google cloud or a document scan within a media article.

Such pdf files and scans may well be useful for intelligence reasons, but are clearly not the best source of evidence for prosecution.

Also exposed in the media was the rampant looting by the previous owners of PrivatBank in the immediate months prior to its nationalisation.

None of the revelations however come as a surprise to anybody – and neither will the size of the taxpayer bailout required.  (Just wait until the last minute plundering prior to Naftogaz getting unraveled!)

PrivatBank was audited by Ernst & Young, and the PGO has been seeking a copy of the audit and accompanying report – including all annexes.  These documents will be used in the on-going embezzlement and misappropriation investigations and will undoubtedly form part of the body of evidence at trial.

However, the law is the law.  (Unless you are in that elite circle where, “for my friends everything, for everybody else the law”.)

Enrst & Young (be they “helpful” or otherwise”) rightly informed the PGO that the report contents fell under the Law of Ukraine regarding Banking and Banking Services, and it could not provide a copy, nor any other form of access, as some of the text met the “bank secrecy” provisions.  Ergo Chapter 4.61 of the Banking and Banking Services statute duly prevented Ernst & Young from meeting the PGO request.

Despite the documents already leaked in the media or floating around in accessible technology clouds, for any successful prosecution the evidence chain and its lawfulness requires robust and uncompromising integrity.

The PGO therefore was required to seek a judicial key/code for the Ernst & Young lock.

The combination for that lock is case №42014000000001261 wherein Pechersk District Court has granted the PGO “temporary access to documents and files subject to banking secrecy held by Ernst & Young relating to PrivatBank”.

A reader may well ponder what “temporary access” means.

Does it mean that Ernst & Young will provide a “reading room” and access to a copy of all the documents for the PGO to  study that are otherwise controlled under banking secrecy clause – or will it literally provide a copy of all applicable documentation to the PGO, thus far refused?

How “temporary” is “access” if providing the PGO a copy?  Is that not rather more permanent than temporary?

Whatever the case, the PGO plods on slowly with its investigation, poking about within the grubby affairs of PrivatBank under its previous ownership – negotiating the legislative hurdles along the way.

How long before the investigation is complete and is placed before the courts remains to be seen – and considering the current state of the courts and the lack of reform (albeit allegedly on-going) there is perhaps no rush (other than statute barred timelines where and if applicable).

Any court case will also drag on and on and on – particularly if Messrs Kolomoisky and Bogolyubov are defendants.   The very finest international lawyers will be hired.

In the meantime perhaps the more cynical of readers might ponder Mr Kolomoisky’s 1+1 and associated media assets taking a surprisingly pro-Presidential line during the election season (if not seized as an asset when PrivatBank loans to corporate entities associated with its previous owners go unserviced), and as a result of such favourable coverage a glacial judicial system may coincidentally become yet more glacial.

The truly cynical reader may ponder whether evidence may even be destroyed by a random fire.  Or via the activation of the fire alarm sprinkler system.  Including any copies or back-ups (if any exist).  Or an evidence chain of uncompromising integrity may suddenly become compromised.  Or documents left in the back or a car and subsequently stolen.  Such “unfortunate” incidents are not unknown.

Whatever the outcome, and whether any sabotaging of the case eventually occurs or not, the current slow pace of the investigation should perhaps be treated with a little understanding.  Such investigations are by their nature tedious, hopefully meticulous, and excessively bureaucracy-ridden involving entities that would rather not get involved.

This is a case to keep an eye upon if a reader has the time to watch paint dry – otherwise something worth the occasional glance to insure the paint remains on the wall will suffice.

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