IBRC claim on €60m Quinn mall in legal mire

The former Anglo Irish Bank is embroiled in multiple legal battles in the Kiev courts

IN THE middle of the last decade when Seán Quinn was secretly investing hugely in Anglo Irish Bank using high-risk instruments called Contracts for Difference, the Quinn Group was also borrowing heavily from Anglo to invest in properties in places such as Russia, Turkey, India, and Ukraine.

In 2006, the group bought two properties in Kiev – the Leonardo Business Centre, for a reported $95 million, and the Ukraina shopping mall, for a reported $59 million.

Mr Quinn set up an elaborate structure for purchasing the properties using a holding company in Sweden, Quinn Investments Sweden AB (QIS), as well as subsidiaries there which in turn owned companies in the countries where the properties were located, which in turn owned the properties. The objective of this was to reduce tax.

The Quinn family has since lost control of the Quinn Group, and Anglo, now the Irish Bank Resolution Corporation (IBRC), is seeking to salvage what it can from the wreck.

However, the State-owned bank has not as yet been able to get its hands on many of the foreign properties whose purchase it funded. The shopping mall in Ukraine produced rental income in 2010 of $10.8 million. The State-owned bank believes it should be in receipt of this rental income, but the money continues to elude it.

While control of the Leonardo Business Centre is satisfactory from the bank’s point of view, the ownership of the mall, the Ukraina, is in danger of slipping from the bank’s grip.

The mall is a Soviet-era one, renovated in 2003 and sold to the Quinn Group three years later. Quinn Holdings Sweden AB (QHS) bought 92.75 per cent of PC Univermag Ukraina, which, in turn, owns the mall. The other shares in Univermag are held by approximately 4,000 individual shareholders, many of them elderly former employees.

In April 2011, immediately following the collapse of the Quinn Group, a Ukrainian law firm, Jurbusinessconsulting, filed a suit in the Kiev courts saying it was owed $225,977.35, or 1.8 million hryvnas, arising from legal services allegedly provided to QHS in 2010. A copy of the document signed by the law firm, and by Seán Quinn on behalf of QHS, and dated October 1st, 2010, was presented to the court.

Cases in the Kiev Commercial Court are supposed to be assigned randomly to judges, according to Magisters, the Kiev law firm acting for IBRC. The April case was heard by Judge Sergiy Stanik.

The sum being sought by Jurbusinessconsulting is very close to the nominal value of the Univermag shares held by QHS. The court granted an interim attachment order against QHS property in Ukraine within the amount claimed by Jurbusinessconsulting. Further interim attachment was granted by the Ukrainian Enforcement Agency against the shares owned by QHS, even though the value of the mall may be as high as $80 million.

When the case came up before Judge Stanik again this week, Jurbusinessconsulting was not present, but the judge declined a motion from QHS that he dismiss the case together with the earlier injunctive order. A second motion against the attachment of the shares by the State Enforcement Agency will be heard later this month.

The two Quinn Group properties in Ukraine had the same director, or general manager, a woman called Larisa Yanez Puga. At the time the Quinn Group was losing control of the Leonardo Business Centre, Ms Yanez Puga was given a $500,000 payment as compensation for her loss of position, according to a source. This payment is now being contested.

A request for an interview with Ms Yanez Puga yesterday, submitted via Univermag, did not receive a response. Local newspapers have reported she is on sick leave.

Efforts to replace Ms Yanez Puga at Univermag are encountering difficulties. At the request of IBRC, the Swedish courts appointed a receiver to QIS and its Swedish subsidiaries.

QHS was unhappy in its dealings with Ms Yanez Puga, and a meeting of the shareholders of Univermag on November 7th appointed Rostyslav Levinzon to replace her. However, when Mr Levinzon turned up to take control of Univermag, the mall’s security would not allow him access to the Ukrainian company’s offices, an event that received extensive coverage in the Ukrainian media.

Back in April, according to Magisters, Ms Yanez Puga initiated proceedings against IBRC seeking to void the bank’s mortgage on the mall. The case was also heard by Judge Stanik, who granted interim relief. The matter remains outstanding.

Last month, two other court proceedings were initiated where individual shareholders in Univermag sought injunctions that would prevent the official registration of the appointment of Mr Levinzon. Magisters says the cases are being taken on behalf of elderly shareholders who gave power of attorney to persons who approached them offering to buy their Univermag shares. However, it transpired the shareholders did not know their names were being used in the court applications, and they dropped the claims when they found out.

“The Kiev Commercial Court has turned into a conveyor of injunctions, which are granted almost automatically,” solicitor Dmytro Marchukov told The Irish Times.

There is no evidence to suggest the Quinn family are involved in the Kiev actions. In fact, the family has not become involved in any way in the proceedings despite the involvement of a valuable asset which they have told other proceedings they believe should remain in their ownership.