D. Sennichenko legalized “padding” in the privatization of the Dnipro Hotel

A year has passed since the auction and it is now the 25th anniversary of the adoption of the Constitution of Ukraine.  D. Sennychenko is still trying to conceal the real ultimate owner of the Dnipro Hotel and the sources of funds for its purchase, which may lead to legalization of funds obtained by criminal means, received without paying taxes or received from the aggressor country.

1. Privatization began with violations.

1.1. Let’s start with the transfer of the functions of managing the corporate rights of PJSC “Hotel Dnipro” from the State Property Management Service to the SPFU. This transfer was not carried out in the course of privatization in accordance with Article 12 of the Law “On Privatization of State and Communal Property”, but was carried out by a government decision and should have been carried out in accordance with the Resolution of the Cabinet of Ministers of December 5, 2012 No. 1146 “On Approval of the Procedure for Transferring Powers to Manage the State’s Corporate Rights to State Property Management Entities”.

The CMU Resolution No. 1154-r of November 27, 2019 states: “To agree with the proposal of the State Administration of Affairs to transfer to the State Property Fund the authority to manage the corporate rights of the state in relation to the private joint-stock company “Hotel Dnipro” (code according to the USREOU 02573547)”. Please note that we agree with the proposal of the State Property Fund on the transfer.

The CMU Resolution No. 1146 provides for two cases of initiation of the transfer (clauses 2, 3), but in both cases – at the proposal of the Ministry of Economic Development or the SPFU (in the second case), and not by SPFU. The Ministry of Economic Development submits a draft governmental decision with a set list of documents or must perform the specified analyzes and checks. No documents were available and the proposal was not from the Ministry of Economy.

Thus, the transfer of the management functions of the stake in Hotel Dnipro PJSC from SPFU to SPFU violated the requirements and procedure of the CMU Resolution.

1.2. Pursuant to Articles 10 and 11 of the Law, privatization begins with the initiation of privatization and the formation of a list of objects subject to privatization.

In our case, it is necessary to pay attention to the annexes of the SPFU orders on the lists related to the privatization of stakes and the UMC.

Article 11 of the Law sets out the procedure for the formation and approval of these lists for privatization.

Let’s start with the SPFU Order No. 1574 dated 12/28/2020 approving the lists for 2020. Pay attention to the annexes on shareholdings and the UMC and to the content of Part 5 of Article 11 of the Law, which defines the conditions for the formation of this annual list (based on proposals of management bodies received by the SPFU by October 1) and the absence of PJSC “Dnipro Hotel” in the list at that time.

In other words, in accordance with Part 5 of Article 11 of the UMC and shareholdings, governing bodies, including the SPFU, may submit their proposals only once a year.

According to the SPFU’s response, as of October 1, 2019, proposals were received from the State Service of Ukraine for Food Safety and Consumer Protection, the Pension Fund of Ukraine, Ukroboronprom, the French and Sumy Regional State Administrations, and the Kyiv City State Administration.

According to Part 10 of Article 11 of the Law – “If during the year, in accordance with the procedure provided for in this Article, decisions are made to include additional objects of state property rights in the lists of objects subject to privatization, the State Property Fund of Ukraine shall include such objects in the relevant list…). That is, this is about.

Now, I would like to draw your attention to the fact that the lists are amended during the year, in accordance with the procedure provided for in this article, decisions are made to include additional objects.

This is our case, because the SPFU Order No. 442 of 11.03.2020 amended Order No. 1574 – the lists for 2020 in relation to Hotel Dnipro PJSC.

What is the procedure set out in Article 11 of the Law on Amendments during the year?

According to Part 5 of Article 11, it is impossible to make a decision on Dnipro Hotel PJSC – only once a year on proposals submitted before October 1.

According to part 6 of Article 11, it is impossible to include a block of shares in the list during the year, because it sets out the procedure for other property.

And the last case of making changes during the year is specified in Part 7 of Article 11 of the Law – at the request of potential buyers.

There was no application from a potential buyer, but an unlawful decision of the SPFU to include in the list in violation of the procedure set forth in Article 11 of the Law.

2. The privatization also continued with violations, namely in the approval of the auction protocol.

According to the law, before approving the protocol, the SPFU must check the application, information and documents attached to it provided by the winner, and if the winner did not submit documents or information required by this Law, the SPFU is obliged not to approve the electronic auction protocol (part 9 of Article 14 of the Law of Ukraine “On Privatization of State and Communal Property”).

The winner was SMARTLAND LLC and, as it turned out, according to the submitted reports, the company is a microenterprise. With net income for 2019 in the amount of UAH 8,197 thousand, net profit of UAH 667 thousand and a book value of assets of UAH 5,553 thousand, it becomes clear that the company was not able to pay the guarantee fee in the amount of UAH 8,092,340.00, pay the closed price offer in the amount of UAH 711 million 111 thousand 111 and pay the final offer in the amount of UAH 1,111,111,222.22 at its own expense.

Therefore, the winner’s reporting indicated the use of borrowed funds, i.e., the acquisition with borrowed funds, which is allowed under Article 23 of the Law of Ukraine “On Privatization of State and Communal Property” (hereinafter – the Law).

The SPFU did not understand this and, when approving the protocol, failed to comply with the requirements of the law in the case of borrowed funds and the lender.

In confirmation of the fundraising, on 26.08.2020, JSC “RVS BANK” published a notice of the general meeting on 10.09.2020, in which the 3rd issue of the agenda and the draft decision is to give consent to the opening of a revolving credit line to SMARTLAND LLC and obtaining collateral in the form of property rights to the funds of the property guarantor GAZ COM TRADE LLC (code 41931047).

On 08/25/2020, JSC BANK SICH announced a decision to grant a loan in the form of a non-revolving credit line secured by property rights under the Bank Deposit Agreement in the amount of UAH 1,050,000 thousand for a period of 10 years, with an interest rate of 9.00% per annum.

On 26.08.2020, JSC BANK SICH announced the announcement of the general meeting on 16.09.2020, in which the 4th item on the agenda and the draft decision is to approve significant transactions, namely the loan agreement dated 26.08.2020 with SMARTLAND LLC.

Thus, the above-mentioned information of JSC “RVS BANK” and JSC “BANK SICH” confirmed the attraction of borrowed funds by SMARTLAND LLC for the acquisition of the privatization object, which was published on August 25 and 26, 2020.

According to the bank statements of the SPFU, SMARTLAND LLC paid for the shares on September 10, 11 and 14, 2020 from the account opened with BANK SICH JSC.

Regarding the issuance of loans to SMARTLAND LLC, I have already written in the article “D. Sennychenko violated the law during the privatization of the Dnipro Hotel, as evidenced by the information of RVS Bank”  and in the article “Sennychenko brazenly pushes a “padding scheme” in the privatization of the Dnipro Hotel“.

However, apparently by coincidence, according to the NBU, RVS Bank JSC and BANK SICH JSC received refinancing loans for almost UAH 600 million in August-September 2020. This raises the question of the use of NBU funds and the NBU’s involvement in the use of a “padding scheme” to acquire the Dnipro Hotel with an unknown ultimate owner. Despite numerous appeals to the NBU to verify the issuance of a “fictitious” loan to SMARTLAND LLC, to monitor the deposit from GAZ COM TRADE LLC, the NBU has so far remained silent. So maybe public funds from the NBU were used to purchase the hotel?

THE FACT OF THE EXISTENCE OF CREDITORS HAS BEEN ESTABLISHED!!!

These facts are evidence of the illegal actions of the Head of the SPFU, who, contrary to the requirements of Part 9 of Article 14 of the Law, approved the auction protocol on 29.07.2020 in the absence of documents on the creditor and without verifying the creditor in accordance with Article 8 of the Law.

I remind you that the winner was obliged to submit the creditor’s documents with its application for participation in the auction. According to part 10 of Article 14 of the Law, “After the end of the electronic auction, the organizer of the auction for the sale of a small-scale privatization object checks the application for participation in the privatization of a small-scale privatization object together with the documents and information of the winner of the auction attached to it and, in case of inconsistency of the documents attached to the application, makes a decision in accordance with part nine of this article.”

Pursuant to clause 68 of the Procedure, “Within the period established for the publication of the protocol on the results of the electronic auction, the privatization body shall check the application for participation in the electronic auction submitted by filling out an electronic form and electronic copies of the documents of the winner of the electronic auction for compliance with the requirements of the Law.”

In other words, the law does not provide for the receipt of additional documents from the winner after the auction, but only electronic copies of the

documents submitted by the winner before the auction are checked.

And the requirement to provide documents on the creditor and to obtain the creditor’s approval is stipulated in Part 13 of Article 14 of the Law – “in case of acquisition of the privatization object with the funds raised, the buyer must also provide information on the relevant creditor, as well as documentary evidence that such creditor is willing to consider providing the appropriate amount of financing in the event that such a participant is selected as the winner of the auction. Please note that the Law states that it is willing to consider in case such a bidder is selected as the winner of the auction. Also, part 1. Article 23 of the Law states that “The property to be privatized may be acquired at the expense of the buyers” own and borrowed funds” and part 4 of this article states that “In case of acquisition of the privatization object at the expense of borrowed funds, the buyer must also submit information about the relevant creditor, as well as documentary evidence that such creditor agrees to provide the appropriate amount of financing in the event that such a participant is selected as the winner of the auction”. In other words, confirmation that the lender agrees to provide financing if the bidder is selected as the winner, but not after the selection.

In the SPFU’s letters dated 22.09.20202 No. 10-21-18943 and 09.10.2020 No. 10-21-20663, D. Sennychenko and T. Yeleyko noted that the auction protocol was approved on 29.07.2020 by Order No. 1268 after verification of the documents submitted by the auction winner together with the application on the PROZORO website. However, there were no documents on the creditors and no documentary evidence of the creditor’s intention to provide financing, as required by Part 13 of Article 14 and Part 4 of Article 23 of the Law.

The content of the letter of the SPFU Economic Security Department dated 07/28/2020 No. 23-1-218 indicates that only the documents of SMARTLAND LLC were checked. I draw attention to the fact that the SPFU in its appeals to the SBU, the SIS, the STSU and the SFSU requested to check only SMARTLAND LLC. In their responses, the STSU and the SFSU did not provide any information regarding the inspection of SMARTLAND LLC, and the SIU noted that there were no facts of non-compliance of SMARTLAND LLC.

In its letter, which was registered with the SPFU on 30.07.2020 under No. 12/15133, the SSU noted an increase in the authorized capital from UAH 10 thousand to UAH 11.3 million in the absence of information about the real sources of origin of this capital and provided a warning that avoiding violations under Art. 8 of the Law is possible subject to appropriate financial monitoring measures.

In the memo dated 12.08.2020 No. 40-1631 (Minutes approved on 29.07.2020), V. Danylyshyn informs about the notification from SMARTLAND LLC dated 06.08.2020 No. 37/20 regarding the creditors of Industrialbank JSC and MEGABANK JSC. Further, V. Danylyshyn in his memo dated 08/14/2020 No. 40-1650 informs that the acquisition of the stake is also planned to be carried out at the expense of funds raised from BANK SICH JSC and asks to inspect BANK SICH JSC by 12:00 on the same day. By letter dated 08/14/2020 No. 23-233, the Economic Security Department informed about the inspection of BANK SICH JSC based on the received responses to inquiries.

However, at the request of Kachur D. M. dated 21.09.2020 No. 2 to provide the SPFU’s requests and answers regarding the inspection of JSC Bank Sich, in a letter dated 28.09.2020 No. 10-23-19195, the SPFU provided information on the lack of documents for the Fund to verify the creditor JSC Bank Sich.

The SPFU has no documents to verify the creditor

Moreover, in the final settlement, SMARTLAND LLC paid about UAH 50 million of its funds, despite the SBU’s warning of UAH 10 million. But Sennichenko sees nothing, does not count and does not hear anything.

The SPFU made a decision on 29.07.2020 to approve the said protocol in the absence of documents regarding the buyer’s creditors and in the absence of the creditor’s consent to provide the appropriate amount of financing, the mandatory submission of which is provided for by this Law, and did not check the creditor for

compliance with the requirements of Art. 8 of the Law and, as it seems, did not check the creditor at the time of signing the contract, because they did not have documents for verification.

THE CONCLUSION IS CLEAR AND UNDERSTANDABLE – D. SENNYCHENKO APPROVED THE AUCTION PROTOCOL IN VIOLATION OF THE LAW

As can be seen from the above, D. Sennichenko is trying to violate the law by: “legalize” the use of “schemes” in privatization; “legalize” the use of “pads – the winner” at the auction on “PROZORRO”; “legalize” the use of banks as “pads” to pay for the privatization object and which have not been verified; use of the “scheme” to conceal the real creditor (through a loan guarantee) and to conceal the real owner of the purchase of the privatization object, which is not verified in accordance with the requirements of Article 8 of the Law; “covers” the “scheme” to conceal the real owner of the privatization object, which is not verified in accordance with the requirements of Article 8 of the Law. of the Law; “covers” a “scheme” of using funds of unknown source and unknown origin to purchase a privatization object, which may be related to legalization of “dirty money” through privatization.

These violations of the law pose a threat of using “dirty” money, money obtained by criminal means or funds of the aggressor state to purchase the privatization object. At the same time, there is a threat that a representative of the aggressor country or some criminal business group may become the ultimate owner of the Dnipro Hotel.

AND ALL THIS D. SENNICHENKO CALLS TRANSPARENT PRIVATIZATION.

Mr. President, it was you who were dragged into all these “schemes” for the privatization of the Dnipro Hotel by D. Sennichenko. But you have been silent for a year now.

It is time for the President, the Verkhovna Rada and the Cabinet of Ministers to raise the issue of dismissal from the SPFU leadership of these “fools” and “schemers” who do not understand the privatization legislation, mislead investors and

citizens, and brazenly violate the requirements of the law, which can harm the State and citizens.

INVESTORS, BE CAREFUL WITH PRIVATIZATION FROM THE “NEW FACES” OF THE STATE PROPERTY FUND!!!

There are already many articles about numerous violations during the privatization of the Dnipro Hotel and they can be found on the pages of the Active Citizens Information Agency (www.gromada.top) and the All-Ukrainian magazine Corrupt in Ukraine (https://korupcioner.in.ua/ua/).

Therefore, citizens, keep an eye on privatization, because it is not only the development of the state and increase of investments, but it can also be a source of harm to the state and the interests of citizens.

3.What are the achievements of Dnipro Hotel PJSC under its new owners after privatization in 2020?

Everyone remembers how Sennichenko has repeatedly noted that the State is an inefficient owner and that during privatization a buyer and an effective investor will come and this will lead to an increase in taxes from the activities of the privatization object.

Let’s look at the strange results of Hotel Dnipro PJSC in 2020%.

How do you like an effective owner – the turnover has fallen, the payables have grown, and the state used to have deductions from profits, but now it has received UAH 0 from profits. The assets have decreased in value, meaning that the investment is UAH 0. And the question arises: how will they pay off the loan? If they only need to pay UAH 90 million a year in interest.

You might think that maybe the owner of SMARTLAND LLC himself is doing well in 2020: he finished with a loss of UAH 37,683.8 thousand and for some reason did not show a loan of UAH 1,050,000 thousand in the balance sheet.

Here is the result of Sennychenko’s transparent privatization with a new effective owner with investments and benefits for the state.

We need to control the actions of the authorities, prevent them from violating the law and the rights of citizens, know and fight for our constitutional rights, for transparent privatization, for budget revenues and fight against the arbitrariness of officials.

Whether a citizen becomes a source of power depends on each of us.