Oleksandr Yankovych - son of the President of Ukraine, one of the wealthiest businessmen in Ukraine
The exponential rise of Oleksandr Yanukovych’s business empire occured in 2010–2013, when his father held the post of President of Ukraine. Prior to 2010, Mr. Oleksandr Yanukovych owned only the Management Assets Corporation, LLC (MAK, LLC) with a statutory capital of55 million UAH (less than $7 million).
The business interests of Oleksandr Yanukovych are concentrated in the Closed Joint Stock Company Ukrainian Bank of Development and the Closed Joint Stock Company Mako Holding.
1. Ukrainian Bank ofDevelopment (UBD)
CJSC Ukrainian Bank ofDevelopmentwas founded onApril 23, 2009 byDonsnabtara LLC, with as tatutory capital of 80 million UAH.
Donsnabtara LLC, which was founded in 1995, was at the time headed by Mrs. Valentyna Arbuzova, mother ofthe incumbent Vice Prime Minister ofUkraine.
Since January 27, 2011 Oleksandr Yanukovych has aquired 100% ownership overthe statutory capital ofUBD. This happened fewer than two months after Serhey Arbuzov, aclose friend ofMr. Oleksand Yanukovych, was appointedhead of theNational Bank ofUkraine. The mother ofMr. Serhey Arbuzov, Mrs. Valentyna Arbuzova has served as Head of the Executive Board ofUBDsince its creation.
Since its establishment in April 2009,UBDhas increased its capital 10 times over. In2013,UBDdoubled its capital overthe previous year. Interestingly, on December 24, 2012, Mr. Serhey Arbuzov, ason ofhead ofUBDMrs. Arbuzova, became the First Vice Prime-Minister ofUkraine.
The chronology ofUBD’scapital growth:
- April 2009 — capital totaling80 million UAH
- December 2010 — capital totaling111,7 million UAH
- December 2011— capital totaling332,2 million UAH
- December 2012— capital totaling409,3 million UAH
- September 2013— capital totaling799,032 million UAH
UBD’scapital was increased through the issuance ofadditional stock, which was all bought with cash byOleksandr Yanukovych. Specifically, in May 2013UBDissued additional stock worth412 million UAH. Mr. Oleksandr Yanukovych bought the stock with his personal funds.
Meanwhile, in 2011UBD’sincreased net profit increased 17 times over 2010.
It is unclear what the origin is of the hundreds millions of cash invested by Oleksandr Yanukovych into his bank over the last three years. It could perhaps befrom activities ofMako Holding, which are described below.
The closeness of Mr. Oleksander Yanukovych to the President of Ukraine allowedUBDto get an array of extremely profitable contracts in 2010–2013 to serve and credit state institutions.
- In February 2012, all employees of the central department of the Tax Service of Ukraine stopped receiving their salaries via the state-owned Ukreximbank and began receiving them via the relatively new UBD. The head of theTax Service of Ukraine, Mr. Klymenko, is known tobeagood friend of Mr. Oleksandr Yanukovych and Mr. Arbuzov, the latter who at that time was head of the National Bank of Ukraine. Each of the more than one thousand employees of the Tax Service received a«salary card» and a«deposit card» at the UBD. Each employee receiving their salary on a «salary card», had afixed amount oftheir salary transferred todeposit card. The employee had no choice about the transfer of the funds to the deposit card. In 2013UBDbecame one of several banks receiving a large portion of the «salary projects» for government employees, including those at the Ministry of the Interior and, court administrations in Kyiv and Donetsk. According to the Head ofthe Association of Ukrainian Banks, civil servants are forced to use the services ofUBDby imposition.
- In 2013 UBD won as eries of public procurement contracts to provide credit to state-owned railway enterprises totaling 978 million UAH. Inparticular, onNovember 14, 2013, the state-owned Odesa Railway signed a contract with UBD to receive a line of credit in U.S. dollars of 55,61 mln UAH with a 10.5% interest rate. On November 8, 2013 the Donetsk railway signed a similar contract with UBD to receive a credit line for 55,64 million UAH.
UBD serves Mako Holding company and its subsidiaries, which are either controlled or belong to Mr. Oleksandr Yanukovych.
UBDuses the following intermediary banks for transfers inUSD and Euros:
- Deutsche Bank Trust Company Americas, New York, USA
- PJSC Commercial Bank KHRESCHATYK
- Deutsche Bank AG, Frankfurt am Main, Germany
2. Closed Joint Stock Company Mako Holding
Mako Holdingis the parent company of about 20 spectacularly successful companies in Ukraine, the Netherlands and Switzerland, most of which significantly expanded in 2010–2013, during the presidency of Mr. Viktor Yanukovych.
- Oleksandr Yanukovych isthesole owner of Mako Holding CJSC, which was established on February 25, 2011 with statutory capital of 55 million UAH. The company isthe successor of the now defunct MAK LLC.MAK LLCwas registered on June 7, 2006 and was wholly owned by Oleksandr Yanukovych.
- Once established in 2011Mako Holding had a negative profit on its balance sheet. In a year the company showed an official net profit totaling 197 million UAH.
- On November 22, 2011Mako Holding issued an additional 450000 shares with a total value of 225 million UAH. In January 2012 Mr. Oleksandr Yanukovych officially purchased all of this stock with cash.
- In September 2013 Oleksandr Yanukovych issued an interest-free loan to Mako Holding worth 150 million UAH.
Mako Holdingistheparent company ofaseries ofenergy, coal and development companies, which significantly expanded in2011–2013, specifically:
- CJSC Edelveis was registered onJanuary 20, 2010 inDonetsk by MAK LLC. In 2012 Mako Holdinginvested 1,56 millionUAH in CJSC Edelveis, receiving a 99% share of Edelveis. During 2010— 2012 the company was not profitable. In 2011 Edelveisreceived 15,02% of Artemivsk Winery CJSC, which appeared to be quite profitable; Artemivsk Winery reported net profits of 13,2 million UAH, 17,7 million UAH, and 13,1 million UAH in 2010, 2011 and 2012, respectively.In June 2013 Edelveis transferred its stock inArtemivsk Winerytothe Netherlands’ based companyARTVIN Holding BV.
Edelveissince 2011 has 25% shares of Corporation Management Assets Company.
- Architecture-Engineering Company Constructiv LLCwas registered in2010. Mako Holding owns 70% shares of the company; in 2012 Mako Holding invested 248,200 UAH in the company.
- Mako Invest LLC was registered on November 24, 2011. Its statutory capital is5 million UAH divided between Mako Holding (51%) and Oleksandr Yanukovych (49%); in2012 «Mako Holding» invested an additional 4,04 millionUAH in Mako Invest LLC.
- Mako Trading LLC was registered onDecember 7, 2011. Its statutory capital is5 million UAH divided betweenOleksandr Yanukovych (49%) and Mako Holding (51%); in2012 Mako Holding invested 43,2 million UAH inMako Trading LLC. During the first quarter of2013Mako Trading exported 370 thousand tons of energy coal with a price of 835 UAH per 1 ton (totaling 308,95 million UAH). The key beneficiary ofthe exported coal became Swiss MAKO Trading SA, which is controlled by Mako Holding a swell. Additionally, in2013Mako Trading exported coal toItalian Energy Coal SPA, Croatian Nasicecement DD and Portuguese Carbol LDA. In 2012 Mako Trading exported 200,000 tons ofcoal, which was received from state-owned enterprises Shakhterskantratsyt, Snezhnoyeantratsyt and Torezantratsyt.
- Mako Activ LLC was registered on March 14, 2012. Its statutory capital is180 million UAH and is 99% controlled byMako Holding; in 2012 Mako Holdinginvested 20 million UAH in Mako Activ LLC.
- Management Assets Company Corporation was registered onMarch 31, 2009. Its statutory capital is 4 million UAH, which isequally shared by Mako Holding,Edelveis LLC,Capital Building Corporation CSJC, and Ryatuvalnyk LLC.
- Ryatuvalnyk LLC shares are 99% controlled by Capital Building Corporation.
- Eastern Business Centre, LLCwas established on August 13, 2010. In2012 Mako Holding invested 127,3 millionUAH in the company; on April25th, 2013 Mako Activ LLCbecame thesuccessor of Eastern Business Centre.
- Capital Building Corporation, CJSC was established on December 9, 2005. Since 2010 the company had been controlled by MAK LLC; in 2012 Mako Holding invested 45,7 million UAH in Capital Building Corporation receiving 96,8% of itsshares. In August 2013 Mako Holding issued aninterest free loan totaling 20 million UAH to the Capital Building Corporation.
- MAKO Holding B.V. was established on October 27, 2011 in theNetherlands by LiFe Holding AG, which was its sole shareholder until December 23, 2011, when Mako Holdingbought all shares ofthe company. The statutory capital of Mako Holding B.V.is currently 10 million Euro. In 2012 Mako Holdinginvested 105,3 millionUAH in MAKO Holding B.V., which asofDecember 31, 2012 didn’thave any employees in theNetherlands, or abroad. Mako HoldingB.V.is thesole shareholder of ARTVIN Holding BV, which owns 19% ofArtemivsk Winery. MAKO Holding B.V.isthesole shareholder of theSwitzerland based MAKO Trading SA.
- Marinaservice CJSC,was registered onMay 26, 2010 by LLC MBService with an initial statutory capital of55 millionUAH. The initial statutory capital of Marinaservice CJSC was increased to64 million UAH in November 2012. Since the third quarter of 2011, Oleksandr Yanukovych became the sole owner of the company. In 2010 Marinaservice bought four historical buildings in Balaklava Bay and received from the Ministry of Transportation anopen-ended lease of hydro-technical facilities. In 2011 the company bought floating pantones, wave-breakers, administrative buildings and two apartment buildings. In total, all of the buildings in Balaklava Bay cost Marinaservice 54,6 million of UAH.In 2010 the Minisrty of Defence of Ukraine allowed the privatization of 8.4 hectares of land belonging to ship yard Metalist near Balaklava Bay and 1.8 hectar of Cape Aya, which were leased byMarinaservice. In 2011 Marinaservice leased 1.8 hectares of Balaklava Bay. On July 16, 2013 the Sevastopol city administration gave 1.32 hectares of Balaklava bay land to Marinaservice. Thus intotal, Marinaservice acquired more than 10 hectares ofprecious access tothe water near Sevastopol.
3. Donbass Rozrahunkovo Finansovyi Centr, DRFC
While UBD,Mako Holding and Mako Holding’ssubsidiaries officially belong tothe business empire of Mr. Oleksandr Yanukovych, there remain anumber ofcorporate structures with nodirect legal ownership links tothe son ofViktor Yanukovych. However, dozens ofjournalistic investigations provide evidence that Oleksandr Yanukovych istheir beneficiary owner. Thus, allegedly Mr. Yanukovych is abeneficiary owner of highly profitable DRFC LLC, which isone ofthe leading businesses inthe coal and energy sector in Ukraine.
The Association Donbass Rozrakhunkovo-Finansovyi Centre (DFRC)was established in1997 and until 2010 was controlled by Eduard Prutnik, an MP from the Party of Regions and close friend of Mr. Viktor Yanukovych.
In June 2012 the Association was reorganized intothe Public Joint Stock Company Central Enrichment Factory Comsomolska, the ownership of which is divided between 3 companies:
- DRFC LLC, which invested 200,1 million UAH giving it 74,18% shares
- Eastern Transport Company LLC, which invested 0,02 million UAH giving it 0,01% shares
- Regional Department of State Property Fund (State), which invested 69.6 million UAH giving it 25,81% of shares
Since November 26, 2013 DRFC LLChas bought all the shares which previously belonged to the other parties.
In turn, DRFC LLCofficially belongs to Sarone Holdings Limited, a company registered in BVI, where the beneficial owner is hidden.
According to anumber of journalistic investigations Mr. Oleksandr Yanukovych has controlled the company since 2010.
In 2011 DFRC LLC won state tenders totaling to 949,3 millionsUAH.
Insummer 2012 DFRC privatized five state-owned factories that enrich coal, specifically Uzlovskaya,Chervona Zirka,Komsomolskaya,UkraineandRussia.
The factories provide services to dozens of state-owned coal mining companies and win multimillion UAH tenders.
Enrichment of excavated coal improves its quality and often coal-mines work with enrichment factories, each of which enriches anaverage of 2–2.5 million tons of coal per year.
In November 2012 the Ministry of Energy and Coal Mining contested the privatizations, claiming that it was illegal to issue more than 50% of state-owned factories’ shares to a private companyDFRC. The commercial court in Donetsk, however, issued adecision infavor ofDFRC, relying on changes inlegislation adopted in March 2012, a few months before the privatization by legislative initiative of the President Viktor Yanukovych.
DFRC has been actively buying coal from so-called «little mines» or«coal pits». According to the data of the Ministry of Energy and Coal, at least 9 mln tons of coal are produced at coal pits, which neither have safe working conditions nor provide social benefits to miners. The coal from pits ischeaper and can bepurchased for 300–400 UAH per ton, versus what the regular coal mines sell for 800–1000 UAH per ton. Taking into consideration thatDFRC sells its coal to the electric stations for 925 UAH per ton, the difference in is a pure profit for DFRC, which when combined with heavy state subsidies enables DFRC to be one of the leading companies in the coal business inUkraine.
According tojournalistic investigations conducted since April 2012 Mako Trading isacting asa guarantor ofexport operations conducted by the Chervona Zirka coal enrichment factory, which belongs to DRFC. During the first quarter of 2013 Chervona Zirka exported about 4300 tons ofcoal toPoland and the Czech Republic at a price of 820 UAH per ton.
Finally, there is one more company called LE MARE, LLC, which could be included in the list of the Yanukovychs’ business structures. Olena Yanukovych, the wife of Oleksandr Yanukovych, is owner of the company with 20 mln UAH of statutory capital. The company allegedly owns a luxurious fitness centre in Donetsk called LE-MAREE.