Yakiv Smoliy. Being a King of Lease

During several years Yakiv Smoliy together with his business environment has been leasing office premises to commercial banks the activities of which are supervised by him at the same time.

It is in fact a direct conflict of interest as according to lease contracts payments depend on the viability of banks.

Moreover, there is every reason to accuse Smoliy of illegal income acquisition – he leases premises to banks at prices that are several times lower that the market ones.

But the National Anti-Corruption Bureau of Ukraine and the Prosecution Service don’t pay attention to the evident contempt of the anti-corruption law because Smoliy is under protection of Poroshenko.

After becoming a state servant in 2014 Mr. Smoliy found himself in the middle of the conflict of interest according to the Law of Ukraine ‘About Corruption Prevention’. Yakiv Smoliy had private interest in the field of his official/representative powers that is the lease of his own premises to bank institutions that he was and is empowered to have influence on being a head/assistant director of the National Bank of Ukraine. It is the contradiction between the private interest of a person and his/her official/representative powers.

Premises being leased at a non-market price can be a vivid confirmation of the aforementioned fact. It may give evidence not only of tax default but also prove corruptive relations between Smoliy and commercial banks.

According to the declarations, the head of the National Bank of Ukraine Yakiv Smoliy owns the non-residential premises bringing him additional annual income in the amount of 3 mln UAH.

Thus he possesses the following office real estate upon the ownership rights:

· 7 % (33 sq. m.) of office space in Ivano-Frankivsk (total floor space – 453 sq. m.);

· 33% (805 sq. m.) of office space in Lviv (total floor space – 2 440 sq. m.);

· 8% (188 sq. m.) of office space in Ternopil (total floor space – 2 356 sq. m.);

· 8% (63 sq. m.) of office space in Cherkasy (total floor space – 790 sq. m.);

· 50% (303 sq. m.) of office space in Kyiv (total floor space – 607 sq. m.);

· 50% (243 sq. m.) of office space in Kyiv (total floor space – 487 sq. m.);

· 7% (6 sq. m.) of office space in Kyiv (total floor space – 86 sq. m.);

· 7% (21 sq. m.) of office space in Kyiv (total floor space – 296 sq. m.);

· 7% (50 sq. m.) of office space in Kyiv (total floor space – 714 sq. m.);

· 8% (67 sq. m.) of office space in Kyiv (total floor space – 834 sq. m.);

· 8% (126 sq. m.) of office space in Dnipro (total floor space – 1 571 кв.м.);

· 8% (80 sq. m.) of office space in Chernivtsi (total floor space – 996 sq. m.);

· 7% (81 sq. m.) of the sports complex в Pohreby (Kyiv region) (total floor space – 1158 sq. m.);

In order to illustrate a full picture of violations, the head of the National Bank of Ukraine did, it’s necessary to inspect some leasable premises that were offered to banks. For this purpose I take notice of his declarations (2015, 2016, 2017 years), where the main banks acting as lessees are:

1. The KSG Bank rented an office space in Dnipro in Mechnikova Street 10B. The bank was closed down by the National Bank of Ukraine on the 31^st of August 2016 for money laundering by illegal means that had been taking place for several years. These facts were discovered by the National Bank of Ukraine only upon the last examination of the bank.

The key phrase of the statement is “upon the last examination”. Most likely, Hontareva and Smoliy hadn’t noticed the “cash-out” before. As Kateryna Rozhkova was the director of the Department of Banking Supervision and Regulation of the National Bank of Ukraine. She managed examinations and had been subordinate to Smoliy at Aval Bank for a long time.

The National Bank of Ukraine decided to close down the bank after the General Prosecutor's Office of Ukraine together with the Security Service of Ukraine had started to show interest to bank operations. The inspectors prepared materials directly for the bank search, because the KSG Bank was connected to the range of cases related to legitimization of illegal income.

The main shareholders of the bank were Serhiy Kasyanov and Kseniya Kasyanova (33.46% each), as well as the companion of Yura Yenakievskiy – Oleksandr Shepelev. He was accused of involvement in finances plundering of the Rodovid Bank in the amount of more than 220mln UAH, plundering of public refunding money of the National Bank of Ukraine in the amount of 315mln UAH, two murders (a banker and a colonel of the Ministry of Internal Affairs) and in one attempted murder.

Despite the criminal’s shares in the capital of the KSG Bank, Smoliy leased a part of premises (126 sq. m.) in the centre of Dnipro in Mechnikova Street 10B, that made up 8% of the total floor space. The lease price of the space for the KSG Bank for 1 sq. m. was 60 UAH/month. On the basis of information from different realtor websites we see that the average lease price in Dnipro for 1 sq. m. is 200 hryvnias.

So we can reasonably assume that Smoliy received and keeps receiving a part of leasing payments in cash that may be supposed to be evasion of tax paying and participation in a bribery scheme.

2. Fidobank had been leasing space from Smoliy from July 2013 till July 2016 at the address: Cherkasy, Baidy Vyshnevetskoho Street 36/1. The owner of the bank was a former head of Ukrsibbank Oleksandr Adarych. The real owner of the bank was a person from the team of Yanukovych. It was Mr. Kolobov holding a position of a Minister. Although Adarych personally denied it all but herewith he didn’t conceal his friendship with Arbuzov.

On the 20^th of May 2016 the Fidobank was declared insolvent by the National Bank of Ukraine. But the owners of the Fidobank accepted the news about de facto bankruptcy of their banking institution surprisingly calmly in contrast with other banks that to the bitter end try to stand upon their right to work and month after month pursue in court with the National Bank of Ukraine.

The National Bank of Ukraine reported that “dissipating of assets into institutions connected with the shareholder hadn’t been carried out”. Adarych wasn’t going to save the bank at all, and the National Bank of Ukraine presented a perfect business reputation to the owner of the Fidobank without any inspections.

The Deposit Guarantee Fund, as opposed to the National Bank of Ukraine, found financial frauds in the amount of about 7 billion hryvnias in the bank’s activity.

Smoliy leased the premises to Adarych at the average price of 4.5k UAH per month. The leased floor area was 63 sq. m. Thus, the price for 1 sq. m. was 71 UAH/month. The minimum market price at this address is 200 UAH/month that also gives evidence of the lease to be underpriced.

The interesting fact is the following: the total floor space rented by the Fidobank at that address was 790 sq. m. and Smoliy supervised only 8 % thereof.

Other parts belonged to Ivan Voloshko, Fedir Shpyh, Oleksandr Derkach, Ivan Voloshchuk, Mykhailo Horovenko, Ivan Pinchuk, Ihor Slobodskyi and S. Sylchenko who were business partners of Yakiv Smoliy.

For now this space is also being leased to the Accord Bank, but this bank isn’t in the list of lessees in the declaration of Smoliy.

3. Printec Ukraine LLC is the company that cannot be called as a bank institution, but it carries out the automation of banking centers and payment terminals network. Also, it belongs to clients of the Aval Bank, and in 2016 it unexpectedly became a winner of tenders held by state banks. As a result 12 contracts to the sum of 73mln UAH were concluded with the state Oshchadbank and Ukrgazbank. Printec Ukraine LLC delivered TV sets to the Oshchadbank but procurement of the equipment was accomplished without an obligatory auction. The Oshchadbank accounted for the purchase of the expensive equipment post factum.

Whereas the operation with the Oshchadbank passed confidentially the purchase of used cash machines by the Ukrgazbank went hammer and tongs. The Ukrgazbank bought used cash machines for 11mln UAH. Their value was 50 % overprized.

4. The Raiffeisen Bank Aval is also a space lessee from Smoliy. Earlier the bank was owned by Shpyh, Derkach and Smoliy (1.25%) and was sold to the Austrian group. I haven’t managed to find out the addresses where the bank leases premises from the head of the National Bank of Ukraine. But the annual income of Smoliy from the space lease to the Aval Bank makes up about 100k UAH that is approximately 8400 UAH per month.

5. During the investigation I’ve discovered such a lessee of Smoliy as Prestige Group, PrJSC. The shareholder of this company is Smoliy’s wife Svitlana and the group is under the control of his business partners Fedir Shpyh (25%) and Oleksandr Derkach (15 %).

Till 2014 Smoliy had also been a member of the Supervisory Council of this company. According to the declaration Smoliy leases the space to Prestige Group, PrJSC at the price of 1900 UAH per month. In its turn the company subleases the spaces and its legal address coincides with the address of the head office of the Raiffeisen Bank Aval (Leskova Street 9).

The land parcel the head office of the Aval Bank is situated on (its address is Kyiv, Leskova Street 9) is owned by the Prestige Group according to the decision of Kyiv Municipal Administration as of December 20, 2017. Only the price of that land parcel (0.1356 ha) made up 7.3 million UAH.

It was exactly the Prestige Group that operated and maintained the administrative building at that address used as the head office of the Raiffeisen Bank Aval. The construction itself was one of the most expensive objects in Kyiv. The minimum lease price in this region is 480 UAH for 1 sq. m.

6. Pravex Bank is another lessee. The average price this bank pays for space ret is 3900 UAH per month.

Thus, one may state several facts testifying to possible corruptive activity of the head of the National Bank of Ukraine in the process of spaces lease to the banks:

· Spaces are leased at non-market prices.

· Spaces are leased, in particular, to people from the business environment of the head of the National Bank of Ukraine, who most likely may sublease these spaces to banks with the purpose of tax evasion.

Unfortunately, I haven’t managed to estimate the complete market lease price and the level of involvement of the Prestige Group in the activity of Smoliy, because I haven’t got information about addresses of all the objects that are directly leased as offices. He hasn’t indicated this information in the declaration. In order to confirm/refute these facts I’ve submitted a request to the head of the National Bank of Ukraine but didn’t receive any answer.

I remind you that failure to report a real conflict of interest in cases specified by law shall result in the recovery of a fine in the sum from one hundred to two hundred tax-exempt minimums of the citizen income according to the article 172-7 of the Code of Ukraine on Administrative Offenses about violation of requirements on prevention and settlement of the conflict of interest.

Actions or decision-making under the circumstances of a real conflict of interest shall result in the recovery of a fine in the sum from two hundred to four hundred tax-exempt minimums of the citizen income.

And it all can also be a reason for removal from the position.