In late January, the Appellate Chamber of the High Anti-Corruption Court (AC HACC) upheld the acquittal of Volodymyr Syvak, former CEO, ZTMC. It took him more than five years to prove that he was innocent. The criminal proceedings initiated by National Anti-Corruption Bureau of Ukraine (NABU) and Specialized Anti-Corruption Prosecutor’s Office (SAP) fell apart in court.
Syvak has always been considered a manager loyal to Group DF, a minority shareholder of the company which owns 49% of ZTMC. Syvak’s dismissal in May 2020 by the decision of the State Property Fund of Ukraine (owner of 51% of ZTMC) was linked to the attempts to deprive a private shareholder of influence over the company. Just like Tolexis Trading Ltd., a minority shareholder of ZTMC, Syvak does not recognize the that his removal from office was legitimate.
This interview is not only the story of the particular legal case. It is the story of the former top manager of the large strategic enterprise who has been standing up against the machinery of the government.
I AM NOT THE KIND OF PERSON WHO TAKES THE ENTIRE MACHINERY OF THE STATE TO DESTROY. THIS IS A COMMON WAR FOR THE ASSET
Decision by the Appellate Chamber of the Supreme Anti-Corruption Court is not the first acquittal in your case. What are the legal implications of this decision?
This is the first acquittal in the history of the Appellate Chamber of the Supreme Anti-Corruption Court and the second positive decision in my favor. The first decision that confirmed the charges against me were absurd and illegal was made more than a year and a half ago by Zaporizhzhya district court.
It was obvious that SAP would file a cassation appeal and it would be the court of cassation that would confirm or deny that the decision was legal. I believe, though, that the court would also confirm my innocence and this epic lasting for more than 5 years would finally come to the end.
After so many years of struggle, what does this decision mean to you personally?
For me, the acquittal is an opportunity to live and work in peace, raise my children, defend my honest name and prove that what they used to say against me and published in the media all this time was a lie and slander. I could never have imagined that the trial of this fabricated case would take more than five years. Five years of living under constant stress and pressure for me and my family. My parents, wife, six children had to endure a lot. I can not even imagine what they have read in the media and what they have experienced. I always realized that I had to come out of this battle victorious for their sake.
Why do you think it was you who “got under the wheels” of the government? Why did ZTMC become a target?
I have a very realistic view of these events, and I am well aware that I am not the kind of person who takes the entire machinery of the government to destroy. Taking me, a top manager, as a hostage, the government, it seems to me personally, is trying to simply settle political accounts with Dmytro Firtash’s company, a key investor in ZTMC. Or at least tried to do it. However, the main target of “machinery of the government” remains ZTMC. There is a war for the asset. It is obvious, that someone’s got very interested in this unique enterprise.
It appears to me personally, that back in 2015, following the change of political elites in control of the country, we felt that the administrative resource was turned on at full capacity. Unfortunately, the new leaders began to use the old proven methods. The law enforcement agencies only played up to this scenario.
PUBLIC OFFICIALS KNOW PERFECTLY WELL WHERE AND HOW THEY BREAK THE LAW
How do you think AC HACC decision in your case will affect the situation with ZTMC as a whole?
The acquittal in my case destroys the entire architecture of ZTMC raider takeover.
Under the guise of rescuing the company against the so-called “oligarchic management”, the State Property Fund of Ukraine (“SPFU”) actually took over the company illegally, violating a number of legal provisions. I’m not even saying anything about the rights of ZTMC private investor and my legal rights. The stark examples include the appointment of Mr. Lubennikov, an incumbent ZTMC acting Director. They fired me and appointed a new director illegally, without any competition. They did not even dare to explain to anybody who was Mr. Lubennikov.
In order to “legitimate” this illegal takeover, I was declared a thief and an embezzler. Without any court decision. It seems to them that it gave them grounds to take away the plant without no questions asked, to hold illegal shareholders’ meetings, and to raise the issue of re-privatization of a private shareholder’s share.
The acquittal puts an end to the raiders’ plans. It also showed the actions of individual law enforcement agencies and SPFU not to their advantage. They know perfectly well where and how they break the law. Although it is now clear that a good game on the part of the raiders did not work, but it seems that neither SPF nor NABU are going to give up on the issue of ZTMC illegal seizure. They did not manage to illegally take over the enterprise in a one-move attack.
You write a lot on your Facebook page about the situation at ZTMC, about production failures. Could you briefly comment on what is happening?
If AC HACC decision is a verdict to the way NABU and SAP work relating to ZTMC, then the current situation at ZTMC is a verdict to the State Property Fund of Ukraine and they way it works. At present, there is a team of looters in charge of the plant, I’m not afraid of using that word. This team was, obviously, appointed by SPFU. Their activities have nothing in common with ZTMC development and modernization. They are “killing” ZTMC in a systemic manner and deliberately destroy the human resources potential. More than a thousand people have been dismissed since June. This makes almost a third of the entire staff! At the times when I run the company we came through different periods at ZTMC, but no one would even think about such a thing! And that’s not all! The company has been on the verge of an emergency stop several times due to restrictions on electricity supply and problems with the supply of raw materials. For an enterprise like ZTMC, this is unacceptable from a safety point of view. Moreover, the contract with the unit of the Ministry of Internal Affairs of Ukraine, which is responsible for security on the territory of the enterprise, was terminated, and special guard was dismissed.
The system of sales was dismantled, supply contracts for titanium are signed with strange intermediaries, products are sold well below market price. Most importantly, there is no growth in production and quality assurance system is completely destroyed. There were cases when international customers refused to accept ZTMC products and returned them. At the international titanium market this is cinsidered an emergency. At present, the company is deliberately driven into debt … I can keep on going with the “list of successes” for a long time.
Previously, I believed that what we saw was the result of unprofessional top management appointed by SPFU. Right now, I have almost no doubt that the SPFU officials are implementing someone’s orders. SPFU officials are nervous about the situation around ZTMC, you can tell that from their “empty” releases. They generate promises, talk about the future recovery of the plant, but for some reason they are hiding the numbers. Those numbers and all the facts prove that the debts of the enterprises are growing day by day. The output is not growing.
SOMEONE HAS CHOSEN ZTMC AS A CASE TO DEMONSTRATE THE FIGHT AGAINST CORRUPTION
Let’s go back to the personal charges against you. What exactly were you accused of?
Police in Zaporizhizhya initiated criminal proceedings against me back in 2015 following the audit by the Court of Auditors. I was accused of allegedly wasting UAH492 million; the criminal case was initiated based on paragraph 5 of Article 191. It implies committing a particularly serious crime and embezzlement of money, punishable by 12 years in prison with confiscation of personal property. From the statement of the Court of Auditors police somehow saw that ZTMC’s money went irretrievably to SOE ZTMC. They summoned me for interrogation during which I provided all the necessary explanations that are recorded in the case files.
Could you explain what kind of money it was?
It’s about assistance to the state owned enterprise SOE “ZTMC”.
At the times when ZTMC LLC was established, all SOE ZTMC property and assets were transferred to its balance sheet including output, raw materials, etc. At the same time, SOE ZTMC had liabilities, i.e. debts for delivered products, prepayments, raw materials, debts for electricity, debts to the bank on loans, liabilities to the State Pension Fund, etc.
SPFU planned to close SOE ZTMC quickly, but in practice it existed for about 1.5 years after ZTMC LLC was established. We needed to operate somehow. Counterparties refused to enter into contracts with us until the debts to the SOE ZTMC were settled. No one else could pay back the debts but us. Even more so that we were the legal successor to the SOE ZTMC. We considered and decided on each line of SOE ZTMC debt individually, i.e. in some cases we acted as a guarantor to get the raw materials that was in pledge. In some cases we made a commitment and completely paid back the debt. In some cases, we paid to oblenergos under a surety agreement. I emphasize yet one more time: they refused to sign contracts for electricity supply until we paid back old SOE ZTMC debts to ZTMC LLC. We had no way out. The company cannot operate without electricity supply contract, it is illegal. If we did not do this, the work of the enterprise would be blocked
It turns out that you were accused of paying back the debts of the state owned SOE ZTMC?
Exactly. Allegedly, I gave the money to ZTMC. Whom did I give it? To the creditors who credited my company. You see, following the merger, they (SOE ZTMC and ZTMC LLC – ed. note) were supposed to become a single entity. We were the successors. Covering the debts of SOE ZTMC was logical and, most importantly, it was legal.
When the criminal proceedings were initiated, all transactions were closed, all debts were repaid, and all personal accounts were closed. Nothing was lost, disappeared or wasted. There were no losses in the balance sheet. The state did not suffer any losses. However, the investigators were not interested, they stubbornly refused to pay attention to my arguments since they had other tasks.
How did it happen that your case was referred to NABU from police?
This is rather the question to my lawyers.
I can tell that from the very beginning the case was in the police; however after the anti-corruption agencies were established the case was transferred to NABU, since the Government owns 51% of ZTMC.
I learned that the case was referred to NABU in the summer of 2016. A few months later, in September, NABU became more active. And then this marathon began.
Do you remember the day when you were arrested?
Yes, it was Friday, September 23.
It was a “classic” arrest, before the weekend. This is “classics” of our punitive system, which has taken root in the so-called “new” law enforcement agencies. Arrest before the weekend is made on purpose when they want to put pressure on the defendant; they have all the weekend at their disposal.
I was preparing for the traditional tour of the enterprise, put on overalls, took the documents. When suddenly in the window I saw people running from all sides to the main office. Some of them were dressed in black clothes, others were wearing camouflage. Back then I did not know who they were. I thought it was an illegal seizure. It happened quite often at those times. Later, I learned that about 70 people were involved in this action. Kyiv NABU operatives arrived in two minibuses. Local SBU officers also joined in to assist during the arrest.
People were running. I was standing in the doorway of my office. When I opened the door to the reception, a man in camouflage and a mask came in. Then I saw “NABU” badge on the uniform. At that moment I realized that this was not an illegal seizure. My first reaction was probably not quite common for them. I smiled instinctively. I remember, for some reason, I thought that if they were the law enforcement officers, then everything would be within the law. The officer saw me smiling and was a little stunned. He stopped For him, my reaction was incomprehensible. Then the detective came in and showed the search warrant and the general warrant.
Have you ever had problems with the law enforcement agencies before? Did you understand why they applied to you, a manager, top executive of the large enterprise, the same methods they used to detain a dangerous hard-core criminal?
No, I have not had any problems with law enforcement agencies before. It was interesting to read the formal justification for that situation. Allegedly, they had information that I was going to flee the country. In their opinion, I could escape because “I had foreign passport.”
What happened next?
I was taken to Kyiv. Just like that, in the overalls They did not put handcuffs on me, although they were instructed to do so from Kyiv. They even fed me on the way to Kyiv. We arrived in Kyiv late night. There were meetings in NABU offices, interrogations, overnight in the penitentiary ward. I was done the fluorography. The next morning there was the court hearing. The judge imposed an unrealistic bail of UAH 5 million…
Later, I learned that during this period they started to actively promote the image of NABU as a new honest anti-corruption agency. Someone selected ZTMC to demonstrate a fiery fight against corruption. In the country of total corruption, for some reason, ZTMC became the first demonstration project of anti-corruption agencies. It attracted attention of not only the media but also of Western partners. It might be the case that ZTMC was ideally suited for some big tasks.
WRITE IN CAPITAL LETTERS – THE STATE HAS NEVER LOST CONTROL OF ZTMC
Were there any preconditions for a criminal case against you and for your arrest? Did you understand from the very beginning that something was being prepared against you?
You are asking the right question. Even before the criminal case was initiated, the SPFU began to behave quite differently in relation to ZTMC. The fund totally opted out from management. SPFU suddenly stopped addressing the issues and problems of the plant for which it was responsible as the holder of 51% of the ZTMC.
Both the private investor and I, as a hired general manager, were extremely interested in the State Property Fund of Ukraine to somehow participate in the operations of the plant. I spent a significant part of my working time to somehow involve the state in the management process, to arouse the interest in ZTMC on the part of SPFU. But there was no one to discuss the fate of the plant.
So, when I am reading Sennichenko’s pathetic statements that the Government has regained control over ZTMC, I am simply shocked that he is taking all of us for fools. You have to write this in capital letters – the Government has NEVER lost control over ZTMC. The Government owns 51% of shares which allows it either to make or to block any managerial decisions. From 2016 to 2020, the Government, as represented by the SPFU, only blocked the decision-making process and completely distanced itself from the processes at the plant.
Could you give an example?
An enterprise like ZTMC needs to constantly monitor current market challenges and respond to them in a swift manner, i.e. to adjust development plans and make the necessary managerial decisions, etc. Instead of addressing these issues, they installed a a rigid bureaucracy. I had a modernization program in my hands, which lost its relevance after 2013. I could not implement it as it was. In order to make changes to the program, we got stuck in bureaucratic procedures for several years. SPFU gave just formal replies. First we were sent to get one piece of paper, then another, then for an expert opinion on these documents.
Do you think that the SPFU deliberately blocked the modernization of ZTMC?
I have no doubt about that. It was obvious that the SPFU was tasked to slow down all processes related to ZTMC modernization. We have all the documents that confirm that SPFU deliberately delayed the process. Perhaps it was done in order to interpret it later as a default by the investor which actually started to happen.
I believe you heard that a series of lawsuits are currently pending in commercial courts, the purpose of which is to deprive Tolexis Trading Limited, ZTMC investor, its share in the company and at the same time the money paid by the investor for ZTMC modernization. The order that is being implemented is to re-privatize the company.
By the way, the money paid by the investor still remains in ZTMC accounts, while the SPFU is trying to defend the position that the investor has not fulfilled its financial obligations. There is a version, in my opinion, well founded, that someone now just wants to rob ZTMC current account, and all the stories about the Government control and the bright future of the plant are the stories for gullible and naive observers.
Do you follow these court proceedings? Is there any progress in the attempt to re-privatize ZTMC?
In the course of the court proceedings, SPFU lawyers have radically changed their position in the courts. In the court of the second instance the SPFU suddenly declared itself a victim in the process and began to actively support all charges. At the same time, none of the SPFU representatives was able to explain in the courts how and from what the SPFU suffered.
Literally, every court hearing is attended by a new SPFU lawyer, completely unprepared for the hearings. They were asked in court what exactly they supported? They answered that they supported all accusations. When they were asked to specify, what exactly the SPFU suffered from, its representatives either could not answer or told such a nonsense that even the judge stopped them and put them in place.
Nevertheless, what do you think are the chances that ZTMC will become 100% state-owned enterprise?
Based on what is happening now, the chances are high. Although there are no legal grounds for this. I will say more, the SPFU is already in full swing planning to privatize 100% of ZTMC. Ignoring all the laws, ignoring the fact that the plant has an investor who has the priority right to buy back shares established by the law. What is happening is a complete breakdown of law and order.
By the way, was there any competition for ZTMC general manager position?
Like I said, now officials are not particularly concerned about even the varnish of legality of their actions.
SPFU demonstratively ignores the requirements of the Law, which clearly states that Serhii Lubennikov can work as an acting director for three months and then there should be a competition. What is happening in practice? Over the course of the year, ZTMC is illegally managed by the person who is acting as a general manager. He took office illegally in May 2020; the court decision confirmed the violation of the law, and soon we expect the decision from the next instance. Understanding that there was little chance of winning in court, the SPFU urgently convened the shareholders’ meeting on 23 February and quickly “reappointed” Lubennikov. They are trying at all costs to extend his tenure, whatever the court decides.
Another very interesting point is the so-called competition for the position of ZTMC general manager. You will be surprised to know that there is the competition for the position of ZTMC general manager going on in full swing, allegedly an open competition. SPFU issued the order on 1 March 2021. The question is who else knows about it, except for the SPFU officials? Did they make it public? For some reason, it is a big secret for everyone. I do not rule out that the day before the competition ends information about it will be published retrospectively. All these examples illustrate the Government’s policy towards ZTMC. You know, this is a story about the total impunity of public officials.
ACTIONS OF NABU AND SAP CAUSED DIRECT DAMAGE TO THE ECONOMIC INTERESTS OF THE COMPANY 51% OF WHICH IS OWNED BY THE GOVERNMENT
How did ZTMC’s foreign partners and customers take the events happening at the plant? I mean the events with your arrest and the attempts to re-privatize the plant?
This question is right to the point. This whole story with my arrest happened just before the World Titanium Congress. This is a major annual event for titanium industry in the United States. This whole story of my arrest has become one of the most discussed issues at the Congress. They discussed what would happen next, whether it was possible to work with ZTMC and Ukraine at all. Titanium market players still do not have a clear answer to these questions. This whole re-privatization story only adds fuel to the fire. Would you work with an enterprise where the acting director is illegitimate and where there is an attempted illegal seizure supported by public officials?
Did it affect ZTMC sales?
Of course, it did. Speaking of sales, I will tell you another epic example. We held a very long and difficult negotiations with a German company to supply our products. It is one of the largest public companies whose shares are traded on the stock exchange. Negotiations were coming to an end, we already passed the entire technical part, agreed on how to proceed about the first deliveries, sampling and analysis in independent laboratories. We did everything to ensure stability and quality of products. We signed the contracts. And then, I got arrested.
The reaction of the customer was immediate: they terminated the contracts. Moreover, they officially requested ZTMC to remove all references to their company from the website. The lessons to be learned from this story is pretty much straightforward: actions of NABU operatives and SAP detectives caused direct damage to the economic interests of the company, 51% of shares are owned by the Government. As a result, the Government missed its legitimate profit, which in the case of successful implementation of the contract it would receive as dividends.
SPFU has repeatedly announced a plan to revive ZTMC. It was stated in a press release. Can you comment on this information?
I saw this paper. A throw of dust in the eyes. In practice, a completely different plan is being implemented. Initially, the SPFU announced plans to re-privatize ZTMC, deliberately ignoring interests of the current shareholder. Now, the SPFU brought up the issue of raising loans at ZTMC shareholders’ meeting. Just think about it! In the current situation, when the plant’s property is under arrest, when the company has been repeatedly cut off from power supply because of the billions in debts for electricity, ZTMC will attract a loan of UAH 170 million.
At the same time, at the shareholders’ meeting no one did specify who would provide this loan, on what terms, and for what specific purposes these funds would be allocated. This is a ready-made scheme of bankruptcy. By the way, at the shareholders’ meeting held on 23 February, they did not even consider 2021 financial plan, to say nothing about the report for the previous year. Everything points to the fact that a scheme of bankruptcy is being implemented, intended to transfer the plant into someone’s hands. To force the asset into a decline and then give it away for nothing is an average-case scenario.
How can business leaders avoid repeating such stories in the future? What would you recommend?
Unfortunately, my case is not a solitary incident. Because of such cases, Ukrainians are afraid of starting a business and no investments are parked in Ukraine. Foreigners fear criminal prosecution, fabricated cases, endless inspections and basic abuse of human rights.
I very much hope that the country and the justice system will change; it should be a priority of the current Government, an adamant respect for investors’ rights. This is the “entrance ticket” of Ukraine to the civilized market.
My case is not only about the imperfection of the system, though. I think, it is also about the fact that judicial reform is moving slowly.
Over the top and at a great price, but in my case it was possible to see justice done through the Anti-Corruption Court. The judges did not follow the fakes and accusations drafted hastily in the offices of some bureaucrats. The judges did not bend under the pressure, which, I am sure, they felt.
It gives me a reason for optimism. It adds strengths. I believe in a fair decision.
Answering your question, I can say this: no one can be immune to stories like this in the future. There is no clear recipe that I can give you. What I know for sure is that any CEO in Ukraine must be able to take punches. What I am absolutely sure of, is that I am ready to take punches in any scenario. No matter how pathetic it may sound.