Almost a year has gone by since the Energopol-Ukraine, the Polish subsidiary of Poland's PBG construction conglomerate, stopped following schedules and started reneging on promises to commission the fourth stage of the residential complex on Kondratiuk Street, 1 in Kyiv. The disruptions during the first several months led to conflicts with the buyers of more than 200 apartments. Minority shareholders of the subsidiary, who had not received status reports for a long time, were compelled to take action. As a result, since April 2019, the National Police of Ukraine and the tax authorities have launched investigations and frozen Energopol-Ukraine's assets. The scandal threatens to escalate into one of the biggest conflicts in Ukraine's real estate market.
During the spring-summer of 2019, dozens of lawsuits and petitions to law enforcement agencies completely blocked the accounts and assets of Energopol-Ukraine, a subsidiary of the Polish PBG S.A., one of the largest construction companies in Poland. Polish executives pretended nothing was amiss and responded to the legal complaints from contracting companies and partners.
The history of the Ministerial residential complex is one of the most illustrative examples of what risks the development business in Ukraine poses.
There is everything in this story: the ruined Polish investor, who is accused of fraud, duped minority shareholders and an unfinished residential complex, which has caused problems for more than 200 families. The situation involving Energopol-Ukraine may be resolved eventually. When it is, the case will serve as an example of how not to do business, especially since the shenanigans have been exposed by OCCRP and Amnesty International journalists.
The story began in 2008. PBG, one of the largest real estate companies in Poland, decided to enter the Ukrainian market. The main owner of PBG is Jerzy Wisniewski, a well-known Polish businessman. Part of the company's shares were quoted on the Warsaw Stock Exchange. Ten years ago, the company found an investment project and acquired a developer, Energopol-Ukraine, which has worked in the market since 1991.
Photo: Telewizja Świnoujście та namepeeper.com
From left to right PGB S.A. main owner Jerzy Wisniewski and PBG Vice President Dariusz Szymanski
PBG purchased the developer for EUR 8.85 million, pledging to invest $240 million construction projects in Ukraine. Ultimately, only $30 million was invested, most of which, as the attorneys of the victims believe, were siphoned off and sent back to Poland. At the same time, the Poles secured 51% of the shares of Energopol-Ukraine, which owned 6.3 hectares of building plots in Kyiv, as well as a positive history of dozens of completed projects and assets Dariusz Szymanski, PBG vice president and confidant of Wisniewski, became the actual head of Energopol-Ukraine.
In 2012, PBG went bankrupt. After lengthy talks with creditors Wisniewski retained the post of manager of the company, and control over it passed to representatives of banks. The PBG supervisory board includes representatives of Powszechna Kasa Oszczednosci Bank Polski, Pekao Bank Polska, Opieki Bank BGZ and BNP Paribas.
The only project Energopol-Ukraine manages today is the construction of the Ministerial residential complex. The party-built complex has already been put into operation, but the fourth stage has not been completed. And although 200 apartments are already been sold, buyers cannot enter them.
Many, many problems
Volodymyr Kochan is a lawyer of one of Energopol-Ukraine's minority shareholders, Oleksandr Klymenko who owns a 23% stake. He has studied the company's activities in detail. After studying in detail the company's activities, he concluded at least several frauds that, in his opinion, were carried out with the participation of Polish shareholders. Statements describing the violations have been filed with the police, along with lawsuits in court. Copies of the statements and lawsuits are available.
At the same time, minority shareholders found problems only in 2018, due to the unfinished fourth block of the Ministerial complex on Kondratiuk 1 in Kyiv's northern-most district Obolon.
Kochan said in August 2009 Energopol-Ukraine and the Stroyholding company signed an agreement for developing Working Documentation for the future facility. The contract amount is about $5.6 million. According to Kochan, the contract looked strange, because Kyiv City Council and construction authorities had not even approved the project. Moreover, Stroyholding at the time did not have the requisite licenses and permits to produce Working Documentation.
"And as subsequent events show, no documentation allegedly produced by Stroyholding was used. Energopol-Ukraine later entered into an agreement with a real company that has produced technical documentation to this day, since 2009, that has been supervising construction work," Kochan said. "It cost $3 million, much less than the strange amount paid earlier by Polish executives.
By 2011, all investment funds allocated for the construction of the Ministerial residential complex were spent. And the construction of the first building of the complex had only reached the 14th floor. As a result, Energopol-Ukraine was forced to attract loans at 17-20% per annum, which significantly worsened the company's financial performance.
The next episode, to which the minority attorneys have questions, is the contracts under which Energopol-Ukraine ordered all the same Stroyholding services to develop a business plan to attract investors.
"In fact, there was no need to develop a business plan, since the intended purpose of the investment and potential sources of resources for the completion of construction were identified at the very beginning of the acquisition of Energopol-Ukraine by the Polish company PBG," the lawyer said, noting that many of the contracts signed look dubious. Energopol-Ukraine actually deducted $10.6 million in favor of third parties. The company’s management estimated the preparation of a business plan that was not implemented.
In the third episode (in 2010) Energopol-Ukraine executives transferred $670 thousand fine to the Polish company Cwertnia at the first request, without trying to somehow resolve the situation, without waiting for appeals to be settled in court. Although time and opportunity to challenge the contract or reduce the amount of the fine was enough, Kochan said. Formally, the contract with Cwertnia concerned the construction of real estate in Poland. According to the lawyer, however, Energopol-Ukraine in Poland had neither a human nor a technical resource.
"There were no construction permits. And of course, no work was started," he said.
Later, Energopol-Ukraine transferred to the mortgage company Dialog Plus all the property in its possession Kochan said as of today the company owns no property at all.
Now, according to the mutual claims of the two parties, the Obolonsky District Court and the Kyiv Court of Appeals are considering several dozens of mutual claims of participants in the conflict. In particular, there is even a lawsuit demanding reimbursement of the debt for the use of Ministerial house complex trademark.
It should be noted that Energopol-Ukraine itself also filed lawsuits against the structures that are associated with contractors, demanding compensation for the damage of UAH 27 million.
"The war is now at a hot stage. This is not surprising. If you withdraw money from the company under fictitious schemes, as was done by the former management of the company, it leads to significant losses for minority shareholders," Kochan said.
"Our client has invested UAH 500 million in the construction of Ministerial. The housing complex was to be commissioned in 2015. It is now 2019, and 200 families cannot wait for the construction of the fourth phase of complex," Klymenko's lawyer said.
Artem Sorkin, chairman of the board of OSBB KB, which manages the fifth Ministerial building, said the residents of the residential complex have many complaints Energopol-Ukraine.
The first is the sale as additional apartments of premises for technical floors. The fact is that there is always a separate technical room between the roof and the residential floor. Energopol-Ukraine started building up technical floors in already constructed houses, dividing the space into 11-12 one-room apartments and assigning them a letter numbering — that is, apartments A, B, C, D, E.
"This is a serious violation of building codes. Therefore, we wrote a statement to the police about what was going on," Sorkin said. "As a result, the technical floor was sealed off and construction halted in our (fifth) building. But earlier they were already built up in a number of complexes." Sorkin said police opened a criminal case based on the violations.
The next problem is the lack of infrastructure around the built house. Sorkin said the streets have not been paved near the complex and not parking lots have been provided.
"We planned to build a house and a parking lot. There is technical documentation, which was filed for a building permit. At the same time, houses were built but parking lots were not. When they bought apartments, they said that there would be a parking lot with 1,119 parking spaces for our house. But there are none. This may be an unprofitable project for the developer, but the buyer should not be made to foot the bill," he said.
Sorkin also said Energopol-Ukraine has not built any schools, kindergartens, or any other parts of the promised infrastructure.
The third and biggest problem is the unfinished fourth building of the complex, Sorkin said.
"There are people who have received nothing at all," he said.
Opinion of Polish shareholders
PBG Vice President and Energopol-Ukraine executive Dariusz Szymanski said the information provided by Kochan, as well information provided in written statements to police and courts, "is not true."
Szymanski promised initially promised to reply to accusations in writing, but stopped picking up the phone and answering calls, including from Polish phones. Attempts to contact him by e-mail were also unsuccessful.
Energopol-Ukraine Director Tetiana Semenkova and Dialog Plus lawyer-consultant Anna Nechaeva initially agreed to comment on allegations of impropriety, but they also stopped answering phone calls.