Ukrainian Corruption Concerns Arise in Grain Dispute.

"A dispute about missing grain assets has pitted U.S. investors against a Ukrainian firm and comes amid longstanding questions about Kyiv's commitment to battling corruption.

U.S. firms representing some of Ukraine's largest private foreign creditors say their efforts to recover $130 million in assets have been hampered by parts of the Kyiv government. The Ukrainian company involved in the fight in turn alleges the U.S. firms are using the events in Ukraine as pretext for taking over their grain-trading business and its subsidiaries.

The dispute, though still working its way through courts in Ukraine, the U.K. and Switzerland, highlights the challenges facing a government dependent on Western support, including private investment, but long plagued by allegations of corruption.

Ukrainian President Volodymyr Zelensky has won praise for his efforts to stamp out government graft but continues to face questions about his efforts.

The current dispute centers around $95 million that U.S. investors Argentem Creek Partners and Innovatus lent to GNT Group, a Ukrainian trading firm. The debt was secured by the Ukrainian company's equity, including one of the country's largest grain terminals located in Odesa. GNT failed to make payments to the U.S. companies last year, however, and then liquidated $130 million of its assets, according to court records that included details of a pretrial investigation by Ukraine's national police.

Some parts of the Ukrainian legal system have supported the investors' efforts to recoup the funds, according to court rulings. But the U.S. companies allege that efforts to get rulings enforced have been blocked by various parts of the Ukrainian bureaucracy, including officials in the ministries of infrastructure and justice.

"We've seen parts of the Ukrainian system act superbly in this case, but others continue to play by old rules," said Daniel Chapman, chief executive of New York-based Argentem Creek Partners.

State Department officials said they have discussed the case with Ukrainian authorities, but declined to elaborate, citing the continuing litigation. Zelensky's office, as well as the ministries of infrastructure, justice and interior, didn't respond to a request for comment.

The dispute dates to last year, when the U.S. investors said they had been in talks to restructure GNT's debt and were open to granting waivers. But they said they grew concerned after the company's shareholders and chief financial officer, Dusan Denic, failed to disclose last year heavy balance-sheet losses caused by an unexplained liquidation of grain and sunflower seed inventory.

The owners of GNT -- Sergiy Groza and Volodymyr Naumenko -- and Denic have since provided conflicting explanations for the liquidation, refused to provide documentation for the losses and worked to block the investors' access to offices, terminals and other assets, the U.S. investors said.

Groza, in a statement provided to The Wall Street Journal by Denic, said the company got rid of inventory that spoiled when they temporarily shut terminal operations. "GNT denied and continues to deny the misappropriation of grain."

Under the terms of GNT's loans, the U.S. firms said, a contract breach such as default gave the creditors authority to establish operational control of the Ukrainian business. After filing criminal complaints with Ukraine's national police, the U.S. firms in January secured a ruling in the U.K., where the parties agreed to settle contractual disagreements, freezing GNT's assets, court records show.

GNT's owners said they are prepared to discuss restructuring the debt with their lenders.

"Argentem has been spreading false allegations about GNT and/or providing misleading information to the media prior to any conclusive adjudication of any of the matters in dispute," Denic wrote in response to questions from the Journal, speaking on behalf of Groza and Naumenko. He said GNT has offered to provide audited details of the inventory, but the creditors have refused to engage -- a claim the creditors deny." [1]

1. World News: Corruption Concerns Arise in Grain Dispute. Talley, Ian. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 06 June 2023: A.7.