Ukraine

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6:23 AM Saturday, November 18, 2017
Government
In the Cathedral's Shadow: Forcible Takeover of Sofiyskiy Fitness Club
A corporate raid by musclemen revives foreigners' worries about property rights in Ukraine
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KYIV -- In a corporate raid reminiscent of Ukraine under former President Viktor Yanukovych, the Sofiyskiy Fitness Club in central Kyiv has been forcefully taken over by a company with links to the Popular Front, a small but powerful political party.

On May 25 police officers, bodyguards and masked titushki, or ‘sportsmen’ for hire, entered the club, an elite gym and spa whose members include Mayor Vitali Klitschko, a three-time world heavyweight boxing champion. Threatening physical harm, the eviction team ordered dozens of patrons and 65 staff members to leave the premises, often not allowing them to collect their belongings.

The high profile seizure, next door to the city’s landmark Saint Sophia's Cathedral, comes as Ukraine seeks to convince skeptical foreign investors that the country is shedding its longstanding reputation as a place where property rights fall victim to thuggery and judicial sleight of hand.

After seizing the fitness club, the occupiers plastered posters on street windows, 'warning' passersby about the mother-daughter owners. (Photo: James Brooke)

At the fitness club, private guards were stationed at the entrances. Club property -- computer hard drives, safes, accounting documents, and work records -- were removed. Fitness equipment worth tens of thousands of dollars was carted out of the club and left in a back alley. After taking over the top floors of the club, the titushki welded metal bars in stairwells to block access.

The raid stems from a dispute over who owns the club, which stands on Rylskyi Lane, a street of expensive fashion boutiques.

The gym was built and operated for 13 years by Iryna Ryabchenko, a prominent Kyiv businesswoman. Her suspicions of financial foul play started last September when the creditor on one of the club’s mortgages changed.

Behind the fitness club, in a patio terrace adjoining Saint Sophia Cathedral grounds, Iryna Ryabchenko and her mother, also Iryna, have set up an improvised outdoor protest camp, talking to reporters and preparing legal appeals on computers and printers powered by long extension cords. (Photo: James Brooke)

The creditor on that mortgage changed three more times between September and December 2016, leaving the holder as BF Group. Two years ago, BF beat five other contenders to win a 10-year contract to lease the 2,000 square meter duty free area at Boryspil International Airport.

The company is owned by Artur Grants, right hand to Andriy Ivanchuk, a leader of the Popular Front political party and a close friend of former Prime Minister Arseniy Yatsenuk. By law, Ryabchenko should have been notified of these changes. She says she never was.

On December 30, BF Group informed Ryabchenko that Sofiyskiy had defaulted on a $15 million loan for which the club building was listed as collateral. Ryabchenko says that the debt does not exist. On December 31, a group of about 20 BF Group representatives entered the fitness club and ordered everyone else to leave, installing their own security at the club’s multiple entrances.

On January 13, 2017 a court ruled that BF Group did not have the right to use Sofiyskiy’s premises. In response, the BF Group vacated the club. On May 24, a Ukrainian court ruled that BF Group had illegally duplicated the mortgage agreement with which they were claiming ownership of Sofiyskiy, rendering any further action taken by them against the club unlawful. Despite that ruling, on the following day, the BF Group seized the club for a second time.

A fitness club worker carries equipment from club to the terrace in a race against the rain (Photo: Mark Satter)

Popular Front HQ?

According to Ryabchenko, a representative of BF Group told her that they intended to convert the club into the Popular Front’s party headquarters. BF Group CEO Yuri Hryshchenko, who used to work as an assistant to Ivanchuk, called the idea “absurd.”

Ivanchuk took to Facebook to express his position, saying he intends to sue Ryabchenko for slander.

“Soon I will send a petition to the court to protect my honor and reputation and will demand an apology and the retraction of the false claims,” he wrote. “She will have the honor of speaking to me for the first time in court.”

The eviction team stacked tens of thousands of dollars worth of exercise equipment outdoors. (Photo: Mark Satter)

Foreigners Skeptical

Michael Willard, American owner of The Willard Group public relations firm and a long-time friend of Ryabchenko, described the situation around the Sofiyskiy Club as “a case of apparent over-dogs with the help of authorities attempting to squash a smaller player.”

“What it boils down to is a power grab by someone larger with more connections,” said Willard, who calls the takeover as a throwback to Ukraine’s ‘corporate raiding’ days.

Bate C. Toms, a lawyer who chairs the British-Ukrainian Chamber of Commerce, is taking on the case as part of the Chamber's campaign to eliminate illegal corporate raiding in Ukraine. He believes that corporate raiding, as in the case of Sofiyskiy, seriously damages the foreign investment climate here.

“On the face of it, the fitness center had the better legal arguments,” said Toms, an American who is managing partner of B.C. Toms & Co., a multinational law firm here. “In any event, there is nothing I have seen that would warrant the claimants coming into the fitness center, much less bringing troops, throwing everyone into the street, throwing equipment into the street, and soldering shut the doors and windows.”

“It looks like a classic corporate raider action inconsistent with Ukraine’s status as a modern democracy,” concluded Toms.


For comments and story ideas, please contact UBJ Correspondent Mark Satter at marksatter@theubj.com

Posted June 23, 2017

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