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Latvian criminal police initiates criminal proceedings regarding illegal takeover implemented by NCH Capital in Ukraine

Pietiek.com, 09.08.2020.Print version
Following the illegal takeover in Ukraine worth tens of millions of euros experienced by LU Invest – a company owned by a member of the Latvian business family Paškausks – as implemented by US investment fund NCH Capital (previously known as New Century Holdings), Criminal proceedings have been initiated by the Office for the Prevention of Economic Crimes of the State Police's Central Criminal Police Office of Latvia.

The State Police is not disclosing any details, however, it has been made known that criminal proceedings have been initiated regarding possible fraud, abuse of authority and bribery enacted by nationals of Ukraine and other countries in order to take over the capital shares of the Ukrainian registered entity Golden Sunrise (Agro) Ltd.

 

No comments have so far been issued by neither entrepreneur Kārlis Cerbulis, who was initially involved in bringing the Latvian entrepreneurs together with the Ukrainian representatives of NCH Capital and developing the relationship, nor the Ukrainian or US representatives of NCH Capital. However, it is known that the case of issue is the desire of the US entrepreneurs to push the Latvian company out of the joint venture at a significantly lower share price than the company’s initial investment.

 

As previously reported, information disclosed by the Ukrainian authorities, which (just like the authorities in Latvia and the USA) are reviewing the facts, indicates that about 14 years ago, in late 2006, an agricultural company was founded in the country by offshore company Trittico Holding Limited owned by NCH Capital and Latvian joint stock company Dobeles dzirnavnieks.

 

However, less than a year later, Dobeles dzirnavnieks was replaced by another Latvian company – LU Invest owned by Vitauts Paškausks, and a month later, when the Latvian representative Valdis Muižnieks was appointed as the Director General of Golden Sunrise (Agro), he received 4% of the company’s shares.

 

Even with this 4%, the Latvian side was in the minority: the Cypriot offshore company Unagro Finance Limited, which had replaced Trittico Holding Limited, owned 50,01% of the shares, while LU Invest and Valdis Muižnieks together owned 49,99%. Yet the rights and obligations of the parties were rather strictly regulated, including the rights of the minority shareholders, such as that they were the ones to nominate the Director General of the company.

 

According to the Ukrainian authorities, already in 2010 the actions of NCH Capital in “optimising” various costs had started to cause some concern to the Latvian partners. The suspicious activity had mostly been related to two basic operations of the company – purchasing of raw material and sale of produced grain.

 

With time, these processes were increasingly taken over by the representatives of NCH Capital, thus effectively bypassing the official Director General of Golden Sunrise (Agro). Raw material was often purchased for inflated prices, while grain was sold for suspiciously low prices.


However, the information collected by Ukrainian authorities shows – this does not necessarily mean that the representatives of NCH Capital deliberately chose to incur losses. Quite the opposite, the NCH Capital representatives who controlled the supply of raw material and grain customers – offshore companies, had chosen to gain profit through those, rather than share it with their Latvian partners and Golden Sunrise (Agro).

 

According to unofficial sources, Ukrainian authorities have gained access to correspondence between Valdis Muižnieks and the CFO of an offshore company involved in the NCH Capital offshore chain, who clearly admits to the existence of this financial scheme and the fact that profit is being gained by the offshores in Cyprus, bypassing the Latvian partners, who are left with only losses.

 

The situation had become completely obvious in 2017-2018 when the possible goal of the NCH Capital representatives had been revealed – to not only gain extra profit through the offshores, but also to force the Latvian partners out of Golden Sunrise (Agro), purchasing their capital shares at the lowest possible price by taking advantage of the shareholders’ agreement and the pre-emptive rights contained therein.

 

This assumption was confirmed in late 2018, when objections voiced by LU Invest and Valdis Muižnieks as to never having received any dividends throughout the duration of the company’s existence, were met with an NCH Capital offer to buy the Latvian partners’ shares for 5 million dollars. Other offers followed, topping out at 8.5 million dollars. Meanwhile, the average annual profit of Golden Sunrise (Agro), which through the financial scheme had been moved to the offshores, had been approximately 9 million dollars, while the company’s actual value was over 70 million dollars.

 

The materials collected by Ukrainian authorities show that when these offers were rejected, NCH Capital representatives effectively implemented a takeover of the company. Despite the company by-laws stipulating that a shareholders’ meeting shall have consensus only if the owners of at least 60% of shares are present, in March of last year the representatives of NCH Capital managed to register a new Director General for Golden Sunrise (Agro) in the Ukrainian Enterprise Register thus removing Valdis Muižnieks from office, even though this decision was taken without the presence of the Latvian partners, thus with only 50,01% shares being represented.

 

According to the Ukrainian authorities, this illegal takeover was facilitated by finding an especially favourable place of registration, and as a result the Latvian entrepreneurs have lost both actual and official control over an agricultural company worth several tens of millions.

 

 






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