By Thomas Rowley in London
The appointment of new officials at a scandal-ridden Ukrainian charity has prompted new questions over the fate of an unaccounted $33.5m in charitable funds given by London-listed iron ore miner Ferrexpo.
Ferrexpo first revealed that the funds – donated as part of a $110mn corporate social responsibility programme in Ukraine – could potentially have been misappropriated in 2019.
It was a scandal that hit the image of Ferrexpo, which is majority-owned by Ukrainian billionaire Kostiantyn Zhevago, hard. Its share price took a 30% hit as auditor Deloitte, and two independent directors, resigned amid the misappropriation probe into the company’s Ukrainian charity, Blooming Land, where millions of dollars went unaccounted for.
The company’s independent review committee later stated that “none of Ferrexpo's directors, management or employees have had any involvement in any possible misappropriation of funds”.
But in April 2023 a new management team took over Blooming Land after the previous trustee became a witness in a Ukrainian criminal investigation into the charity.
The new officials – a group of lawyers and civic activists based in the Ukrainian capital Kyiv – say they are trying to ascertain what really happened to the funds, and wish to return them to Ukraine for rehabilitating veterans of the country’s war with Russia.
But, the new officials allege, Ferrexpo has not engaged in this new effort to investigate what happened.
“We thought they – as a London-listed company – would react in a very different way. But in reality it was very disappointing,” said lawyer Volodymyr Volyanskyi, a member of Blooming Land’s new management.
This lack of engagement, Volyanskyi claims, is particularly concerning, as Ferrexpo had previously stated that Blooming Land’s previous management had failed to cooperate with both Deloitte and an independent review committee set up by the company.
“With the exception of a little bit of correspondence early in the forensic stage [the charity] have clammed up,” Zhevago, the company's chief exec at the time, told the Financial Times.
Blooming Land’s new management wrote to Ferrexpo in May 2023 with what they claim is new evidence of potential wrongdoing – the preliminary results of a forensic audit of the charity’s operations and accounts.
A representative of the new trustees also attempted to attend Ferrexpo’s annual general meeting (AGM) in London that month, buying several hundred shares in order to gain admission and present their findings – but they were not admitted by the company.
Lucio Genovese, Ferrexpo’s executive chair, initially wrote to ask for more detailed information regarding the new evidence, but did not engage further with Blooming Land after 1 July, 2023, aside from acknowledging receipt of the charity’s letters at the end of August 2023.
The new evidence sent to Ferrexpo included information regarding a potential fraud involving contracts for prosthetics and events supplied by related party companies in 2016-2017 – equipment, the new management at Blooming Land claims, which was never delivered.
Those contracts form part of an alleged pattern of suspicious transactions at Blooming Land which are currently the subject of an ongoing criminal investigation by Ukraine’s State Bureau of Investigations.
Ferrexpo, charity officials say, could have acted differently during the Deloitte audit and independent review process in 2018-2019.
Namely, Volyanskyi argues, the company could have compelled Blooming Land to produce the relevant documents that both the external and internal reviews had asked for; it could have contacted the related party companies that received the missing funds, but did not; and could have applied to Ukrainian law enforcement to become an aggrieved party to the investigation, but did not.
In another twist, Blooming Land’s original director at the time, Ihor Temchenko, claimed, via his legal representative, that he was not contacted by Ferrexpo’s independent review committee at all in 2019.
