17:23 06.11.2017

Law firm representing Poroshenko claims manipulation of facts in journalistic investigation into Roshen's transfer to blind trust

6 min read
Law firm representing Poroshenko claims manipulation of facts in journalistic investigation into Roshen's transfer to blind trust

The Avellum law firm, representing the interests of Ukrainian President Petro Poroshenko, has claimed that the materials by Slidstvo.Info regarding the alleged violation of the law during the transfer of Roshen to a blind trust contain manipulative statements that do not objectively reflect the firm's position.

"Indeed, as stated in the materials cited by Slidstvo.Info, the priority task for the development of an international holding structure for Roshen Corporation was to ensure the sale of Roshen Corporation, should this be possible in accordance with commercial conditions. The structure, which was discussed with Appleby, has signs of preparing Roshen Corporation for sale," Avellum said in a statement on Monday.

At the same time, the company said that certain ways of selling Roshen Corporation, which were considered, could not be implemented without an international holding structure. In particular, it concerns the implementation of Roshen's initial public offering (IPO) on a foreign exchange or the sale of an international public company. Given the size of this transaction, it was these methods that were most likely.

"We provided information about this in our response to the request of Slidstvo.Info journalists on October 27, 2017," the law firm said.

"We emphasize that the international holding structure designed to complete the transaction for the sale of Roshen had to avoid double taxation in order to ensure that all taxes were paid in full in Ukraine and not abroad. In the event of Roshen Corporation's sale, all the funds would be transferred to the ultimate owner in Ukraine, declared and taxes from them would be paid, just like Roshen Corporation pays today and will pay in future all taxes in Ukraine. This is what we said in the response to Slidstvo.Info journalists on October 27, 2017. Journalists completely ignored this important information and did not cover it in the story. We believe that this fact, as well as the conclusion and title of the article on the purpose of creating the structure, is manipulative and biased," Avellum said.

The company noted that since it was impossible to sell Roshen Corporation due to commercial circumstances, it was decided to transfer the corporation to a blind trust in accordance with international standards, and the "manager of the blind trust confirmed that the trust meets international standards."

"In connection with the transfer of Roshen Corporation to the trust management of a respectable international banking group Rothschild, Poroshenko does not have the authority to control the process of searching for buyers or the negotiation process for the sale of Roshen Corporation or any of its parts. This question fully falls within the competence and authority of Rothschild," the law firm added.

At the same time, the company draws attention to the fact that without the creation of an international holding structure, the transfer of Roshen Corporation to a blind trust would be impossible or legally defective. Ukraine is not a party to the 1985 Hague Convention on the law applicable to trusts and their recognition, "therefore, the transfer of Roshen Corporation to a trust without the creation of an international corporate structure would be null and void from the point of view of Ukrainian law."

"The companies of the international holding structure before Roshen Corporation's transfer to the blind trust did not have bank accounts. Therefore, any allegations of violation of currency legislation or the transfer of cash from Ukraine when creating an international holding structure are groundless inventions," Avellum said.

In addition, the law firm noted that the refusal of the Appleby law firm from participating in the project was related precisely to Russian aggression against Ukraine and Poroshenko's readiness to give a tough response to the illegal actions of Russian military units.

"Such a decision taken by Appleby cannot be regarded as evidence of reservations about the transaction as such. Avellum has provided legal services for Roshen Corporation since 2013, and we have no reservations regarding the representation of Roshen, Petro Oleksiyovych Poroshenko or the manager of the blind trust, especially given the transparency of the structure, compliance with all legislative requirements and excellent business reputation of our clients," the law firm said.

Roshen Corporation is one of the top 30 largest confectionery manufacturers in the world. It includes confectionery factories in Kyiv, Kremenchuk and Vinnytsia, and the Vinnytsia Dairy Plant in Ukraine; as well as the Klaipeda Confectionery Factory in Lithuania and the BonbonettiChoco factory in Hungary. The Lipetsk factory in Russia stopped production on April 1, 2017

According to the contract signed by President Petro Poroshenko in January 2016, he transferred his 85% stake in the corporation to the independent blind trust of Rothschild Trust. The bank managing the trust also has a four-year power of attorney to negotiate the sale of assets. Roshen President Viacheslav Moskalevsky owns 13% through the Kondyterinvest investment fund, and four other top managers own 0.5% each.

On November 5, 2017, the Organized Crime and Corruption Reporting Project (OCCRP) and Slidstvo.Info published a journalistic investigation, according to which the goal of restructuring the Roshen confectionary corporation and the creation of offshore companies was to minimize taxes, rather than transfer the company to a blind trust.

"Apparently, offshore firms were created precisely in order to avoid taxation in case of sale or profit," the investigators said.

According to the data obtained by journalists, Roshen is currently owned by a Dutch company. According to the documents that German newspaper Suddeutsche Zeitung received and transmitted to the networks of investigative journalists ICIJ and OCCRP, in June 2014 lawyers from Ukrainian law firm Avellum, which represents Poroshenko's interests, wrote a letter to Appleby lawyers from the Isle of Man in which Roshen's sale is considered as one of the possible options.

"The matter itself is extremely sensitive. The client's name is Petro Poroshenko. We are working on restructuring of his confectionary business (Roshen). In order to obtain access to international markets, we are going to establish a new holding company for the group in Luxembourg. Underneath will be a Dutch sub-holding, which will hold all operating companies. For tax purposes, there will be a Cypriot entity on top of the LuxCo, which will be owned by [the proposed] offshore company," reads the document.

Journalists recalled that Poroshenko explained the need to create an offshore structure solely by the need to transfer the confectionery business to a blind trust. According to lawyer Bogdan Borovyk, it does not follow from the letter that a trust was a purpose or option when building an offshore structure and that such a structure is not needed to transfer the management of the company to a blind trust.

"It does not follow from this letter that the sale was the only and major goal - it was an opportunity for the future... This structure is needed for selling in order to optimize the income from selling. I don't see the point for the trust itself in the construction of all these three companies," the lawyer said.

Poroshenko's lawyers, in turn, insist that they structured Roshen in such a way that all taxes are paid in Ukraine.


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