Offshore web or the master class from Serhii Rybalka

Article published on June 12, 2017
Article published on June 12, 2017

Financial and trade manipulation: Head of the parliamentary committee on finance and banking policy, people's deputy of Ukraine Serhiy Rybalko, the results of journalistic research UNN in cooperation with colleagues from the European Journalists Association, uses schemes of money laundering and tax evasion, and also violates the trade legislation.

Subject matter of offshores became some of the most resonant in the world’s information space. Of course, the results of the investigation of foreign journalists opened the eyes of the Ukrainians to the “schemes” of separate government leaders. But the “second outbreak” of analytical texts in the media turned out to be way more interesting. Journalists got interested in «smaller fish»: heads of certain jurisdictions, heads of state-owned enterprises and, of course, people's deputies of Ukraine.

Editors of UNN in their turn together with colleagues from the European Journalists Association conducted the analysis of the actions, which were performed regarding the assets of the family business of the people’s deputy of Ukraine, head of the committee on fiscal policy and banking business.

Let us remind that earlier this politician has repeatedly resorted to insulting journalists of the agency accusing UNN in performance of ordered provocations and threatened some of our employees.

In response to the groundless accusations and threats, journalists of UNN recorded a video message to Serhii Rybalka, in which they publicly stated that they are not scared of his threats and that they intend to objectively cover his work as the people's deputy in future as well.

We have kept our word. And with the support of colleagues from the European Association of Journalists, which strongly helped us in the preparation of the stated below material, we publish the facts of the existence of the offshore family business of the politician.

Readers will also be able to make sure that the companies, which are controlled by the family of Serhii Rybalka, are not only in every way avoiding paying taxes to the state treasury, but also run functioning business in Russia, while having a private factory in Lipetsk!

So….

Serhii Rybalka is a representative of the Radical Party (RP) of Oleh Liashko. The head of the party has repeatedly called him one of the key sponsors of the RP. At the same time Oleh Liashko proudly talked about this party member noting that the latter creates job opportunities and thus makes a strong contribution to the development of the Ukrainian economy.

However, it turned out that Serhii Rybalka worries about the domestic economy much less than about his wallet.

Indeed, the business of the S.Group corporation, which was created by the politician, thrives. Companies produce household goods as well as a wide range of snacks (including such popular brands as Semki, "Macho", "Kozatska rozvaha" and so on). At the time of the parliamentary cadence Serhii Rybalka granted the rights to manage the company to his family, nominating his brother Dmytro for a post of the Chairman of the Board of Directors.

As we found out during the journalistic investigation, corporations of the S.Group registered all their trademarks for the foreign companies. Thus, in fact the corporation of the politician got an opportunity to move out currency assets abroad "from scratch" in the form of payment of license royalties for the use of brands on the basis of the concluded licensing agreements.

Thus, only in 2014 S.Group reported to the state tax inspectorate that it paid not less than 25 mln. hryvnias of such license royalties for the use of own trademarks. Experts in such movements of currencies don’t see anything surprising naming the scheme used in this case as the one of the Top-3 most famous schemes.

«The most popular scheme for moving out foreign currency funds abroad is overshooting of import prices and undercutting of export prices. This is the most popular scheme! Payment of interest on loans of foreign companies is the second top-scheme. And the third top-scheme is the payment of royalties», - said Eric Naiman, who is a financial analyst and a managing partner of the Capital Times company.

This whole situation affects the reputation of the politician not in the best way, in recent years his reputation has been hit hard due to the fact that as the head of the parliamentary committee on fiscal policy and banking business he saves his own money exclusively in cash (according to the electronic declaration). Moreover, here we have such an offshore scandal.

But it turned out that such a common moving of money out abroad and schemes of tax evasion in his own country are just the tip of the iceberg. Much more serious things may be undiscovered, for example the creation of the semi-legal conglomerate stealing money from the country and working for the aggressor country among other countries.

Together with colleagues from the European Association of Journalists, we analyzed schemes of Serhii Rybalka in the context of the three most popular trademarks of S.Group

Red / Red City

Enterprises of the S.Group company have been making products under the Red (roasted pistachios) trademark for many years. As it has been said before, the holding company doesn’t own the brand itself. Approximately since 2015 it has been owned by the Cyprus company named Dianatus Management Limited, while other offshore companies were noted as the owners before. And all this time the Ukrainian manufacturer has been faithfully paying royalties to foreign companies.

«Speaking about moving money out abroad, I guess that the scheme of fictitious import contracts and royalties is the most effective and it has been used», - Oleh Ustenko, who is the executive director of the International Blazer Fund, sees nothing strange in such a scheme.

However, as we have already noted, moving out currency funds is not the worst detail of frauds of the S.Group. After all, completely identical products were produced on the territory of the Russian Federation at the same time, but under the Red City brand. There are no doubt that “Red City” is the twin brother of “Red”. Not only the logo, packaging and product range are the same, but also advertising campaigns, ways of sales promotion.

However, the fate of the Russian brand Red City is much more interesting. For a long time the right to the brand belonged to the Soldex Limited company registered in the British Virgin Islands. Moreover, this offshore has been gaining popularity among local entrepreneurs in recent years.

«I guess that Ukrainian businessmen have started to actively use the services of the British Virgin Islands. Cyprus was the champion before, but now, judging by the way the directions of foreign investment flows changed, businessmen stopped using the territory of Cyprus and started actively using British Virgin Islands. These directions are really the most popular among the Ukrainian "moneybags"», - said Oleh Ustenko. Vitalii Shapran, who is a member of the Ukrainian group of financial analysts and a deputy director of “Expert-Rating”, agrees with such a thought.

 «Virgin, Pontine Islands, which are registered for the Netherlands, also the Isle of Man – these places are for the richest businessmen. In general, the islands of the Pacific Region are the most popular among the Ukrainian businessmen. They are a lot of such islands», - he said.

In 2011 from such region Soldex Limited granted the rights for the use of the trademark in Russian Federation through a license agreement to Archimboldo Limited, which is a Cyprian company. The corresponding agreement was registered in the Russian State Register on 10.08.2011. A year later, the Cyprian offshore company found a sub-licensee, who started producing pistachios in Russian Federation. We are talking about OOO "Mega Trade", which in its turn belongs to the Cyprian company named Stertar Snacks Limited.

The scheme worked until 2015, when Soldex Limited transferred the exclusive rights to the Red City trademark to the Lagrion Limited company. Please remember this name, we will repeatedly say it. Then, using the same scheme the brand was transferred to the Dianatus Management Limited company – it is the same company that owns the Ukrainian trademark named Red since 2015. Dianatus Management Limited concluded a new licensing agreement with "Mega Trade" company for the production of Red City in Russia.

This scheme is demonstrated on the figure 1.

By the way, Lagrion Limited, which became the transitional owner of Russia's brand named Red City has its own representative in Ukraine. Several media sources indicate that it is Oleh Kryvohatko. By a strange coincidence he is also a relative of Serhii Rybalka maternally. It is also quite common for the domestic businesses trying to hide their profits using offshores.

«There is a great risk that the business partner can simply “ditch” his business partner. So this thing is risky. That’s why businessmen often register businesses and property in the name of their relatives, children», - said Vadym Karasiov, director of the Institute for Global Strategies.

For the sake of reliability, Serhii Rybalko nominated his relative and business partner Oleh Kryvohatko for a post of the advising assistant as the people’s deputy of Ukraine .

Fig.1 Approximate scheme of transfer of rights for the Red City and Red brands

Macho / MachoHit

Similarly, there is no doubt the Ukrainian brand named “Macho” produced by S.Group  and Russian brand named «Machohit» are “twins”. And in this case the thing is not that the brands are very similar. Ukrainian company named OOO “Snack Export” was the initial owner of the “Russian” trademark according to the information from the Federal Service for Intellectual Property, Patents and Trademarks of the Russian Federation. This company is not only a part of the S.Group structure, but it is also managed by the father of Serhii Rybalka.

The path of «Machohit» also turned out to be very bandy. The brand had been owned by the Ukrainians for almost five years, but in 2011 it was completely transferred to the Soldex Limited company, which only in a few months transferred the right to use the trademark in Russian Federation to the Archimboldo Limited company. The scheme is completely similar to the one that was used in case of the Red City. It is not surprisingly, that OOO “Mega Trade” obtained a sub-license very soon. The difference is that another company showed up this time, a new enterprise called “Snack-Group” (owned by the Cyprian company named Asl Agrostart Limited) started selling the products of the brand. It is a very important fact as for our subsequent conclusions, the transfers of rights for trademarks are demonstrated on the figure 2.

Fig.2 Approximate scheme of transfer of rights for the Macho and MachoHit brands

Semki

Adventures of Semki brand are not less interesting, it is the flagship trademark of S.Group. Back in 2006 Serhii Rybalka acting as the applicant registered it in the State Intellectual Property Service of Ukraine in the name of the Cyprian company named Lagrion Limited. In 2015 this offshore company was replaced by another one called Dianatus Management Limited, in the name of which many brands created by the fellow Dnipro citizen were re-registered. Such a complex scheme allows to produce the brand of seeds, which was actually created by Serhii Rybalka, using the facilities of S.Group in our country, using Ukrainian raw materials, using Ukrainian workers, but moving out money as royalties for the use of the trademark to Cyprus.

By the way, companies declined to work with Lagrion Limited while working with Semki brand in other countries. According to the inquiry received in the Ministry of Justice of Israel, Soldex Limited from the British Virgin Islands became the owner of the trademark in this country in May 2015 instead of the Cyprian offshore company.

The other fact is also very demonstrative. The politician didn’t deny that he had something to do with Semki brand in Russia. He was registered as the rightholder of this brand in the Federal Service for Intellectual Property, Patents and Trademarks.

OOO “Mega Trade” has been manufacturing products in Russia on the basis of the license agreement concluded with Serhii Rybalka and dated 2009. This company was mentioned in this text due to its cooperation with the businessman from Dnipro city regarding other brands. Bu when we were examining the extract from the document of the Federal Service for Intellectual Property we noticed another interesting detail.

It turns out that Serhii Rybalka is not only moving out funds from the country to the controlled offshore companies, but also runs business in the Russian Federation.

At this moment we would like to recall the speech of Oleh Liashko, who is the head of the party of which Oleh Rybalka is a member. In this speech Oleh Liashko asked the president of Ukraine Petro Poroshenko not to sponsor the economy of the aggressor country by means of the factory in Lipetsk. The politician even asked the president to present this factory as a gift to the Russian province .

So, the facilities of the Russian company named OOO “Mega Trade”, which is controlled by Serhii Rybalka through a number of offshore companies, are located in Lipetsk! Here is the address of the facilities as well: 38 Pestelia alley, Lipetsk city, Lipetsk oblast, Russia, 398042. At this address you can also find the «SNACK-GROUP» company, which we mentioned before, its facilities are used to provide products of the modified Ukrainian brands of Serhii Rybalka on the Russian market .

By the way, this is how they describe themselves: «SNACK GROUP Company is one of the major companies producing snacks in the Eastern Europe, it is the undisputed leader of the Central, Southern and Volga Federal Districts of Russia.

Main activity areas of the company production of snack products under own brands, production of Private Label and distribution of goods in Russia. Facilities and the central office of the SNACK GROUP company are located in the city of Lipetsk.

Network

We examined the transfer of each trademark between the companies so precisely for a reason. After all, these all are not some separate cases. If we connect the dots not only of the scheme of transfer of rights, but also the legal addresses of the named companies, then it will look like we deal with a unified conglomerate. Thus, three foreign companies, which were mentioned in this txt the most often, are located not just in the same city (Nicosia, capital of Cyprus) and not just in the same business center (Tlais Tower), but in the same office № 103 on the 3 floor. This is the owner of all the brands used in Ukraine under Dianatus Management Limited, which is the holding of Serhii Rybalka. This is the same company named Lagrion Limited that transferred the rights to Semki and Red City brands. It is the same company named Archimboldo Limited, which was involved in the other transfers of rights.

We would like tell more details about the latter company. The thing is, this company has been registered in this building not for a long time. Previously it was located at such address: Digeni Akrita, 8, Flat 303 (also in Kicosia). Stertar Snacks Limited and Asl Agrostart Limited companies owning Russian companies named ООО «Mega Trade» and «Snack-Group» accordingly were located before and are located now at the same address, in the same office.

«British Virgin Islands and Cyprus still remain the most popular offshores to move out currency funds to from Ukraine. Despite the fact that, as you may recall, accounts were blocked in Cyprus. I would say that Cyprus is the most popular place for moving money out as of today, because the most favorable terms of taxation are in effect there», - that’s how Eric Naiman explains the «popularity» of the island.

If we make a graphic drawing of transfer of documents concerning snack trademarks between these two buildings, then we might get a pretty large web (see figure 3).

It is very convenient to hide taxes and the fact of work for the markets of the aggressor country in such a mess. Actually, that’s what a businessman has to do to create a business using offshores. But all the secrets are disclosed sooner or later. Not only the journalists and public, but also Procurator General of Ukraine got interested in the details of how Serhii Rybalka runs his business.

On Monday, January 23, 2017 it became known that the Procurator General of Ukraine requested the State Fiscal Service of Ukraine to check the tax payments made by the people's deputy of Ukraine Serhii Rybalka, who declared more than 49 million hryvnias in cash and in bank accounts, despite the fact that during 1999-2015 he paid taxes only for 16 million hryvnias of income.

Fig.3 Transfer of rights for the snack brands between two buildings in Cyprus