What’s wrong with Shevchenko’s case

The new Head of the NBU (the National Bank of Ukraine) Andrii Pyshnyi was successfully onboarded. He preserved all procedures and mechanisms of his predecessor Kyrylo Shevchenko and very carefully made the personnel rotation.  Journalist and blogger Serhiy Lyamets writes about it.

Now it’s time for the second stage, the reason, why, in my opinion he got this position. This article is the integral material based on the information received from the discussions with the representatives of banking community and beyond.

The first thing my interlocutors point out is that the Head of the Office of the President Andrii Yermak is a godfather to Pyshnyi’s children.  Meaning Pyshnyi is friend for the government and he can be trusted, which was not Shevchenko’s case. Dealing with Shevchenko required taking into account his interests and looking for compromises. Sometimes you even need to accept that the “outsider” might not be interested in some of the offers. Feel the difference.

The latest decision of High Anti-Corruption Court (HACC) on Kyrylo Shevchenko’s case once again confirms that his case is a political frame-up.

It turned out that finding out the details of the case and getting Shevchenko's testimony were of no importance for the NABU (National Anti-Corruption Bureau of Ukraine) and the SAP (Specialized Anti-Corruption Prosecutor's Office). It is already clear that the former NBU governor is abroad and is not going to return to Ukraine. But that’s what they needed. Nobody was going to investigate. The task was to destroy Shevchenko’s reputation and keep him abroad. In law enforcement it is called "bring to a halt".

In this way, a persecuted person can live abroad for years. Meanwhile, law enforcement officers will keep telling him to come back to Ukraine and defend himself here if he feels innocent. It sounds good, but that's not the point. Even if Shevchenko does take the risk of coming, that will not make things move faster or become more transparent. The law enforcement, viz the judicial system in Ukraine, is not a mechanism of justice, but a part of state administration. There is no justice in a political case. Most likely, Shevchenko's case would have been turned into a media show lasting many months, as there is no need to investigate it.

This is a classic political case. Usually, political cases are created to knock out a politician or a particularly powerful official. Another possible reason is a personal conflict. Speaking of which, it’s been a while since we found out that Shevchenko is in conflict with Andrii Yermak. But I am confident that initial purpose was to push Shevchenko out of the NBU chairmanship. Why? In order to appoint Andrii Pyshnyi, who is Yermak's comfortable friend.

Meanwhile, they planned to cleanse the management of the NBU and state-owned banks of Shevchenko's people in order to appoint their own people instead. This process is now known under the slogan of "oschadization", named after Oschadbank, once headed by Andrii Pyshnyi. Top managers of Oschadbank have already been recruited to the NBU Board and Council, and are now waiting for the appointment to senior positions in state-owned banks.

That's the reason why it was so important not to investigate Shevchenko's case, but to do a large-scale black PR campaign against him. And it had to be done "with headroom", otherwise they would have to justify firing competent "other" managers in order to appoint "ours", albeit competent ones. The point, of course, is not qualifications or conscientious performance of duties. They just need "friends" who will silently fulfill tasks and not set their own.

To accomplish this mission quickly and powerfully, we need a "revolutionary situation". Then no one will notice the savings and the lack of fair competitions. Then no one will raise questions about the activities of the new NBU leadership. Because the public's attention will be focused on the "bad paperwork," against which the new head looks like a pure angel of virtue. This is a typical political technology. But, as they say, the oldest technologies work best when everyone knows about them.

All this explains why this technology was chosen.

The NBU governor is particularly protected by law. Therefore, the best way to dismiss him before the official term expires is to force him to write a letter of his own free will. Traditionally, the best way to do this is through a criminal case or a high-profile media scandal. It feels like living in the USSR under Stalin, where people were prosecuted for opposing something.

It was not easy to find flaws in Shevchenko's work as head of the NBU, as he was a professional manager. He performed his duties quite well.

We would have to analyze his professionalism, which is difficult, time-consuming, and unproductive. It is confirmed by reputable sources, which I will quote at the end of this article.

It was also extremely difficult to find corruption schemes in his actions. We would have to question, say, the refinancing for the Big Construction project. Which is politically wise inappropriate and even dangerous, as it would cast a shadow over the President, the Head of his office, and the “Servant of the People”. There is also another question of why Shevchenko was appointed Head of the NBU by a majority vote in the Verkhovna Rada (Ukrainian Parliament) when there was an open case against him.

So we had to justify it in some other way. They say that the Head of the NBU is a professional and good man, but he has a small problem with the law that we couldn’t know about. That's where a rather ordinary case, which is four (!) years old and could have been investigated long ago (if they wanted to), came in handy. 

Frankly, it would have been difficult to conduct a trial based on the results of the investigation. Shevchenko's lawyers would probably have reminded him that all of Ukrgasbank's financial transactions were confirmed by forensic Baker McKenzie and Deloitte Touche Tohmatsu, as well as a separate diagnostic examination by PwC and the State Audit Service. We would like to remind you of the loan agreement signed between Ukrgasbank and IFC with the possibility of conversion into the bank's share capital.

So, it would be a rather inconvenient and difficult thing to implement. But, I must admit, a long and stinky one. I think that's why Shevchenko decided to leave Ukraine.

And it was a good choice. It is a very convenient option, as the case does not even have to make its way to the courtroom. As soon as Shevchenko was allowed to cross the border, they filed a lawsuit to impose a preventive measure. They say that the NABU is asking to extend the investigation for a year due to the need for additional investigation. In 4 years they have failed to obtain evidence, but managed to  announce suspicion and wanted list.

Typical case we witness now. Stale mate. To investigate, we need to bring Shevchenko to Ukraine. And since he is not coming, it is impossible to continue investigation. This is a chicken and egg argument that will last at least a year.

Shevchenko says he wants to communicate via video? Who needs it?

So, the attempt to present the NABU case as something separate is a rather funny attempt. On the same day (October 6, 2022), the suspicion was served, and the Verkhovna Rada voted to dismiss him. Coincidence? Do you believe it?

The search is also an outright fake. Shevchenko constantly informs the NABU and the SAP about his whereabouts. I think that is why journalists were able to find him easily in Vienna.

A scandal is like a fire - it needs to be kept burning for a while. Moreover, not all of Oschadbank's managers have yet to take up senior positions. That is why, in my opinion, the scandal around Ukrgasbank has been escalating lately. First, there were many inspections at the same time and allegedly 3,000 violations. Now there is a scandal about alleged misdirection in servicing the gambling business. Please note that gambling financial flows are serviced by about ten banks, but for some reason we know only one. Why? Because they want us to know this information. Because Ukrgasbank = Shevchenko and his people.

Pay attention. Again, no facts, just hints. But this is enough to get things done. The Head of Ukrgasbank has already resigned, and Anton Tiutiun from Oschadbank is expected to take his place (guess where?).

And now the obvious conclusion. Does Kyrylo Shevchenko have a chance of getting political asylum in another country? Of course he does. What he is going through is a typical political case, and the Head of the Office of the President has his own interest there.

In addition to this we have a faked search, an inappropriate preventive measure, a one-sided position of the court, a conflict with Yermak, an appointment of the friend of the Head of the Office of the President, and a systematic hunt for people from Shevchenko's team.

The opinion of my interlocutors is that there is no justice, but a persecution in this case. Though the case is “brought to a halt” it still remains political persecution. This is quite a common occurrence in Ukraine, where you are lucky not to get into jail.

COMMENTS:

Anna Derevianko, Executive Director of the European Business Association.

The National Bank is a real good job. It is a feat to have kept the hryvnia in relative order in the conditions in which the country has found itself.

Even in other countries where there is no war, inflation is higher: in the Baltic States, it is 30%, and in peace Europe, it is between 4 and 12%.

Facing inflation during a full-scale war and having a relatively stable national currency is the result of the coordinated work of the National Bank and other authorities. Looking back at the previous year, we can say that the NBU did very well all things considered. Kyrylo Shevchenko, made his contribution, of course, but he came on a solid foundation prepared by the previous team.

Nina Yuzhanina, MP

I was worried when Kyrylo Shevchenko was appointed. I cannot say that everything is fine. There are some comments, but they are related to the NBU's operations. The NBU managed to maintain financial stability during the Covid period and during the large-scale war.

I don't know all the details of how decisions were made during the war, but I'm sure he had to make incredibly difficult decisions and managed to maintain stability during the war. The fact that Kyrylo Shevchenko did not agree to issue hryvnia had a significant impact on the hryvnia strengthening, and [the National Bank] managed to keep inflation at 25-30%. We have a vivid example of Turkiye, which didn’t perform sufficient calculations and got inflation of up to 100%.

He has an understanding of the banking system itself. As an experienced specialist, he did not break it to suit the vision of politicians and authorities. He clearly understood how the banking system should work and knew what he should or shouldn't do to launch lending to the real economy.

Perhaps he did his job quietly, spoke little about his achievements and victories, and simply did his job as a manager.

The government is trying to influence the regulator's work in a very populist way. It allows itself to issue significant  amount of money, provides populist loans to support its electorate, even though the banking system cannot provide such value to real business. The government writes off debts without any specific procedures and creates a widespread belief that it is possible not to pay interest and loans to banks at all - the war will write off everything - and not to be afraid of the banking system. For example, 5-7-9% is a populist program. If the average interest rate is 11%, how do we cover these costs? Did they ask whether there are funds in the budget for this program?

Cases opened by the NABU cannot be used to put pressure on officials, and the authorities cannot use them, especially against people like the Head of the Central Bank. But here is a vivid example. In spite of everything, the NABU reopened an old case against Shevchenko related to his work at Ukrgasbank, viz for paying for the services for attracting bank clients. This is a common banking practice of paying commissions. When I  used to be an auditor, I saw this often. I think every bank makes such payments.

If it was so easy to find it out, then where were they all these years? I trusted the NABU. This case can be investigated very quickly if there were front men or money laundering. Taking into the account the fact that this is a simple issue that did not require to be researched and investigated for a very long time, we can conclude that this case was used specifically to get him fired and deprive him of the opportunity to stay in Ukraine at all.

In fact, time will show what the new Head of the NBU will do, how he will implement the instructions. These first months of [Andrii] Pyshnyi's work do not say anything - he has left the entire working system at the same level, with the same approaches as before.

This case undermines the professionalism of our law enforcement agencies, because audit companies such as Deloitte (which audited Ukrgasbank) describe even the smallest transactions in the notes to their audit reports if the doubts may rise. This case is likely to fall apart in court, like most cases prepared by NABU unless there is some political will to carry out a demonstrative punishment.

Taking into the account the actions of the authorities, Pyshnyi's appointment is clearly related to close acquaintance. I am not sure whether Mr. Pyshnyi will continue to follow the instructions of those to whom he is beholden. He has his own professional opinion.

Perhaps he will have more opportunities to prove his point of view to his patrons. And to prove that it is the right thing to do. I hope that he will be able to build a system in which, on the one hand, he will not lose his closeness to the patron, and on the other hand, he will do his job.

Oleh Hetman, Manager of the Banking Sector Reform Group, Reanimation Package of Reforms

We, as a think tank, and many other financial sector experts, assess this period of the NBU's work positively. The response to the military actions was particularly positive and adequate, including a timely increase in the key policy rate and very reasonable currency restrictions that were introduced to prevent a frenzy of foreign currency from leaving the country.

In our opinion, the NBU's work can be rated B+ on a 5-point scale. In other words, all the NBU's actions were appropriate and timely - except for certain points, in particular, the ban on the services of Ukrainian companies for war risk insurance. The NBU has banned this currency transaction, and I think that was wrong.

As experts, we are not ready to comment on political issues, so it is very difficult to determine which reason became the main one for his resignation and what was secondary. It was a set of factors, and it is difficult to determine which one was the key one.

Speaking of commissions, I can say this practice exists. But any practice may or may not have additional corruption factors. Only the investigation can determine this. We have the NABU, the SSU, the HACC. I propose to wait for at least an interim decision of these instances.

Taras Kozak, investment banker

The impact of the war was enormous. The fact that the NBU maintained the banking system and it did not collapse, that citizens were convinced of the reliability of this system, and that the payment system was always working is undoubtedly a merit of the NBU and Kyrylo Shevchenko as its chairman at that time.

Conflicts often arise between the government and the NBU due to different views on monetary policy, the exchange rate, the size of the discount rate, the bank's lending standards for the real sector, etc. This confrontation is normal, because the stability of the financial system often requires certain decisions that the government does not like. And whoever has more power can exert pressure.

I think there was some political pressure, just like it happened earlier with Smolii, Hontareva, and probably,  Pyshnyi. The point is that he is still new, there are certain agreements between the government and the Office.

Does the Office want to control Pyshnyi? Yes, it does. Does the Constitution allow it? No. So it's either an agreement or a conflict. We saw that there was a conflict between Smolii and Shevchenko. Not yet with Pyshnyi, but who knows what will happen next.

Serhii Fursa, investment banker

The NBU did a very good job over the past year - it has gone through the crisis period perfectly. The fact that we have seen macro-financial stability and the stability of the hryvnia is primarily due to the NBU. So this is a plus.

The negative part of Shevchenko’s period was the personnel scandals, when you come in and change everyone to suit you. This is a Soviet style of leadership.

He is accused of paying commissions for the sources. Is this a normal banking practice?  Unfortunately, we have a problem here - he paid and that looks like a corruption scheme. But this is a standard format in many banks, especially in state-owned ones. When we talk about Ukrgasbank, it mainly attracts funds from state-owned companies. And these state-owned companies will not lend money without commissions - they will simply withdraw it from your bank and go to another bank where they will get their "payoff". This is the practice.