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Prosecutors block accounts of steel giant ArcelorMittal in tax evasion probe

by Artur Korniienko January 6, 2022 11:28 AM 2 min read
The production process at ArcelorMittal Kryvyi Rih, Ukraine’s largest steel mill owned by Luxembourg-based ArcelorMittal, Ukraine's biggest foreign investor. The company accused the Prosecutor General’s Office of unlawfully blocking its bank accounts on Jan. 4, 2022. (ArcelorMittal)
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The standoff between the Prosecutor General's Office and ArcelorMittal Kryvyi Rih, the country's largest steel mill, reached new heights on Jan. 4 when the company's bank accounts were frozen by the state.

According to the Prosecutor General's Office, the non-cash funds of the steel mill were frozen as part of a tax evasion probe launched in November.

The Ukrainian steel mill, owned by Luxembourg based ArcelorMittal, called the investigation "political pressure." The mill is located in the southeast city of Kryvyi Rih – President Volodymyr Zelensky's hometown.

On Nov. 17, the Prosecutor General's Office and Ukraine’s Security Service charged the financial director of ArcelorMittal Kryvyi Rih with tax evasion. The law enforcement agencies didn't publish the suspect's name, however, Ukrainian media reported that CFO Serhiy Plychko is the one being charged in the case.

According to the investigation, between 2017 and 2019, the financial director and the company’s chief accountant forged the sum received from the extraction of minerals, thus not paying Hr 2.24 billion ($82 million) in rent fees.

The frozen sum is now considered case evidence, according to the prosecution.

The company says that these accusations are baseless and allege “political pressure on the largest foreign investor.”

ArcelorMittal Kryvyi Rih accused the Prosecutor General's Office of unlawfully blocking the company’s funds that will paralyze the mill’s future operations.

"The Office has taken aggressive measures against the company, which are against the law," Artem Filipyev, deputy director of the company, said in a statement on Jan. 5.

The General Prosecutor's Office said on Jan. 5 that it arrested funds on accounts that weren't used to pay salaries.

However, ArcelorMittal Kryvyi Rih accused the prosecutors of lying in a Jan. 6 letter to the Kyiv Independent. The company said that one of its frozen accounts was used for payroll. The company also said that the account freeze will endanger more than 20,000 of the company’s employees, who won't receive their salaries on time.

According to the company, the Prosecutor General's Office demanded that Ukrainian banks comply with the decision of the Shevchenkivskyi District Court in Kyiv from Nov. 30 regarding the seizure of its accounts.

However, the company argues that there are no legal grounds to block the accounts since it wasn’t found guilty by the court and the company itself isn’t officially charged in the tax evasion case.

According to ArcelorMittal Kryvyi Rih, the same goes for the two other cases involving the company that are currently pending in courts.

After Zelensky criticized the company for failing to decrease its environmental damage in his native city in 2019, the Security Service probed the company.

According to the Ministry of Environmental Protection and Natural Resources, ArcelorMittal Kryvyi Rih is the second biggest polluter in the country. In September, the State Environmental Inspectorate fined the company $16.5 million for environmental damage, which was challenged by the company in court.

In a separate case, the Kyiv District Administrative Court rejected a civil lawsuit against ArcelorMittal Kryvyi Rih filed by the State Tax Service on Nov. 4. The company filed an appeal with the tax authorities to drop all charges against it.

The company, led by Indian steel magnate Lakshmi Mittal, bought the mill for $4.8 billion after it was put up for re-privatization in 2005, becoming the country’s most expensive privatized asset to date.

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