December 21, 2017 / 3:47 PM / a year ago

Ukraine finance minister wars with chief prosecutor over PrivatBank

KIEV (Reuters) - Ukrainian Finance Minister Oleksandr Danylyuk called on the general prosecutor to be sacked on Thursday as wrangling over the nationalisation of the country’s largest bank spilled out into the open.

FILE PHOTO - Ukraine's finance minister Oleksandr Danylyuk speaks to a Reuters journalist during an interview in London, Britain July 5, 2017. REUTERS/Hannah McKay

Danylyuk said General Prosecutor Yuriy Lutsenko had discredited himself and sabotaged the state’s efforts to claw back money from the former owners of PrivatBank by opening cases against the finance ministry, PrivatBank and the central bank.

Lutsenko’s spokesman said Danylyuk was trying to deflect attention from a tax probe. A separate statement on the office’s website said the cases against the state over PrivatBank were opened at the request of a lawmaker and since been closed.

PrivatBank was taken under state control last year but the nationalisation spawned hundreds of lawsuits and investigations, in what Danylyuk described as a “litmus test” for the effectiveness of law enforcement.

The saga has shone a spotlight on Ukraine’s ability to reform after the 2014 Maidan street protests brought a pro-Western leadership to power, which has been propped up with billions of dollars of foreign aid money.

“The general prosecutor has discredited himself with the attacks on new anti-corruption bodies and his failure to bring important cases for the country to court,” Danylyuk told reporters at a briefing.

“In front of the Ukrainian people and international partners, he is discrediting the president and parliament which entrusted him with such an important role and function.”

The government says it has pumped more than $5 billion (£3.74 billion) of taxpayers’ money into PrivatBank after the central bank nationalised the lender in December 2016, saying risky lending practices caused a large capital shortfall.

PrivatBank’s former owners Ihor Kolomoisky and Gennadiy Bogolyubov have contested the nationalisation and say the central bank misrepresented the health of PrivatBank’s finances.

Danylyuk said Lutsenko’s team was actively pursuing cases that were in the interests of the former owners while obstructing those brought by the state.

Danylyuk is under investigation for suspected tax evasion, which he says is a trumped up charge in retaliation for his efforts to root out corruption and tackle vested interests.

Lutsenko’s spokesman Andriy Lysenko said Danylyuk’s statement was “seen as a primitive desire to avoid criminal liability for a failure”.

It comes a day after PrivatBank announced a London court, where it launched legal action, had frozen the worldwide assets of Kolomoisky and Bogolyubov.

Kolomoisky told the news website it was “a temporary (freeze) while the court considers the case”.

Danylyuk said the decision in London “was achieved not thanks to the support of the general prosecutor ... and despite all the direct attempts from the side of the general prosecutor to disrupt this process.”

“The PrivatBank case is a litmus test of the effectiveness of the work of law enforcement agencies ... Here, backroom agreements and inaction of law enforcement agencies are not permissible.”

Additional reporting by Pavel Polityuk; Editing by Jeremy Gaunt

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