Investment company Dragon Capital reports pressure from the Bureau of Economic Security (BES) authorities, who are showing increased attention to the activities of the Victoria Gardens shopping and entertainment center (VG Mall) in Lviv and conducting repeated investigations into criminal cases dating back seven years against former owners.

"Over the past few months, we have encountered increased attention from the Ukrainian Bureau of Economic Security to the activities of the Victoria Gardens shopping and entertainment center (VG Mall) in Lviv – one of Dragon Capital's key assets, which we acquired from Turkish businessmen in March 2018," the company said on its website.

According to the report, detectives from the BES territorial office in Kyiv, in a criminal case opened in 2017 before Dragon Capital acquired the asset, have brought charges of tax evasion in the sale of the VG Mall from Phoenix Capital LLC to Europolis Property Holding LLC (the current owner).

"We provided the necessary explanations and documents. Our employees were interrogated, including in Lviv with the involvement of detectives from the BES territorial office in Lviv region. It seemed that all tax evasion issues had been resolved," the company said.

However, in May of this year, Europolis Property Holding received a demand from detectives from the BES territorial office in Lviv region for another criminal case from 2017, requiring the same explanations and documents regarding the same operation.

The company-owner of the shopping center provided its explanations and reminded that these circumstances had already been investigated by another territorial office of the BES.

Following this, the investment company received another demand from Lviv detectives, warning of possible searches and raids.

"Dragon Capital believes that duplicating the work of BES detectives and involving the company in old criminal proceedings is a form of pressure on business. Dragon Capital calls for an end to such practices and ensuring favorable conditions for doing business in Ukraine. The company hopes for the support of state authorities in creating a transparent and fair business environment," the company said.

Dragon Capital reminded that when purchasing Phoenix Capital in 2018, which owned the VG Mall at the time, the total amount of accumulated losses of this LLC was about half a billion hryvnias, with the main amount formed by exchange rate differences on a loan from a nonresident company. The purpose of this acquisition was to increase the investment value of the asset through reconstruction, modernization, and turning the loss-making enterprise into a profitable one.

"As far as we know, the previous owner of the said company – the foreign company Globcon Limited and its beneficial owners – faced attempts of raiding the VG Mall in 2017, organized by the former director of Phoenix Capital together with other individuals. According to the sellers, they took sufficient measures to prevent any illegal claims against the new owner of Phoenix Capital LLC/VG Mall, particularly due to proceedings in more than five criminal cases opened in 2017," the investment company said in the press release.

At the same time, Dragon Capital said that despite the change of ownership, the attempts to raid the VG Mall have not stopped, and the new owner faced the threat of losing control over the lawfully acquired assets. To create additional legal protection for the VG Mall against unlawful encroachments, a decision was made to sell the VG Mall to another company within the Dragon Capital group at a market price determined by an independent expert. As a result of this sale, Phoenix Capital paid more than UAH 80 million in VAT directly to the budget in September 2018.

"After that, we carried out reconstructions and other improvements to the real estate for a total amount of more than UAH 250 million, significantly increasing the market value of the VG Mall. These transactions were audited by the tax authorities in 2021 during a planned documentary field audit," the company said.

 

According to it, Europolis Property Holding (the current owner of the VG Mall) began to pay VAT from transactions for the lease of areas in the VG Mall directly to the budget from February 2021, currently about UAHA 9 million monthly. As a result of 2023, the limited liability company finally became profitable: UAH 54.5 million of profit tax was paid for the year, and for the first quarter of 2024 – UAH 12 million.

For its part, the BES press service reported that the statements about pressure on the investment company Dragon Capital are untrue.

"The investigation into the activities of the mentioned company was conducted on the fact of tax evasion. To verify the available information, BES detectives conducted a series of investigative actions. After that, on February 29, 2024, the criminal proceedings under Article 212 of the Criminal Code of Ukraine conducted by BES detectives in Kyiv were closed. As for the criminal proceedings of the BES office in Lviv region – in May of this year, in the course of determining jurisdiction, it was transferred from the National Police of Ukraine to the BES by the prosecutor's office. As part of the verification of the provided data, detectives sent a request for information to the company. Currently, materials are being prepared to close this criminal case," the bureau said.