Makfa owners offer to purchase part of company's shares to settle prosecutor general office's case

CHELYABINSK. May 6 (Interfax) - The respondents in the case regarding converting Makfa and related companies into government revenues have proposed concluding a settlement agreement that envisages the current owners purchasing a specific stake in the enterprise, Igor Trunov, the lawyer representing the interests of Mikhail Yurevich, told reporters on Monday.

"We have announced a settlement agreement [...], by which [...] the government would take possession of the enterprise and exercise certain state oversight, though the owners would retain a specific part of the enterprise. They [the current shareholders] would naturally pay, buy back the part from themselves," Trunov said.

Trunov also said that the amount of the shares, those of the government and the current owners, would have to be discussed during negotiations between the parties.

Trunov added that the proposal has been delivered to representatives of the Prosecutor General's Office (PGO), as well as sent to the Federal Property Management Agency (Rosimuschestvo).

The lawyer argues that the holding may be subject to sanctions-related pressure due to the transfer of Makfa's assets into state ownership.

Trunov said the bulk of the equipment used at the enterprise is Western, so problems may arise with its maintenance, and there are no equivalents of this equipment in other countries.

"Transition to state ownership automatically entails sanctions," the lawyer said, adding that one of the investors was located in the UAE.

"There is an investment protection agreement between the United Arab Emirates and Russia, so investment lawsuits are possible. Therefore, [the expropriation of Makfa's assets] could have repercussions," Trunov said.

The deputy prosecutor general on March 28 filed a lawsuit on behalf of the Russian Federation in the Central District Court of Chelyabinsk against Makfa, one of Russia's largest makers of pasta products, groats and flour, and 33 other legal entities, including JSC Smak, seeking to expropriate stakes in Makfa and related companies. The defendants also include 13 individuals, including former Chelyabinsk Region Governor Valery Yurevich and former Senator Vadim Belousov, as well as Alexander, Mikhail and Natalya Yurevich and Irina Belousova.

The court granted a plea by the PGO to take interim measures - a ban on registration and administrative actions with shares and stakes in the companies. Later, in April, the court, at the request of the PGO, changed some of the interim measures against Makfa JSC, allowing settlements with counterparties, a source close to the PGO told Interfax.

In particular, Makfa JSC, Novaya Pyatiletka JSC and Dolgovskoye JSC were allowed to borrow within certain limits from Russian banks to buy raw materials. In addition, the court allowed Makfa JSC to make payments in favor of several counterparties under contracts for the supply of spare parts and components to keep equipment working.

It has also been reported that in the lawsuit, a copy of which was provided to Interfax by Igor Trunov, the PGO is seeking to expropriate stakes in Makfa and related companies due to the corrupt origin of the business. It argues that the main defendants Mikhail Yurevich and Vadim Belousov did not stop doing business while working for government bodies, in violation of anti-corruption legislation, and effectively owned a group of commercial companies, did not declare information about them or submit it to control authorities, and used their position of power to further business interests. The defendants, according to the PGO, managed their business assets through relatives and proxies.

The group's core business is JSC Makfa, which according to its website and market participants is one of the world's top five makers of pasta products, and is also on the list of systemic companies in Russia's agribusiness sector. Makfa includes 26 other companies registered in Moscow and Kurgan, Moscow, Sverdlovsk, Kherson and Chelyabinsk regions. The lawsuit puts their combined value at 46 billion rubles, annual revenue at 41 billion rubles and gross profit at 13.6 billion rubles.

Makfa, which makes pasta products, groats, cereal flakes, flour and backing mixes, has an assortment of over 150 products. The company has production facilities in Chelyabinsk, Sverdlovsk and Kurgan regions, and Altai and Stavropol territories.

Mikhail Yurevich served as governor of Chelyabinsk Region from 2010 to 2014, prior to which he was mayor of Chelyabinsk. He was subsequently placed on the international wanted list in a criminal case involving a large bribe totaling 3 billion rubles.