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Real Estate Scam in Ukraine: 7 Years Without Compensation

By Alina Varfolomeyeva
Epoch Times Staff
Created: February 20, 2013 Last Updated: February 26, 2013
Related articles: World » Europe
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Victims of the Elita-Center real estate scam and their supporters rally in front of Kyiv administration building in Kyiv, Ukraine, on Feb. 6, 2013. The case has been delayed in court for seven years, and the victims demand compensation. (kiev.pravda.com.ua)

Victims of the Elita-Center real estate scam and their supporters rally in front of Kyiv administration building in Kyiv, Ukraine, on Feb. 6, 2013. The case has been delayed in court for seven years, and the victims demand compensation. (kiev.pravda.com.ua)

KYIV, Ukraine—Victims of the Elita-Center real estate scam have urged Kyiv elected officials to include their compensations in the 2013 city budget.

Seven years have passed since one of the biggest speculations in the Ukrainian real estate market was revealed as fraudulent. Almost 2,000 people lost their long-term savings when they invested in luxury homes in the Ukrainian capital of Kyiv.

The construction never got underway, and the same non-existent flats were sold to two or three different buyers. The combined loss of investors was $76 million.

Most people still have not received compensation payments, nor apartments, and no verdict has been decided.

The local government has thus far provided 137 of the victims with apartments.

Many people criticize government compensations to scam victims, saying taxpayers are not responsible for the loses.

A middle-aged man who declined to give his name shared his experience as he participated in a rally in Kyiv on Feb. 6.

“Apartments were given to priority waiting people—disabled people, or simply those who are most sly,” the man said in Ukrainian. “The others, even those who have paid the whole cost of the apartment (as we have done), haven’t gotten them.”

He says he is 55th in line to get compensation. He explained that many scam victims are desperate for compensation, even willing to take very low-quality apartments. 

Although the Ministry of Internal Affair’s press service announced that 90 million hryvnyas (US$11 million) have been payed out in compensation, a lawyer representing the victims says he doesn’t know where this money was spent.

“Defendants haven’t recovered a cent,” Vasyl Zhovnovsky told the Ukrainian news agency Unian. He said the property confiscated from the scam organizer, Alexander Volkonsky, may have been valued at about 90 million hryvnyas. The government seized 22 hectares of land and an unfinished multistory building owned by Volkonsky.

For 2013, 95 apartments are due to be given as compensation, Igor Kushnir, head of the major building company Kyivmiskbud, told Interfax news agency. The Kyiv government has paid Kyivmiskbud to give 5.6 percent of the total number of apartments in several new buildings to vicitims of the Elita-Center scam.

By April 2012, the percentage of flats given as a compensation was much higher at 25 percent.

Many people criticize government compensations to scam victims, saying taxpayers are not responsible for the loses.

Almost 2,000 people lost their long-term savings when they invested in luxury homes in the Ukrainian capital of Kyiv.

“On one side, to lose a sum which is equivalent to the cost of an apartment in Kyiv is very hard,” wrote Mihail, a commentator on the Korrespondent news site. “But on the other side, investments always bring risk, and I don’t understand what is the basis for requiring money for compensation from the state.”

Viktor Grycyuk, Volkonsky’s lawyer, spoke about his client’s case at a recent press conference. Volkonsky has been in prison for seven years without a verdict—three times the court has sent the case back for further investigation.

“If the case doesn’t move, after some period of time the government will change and he’ll be released. The problem is that you need to solve a conflict [by making a] compromise agreement. The idea is to pay damages to the citizens and to determine guilt,” Grycyuk said.

According to the Ukrainian criminal code, the two sides can come to an agreement about reimbursement, and the court need only approve it. Victims would have more of a chance to get their compensation this way rather than keeping the accused in prison, said the lawyer.

But the victims’ lawyer, Zhovnovsky, is skeptical of this proposed settlement.

“[Volkonsky] is a thief of international level,” said Zhovnovsky in a phone interview. “Any agreement with him, he won’t fulfill. He would come to agreement to be released.”

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