CONSTRUCTION UKRAINE |
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Construction Ukraine 02/10/2006 |
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Construction Scam - $75M Stolen. |
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Apartments owners that bought their property from Kiev based Elite Center Group discovered that some apartments were sold twice. Elite Center explained that it was a computer malfunction. Nevertheless, alarmed owners formed committee and hired a lower. The committee discovered that all apartments in the building located on 34-42 Otto Schmidt St. were sold at least twice and some of them three times. Apartments were also sold in buildings on Heroes of Stalingrad St., Kurtanovskogo St., Laboratornaya St, and Stroiteley St. In fact construction didn’t start on any of these sites. The only project in progress was the oversold building on 34-42 Otto Schmidt St. On Monday February 6 all offices of Elite Center were closed. It was discovered that the top management of the Group disappear in January 30th leaving bank account empty. In total at least $75M were stolen.1.5 thousand of the fraud’s victims includes high rank officers of Ministry of Internal Affairs, and an advisor of the President of Ukraine. Criminal Charges against management of Elite Center Group were filed. Ministry of Internal Affairs started investigation of the massive fraud. Mayor of Kiev Mr. Omelchenko talked to media. He remained about frauds of midd-90s and blamed “better times” that made victims too naive. He also mentioned that it’s not wise to buy an apartment 20% chipper than the one from others without questioning the reason. Chief of Police Mr. Yarema made a statement for media about construction scam investigation. In his speech he mentioned that it’s unfortunate that current rules allow people pay cash for apartment. He told that Elite-Center encouraged people to pay cash, and many buyers did so. In his opinion it would we very difficult to get victims money back. Elite Center was a group of companies that included R&D Center Progress, Construction -Engineering Company BIK, Financial-Construction Company Elite Center and others. Elite Center Group has been using brand and logo of Financial-Construction Company Elite Center. CEO of Financial -Construction Company Elite Center Mr. Tziganok made a statement that his company is just a victim of the fraud that lost 20% share of the building located on 34-42 Otto Schmidt St. Mr. Tziganok suggested continuing construction of started building(s) under condition that fraud victims would agree to pay extra $250 per sqm to match realistic market price. He also stated that of Elite Center Group has been using his brand “illegally”, but he couldn’t do anything because the trademark was not registered. Workers of general contractor (building on 34-42 Otto Schmidt St.) Construction -Engineering Company BIK haven’t been paid since December. CEO of the company is facing criminal charges and eventually disappeared. Construction of the building on 34-42 Otto Schmidt St. is on hold. It is expected that this massive construction scam could cause some damage to the situation on the Ukrainian construction market. New and small companies could lose a lot of businesses to big well-known companies, because of buyers’ fear of fraud. Minister of construction Mr. Katchur on another press- conference told that the rules of construction financing shall be changed. The financing shall not be available to companies that don’t have the construction permit or don’t start construction. Some construction companies are optimistic expecting that close attention to construction market triggered by this scandal will improve buyers’ confidence.
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02/10/2006 |
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34-42 Otto Schmidt St.
