- The Guardian Sat urday 31 Aug ust 2019
(^44) Financial
Mining fi rm says charity
donations ‘could have
been misappropriated’
Jasper Jolly
The London-listed mining company
Ferrexpo has found that money it
donated to a Ukrainian charity may
have been “misappropriated” – but
said none of its directors or employees
were implicated.
The company, which mines iron
ore in Ukraine for the steel industry,
has been embroiled in scandal for
months after its previous auditors,
Deloitte, demanded an investigation
into payments to Blooming Land, a
Ukrainian healthcare charity.
Ferrexpo paid Blooming Land $24m
in 2017 and $9.5m in 2018. In total since
2013 it has paid the charity $110m ,
which was meant to be used to support
diabetes prevention, eyesight care and
support for older people.
The company has insisted that
the charity is not a related party to
Kostyantin Zhevago, its billionaire
chief executive and the owner of
50.45% of the company’s shares.
In a statement to the stock market
yesterday , Ferrexpo said its review,
including an investigation by the
accountants BDO, had been unable to
explain “a number of discrepancies”
in the charity’s explanation of how it
used donations.
The independent review committee
(IRC) that carried out the investigation
comprised Ferrexpo’s non-executive
directors, led by Steve Lucas, the for-
mer fi nance director of National Grid.
Ferrexpo’s statement said: “The IRC
has been unable to conclude as to the
ultimate use of all of the funds by the
charity, a third party. Indications there-
fore remain that some of the funds
could have been misappropriated.”
In April Deloitte issued a qualifi ed
opinion on the company’s twice-
delayed full-year accounts over
possible links between Zhevago and
Blooming Land. It resigned two days
later, saying it could not carry on after
Ferrexpo had initially rebuff ed calls to
launch an investigation into the dis-
crepancies it had found.
The review committee said it was
“satisfied that none of Ferrexpo’s
directors, management or employees
have had any involvement in any pos-
sible misappropriation of funds” – and
added that the charity was not a related
party to Zhevago under the UK’s listing
rules because he did not have control
over the charity’s operations.
Zhevago, who splits his time
between Ferrexpo’s Swiss headquar-
ters and Ukraine, is an infl uential
fi gure in the country, where his com-
pany employs more than 10,000
people, although last month he lost his
seat in Ukraine’s national legislature.
The scandal has hit Zhevago’s
wealth, with Ferrexpo’s share price
about a third lower than its April peak,
before Deloitte’s resignation. Zhevago
said last month that Ferrexpo shares
had suff ered because “representa-
tives from the audit committee made
absurd statements saying nonsense ”,
according to Bloomberg.
Ferrexpo declined to say how much
of the money may have been misap-
propriated. It is understood that there
is evidence that some of the money
was used on healthcare programmes.
The board is considering its options
for the next steps with regards to the
money. It is understood this could
include attempting to recover the
donations as well as the $6.4m costs
of the investigation.
Ferrexpo still faces investigations
by the Ukrainian tax authorities over
the charity.
‘Representatives
from the audit
committee have
made absurd
statements saying
nonsense’
Kostyantin Zhevago
Ferrexpo CEO
$110m
The amount of money that Ferrexpo
has paid the Ukrainian healthcare
charity Blooming Land since 2013
10,000
The number of people employed in
Ukraine by Ferrexpo, a London-
listed company that mines iron ore
Tough going for Shoe Zone
as shares plunge by a third
Sarah Butler
Shares in Shoe Zone plunged by a third
yesterday after the discount footwear
retailer issued a profi ts warning and
said its chief executive had resigned.
The retail group, which has more
than 500 stores in the UK and Ireland,
blamed the profi ts blow on tough high
street trading conditions and said it
was writing down the value of its 17
freehold properties by £3.1m to £5.3m.
Nick Davis, the group’s chief execu-
tive who has led the company for three
years and was fi nance director for nine
years before that, has stepped down
with immediate eff ect to “pursue
other business interests”.
He will be replaced by Anthony
Smith, executive chairman. Smith’s
brother Charles, who joined the com-
pany in 1998, fi ve years after Anthony,
is now interim executive chairman.
The company said that while its out-
of-town “big box” stores and digital
sales were strong, their performance
had been off set by a “tough” high
street trading environment, which
meant profi ts for the year to 5 October
would be lower than expected.
Anthony Smith said: “As has been
widely publicised, the UK high street is
currently facing a challenging environ-
ment in which to operate.
“While we therefore face a
short-term impact on our balance
sheet, we do not anticipate any
change to our dividend policy, refl ect-
ing our confi dence and excitement in
the long-term growth opportunities
through the big box rollout, contin-
ued operational improvements and
our multi channel proposition .”
Shoe Zone is the latest victim of a
high street crisis that has forced major
retailers such as Debenhams , House of
Fraser and New Look to close stores or
enter administration amid a slowdown
in consumer spending and rising costs
partly linked to the fall in the value
of the pound since the Brexit vote
but also from business rates and the
legal minimum wage. Physical stores,
including on retail parks where Shoe
Zone has been expanding, have also
been hit by a switch towards online
shopping.
Some analysts expressed surprise
that Shoe Zone had been forced into
diffi culties as it had seemed resilient
thanks to its cut-price products and
eff orts to persuade landlords to cut
rents. “To now have a profi t warning
from [Shoe Zone] would suggest the
retail sector is still a brutal place in
which to operate ,” said Russ Mould,
investment director at AJ Bell.
Pressure on
Brazil as
fi rms and
investors
warn over
Amazon
fi re crisis
▲ High street trading conditions have
led to a profi t warning by Shoe Zone
Dom Phillips
Rio de Janeiro
Financial pressure is growing on Bra-
zil over the Amazon fi res crisis and
far-right president Jair Bolsonaro’s
belligerent response.
Asset managers, pension funds and
companies have responded by issuing
warnings, halting purchases and stop-
ping purchases of government bonds.
The US clothing company VF cor-
poration, which is behind brands
including Timberland, Kipling bags
and The North Face, has suspended
Brazilian leather purchases and Nor-
way’s two biggest investors warned
global fi rms over contributing to envi-
ronmental d amage.
Fitch Solutions Macro Research
issued two reports warning of
“increased scrutiny” and “economic
risks” following the fi res, which soared
to 29,000 in the Amazon in August, the
highest since 2010. “We believe inter-
national concern over deforestation in
the Brazilian Amazon basin will cre-
ate headwinds to export demand and
investment infl ows,” Fitch warned.
VF Corporation told the Guardian
that less than 5% of the leather it uses
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