The noble art of cheating Norwegian shipping companies

Norwegian shipping sailed into unknown waters, as the company FMV ordered supply ships at Ukrainian shipyards.

By Tatyana Rikhtun and Erik Hagen

Posted September 27, 2009

This investigation is the follow up of another one done by Tatyana Bus Rikhtun about the privatization of Sevastopol Marine Plant. Later on a new shareholder, Rafik Dau, bought into the company in 2003, and by 2006 had control over half the shares – during his tenure the company signed 3 contracts with Norwegian company FMV to build three ship hulls. But in just one day, the SPF decided to sell its last stake and did not allow Mr Dau to purchase it – he abruptly sold his shares and left Ukraine.

The new contracts required SMZ' owners to build up new specializations and equipment, and put in new investments (USD 100 mln) – which never came. An FMV engineer interviewed for the article said the main problem with the projects was weak management at the plant.

When the administration of the plant changed, the new owners changed all the subsidiary company managers – and even the company's general director left. Workers began quitting on their own, including ones that had learned new skills and learned the specifications for the FMV orders. According to one SMZ technician, FMV representatives were astonished that there were not even a sufficient number of people to do the work scheduled for the next day.

The issues between the workers and the administration include wage arrears, promised payroll guarantees and reforms. In addition, there were also issues with counteragents, whom were contracted by SMZ to complete work on the FMV orders; they were changed constantly due to SMZ not paying them or low quality work. SMZ still owes some counteragents for their work. About the same time, conditions at the plant deteriorated rapidly – there was no drinking water, no places to wash hands, no working toilet, and electricity was cut off from time to time. Nevertheless, the hull was completed – but FMV refused further plans to build more hulls with SMZ. In two years under the new management, even with orders and downsizing, the plant's debt increased by 16 times.

Conditions at the plant continued to deteriorate and by December 2008, wages had not been paid for two months. Finally, the workers were sent on unpaid vacation – still without the wage arrears being cleared. Upon their return – there was still no work or wages. Those that complained were offered to quit.

A local prosecutor checked into the worker's complaints and found that everything they said was true. He noted that though wages had not been paid – the plant's account had UAH 13 mln (though the salary debt was UAH 3 mln), and it continued to pay taxes and bank loans back. A criminal case was opened, but he believed it would be technically difficult to get it to court.

After workers began to strike over wage arrears, the plant's officials responded by prohibiting them from coming to work. During that time, according to workers, equipment and materials were being destroyed and looted from the plant.

At the closing of the article, workers were told to sign an agreement about downsizing and a complete firing of workers – and were threatened physically if they did not comply. The workers held out one last hope that an annual shareholder meeting could resolve the situation. However, on that day, only shareholder-workers were allowed on to the plant – and a controversial item was voted through – that "Yugsevmorservis" would be sold for UAH 50 mln to four unknown companies. The workers hoped it would at least lead to the salary debt being paid. But, as it turned out – the buyers were related to the plant's current owner.

The first part of the investigation was published in Sevastopolskaya Gazeta on April 30, 2009, the second on May 7, 2009, please see attached PDF-files. For the English version please click here.  

The story also was published by influential national weekly "Zerkalo nedeli" and is posted here.

smz1.pdf
smz2_1_.pdf