Official statement

Official statement

On August 25, 2020 on its website, published an interview with the former chairperson of the Togliattiazot Board of Directors, Sergei Makhlai, in which he improperly accused URALCHEM, JSC of tax evasion, corruption, possible bankruptcy, etc., deliberately distorting financial figures and facts, and misleading readers.

URALCHEM, JSC declares that the data and statements given in the publication are unreliable and are fabrications of the interviewee. We believe that this publication, in which many statements may be defined as "slander", is aimed at damaging the business reputation of URALCHEM, JSC and looks like an attempt to destabilize the situation around URALCHEM, JSC.

For instance, Sergei Makhlai expressed the opinion that URALCHEM, JSC “... virtually does not pay taxes”, referring to Togliattiazot payments for 2008 – 2011 as an example. URALCHEM declares that it is a conscientious taxpayer. All companies of the group undergo regular on-site and office tax audits. Based on the audited consolidated financial statements, the amount of income tax paid by URALCHEM, JSC for the years 2008 – 2011 amounted to 7.43 billion rubles. In 2019, the enterprises of the URALCHEM Group paid RUB 3.7 billion rubles as income tax.

In his interview, S. Makhlai several times pointed out that URALCHEM, JSC has many debts and made a conclusion about the possible bankruptcy. The company officially declares that throughout its existence, URALCHEM, JSC has always fulfilled and continues fulfilling its obligations to creditors, services its debt and never delays loan payments. The company’s financial statements and positive audit reports that are submitted to business partners evidence this. The company has no signs of bankruptcy. URALCHEM, JSC is successfully implementing its sustainable development strategy, continues investing in production, the social aspects, upgrading equipment and infrastructure, and providing jobs for thousands of people working at the group enterprises.

URALCHEM and/or its representatives never put pressure on Sergei Makhlai and did not force him to leave Russia. It is known from open sources that he moved to the United States of America for permanent residence back in 1994, while URALCHEM, JSC was created only in 2007.

URALCHEM exercises its rights as a shareholder of Togliattiazot strictly within the framework of the Federal Law “On Joint Stock Companies”, seeks to observe the rights of shareholders and to stop violations of legislation related to the production and economic activities of Togliattiazot. All actions of URALCHEM, JSC in relation to Togliattiazot are and will be taken within the framework of the current legislation.

On July 5, 2019, the Komsomolsk District Court of Togliatti handed down a guilty verdict against Sergey Makhlai and other defendants in the case under Art. 159.4 of the Criminal Code of the Russian Federation on fraud on an especially large scale committed by a group of persons by prior conspiracy. On November 26, 2019, the sentence became final. As a minority shareholder of Togliattiazot, URALCHEM, JSC was recognized as an injured party, just as Togliattiazot itself was. The court ordered the convicts to reimburse 77.3 billion rubles of damage to Togliattiazot, and 10.3 billion rubles to URALCHEM. The court appointed URALCHEM, JSC as a collector for damage in favor of Togliattiazot.

The Russian court established that Makhlai, together with his accomplices, stole part of the profits from the sale of ammonia produced by the plant and took it to controlled offshores, which was confirmed by numerous documents and testimonies of witnesses. As a result, other shareholders, who were entitled to a share of the company's earnings, were harmed. The trial also revealed a complex network of foreign offshore companies created to cover up the scheme of illegal withdrawal of funds from Togliattiazot. The facts of a significant decrease in the value of Togliattiazot's assets through the illegal withdrawal of a significant part of fixed assets from the balance sheet of the plant were discovered and proved.

In his interview, Sergei Makhlai denies the facts of embezzlement, illegal withdrawal of funds from Togliattiazot and says that the conviction, which has entered into force, was unlawful and “paid-for”. URALCHEM, JSC believes that by his statements in this interview, Sergei Makhlai misled the newspaper, which unwittingly questioned the legality of Russian justice.

In addition, URALCHEM received additional information from the US courts, which may indicate that Nitrochem Distribution AG, which used to buy the export products of Togliattiazot, shared the profits from the resale of the plant's products with persons controlling Togliattiazot, to the detriment of the interests of Togliattiazot and its minority shareholders.

URALCHEM, JSC does not exclude a possibility of filing claims in the US courts in order to compensate for damage from the activities of the Togliattiazot majority shareholders. The company may apply to them the US RICO Act aimed at prevention of organized crime, corruption, and money laundering.

In turn, URALCHEM, JSC is not aware of any claims filed against the company in the US courts.

Dimitri Tatyanin, Legal Affairs Director, URALCHEM, JSC:

“As the injured party, URALCHEM Company considers the decision of the Komsomolsk District Court of Togliatti to be lawful, reasonable and fair. We expect the earliest possible compensation for damage in the amount of 10.3 billion rubles, caused by the actions of the majority shareholders of Togliattiazot. Togliattiazot itself was also recognized as a victim in the case, to which the convicts will have to compensate 77.3 billion rubles of damage.

The return of 77.3 billion rubles to the enterprise will have the most favorable effect on the further activities of Togliattiazot. The funds that will go to the plant can be used to implement a comprehensive program for the production upgrade and development. Worn out equipment and infrastructure, as well as measures to improve industrial safety and labor protection, require significant investments.

As a minority shareholder in Togliattiazot, URALCHEM is also interested in investing in the Togliatti enterprise. The investments may result in an increase in production and sales, which means an improvement in financial performance. We expect that Togliattiazot's dividends will start to grow accordingly”.

URALCHEM, JSC reserves the right to take measures provided for by Russian law in order to protect its business reputation.