Ferrexpo charity funds ‘could have been misappropriated’

A probe into charitable donations at Ferrexpo has found that some of the Ukraine-focused miner’s funds “could have been misappropriated”.

The London-listed company launched an independent review into payments made to charitable foundation Blooming Land earlier this year after its auditor Deloitte flagged discrepancies in last year’s annual report.

Announcing the review’s findings on Friday, Ferrexpo said that none of its management or directors were involved in any misappropriation of funds, but that it was unable to explain a number of the discrepancies relating to the charity and its use of the miner’s donations.

“As a result, the independent review committee has been unable to conclude as to the ultimate use of all of the funds by the charity, a third party. Indications therefore remain that some of the funds could have been misappropriated. The board is considering further steps in this regard,” the group said.

Between 2013 and 2018, Ferrexpo donated $110m to the charity as part of its corporate social responsibility programme in Ukraine.

Questions over the charitable funds led Ferrexpo’s annual report to be delayed twice, Deloitte to resign as its auditor and the miner’s share price to tumble.

Ukrainian charity Blooming Land was established to co-ordinate Ferrexpo’s corporate social responsibility programme, and provides medical and social services to local communities.

Ferrexpo, which is a major producer of iron ore pellets for use in the steelmaking industry, has now terminated its relationship with Blooming Land, and since the establishment of the review in February appointed two new independent directors to its board and Baker Tilly as its new auditor.

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Deloitte resigned in April after clashing with the company over possible links between the Ukrainian miner’s chief executive Kostyantin Zhevago and the charitable foundation.

Deloitte had said its investigation regarding Blooming Land had identified a significant number of “potential associations and linkages adjacent to the CEO”.

Mr Zhevago is the controlling shareholder of Ferrexpo and has also been a member of the Ukrainian parliament since 1998.

Ferrexpo said the review was conducted by law firm BDO and involved “relevant documentation, interviews with Ferrexpo employees and directors, correspondence with the charity and other third parties and advice from legal counsel in the UK and Ukraine”.

Blooming Land could not be immediately contacted for comment.

Shares in Ferrexpo closed up 1.6 per cent at 202.1p.



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