Ferrexpo probe finds charity funds may have been 'misappropriated'

Iron ore miner Ferrexpo on Friday said donations made to a Ukrainian charity may have been “misappropriated” after an investigation failed to establish where the money had gone.

The FTSE 250 group, controlled by Ukrainian billionaire Kostyantin Zhevago, launched a review in February after auditor Deloitte found inconsistencies in bank statements from the charity Blooming Land.

Between 2013 and 2018 Ferrexpo handed $110 million to Blooming Land, which claims to do work on diabetes and eye care inside Ukraine. It stopped making donations in May 2018.

Little is known about Blooming Land, said to be based in Kiev. Its Facebook page was last updated in 2015. Despite six months of questioning, hours of forensic accounting work and $6.4 million costs, the committee failed to uncover the ultimate recipients of the donations. “The (review committee) has been unable to conclude as to the ultimate use of all of the funds by the charity, a third party,” Ferrexpo said.

“Indications therefore remain that some of the funds could have been misappropriated. The board is considering further steps in this regard.”

Deloitte resigned as auditor in April claiming Ferrexpo had delayed launching an investigation for three months. Ferrexpo said it wanted to pursue a “co-operative route” first.

The company has battled to improve its corporate governance reputation in recent years and shares have fallen about 23% since the charity irregularities surfaced. Investors appeared relieved today, with the stock rising 2% to 202.5p.

The review, assisted by BDO and Herbert Smith Freehills, was chaired by board member Vitalii Lisovenko.

Ferrexpo has appointed a new independent director, Fiona MacAulay, who went on to sit on the committee.

It had examined transactions between Blooming Land and Khimreaktiv, an entity ultimately controlled by chief executive Zhevago which also did charity work in Ukraine, but found neither the CEO nor the company was a related party to the charity.