Poroshenko spends stolen Yanukovych money on his friends

Kyiv Post - - Opinion -

On April 28, Ukrainian Pros­e­cu­tor Gen­eral Yuriy Lut­senko re­ported re­cov­er­ing $1.5 bil­lion stolen by ex-Pres­i­dent Vik­tor Yanukovych. With es­ti­mates of Yanukovych-era theft run­ning as high as $40 bil­lion dur­ing his rule from 2010–2014, the amount — while sig­nif­i­cant — rep­re­sents less than 5 per­cent of the grand­scale fi­nan­cial cor­rup­tion that took place.

The ben­e­fi­ciary of the re­cov­ered funds, Lut­senko pro­claimed, would be the state bud­get. “I’m sure that this money that was stolen by Yanukovych’s mob has to be used in a way that the army and the peo­ple of Ukraine can feel it,” he said.

Pres­i­dent Petro Poroshenko echoed the sen­ti­ment. “This does in­crease the pos­si­bil­i­ties of the state bud­get and Ukraine to re­new jus­tice and in­vest this money in the Ukrainian army, strengthen the state’s de­fense ca­pa­bil­i­ties and re­store so­cial jus­tice by tar­get­ing th­ese funds to pro­tect the most vul­ner­a­ble groups of the population,” he said.

In re­al­ity, how­ever, a large part of the re­cov­ered loot was spent on a di­rect bud­get do­na­tion to agri­cul­tural barons — the rich friends of Poroshenko, who him­self is prac­ti­cally a bil­lion­aire.

An­other big part of the “Yanukovych money” is go­ing to re­gional projects, timed to pre­pare the elec­toral ground for the par­lia­men­tary and pres­i­den­tial vote in 2019, when Poroshenko is ex­pected to seek re-elec­tion.

Less than a third of the re­cov­ered $1.5 bil­lion will be spent on the de­fense sec­tor.

Spe­cial fund

There is a spe­cial fund within the bud­get of Ukraine aimed at strength­en­ing de­fense and se­cu­rity. Its main source of in­come is con­fis­cated pro­ceeds of cor­rup­tion.

In 2015 and 2016 the spe­cial fund re­ceived very lit­tle — Hr 100,000 in 2015 and Hr 165,000 in 2016 — or about $10,350 to­day.

The money was far short of the planned Hr 1.5 bil­lion for 2015 and Hr 7.7 bil­lion for 2016 — or nearly $360 mil­lion.

Fi­nally, the spe­cial fund re­ceived nearly Hr 30 bil­l­lion (nearly $1.2 bil­lion) from con­fis­cated Yanukovych’s as­sets. This sum is less than the $1.5 bil­lion an­nounced by Lut­senko. The state trea­sury did not re­ceive the whole amount; some $200 mil­lion from the con­fis­cated amount are in the form of un­paid bonds.

In April, the Cabi­net of Min­is­ters ap­proved a fe­cree that de­fined how to use the con­fis­cated pro­ceeds.

Ac­cord­ingly, only 26 per­cent had to be spent on army and strength­en­ing the de­fense sec­tor. Most of the money (52 per­cent) was di­rected to re­gional de­vel­op­ment or sup­port of agri­cul­tural pro­duc­ers (22 per­cent).

Un­til July, the gov­ern­ment had the le­gal right to spend only Hr 11.5 bil­lion of the re­cov­ered amount. In July, par­lia­ment changed the bud­get, which raised the amount of al­lowed spend­ing to Hr 22.5 bil­lion and pre­scribed a list of pri­or­i­ties.

Hr 9 bil­lion went for strength­en­ing se­cu­rity and de­fense, with half go­ing to the De­fense Min­istry and sig­nif­i­cant amounts go­ing to the Na­tional Po­lice (Hr 980 mil­lion), Na­tional Guard (Hr 900 mil­lion), Min­istry of In­te­rior (Hr 500 mil­lion), State Bor­der Guard (Hr 700 mil­lion). For de­fense pur­poses lesser amounts will also go to the Se­cu­rity Ser­vice of Ukraine, the State Body­guard Agency, the State Agency on Spe­cial Com­mu­ni­ca­tions, the Econ­omy Min­istry and the State Emer­gency Ser­vice.

Hr. 7.7 bil­lion went for road projects. An­other Hr 4 bil­lion went to lo­cal gov­ern­ments for the de­vel­op­ment of a med­i­cal sys­tem in ru­ral ar­eas while sub­si­dies to lo­cal gov­ern­ments for de­vel­op­ment amount to Hr 2.5 bil­lion.

The State Fund on Re­gional De­vel­op­ment was also a win­ner, get­ting Hr 2 bil­lion while nearly Hr 1 bil­lion went to lo­cal bud­gets for in­fra­struc­ture projects.

Also note­wor­thy is Hr 3.4 bil­lion set aside for the agri­cul­tural min­istry to sub­si­dize food pro­duc­ers. An ex­am­i­na­tion shows that the funds didn’t go to small farm­ers. In­stead, the em­pires of Yuriy Ko­siuk and Oleh Bakhmatiuk ben­e­fited.

The dis­tri­bu­tion de­pends on the amount of value-added tax paid by the agrar­i­ans, with pref­er­ences for poul­try breed­ers.

In 2017, un­der pres­sure from the In­ter­na­tional Mon­e­tary Fund, Ukraine abol­ished lower VAT rates for highly prof­itable agri­cul­tural busi­ness.rd The state bud­get was los­ing at least $200 mil­lion an­nu­ally be­cause of this spe­cial tax regime.

How­ever, in­stead of tax ben­e­fits, in Jan­uary sys­tem of di­rect bud­get sup­port was de­vised. Es­sen­tially the state was telling the big agro­hold- ings: “You have to pay VAT like ev­ery­one else, but don’t worry, we will re­im­burse you this with di­rect bud­get do­na­tions de­pend­ing on the amount of VAT paid by you.”

Most of the sub­si­dies that went to agri­cul­tural busi­nesses from Jan­uary to June were re­ceived by two big hold­ings: My­ronivskiy Hli­bo­prod­uct owned by Ko­siuk (Hr 809 mil­lion) and Ukr­land­farm­ing owned by Bakhmatiuk (Hr 142 mil­lion) — 42 and 14 per­cent of the to­tal, re­spec­tively.

Ko­siuk, who in 2015 was the deputy head of the Pres­i­den­tial Ad­min­is­tra­tion, is in no need of sub­si­dies with his man­sion, yachts and a small plane.

Bakhmatiuk owes bil­lions of hryv­nias to the na­tion’s tax­pay­ers, as well as de­pos­i­tors of two of his bank­rupt banks, Fi­nan­cial Ini­tia­tive and VAB. This height­ens the ab­sur­dity of the state giv­ing him money since many de­pos­i­tors have lost the pos­si­bil­ity of be­ing re­paid.

The Na­tional Bank of Ukraine tried to make Bakhmatiuk pay debts through court but did not suc­ceed.

The De­posit Guar­an­tee Fund is also not in fa­vor of su­ing the busi­ness­man: the fund did not file any civil law­suit against the agrar­ian. As of July 2015, the De­posit Guar­an­tee Fund had the right to file such law­suits against the own­ers of bank­rupt banks, who can be re­quired to re­pay losses with prop­erty and as­sets.

Much of the money ear­marked to the re­gions is likely to dis­solve into the Poroshenko re-elec­tion cam­paign.

At the least, it will be hard to fol­low how money gets spent for “so­cial jus­tice,” road con­struc­tion or ru­ral medicine. The ear­marked funds ap­pear to be a clean source of dirty cash to feed the Poroshenko net­work and those fa­vored by the pres­i­dent for elec­tion to par­lia­ment in 2019.

And fi­nally, the con­fis­ca­tion of this amount is very sus­pect.

The court de­ci­sion is not pub­lic, in vi­o­la­tion of Ukrainian law and in­ter­na­tional stan­dards.

It is not known even who and from whom and how this $1.5 bil­lion were stolen.

Any ev­i­dence or proof is clas­si­fied as a state se­cret by Lut­senko.

The il­le­gal level of se­crecy pro­vides a solid case for ap­peal against the con­fis­ca­tion to the Euro­pean Court of Hu­man Rights.

This could lead to a rul­ing in which Ukraini­ans will not only have to re­turn this sum to the Yanukovych fam­ily af­ter the con­fis­cated money is al­ready spent in du­bi­ous ways. So, Ukrainian tax­pay­ers will be fleeced twice — firstly by re­turn­ing money to the peo­ple who stole it in the first place, and sec­ondly by pay­ing to en­rich rich busi­ness­peo­ple close to Poroshenko.

Cor­rup­tion and im­punity are sel­domly so clearly de­fined.

Daria Kaleniuk and Tetiana Shevchuk work for the Anti-Cor­rup­tion Ac­tion Cen­tre, one of Ukraine’s lead­ing watch­dogs, in Kyiv.


Two work­ers op­er­ate a pro­duc­tion line at the My­ronivsky Hli­bo­prod­uct poul­try fac­tory in Vin­nyt­sia on June 11, 2013. Fac­tory owner Yuriy Ko­siuk, a for­mer state of­fi­cial, has ben­e­fited from tax breaks. (Ukrafoto)

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