Top of­fi­cials steal­ing from na­tion at war?

Kyiv Post - - Front Page - BY YULIANA ROMANYSHYN and OLEG SUKHOV ROMANYSHYN@KYIVPOST.COM and SUKHOV@KYIVPOST.COM

Ukraine’s De­fense Min­istry and its se­cre­tive pro­cure­ment prac­tices have long been sus­pected to be a hot­bed of cor­rup­tion.

Those sus­pi­cions gained more cur­rency with the Oct. 11 de­ten- tion by the Na­tional Anti-Cor­rup­tion Bu­reau of Ukraine, bet­ter known as NABU, of Deputy De­fense Min­is­ter Ihor Pavlovskyi and the head of the min­istry’s pro­cure­ment depart­ment, Volodymyr Hu­lyevych. They are the tar­gets of an in­ves­ti­ga­tion in a mul­ti­mil­lion-dol­lar em­bez­zle­ment scheme.

Pavlovskyi, who de­nies the ac­cu­sa­tions, is the high­est-rank­ing mil­i­tary of­fi­cial in Ukraine to be de­tained on cor­rup­tion charges. The NABU has noted two other sus­pects in the case, but said one is an em­ployee of the pro­cure­ment depart­ment, while the other works for the Depart­ment of In­ter­nal Au­dits at the Min­istry of De­fense.

The four are sus­pected of em­bez-

zling Hr 149 mil­lion ($5.5 mil­lion) in state funds through the pur­chase of fuel at in­flated prices for the De­fense Min­istry.

Law­maker Olek­sandr Hra­novsky, a top ally of Pres­i­dent Petro Poroshenko, has also been ac­cused of be­ing in­volved in the scheme, although he also de­nies the charges.

The ar­rests un­der­score fears of per­va­sive cor­rup­tion in Ukraine’s de­fense pro­cure­ment, made pos­si­ble by its highly se­cre­tive na­ture.

Sev­eral as­so­ci­ates of Poroshenko, in­clud­ing Oleh Hlad­kovsky, have been ac­cused of prof­i­teer­ing from the mas­sive in­crease in the coun­try’s de­fense spend­ing that has oc­curred since Rus­sia launched its war on Ukraine in 2014. All, in­clud­ing the pres­i­dent, main­tain their in­no­cence.

Pavlovskyi de­nied all of the charges against him at his pre-trial hear­ing. He said that the De­fense Min­istry had pur­chased fuel at the low­est price. The court on Oct. 12 placed Pavlovskyi un­der house ar­rest for two months. There was no in­for­ma­tion about a rul­ing on the de­ten­tion of Hu­lyevych as the Kyiv Post went to press on Oct. 12.

Pavlovskyi’s boss, De­fense Min­is­ter Stepan Poltorak, said his deputy “has been per­form­ing his du­ties quite pro­fes­sion­ally” since Rus­sia’s war against Ukraine started. “But if he is con­nected to a crime, he should be held re­spon­si­ble,” Poltorak said.

Pavlovskyi’s lawyer, Rostyslav Kravets, said the ev­i­dence pre­sented by the NABU did not point to any crime hav­ing been com­mit­ted. In court, Pavlovskyi said he didn’t sign any doc­u­ments that in­creased the price of the fuel il­le­gally, as the NABU claimed.

“The fuel was bought at the low­est cost,” Pavlovskyi said.

Poroshenko, com­ment­ing on the case on Oct. 12, said that the army was his per­sonal con­cern and that he wel­comed ev­ery cor­rup­tion case sent to law en­force­ment.

‘Cut off the hands’

“I will not al­low any­one to steal in the army,” he said. “I will cut off the hands of those who will steal from the army.”

The fuel sup­plier in the case was Trade Com­mod­ity — a com­pany con­nected to busi­ness­man An­driy Adamovsky.

Adamovsky used to be a busi­ness part­ner of Hra­novsky, a law­maker from the Bloc of Pres­i­dent Petro Poroshenko’s fac­tion in par­lia­ment. Hra­novsky is also un­der in­ves­ti­ga­tion in con­nec­tion with sev­eral cor­rup­tion schemes.

Hra­novsky, in com­ments made to on­line news­pa­per Ukrain­ska Pravda on Oct. 11, de­nied hav­ing any con­nec­tion to Trade Com­mod­ity.

The case in­volv­ing Pavlovskyi and Hu­lyevych goes back to early 2016. Ac­cord­ing to in­ves­ti­ga­tors, the Min­istry of De­fense auc­tion com­mit­tee called an open com­pe­ti­tion for fuel pro­cure­ment. The com­mit­tee se­lected the sup­plier that of­fered the low­est price, and the com­pany and the Min­istry of De­fense signed 14 agree­ments to­gether worth more than Hr 1 bil­lion ($37 mil­lion) for the sup­ply of fuel.

How­ever, the cus­tomer and sup­plier in the sum­mer of 2016 amended the con­tracts, in­creas­ing the price by 16 per­cent. Ac­cord­ing to the in­ves­ti­ga­tors, the amend­ment was il­le­gal.

The sup­plier re­ceived an ad­di­tional pay­ment of Hr 149 mil­lion. On ac­count of that, Pavlovskyi and Hu­lyevych are sus­pected of mis­ap­pro­pri­a­tion and em­bez­zle­ment of state prop­erty, charges that carry sen­tences of from seven to 12 years in prison if they are found guilty.

Shady deals

Ac­cord­ing to on­line pro­cure­ment sys­tem Pro­zorro, Trade Com­mod­ity won 16 open pro­cure­ment calls with the Min­istry of De­fense over 2015– 2017. The com­pany sup­plied gaso­line, fuel for jet en­gines, and diesel fuel. The to­tal value of the deals was Hr 2.2 bil­lion (around $80 mil­lion).

Over­all, Trade Com­mod­ity won ten­ders worth more than Hr 5.4 bil­lion ($200 mil­lion), ac­cord­ing to Pro­Zorro.

Be­sides the Min­istry of De­fense, the com­pany also sup­plied fuel to the Ukrainian state rail­way com­pany Ukrza­l­iznyt­sya, the na­tional nu­clear en­ergy com­pany En­er­goatom, the

state en­ergy com­pany Cen­teren­ergo, and also sev­eral sea­ports, namely Mar­i­upol, port Yuzhny in Odesa, and the port in Bil­horod-Dnistro­vsky.

Trade Com­mod­ity was founded in Dnipropetro­vsk Oblast, in the city of Kamyanske (for­merly named Dniprodz­erzhynsk) in 1999. The com­pany’s main ac­tiv­ity, ac­cord­ing to the open pri­vate com­pa­nies reg­is­ter, is pro­duc­ing pe­tro­leum prod­ucts. The statu­tory cap­i­tal of the com­pany is Hr 7,400 ($274).

The Kyiv Post couldn’t reach the com­pany di­rec­tor for com­ment.

No con­vic­tions

Vi­taliy Shabunin of the An­tiCor­rup­tion Ac­tion Cen­ter said the fuel con­tract em­bez­zle­ment case would prob­a­bly go to trial. How­ever, he said he had lit­tle hope the sus­pects would be con­victed, even though the cor­rup­tion scheme in the case is sim­ple. There have been no con­vic­tions in any of the big cases that has NABU sent to trial, he said.

“Noth­ing will hap­pen with this case with­out the cre­ation of anti-cor­rup­tion courts,” he said. “It will lie there (in the court), un­mov­ing.”

The De­fense Min­istry has been im­pli­cated in cor­rup­tion cases be­fore.

In July, the NABU and Spe­cial­ized Anti-Cor­rup­tion Pros­e­cu­tor’s Of­fice de­tained army of­fi­cials and the di­rec­tor and deputy di­rec­tor of Lviv Ar­mor Plant on charges of steal­ing Hr 28.5 mil­lion ($1.1 mil­lion) in bud­get funds.

The of­fi­cials were ac­cused of pur­chas­ing used en­gines for T-72 tanks through a shell com­pany, in­stead of buy­ing new ones.

In an­other case in Au­gust, the Gen­eral Pros­e­cu­tor’s Of­fice served no­tices of sus­pi­cion to five cur­rent and for­mer em­ploy­ees of the De­fense Min­istry on charges of neg­li­gence and abuse of power.

That case, dat­ing to 2014 and 2015 con­cerned a deal between the min­istry and a pri­vate com­pany for the sup­ply of hel­mets and bul­let­proof vests for the army. De­spite the fact that sim­i­lar deals were ex­empt from value-add tax be­cause of the war, the min­istry paid the tax to the pri­vate com­pany and signed an ad­di­tional deal, il­le­gally pay­ing Hr 34 mil­lion ($1.6 mil­lion).

The state pros­e­cu­tion ser­vice has not re­vealed the name of the sup­plier com­pany, but said its di­rec­tor and ac­coun­tant were also sus­pects in the case. The as­sets of the sus­pects have been ar­rested and the case has been sent to trial, ac­cord­ing to a state­ment from pros­e­cu­tors.

Olek­sandr Le­menov, an anti-cor­rup­tion ex­pert at the Rean­i­ma­tion Pack­age of Re­forms said cor­rupt schemes for the pro­cure­ment of fuel were com­mon­place. How­ever, this case is spe­cial as the NABU has a great deal of ev­i­dence. The de­ten­tion of top of­fi­cials is also a good sig­nal for the pub­lic.

“UZ (Ukrza­l­iznyt­sya, an­other Trade Com­mod­ity client) and the De­fense Min­istry have al­ways fed those who are close to power,” he said.

Even as more cases against the De­fense Min­istry be­come known, Le­menov said there was still a place in the min­istry for hon­est of­fi­cials. He said the like­li­hood of cor­rup­tion de­pended on the po­si­tion a per- son held in the min­istry, and their char­ac­ter.

Other al­lies

Apart from Hra­novsky, other Poroshenko al­lies have also been ac­cused of be­ing in­volved in cor­rup­tion in the de­fense in­dus­try — charges that they deny.

Oleh Hlad­kovsky, Poroshenko’s busi­ness part­ner and a deputy sec­re­tary of the Na­tional Se­cu­rity and De­fense Coun­cil, said on Oct. 12 he was ready to vouch for Pavlovskyi dur­ing the hear­ing.

Hlad­kovsky is linked to Cyprus­reg­is­tered com­pany HUDC Hold­ing Lim­ited, which sold four used ar­mored Toy­ota Land Cruiser V8 cars worth $428,000 to state-owned de­fense com­pany SpecTech­noEk­sport in May. The cars were al­legedly over­priced, with the state over­pay­ing by $56,000.

Hlad­kovsky’s of­fice con­firmed that he “used to have a con­nec­tion to HUDC Hold­ing Lim­ited” but said he was not cur­rently in­volved in man­ag­ing it.

Hlad­kovsky has also man­aged to re­ceive sev­eral lu­cra­tive mil­i­tary con­tracts for his au­tomaker Bo­hdan, which was for­merly co-owned by Poroshenko. Th­ese in­clude sup­plies of MAZ trucks, 60 mil­i­tary am­bu­lances worth $2 mil­lion, as well as Hyundai HD65 and Hyundai HD120 trucks, ac­cord­ing to the Nashi Hroshi in­ves­tiga­tive jour­nal­ism project. Ser­hiy Kra­sulya, a Bo­hdan spokesman, ar­gued that there was no con­flict of in­ter­est be­cause Hlad­kovsky was not in­volved in the com­pany’s man­age­ment, de­spite own­ing it.

Ro­man Ro­manov, a for­mer Bo­hdan dealer and a po­lit­i­cal as­so­ci­ate of Poroshenko, heads state de­fense firm Ukroboron­prom.

Mean­while, the Ry­bal­sky Kuz­nia ship­yard, which Poroshenko owns with one of his clos­est po­lit­i­cal al­lies, Ihor Kononenko, won govern­ment con­tracts, in­clud­ing mil­i­tary ones, worth $2.5 mil­lion in 2016, and con­tracts worth $560,000 in 2017, pub­lic data shows.

Deputy De­fense Min­is­ter Ihor Pavlovskyi

Volodymyr Hu­lyevych, head of De­fense Min­istry pro­cure­ment

Deputy De­fense Min­is­ter Ihor Pavlovskyi speaks at the pre-trial hear­ing in Kyiv Solomyan­sky District Court on Oct. 12. He and three other em­ploy­ees of the Min­istry of De­fense are sus­pected of em­bez­zling Hr 149 mil­lion in state funds dur­ing the pur­chase of fuel. (Oleg Pe­tra­siuk)

Ukraine’s De­fense Min­is­ter Stepan Poltorak. (Ukrafoto)

A worker passes by a train car with fuel on a rail­way sid­ing in Kyiv Oblast. Two se­nior De­fense Min­istry of­fi­cials were de­tained on Oct. 11 on charges of em­bez­zling $5.5 mil­lion in state funds dur­ing the pro­cure­ment of fuel for the mil­i­tary. (Kostyan­tyn Ch­er­nichkin)

Ukraine’s Pres­i­dent Petro Poroshenko. (Mykola Lazarenko)

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