Un­able To Take Flight

Kyiv Post - - Front Page - BY OLEG SUKHOV

Visi­tors of state-owned air­craft maker Antonov are greeted by the statue of Vladimir Lenin that over­looks the fac­tory premises in Kyiv. Ap­ple trees and green­houses for grow­ing cab­bages are an­other relic from the Soviet era here.

So is the man ef­fec­tively in charge of the gi­ant air­craft maker, Dmytro Kiva, who has worked at the com­pany since 1964.

He has held sev­eral jobs here since the early 1980s. He was Antonov’s chief de­signer in 1987-1991, and af­ter a break got the same job back in 2006, be­fore get­ting ap­pointed the com­pany’s pres­i­dent two years later.

De­spite ac­cu­sa­tions of cor­rup­tion and fail­ure to mod­ern­ize the air­craft maker, Kiva, 72, has re­sisted at­tempts to re­move him as head of the com­pany. His stay­ing power is not for the lack of govern­ment effort in try­ing to plough through the cum­ber­some pro­ce­dure to re­move him.

Kiva said all ac­cu­sa­tions against him are “lies.”

“Rus­lan In­ter­na­tional and Rus­lan SALIS have been au­dited by Ernst & Young,” Kiva said. “These are just ac­cu­sa­tions made by peo­ple who have got­ten used to steal­ing them­selves.”

Antonov is Ukraine’s largest air­craft pro­ducer and also has air­line and air­port ser­vice units. That doesn’t mean it is ter­ri­bly suc­cess­ful – it pro­duced just two air­craft last year, three in 2013 and eight in 2012.

In 2013, its net profit fell 0.71 per­cent to Hr 39.05 mil­lion ($1.5 mil­lion), while its net rev­enue dropped 1.47 per­cent to Hr 3.27 bil­lion – or $130 mil­lion a year at an ex­change rate of Hr 25/$1.

To its crit­ics, Antonov stands as a mon­u­ment to Ukraine’s Soviet-era graft, low pro­duc­tion and in­ef­fi­ciency If Antonov were prop­erly man-

aged, crit­ics say, it could sell bil­lions of hryv­nias more in com­mer­cial and mil­i­tary air­craft in its niche as a low-cost al­ter­na­tive to Boe­ing and other global gi­ants.

Kiva is seen as a liv­ing sym­bol of the ob­sta­cles hold­ing Antonov back.

Tech­ni­cally, Kiva was re­moved in July 2014, but his re­place­ment, Ser­hiy Merenkov, has been pre­vented from per­form­ing his du­ties by armed guards.

“For me, Kiva and cor­rup­tion are syn­onyms,” said Merenkov, who was ap­pointed by the In­dus­trial Pol­icy Min­istry as pres­i­dent of Antonov in July 2014.

Kiva dis­puted Merenkov’s ap­point­ment in court, ar­gu­ing that the min­istry had no grounds for fir­ing him, and has pre­vented him from en­ter­ing Antonov’s premises.

In Septem­ber 2014, the Kyiv District Ad­min­is­tra­tive Court re­in­stated Kiva as Antonov’s pres­i­dent, and the de­ci­sion was up­held by the Kyiv Court of Ap­peals in November.

On Feb. 3 Kiva’s em­ploy­ment con­tract with Antonov ex­pired, and the Eco­nomic Devel­op­ment and Trade Min­istry, the heir to the In­dus­trial Pol­icy Min­istry, which over­sees Antonov, ap­pointed him as act­ing pres­i­dent of the com­pany.

The min­istry plans to select a new head of Antonov in a com­pet­i­tive hir­ing process by the end of this year. It is not clear if Kiva will be el­i­gi­ble.

Mean­while, on Feb. 18, the Supreme Ad­min­is­tra­tive Court ruled that the In­dus­trial Pol­icy Min­istry’s or­der to ap­point Merenkov was le­gal. But Kiva told the Kyiv Post that the rul­ing did not make Merenkov pres­i­dent be­cause it ap­plied only to the In­dus­trial Pol­icy Min­istry and did not in­val­i­date the Eco­nomic Devel­op­ment and Trade Min­istry’s or­der to ap­point Kiva.

(The min­istry) “de facto rec­og­nized that in the pe­riod from Au­gust 2014 to Fe­bru­ary 2015 there were two pres­i­dents at Antonov, Kiva and me,” Merenkov said by phone.

The lengthy saga of Kiva’s re­moval started be­cause of mount­ing ac­cusa- tions of crimes against him. Some of them are re­lated to highly prof­itable busi­ness ac­tiv­i­ties by Antonov’s sub­sidiaries out­side of Ukraine.

For ex­am­ple, in Oc­to­ber the Pros­e­cu­tor Gen­eral’s Of­fice opened a neg­li­gence, abuse of power and em­bez­zle­ment case against Antonov’s man­age­ment. The com­pany’s top ex­ec­u­tives failed to trans­fer div­i­dends from cargo air­lines Rus­lan In­ter­na­tional and Rus­lan SALIS to the bud­get, the Pros­e­cu­tor Gen­eral’s Of­fice said.

Lon­don-based Rus­lan In­ter­na­tional and Leipzig-based Rus­lan SALIS are joint ven­tures be­tween Antonov and Rus­sia’s Volga Dnepr group. Rus­lan SALIS has lu­cra­tive con­tracts to de­liver car­goes for NATO and E.U. gov­ern­ments. In 2006 the com­pany signed a 600 mil­lion euro con­tract with NATO that was valid un­til 2012 and was sub­se­quently ex­tended.

The Pros­e­cu­tor Gen­eral’s Of­fice told the Kyiv Post, in re­sponse to an in­quiry, that these for­eign-reg­is­tered com­pa­nies failed to share their in­come with Ukraine’s govern­ment, which is ef­fec­tively a ben­e­fi­ciary owner of the cargo trans­porters.

The com­pa­nies kept their in­comes in for­eign ac­counts, the pros­e­cu­tors said, and the govern­ment in­curred at least Hr 37 mil­lion worth of losses. It did not, how­ever, clar­ify over what pe­riod of time the losses oc­curred. Mean­while, Ukraine’s Mil­i­tary Pros­e­cu­tor Ana­toliy Ma­tios told UNN news agency in Oc­to­ber that the state in­curred Hr 502 mil­lion in losses be­tween 2006-2012 be­cause of Antonov’s man­age­ment.

Merenkov, who was ap­pointed pres­i­dent of Antonov but never took over, said that Rus­lan In­ter­na­tional and Rus­lan SALIS had cooked their books to hide the prof­its.

But Antonov de­nied ac­cu­sa­tions in a state­ment on their web­site in Oc­to­ber 2014, say­ing that it re­ceived $9.4 mil­lion in div­i­dends from the two com­pa­nies for the pe­riod of 2006 to 2013, and trans­ferred the funds to the bud­get.

Ukraine’s Mil­i­tary Ma­tios also said in Oc­to­ber 2014 that Kiva owned stakes in Rus­lan In­ter­na­tional and Rus­lan SALIS, but Kiva de­nies this.

But the com­pany it­self con­tin­ues to co-own the for­eign busi­nesses. The Pros­e­cu­tor Gen­eral’s Of­fice told the Kyiv Post that it had pro­posed trans­fer­ring Antonov’s shares in the two com­pa­nies to the govern­ment.

For­mer Prime Min­is­ter Mykola Azarov is also a sus­pect in one of the cases re­lated to Antonov man­age- ment’s al­leged mis­deeds. Ac­cord­ing to the pros­e­cu­tor’s of­fice, he is charged with il­le­gally sus­pend­ing a probe by a govern­ment com­mis­sion into fi­nan­cial vi­o­la­tions by Antonov. In Fe­bru­ary an ar­rest war­rant was is­sued for Azarov in re­la­tion to this case.

Azarov’s name is the only one re­leased by the Pros­e­cu­tor Gen­eral’s Of­fice in re­la­tion to abuse of power, neg­li­gence and em­bez­zle­ment cases, but Merenkov says Kiva is also in­volved. The names of Antonov ex­ec­u­tives linked to the case have not yet been re­leased be­cause they have not been in­formed about be­ing sus­pects as of now.

Merenkov claimed that top of­fi­cials of the In­dus­trial Pol­icy Min­istry used to be “in Kiva’s pocket,” but the pros­e­cu­tor’s of­fice re­fused to re­lease de­tails about on­go­ing in­ves­ti­ga­tions.

Kiva has also been ac­cused of nepo­tism be­cause his son, 52-year-old Olek­sandr Kiva, has held a num­ber of se­nior jobs in the state com­pany also. He was ap­pointed vice pres­i­dent and a deputy chief de­signer be­fore his father be­came pres­i­dent in 2008, and kept his job af­ter his father was pro­moted to pres­i­dent.

Kiva Jr. also topped the list of po­ten­tial suc­ces­sors for the com­pany’s top job, compiled by Antonov it­self in Jan­uary 2014.

“When Kiva be­came the com­pany’s head, eth­i­cal prin­ci­ples dic­tated that he should change his son’s po­si­tion,” Merenkov said.

But Dmytro Kiva dis­missed the ac­cu­sa­tions, say­ing that his son is no longer on the list of con­tenders for the pres­i­dent’s job. “Pre­vi­ously dy­nas­ties were be­lieved to be a good thing,” he added.


Antonov Pres­i­dent Dmytro Kiva at a cer­e­mony de­voted to the cer­ti­fi­ca­tion of An-158 air­craft on Feb. 28, 2011, in Kyiv.


A protest held by Antonov staff in sup­port of Antonov Pres­i­dent Dmytro Kiva on May 21 near the Cab­i­net of Min­is­ters in Kyiv.

From left, Antonov Pres­i­dent Dmytro Kiva, then-Verkhovna Rada Speaker Olek­sandr Turchynov and In­te­rior Min­is­ter Arsen Avakov speak dur­ing the Arms and Se­cu­rity 2014 ex­hi­bi­tion on Sept. 24 in Kyiv. (Volodymyr Petrov)

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