One man’s war is another man’s “fortune”: how does the money get laundered off of the “Ukroboronprom” – Investigation

Defense enterprises of the country are full of corruption and financial abuses. Inspections of controllers won’t help. The sector has to become a part of state security system but not the source of income for the state budget.

Due to Russian aggression in the East of Ukraine army and defense sector of the country have been receiving huge budgets in the recent years. In 2017 the state has to spend a record high amount of 5,2% of GDP on the defense.

However, there are lots of questions regarding the use of such budgets. During the last couple of years using different illegal instruments hundreds of millions of UAH were laundered off of the enterprises.

The EP received the documents that explain how this money was laundered off of the enterprises and what losses the state incurred.

A joint feeder

Ukroboronprom” is comprised of dozens of state enterprises from different spheres of defense industry.

Part of the consortium is an important enterprise – «Ukrspetsexport» which exports the products of Ukrainian defense industry. Recently another famous company – State Enterprise «Antonov» – became part of the consortium.

The consortium is almost under full control of trustees of the President Petro Poroshenko.

As of 2014 the head of the consortium is Roman Romanov. Having a degree of a physics teacher, before his recent appointment, Romanov was a dealer of the corporation «Bogdan» in Kherson region, and during the Presidential elections in 2014 was the head of the Poroshenko’s Election Headquarters in the region.

Oleg Gladkovskiy, a long-standing business-partner of Poroshenko and now a First Deputy of the Secretary of the National Security and Defense Council, also has a big influence on the consortium. «Ukrayinska Pravda» has earlier already published a more detailed story about the influence that the President’s team has on the state consortium.

Rumors about corruption in the system of «Ukroboronprom» are not new. As Poroshenko himself stated, based on the results of inspections conducted by the security service of the consortium, 25 managers of state enterprises were suspended and stealing of 631 million UAH was prevented.

However, the EP has a letter of the State Audit Service addressed to the Ministry of Economic Development showing that the internal security service of the consortium has prevented far from all the abuses.

Taking into account the results of inspections that we are going to talk about further, the State Audit Service advised the ministry to consider the issue of effectiveness of work of the consortium in the form of the state corporation.

New leadership – old methods

The letter of the State Audit Service to the Ministry of Economic Development says that during 2014-2016 years there were conducted planned financial audits and inspections of activity of 12 enterprises-members of the State Company «Ukroboronprom».

Upon the results of the inspections there were detected the facts of financial violations and ineffective resources management for the amount of 557,8 million UAH. «First of all – because of manipulations with the process of formation of financial results in order to minimize taxes and deductions to the budget», – reads the letter of the State Audit Service.

Detected were the problems that are typical for state enterprises. There were cases of realization of the products at prices lower than cost value, contractual obligations were not being fulfilled which led to creation of debts and imposition of fines.

Numbers in the report of the audit service could have been much bigger, however, some enterprises could not have been inspected because of the lack of reporting documents.

Inspection of the financial and economic activity of the State Enterprise «Kharkiv State Aviation Enterprise» for 2013-2016 was not conducted in April 2017 because of the absence of accounting documents, and availability of financial reporting only for the third quarter of 2016. «National Anti-Corruption Bureau of Ukraine and police were informed of it», – reads the letter.

The biggest violations were detected in the company «Ukrspetsexport» and its subsidiaries: «Promoboronexport», «Ukrinmash», «Tasko-export», «Progress», «Spetstechnoexport», «Ukroboronservice».

The Service also detected violations that led to loss of assets and ineffective resources usage for the total amount of 685 million UAH.

Thus, enterprises lost assets worth more than 130 million UAH because of the lack of control over the performance of contracts on acquisition and realization of property, failure to return advance payments, absence of fines for non-performance of contracts.

State funds were being also lost in bankrupt banks. More than 92 million UAH were allocated by the enterprises on the accounts of VAB Bank, «Finances and Credit», Interbank, Transbank. These financial institutions are in the liquidation stage, and the enterprises belong to the seventh priority list of creditors. This means, that they will not receive the mentioned funds back.

The scheme works as follows: the head of the state enterprise puts money in the bank that is about to go bankrupt, after that bankers launder money off and share profits. There are also cases when money is being allocated at the below-market interest rate, and the margin is shared between the bankers and the leadership of the enterprise.

Ukrainian defense sector traditionally works with the state-owned Ukreximbank in which also the accounts of the above mentioned enterprises should have been kept.

Besides that, subsidiary enterprises of “Ukrspetsexport”, having the right to indecently export and import military and special property, engaged intermediary structures. Enterprises lost 5,1 million UAH because of this.

According to the letter of the State Audit Service, subsidiary enterprises of «Ukrspetsexport» and the very parent company in 2016 had expenses that were not foreseen by the financial plans, and the State Enterprise «Tasko-Export» at all spent more than 533 million UAH having no financial plans.

Besides this, in 2014-2015 the State Financial Inspection conducted two inspections of «Ukroboronprom» in the course of which there were detected financial violations and facts of ineffective use of resources for the total amount of more than 500 million UAH.

The State Audit Service established, that the company does not follow its own Charter, since the prices approved by the consortium on the military goods for special exporters did not have any documented justifications based on the demand on foreign markets.

Instead of a conclusion

Leadership of the state acknowledges that there is stealing at the state enterprises, however, they stress upon the fact that they combat this. In July, making his statement at the Lviv Armored Plant, Poroshenko informed about 41 initiated criminal cases based upon results of work of the internal security service of the consortium.

However, as we all know, there are lots of cases that are being initiated in Ukraine, but all they rarely end up with real indictments and compensations to the state. The EP addressed the «Ukroboronprom» with a request to inform how many sentences have corrupt officials received but as of the moment of publication of the material there was no answer.

Oleksandr Moyseyenko, Ekonomichna Pravda, published on 18 August, 2017

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