NABU uncovered a 480 million scheme during the construction of defence structures in the Sumy region: contractors, fake supervision, and collusion

NABU uncovered a 480 million scheme during the construction of defence structures in the Sumy region: contractors, fake supervision, and collusion

Corruption Case from NABU: Northern Department of the Customer of Works of the Ministry of Defence.

Detectives discovered a potential scheme to misappropriate 480 million UAH during the construction of military engineering structures and defense lines in Sumy region.

According to investigation KP No. 52024000000000242, in February-March 2024, the Northern UZC concluded contracts with LLC "Topaz", LLC "Sumybudinvest" LTD, and LLC "Budmontazhservice 1" for the construction of 21 military engineering structures and 16 defence lines (non-explosive barriers). This amounts to approximately 700 million UAH, of which 70% (490 million UAH) were paid as an advance payment, which is the maximum allowed by law.

During an inspection conducted by employees of the technical supervision department of the main capital investments management (MCIM) of the Ministry of Defence, significant deficiencies were found in the work execution. These violations were repeatedly reported to the contractors’ representatives, but they ignored the remarks. Moreover, the deficiencies were concealed by covering the objects with soil, complicating further inspections. This led the technical supervision employees to refuse to sign work completion acts (form KB-2v) without addressing these issues.

In response, the head of the Northern UZC issued an order on May 8, 2024, No. 40/od, canceling the previous order from March 12, 2024, No. 38/od on the appointment of technical supervision officers among MCIM staff.

Instead, local civilians were engaged for supervision, including individual entrepreneurs, with whom 21 contracts for technical supervision were signed on May 8. According to NABU, this decision could have been aimed at weakening quality control of the works and assisting contractors in concealing deficiencies.

The contracts stipulated that in case of a delay in the work performance, contractors had to pay a penalty of 0.1% of the contract price for each day of delay. As of July 2024, the works had not been completed in full, although additional agreements from April 2024 set deadlines until May 31. Instead of imposing penalties amounting to approximately 25 million UAH, officials from the Northern UZC and MCIM, according to the investigation, colluded with the contractors.

To avoid fines, contractors received certificates from the regional Chamber of Commerce, confirming force majeure circumstances. NABU believes that these actions were part of a scheme aimed at avoiding punitive sanctions and causing damage to the state.

According to the investigation, officials from the Northern UZC and MCIM in collusion with contractors organized a scheme that led to:

- Embezzlement of 480 million UAH of state funds through poor-quality work execution and concealment of deficiencies.
- Avoiding a penalty of 25 million UAH through manipulations with force majeure circumstances.

NABU gained access to the mobile phones of the directors of the contractor companies and the head of the Northern Department of the Customer of Works of the Ministry of Defence. In particular, in the iPhone of the director of LLC "Topaz", law enforcement found the group "Sumy Region Fortification", which includes 49 participants. It contains information about the progress and order of work execution for the construction of fortification structures.

- LLC "Topaz" was established in May 2004. It is owned by Sumy resident Valentyna Sirosthan. The authorized capital of the company is 21 thousand UAH.

- The founder and owner of LLC "Sumybudinvest" LTD is listed as a Kharkiv resident Artem Dehtyarov. The company’s authorized capital is 80.5 thousand UAH.

- LLC "Budmontazhservice 1" with an authorized capital of 17 million UAH was established in February 2009. Its founder and owner is a Kyiv resident Andriy Handzyuk.