Bribery in Minregion: What Is Lozynskyi Suspected of and How He Received Funds?

Author: Daryna Synytska, journalist of DOZORRO TI Ukraine project

On February 9, the Appeals Chamber of the High Anti-Corruption Court will consider an appeal against the selection of an interim measure to the former Deputy Minister for Communities and Territories Development Vasyl Lozynskyi. This story became one of the most resonant in January, so, the experts of the DOZORRO project of Transparency International Ukraine decided to make sense of this case.

On January 21, the NABU and the SAPO detained First Deputy Minister for Communities and Territories Development Vasyl Lozynskyi, who has now been dismissed from his post. He is suspected of receiving a bribe in the amount of USD 400,000.

According to NABU detectives, the minister received these funds for assistance in concluding contracts for the procurement of equipment and machinery at inflated prices. Among them were generators. Who was the procuring entity of these goods, whom Lozynsky allegedly assisted, and what the price was — let’s find out in our material.

Press releases from the National Anti-Corruption Bureau and the Specialized Anti-Corruption Prosecutor’s Office indicated that the investigation concerned the procurement of equipment and machinery, which was supposed to provide the population with alternative sources of light, heat, and water supply in winter in the face of destruction of critical infrastructure. In summer 2022, the Cabinet of Ministers allocated UAH 1.68 bln for them.

In addition, law enforcement officers noted that the minister did not act alone, but as part of a criminal group of five people. The names of the suspected members of the group, as well as some details and amounts of transactions, became known from the streams of the court hearings on the selection of interim measures, published on the YouTube channel of the High Anti-Corruption Court.

UkrNDIvodokanalproekt ordered equipment worth UAH 1.4 bln in two months

According to the case file, Vasyl Lozynskyi allegedly received an unlawful benefit from the difference between the real and agreed prices of equipment procurement conducted by the UkrNDIvodokanalproekt SI, subordinated to the Ministry for Communities and Territories Development. Prozorro contains information about seven procurement transactions of the institute in 2022. All of them were concluded from November to December with six suppliers:

• LLC “TH Budshliakhmash,” which supplied40 trucks for the transportation of drinking water for UAH 242.6 mln;
• LLC “EPG,” which provided 82 solid fuel modular boiler stationsfor UAH 797.5 mln;
• LLC “M.B.,” which sold 72 diesel generatorsfor UAH 65.6 mln;
• LLC “Ultra-Maria,” which supplied 32 diesel generatorsfor UAH 28.2 mln;
• LLC “Techno Train,” which provided 20 mobile water treatment plantsfor UAH 127.5 mln;
• LLC “Difrano Union,” which sold 25 mobile installations for surface and artesian water treatmentfor UAH 97.8 mln.

That is, in total, we are talking about procurement worth UAH 1.4 bln, of which, according to the Spending service, UAH 519 mln was paid as of January 21.

The relevant documents on the part of the procuring entity were signed by Vasyl Dub, deputy director of the state institute, who began to perform the duties of Oleksandr Ohloblia after his dismissal on November 4. It was then that First Deputy Vasyl Lozynskyi became acting Minister instead of Oleksii Chernyshov, who was appointed Head of the Board of NJSC Naftogaz of Ukraine. The case file states that in conversations with Lozynskyi, Ohloblia refused to enter into agreements with them, allegedly due to distrust of companies with a minimum balance in accounts and violations.

Judging by the recordings of conversations cited by law enforcement officers, these companies were not the only ones that could supply such equipment. In particular, Vasyl Lozynskyi complained that other suppliers called him with offers of cooperation.

The law enforcement officers calculated that there was overpricing by more than 30% on one of the generator models.

According to the investigation, UkrNDIvodokanalproekt received price offers from the above-mentioned companies, as a result of which it concluded direct contracts. The companies allegedly agreed upon the inflated prices in advance, as did Deputy Minister Vasyl Lozynskyi. The latter pressured the heads of the institute to sign contracts and pay the money.

The NABU and the SAPO assume that prices were 25-30% higher than market prices at the time of concluding contracts. Vasyl Lozynskyi allegedly received 7-10% of the amount of the signed contracts, and he engaged Serhii Kryvyi, the head of Techno Train LLC, in the case. The latter engaged other persons. In general, according to investigators, the roles between the suspects were distributed as follows:

• Vasyl Lozynskyi, Deputy Minister of Regional Development, agreed with the companies and chose the equipment they were to supply to UkrNDIvodokanalproekt after pressuring the head;
• Serhii Kryvyi, the owner and head of Techno Train LLC, involved the companies controlled by him, among which was LLC Budshliakhmash;
• Mykhailo Lukashyk, Kryvyi’s subordinate, prepared deliberately inflated price offers;
• Oleksandr Kroshka, ex-head of LLC “EPG,” provided the enterprise, actually controlled by him, for the supply of goods and the accrual of funds from UkrNDIvodokanalproekt, which were to be subsequently cashed out, converted into currency, and given to Vasyl Lozynskyi;
• Roman Kitnerreceived part of Lozynskyi’s bribe in Lviv from Ihor Politar and transported funds to Kyiv.

The amount of the bribe was the result of the difference between market and offered prices. For example, the materials of the criminal proceedings contain the NABU Information and Analytical Certificate, according to which on September 1, 2022, LLC “M.B.” provided a commercial proposal for the supply of diesel generators. Among them was the Turkish generator Genpower GNT 120 worth UAH 597,261. Exactly for the same price, this company sold 35 of the same generators to UkrNDIvodokanalproekt in November. At the same time, law enforcement officers, referring to the data of the information base of the customs service, note that LLC “M.B.” imported such generators for UAH 393,782 in September.

Based on the difference in the price of import and sale, the SAPO prosecutor noted a possible overpayment of more than UAH 200,000 from each such generator at the court session. Given that 35 of them were purchased, we can talk about an overpayment of UAH 7 million from only one model of a diesel generator. And there were 72 of them ordered. However, Spending does not contain information on payments of funds of LLC “M.B.” for generators for UkrNDIvodokanalproekt.

By the way, it was this company that sold 24 Turkish inventor gasoline generators Genpower GBG15 with a capacity of 1.5 kW to Kryvyi Rih in October. According to Spending.ua, it cost the city budget UAH 417,000.

Probable scheme of transferring a bribe to the First Deputy Minister

The NABU opened proceedings for alleged embezzlement of funds and extortion of unlawful benefits on September 26. Since then, agents have almost constantly monitored members of the alleged criminal group and conducted wiretapping. Some dialogues between them, as well as descriptions of meetings, were voiced by one of SAPO prosecutors during the HACC court hearings.

In particular, according to the prosecutor, the accomplices discussed a bribe for Lozynskyi in the amount of USD 500,000, USD 400,000. Law enforcement officers are still studying the source and fate of the other USD 100,000, but suggest that these were funds for Lozynskyi’s influence on concluding contracts with other institutions (not UkrNDIvodokanalproekt). The prosecutor did not name specific cases, contracts and procuring entities, but noted that law enforcement officers had materials on such violations.

Thus, the documents published in the register of court decisions on this case mention such companies as LLC “Modern Trucks,” LLC “TH Spetszapchast,” LLC “SPC Ecosoft,” LLC “TH Municipal Equipment,” LLC “PC Viva,” LLC “VLIV.” According to the prosecutor, Serhii Kryvyi also had meetings with First Deputy Minister of Economy Denys Kudin, Oleksandr Pyvovarov (allegedly involved in the case of unlawful benefits in the State Emergency Service), and Deputy Head of the Presidential Office Rostyslav Shurma.

In addition, according to NV, Serhii Kryvyi was the manager of the Ukrainian oligarch Oleksandr Kurchenko, held the position of department head of light petroleum products of the CEPEC group of companies. After Kurchenko fled, he allegedly collaborated with oligarch Ihor Kolomoiskyi. YouControl also contains information that in 2017, he was convicted of attempted seizure of property on a particularly large scale and entered in the register of corrupt officials, which is currently closed for public review. At that time, Kryvyi was in a position at NJSC Naftogaz of Ukraine.

The scheme of arrangement of a bribe, according to the investigation, was as follows. Part of the funds that the supplier received to the account from the State Treasury were transferred to the intermediary. The intermediary brought cash to the cash desk of the conversion center in Kyiv. You could get there only by knowing the password. Subsequently, the funds were transferred to an exchange office in Lviv, where they were again cashed out, but in foreign currency, and then transferred through the intermediary.

Judging by the materials voiced at the meetings, Lozynskyi did not physically receive funds. NABU detectives detained the intermediary and searched his apartment, and then detained the minister.

Four alleged participants in the crime were assigned bail, the minister — house arrest.

So far, the HACC has chosen all five interim measures. Vasyl Lozynskyi was given round-the-clock house arrest, Roman Kitner was assigned UAH 805,200 of bail, Oleksandr Kroshka — UAH 0.5 mln of bail, Mykhailo Lukashyk — UAH 26.8 mln of bail, and Serhiy Kryvyi — UAH 100 mln of bail. Defenders of all five have already filed appeals against the relevant decisions.

Currently, not all materials of the pre-trial investigation have been published in the public domain. Therefore, it is impossible to say precisely whether law enforcement officers suspect Lozynskyi of pressure on all the mentioned above contracts.

We would like to add that the minister is suspected of obtaining an unlawful benefit by an official in a particularly large amount, or committed by an official who occupies a particularly responsible position (Article 368, part 4 of the Criminal Code). Lozynskyi may face 8 to 12 years in prison with deprivation of the right to hold certain positions or engage in certain activities for up to 3 years, with confiscation of property.