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Fuel procurement scandal: Who is who and what does it have to do with Poroshenko

Author : Olena Holubeva

14:30, 13 October 2017
Fuel procurement scandal: Who is who and what does it have to do with Poroshenko

Author : Olena Holubeva

National Anti-Corruption Bureau exposed the corruption scheme with embezzlement of public funds in the amount of over 5,7 million USD n the purchase of fuel for Ukraine’s Ministry of Defense

14:30, 13 October 2017

Read the original text at 112.ua.

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One of the defendants in the scandalous exposure by National Anti-corruption Bureau of Ukraine (NABU) and Specialized Anti-Corruption Prosecution (SAP) of the corruption scheme in the Ministry of Defense of Ukraine, during which the Deputy Minister of Defense of Ukraine and the Director of the Department of State Procurement and Supplies of Material Resources of the Ministry were detained, is Trade Commodity company. Head of the SAP, Nazar Kholodnytsky refused to officially confirm this information, but several people's deputies and a number of experts indicate that it is a company connected with Andriy Adamovsky. And the company actually confirmed this with its release.

What is the core of the corruption scheme?

According to NABU, April 26, 2016, during a tender for the purchase of liquid fuel, Ministry of Defense announced that a certain company has won 14 lots. May 13 and 18, 2016, 14 contracts for the supply of fuel for special purpose vehicles for more than USD 38 million were concluded between the Ministry of Defense and this company. According to the data of the pre-trial investigation, in June-August 2016, in the absence of any legal grounds for amending the contracts for the procurement of goods for budgetary funds, Ministry of Defense and the winning company concluded a number of additional contracts, according to which the unit price was raised on average at 16% of the initial price. As a result, the company-supplier supposedly groundlessly has brought 8,5 thousand tons of fuel less. According to Nazar Kholodnytsky, the supplier argued the revision of the contract fluctuations in prices in the market, that is, at the time of delivery, fuel in the market has risen in price, and therefore the parties were forced to negotiate. SAP received a conclusion of the examination, which states that there were no significant fluctuations in the market, and prosecutors qualified the change of contracts as corruption, as a result of which the state was damaged in the amount of 5,7 million USD. The case has been investigated for almost a year, and on October 11 it was publicized, and the officials involved were detained.

Related: Corruption dirt in Ukraine's Ministry of Defense: Two senior officials detained

The winner of tenders for the delivery of the Defense Ministry to 66 thousand tons of fuel in April 2016 was the Trade Commodity company, People's Deputy Ihor Lutsenko said in his blog on Pravda.com.ua. From 13 to 18 May, the parties entered into contracts, and indeed, the company offered the lowest price. However, after a while the purchase price was increased by 12-17%. Legislation, which regulates public procurement for Prozorro government e-procurement system, provides for the possibility of raising prices through negotiations, Lutsenko wrote. He said that he addressed a deputy appeal to the Ministry of Defense and received a response signed by Defense Minister Stepan Poltorak. In the text of the answer (the People's Deputy placed a copy of it), it was said that the prices under the contracts that were concluded with Trade Commodity LLC were higher due to rising prices on the oil products market. It was also noted that the company supplies gasoline produced at oil refineries in Belarus, Lithuania, and Azerbaijan.

Lutsenko said that after the response of Ministry of Defense, he used the statistics of "A-95" consulting agency and concluded that during the summer prices fell, but did not grow. According to Lutsenko’s data, the average market price, for diesel fuel since April 1, when it was 0,64 USD/l, rose to a maximum value of 0.72 USD/l on June 13 and then began to fall. At the same time, the price at which Ministry of Defense entered into contracts was higher than the average market price: from 0,64 USD/l it was raised to 0,75 USD/ l. According to the answer posted by the Defense Ministry, in addition to the diesel, it has bought A-92 gasoline and aviation kerosene for jet engines TS-1, RT and Jet A-1 from Trade Commodity. Ihor Lutsenko said that he wrote a statement to the NABU with a request, together with the specialists of the Ministry of Defense, to check whether the prices for fuel in the contracts were lawfully raised.

Related: Ukraine’s corrupt deputy defense minister has three cases opened against him in Russia

For Trade Commodity, this tender was the first big victory, Serhiy Kuiun, the director of "Consulting Group A-95" wrote on Facebook page. He said that together with Nelia Stelmakh, one of the top managers of state company Ukrgazvydobuv, he studied the tender and came to the conclusion that the army overpaid 3,8 million USD for fuel.

Trade Commodity categorically disagrees with the accusations of the NABU, and therefore it is ready to contribute to the search for truth. Trade Commodity also added that their activities are not connected and not affiliated with any politicians or political forces, as some media point out.

Trade Commodity, as a major fuel supplier, was practically unknown until 2016. Since 2016, "Trade Commodity" has received state contracts for the supply of fuel, according to various sources, by UAH 270-385 million USD.

In particular, in summer, the Ministry of Defense signed contracts with the company "Gaztrade" (which is of orbit of Trade Commodity) for the supply of 20 325 tons of cold-resistant diesel fuel, Enkorr portal informs. Before that, the agency purchased a frost-resistant diesel at the refineries in Lithuania and Belarus. In addition, Trade Commodity was recognized as the winner at the auction of Ukrzaliznytsia - it won three lots with a total volume of 30 thousand tons, offering prices of 888 USD / t, 896 USD/liter. Avatrade and Element Nafta also won this tender of Ukrzaliznytsia, which was allegedly conducted due to the threat of national security and inability to meet the army's needs for rail transportation,. The State Monopolist concluded contracts with suppliers for the supply of a total of 60 thousand tons of diesel oil. At the same time, Aviatrade and Element Nafta complied with contractual obligations without raising prices, despite a sharp increase in the price of diesel fuel in September, the Enkorr portal writes. "Trade Commodity" refused to ship fuel and disrupted the supply of 10 thousand tons of diesel fuel. They delivered less than 10 thousand tons of diesel fuel and stated that they either need to raise the price or they will not deliver the fuel. Tender committee of Ukrzaliznytsia was forced to cancel the lot.

Related: EU demands from Ukraine to create detached Anti-corruption court

Before that, in February, Trade Commodity signed two more contracts with Ukrzaliznytsia to supply 75 thousand tons of diesel fuel for a total of 64 million USD and 50 thousand tons of diesel fuel for 43 million USd, the media reported. Also, Trade Commodity won an annual contract for the supply of fuel to the Boryspil airport.

What do the people in the president's circle have to do with this? According to the portal "Nashi Hroshi", the authorized capital of "Trade Commodity" is 285 USD. According to the documents, the head of the company is certain Vadym Maiko from Kamenske (formerly Dneprodzerzhinsk), Dnipropetrovsk region. The media claim that he lives in an ordinary apartment building in Kamenske and does not even have his own car.

At the same time, Transport and Infrastructure Minister Volodymyr Omelyan told the RBC-Ukraine news agency that Trade Commodity is a company from the orbit of the influence of private entrepreneur Andriy Adamovsky. Minister linked Adamovsky’s excessive influence on the Ukrzaliznytsia with the problem of critically low diesel fuel reserves in the branches of the state monopolist. Portal Enkorr (with reference to the head of the State Reserve Vadym Mosiychuk) said that Adamovsky took part in the negotiations on behalf of Trade Commodity.

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Andriy Adamovsky 

This scandal occurred in 2016. The State Reserve and Trade Commodity then signed a contract for the supply of fuels and lubricants. The company began to supply them, but when the purchased raw materials were poured into the appropriate containers, the goods allegedly began to decompose, which indicated its low quality. The State Reserve refused to accept such materials, after which businessman Adamovsky personally came to the chairman of the State Reserve Mosiychuk and began to convince him and then resorted to threats. "He was actually the owner of this company ... When we sat down at the negotiating table, we found out (and by his words it was clear) that he was the ultimate owner," Mosiychuk specified in an interview.

Related: Energy sector remains most corrupted in Ukraine’s economy, - Anti-Corruption Bureau

Subsequently, according to Deputy Serhiy Leshchenko, representatives of the Ministry of Economic Development headed by Stepan Kubiv began to conduct official investigations, inspections, criminal cases against Mosiychuk.

Earlier this year, Adamovsky admitted that he was financing the company Trade Commodity LLC. Journalistic investigations also report the link between this company with another influential person from the close circle of the president of Ukraine - Olexander Granovsky. "Adamovsky is a partner of Granovsky," wrote the People's Deputy Leshchenko. One of Adamovsky's offices is located in the business center "Eurasia", and there is a sign "Reception of People's Deputy Olexander Granovsky." Granovsky is a close friend and partner of the People's Deputy Igor Kononenko, the army comrade of the head of state. The media often write about them as a tandem: one is responsible for the courts and law enforcement agencies, and the second - for the state company.

Granovsky himself has already denied his involvement in the Trade Commodity case. In his comments of Pravda.com.ua, he stated that he has nothing to do with the company and with the same success "could comment on the activities of NASA or the veterinary service of Belarus." Previously, Granovsky stated that he had partnered with Adamovsky until 2014.

Interestingly, after Maidan, Granovsky and Adamovsky appeared in a big scandal around the Skymall shopping and entertainment center: businessmen were accused of stripping the rights of its legal owner, Estonian Hillar Teder.

Related: Anti-corruption organization to adress Prosecution to stop lawlessness at Odesa customs

Media mention Adamovskiy as a co-owner of the network of "Vikoil" petrol stations, which were sold to the Russian fuel giant – TNK company. Granovsky was his partner and in this asset, along with Andriy Malytsky and Ihor Filippenko. According to Liga.net, Adamovsky had business projects with officials of the team of Viktor Yanukovych.

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