Among those detained are current and former Defense Ministry officials and a people's deputy of the first convocation
Clearing of the Augean stables at the Ministry of Defense continues. Late in the evening of Saturday, January 27, security forces detained several defendants in a high-profile criminal case involving the theft of almost UAH 1.5 billion under a 2022 defense contract. Among those detained:
- former deputy director of the department of military-technical policy, development of weapons and military equipment of the Ministry of Defense, Alexander Liev;
- the current head of the military-technical cooperation department of the department of military-technical policy, development of weapons and military equipment of the Ministry of Defense Toomas Nahkur;
- owner and director of Lviv Arsenal LLC, and former People's Deputy of Ukraine of the 1st convocation, Yuriy Zbitnev.
Among the accomplices is also a representative of a foreign commercial structure. The listed persons were informed of suspicion of taking property through abuse of official position as part of an organized group (Part 5 of Article 191 of the Criminal Code).
Important detail. Official releases emphasize that the operation to expose the top figures took place with the assistance of the Ministry of Defense. On this occasion, the new leadership of the defense department, which came after the dismissal of Minister Alexei Reznikov, also published a message: “The Ministry of Defense continues an uncompromising fight against those who steal money from weapons purchases. We have no place for corrupt officials. We are fighting not only against Russian occupiers, but also against internal traitors.”
The criminal case against the mentioned persons has been dragging on since April 2023. As the Main Investigation Department of the National Police found out, on August 14, 2022, the director of Lviv Arsenal LLC, Yuriy Zbitnev, signed a contract with the Slovak Sevotech spol sro for the supply of 100 thousand mortar shells (40 thousand pieces of 120 mm caliber mortar rounds and 60 thousand pieces of mortar rounds 82mm rounds) totaling $36 million. This amount completely covers the needs of the front for two weeks, the investigation noted.
To implement preliminary agreements with the Slovaks, on October 11, 2022, Lviv Arsenal LLC received defense contract No. 403/1/22/317. According to its terms, by February 20, 2023, the contractor had to supply 100 thousand mortar shells worth $36.6 million. That is, fully comply with the Ministry of Defense agreement.
For its part, the Ministry of Defense almost immediately after signing transferred UAH 1.34 billion in advance (97% of the contract value) to the account of Lviv Arsenal LLC. At the same time, Zbitnev’s company, without receiving supporting documents from the foreign counterparty, transferred $3.65 million and 9.15 million euros to the accounts of Sevotech spol sro. The Slovaks transferred part of these funds to the accounts of WDG promet doo, registered in Croatia.
What do the auditors and defendants say?
According to the head of the State Audit Service of Ukraine, Alla Basalaeva, the Slovak company transferred only 37% of the advance payment to the Croats. For the balance of funds, Sevotech spol sro entered into an agreement with a commercial bank on the calculation of daily interest for the use of money. From November 2022 to May 2023, the foreign company received more than UAH 78 million in interest from the bank for the use of these funds. Basalaeva clarified that this is an illegal operation, since the funds from the defense contract must be spent for their intended purpose.
“I note that this is not the period of the beginning of a large-scale invasion so that one can justify it by the chaos of the war. This is November 2022. Deliveries were to begin in December and be completed by the end of February 2023. However, for more than a year from the date of transfer of funds, the Ministry of Defense has not received the goods. The money was also not returned,” the auditor explained.
In total, law enforcement officers managed to seize UAH 818 million, which the Ministry of Defense transferred to Lviv Arsenal LLC.
Before the announcement of suspicion, Yuri Zbitnev outlined his version for the media. He noted that he deliberately paid only 35% of the advance payment (about 12 million euros), since he allegedly did not receive all the confirmation documents from the counterparties. The remaining funds remained in the account of Lviv Arsenal LLC and were seized as part of the trial.
“We will now jointly decide with the Ministry of Defense (how to return - “Glavkom”) this prepayment, and it would still be advisable to return the rest to the state and use it for some more expedient purposes. Therefore, I believe that I saved this billion rather than spent it,” Zbitnev said.
Yuri Zbitnev in 1990 became one of the youngest deputies of the Verkhovna Rada of the Ukrainian SSR. He also participated in the creation of the SDPU(u), but later left it. He is one of the authors of the Declaration of State Sovereignty of Ukraine. In the 1990s, Zbitnev was an adviser to Prime Minister Vitaly Masol. In the 2004 presidential elections, Yuri Zbitnev received 0.05% support.
During the Revolution of Dignity, Zbitnev participated in the seizure of the Kyiv City State Administration, and his ex-wife Rena Nazarova became a deputy of the Kyiv City Council from the Udar party in the 2015 local elections. In 2021, information appeared about Nazarova’s work for the Office of President Zelensky.
In September 2016, Yuriy Zbitnev created Lviv Arsenal LLC. The authorized capital of this company is 120 thousand UAH.
Ex-official of the Ministry of Defense Alexander Liev, who was involved in the signing of the scandalous contract, also tried on the mantle of the savior of the state’s money. In particular, the former official took credit for the fact that it was he who included strict penalties in the contract for failure and delay and, in the end, imposed fines on Lviv Arsenal, and then turned to law enforcement agencies.
The figure of Liev is quite controversial. During Yanukovych's presidency, Alexander Liev worked as the Minister of Resorts and Tourism of Crimea. In March 2014, when the Ukrainian peninsula was captured by Russian troops, an official told the media: “Of course, we are mentally Russian, although many of us speak Ukrainian, many fell in love with this country, although... it [Crimea within Ukraine] was not our choice ... And I personally am sorry that now this is falling apart, but this is not coming from Crimea.”
Despite all this, Liev ended up on mainland Ukraine and eventually built a successful career here. He worked as first deputy director of the National Television Company of Ukraine, advisor to the Minister of Agrarian Policy Alexey Pavlenko, executive director of PJSC National Public Television and Radio Company of Ukraine.
In 2022, Liev became deputy director of the department of military-technical policy, development of weapons and military equipment of the Ministry of Defense. And in the end, his name became toxic after a series of journalistic investigations that concerned large-scale thefts in procurement for the army.
At the beginning of 2023, a scandal arose over the allegedly Russian passport of Alexander Liev. However, this information was not confirmed, so journalists had to write a refutation.
Last year, Alexander Liev sued a number of Ukrainian media, which accused him of obstructing the Ukrainian army and recalled his love for the “Crimean spring.” In December, the ex-official lost the case to the Ukrayinska Pravda publication. That same month, Liev dropped his lawsuit against Zerkalo Nedeli.
Separately, the publication hromadske conducted an investigation, which stated that the Ministry of Defense had other direct contracts with the Slovak Sevotech spol sro and the Croatian WDG promet doo. In particular, in the spring of 2022, the Slovaks promised to bring 17 thousand sets of body armor and helmets for the Armed Forces of Ukraine for 15 million euros. Instead, only 2.5 thousand sets were delivered. In December 2022, the Croatian company received 3 million euros from the Ministry of Defense for the supply of 30 thousand tank rounds. As with Lviv Arsenal LLC, this contract also failed.
In addition, journalists called WDG promet doo a gasket, which in total earned 14.5 million euros in Ukraine, which is waging a fierce war. The Croats used part of these funds (5.5 million euros) to purchase the abandoned Vitezit gunpowder factory in Bosnia and Herzegovina. Another 5 million euros transferred by Ukraine for weapons were converted into cash.
Investigators also recorded a “Russian trace” in WDG promet doo. In particular, its parent company still stores its archives in Moscow. This was confirmed in a Croatian court by local businessman Peter Pernicka, who is closely associated with the owners of WDG promet doo
The punitive operation has begun
On the eve of the high-profile detention of Zbitnev and current and former Defense Ministry officials, another significant event occurred. On January 24, 2024, the Northern Economic Court of Appeal upheld the decision of the Economic Court of Kyiv dated September 26, 2023 to recover UAH 1.34 billion in advance payment from Lviv Arsenal LLC in favor of the Ministry of Defense for non-delivery of paid mines. In addition, the contractor must pay UAH 90.6 million in penalties and UAH 96.7 million in fines. The decision has entered into legal force and is subject to enforcement.
In the court of first instance, the representative of Lviv Arsenal LLC tried to shift all the blame for the failure to supply 100 thousand mortar mines for the Ukrainian Armed Forces (contract No. 403/1/22/317) to its foreign counterparties (Sevotech spol sro and WDG promet doo), and also circumstances of “force majeure” (referring to the behavior of export control authorities of foreign states).
“Risk is one of the signs of entrepreneurial activity... Therefore, there are no legal grounds to shift the commercial risk of the defendant (Lviv Arsenal LLC - Glavkom) to the plaintiff (Ministry of Defense - Glavkom) by releasing the former from fulfilling his obligations. The defendant did not provide evidence that the behavior of the export control authorities of foreign states was in direct causal connection with the delay in delivery of the goods stipulated by the contract from the foreign supplier. In addition, the defendant could and should have taken care that he and/or the counterparty he attracted had the necessary set of documents that allowed the movement of such goods,” says the decision of the Kyiv Economic Court, which entered into legal force.
This court decision does not exhaust the list of “punitive” measures that the Ministry of Defense has planned against Yuri Zbitnev’s company. As Glavkom found out, another lawsuit from the defense department against Lvov Arsenal LLC is being considered in the Economic Court of Kyiv. This time, the plaintiff is seeking to recover UAH 163.48 million from the contractor in the form of a penalty under the same government contract No. 403/1/22/317. On December 26, 2023, the court, at the insistence of the Ministry of Defense, seized the bank accounts and property of Zbitnev’s company.
