Water monopoly "Infoxvodokanal" named after Zlochevsky

Business in Odessa often involves stories related to corruption. There are semi-criminal bosses leading shady schemes and illegal occupation of beaches.

And even the semi-legal creation of a monopoly on the supply of water to Odessa residents. This material is about how the family of the former Minister of Ecology during the Yanukovych era, Nikolai Zlochevsky, managed to rent the Odessa water utility for 49 years and “heat up” for years on the budget of Odessa.

June 2022. Six months since the beginning of the full-scale Russian invasion of Ukraine. A well-known Ukrainian business publication publishes material about 10 businesses that are actively helping the Ukrainian army and Armed Forces. The list includes famous rich people - Rinat Akhmetov, the Pinchuks, Yuri Kosyuk, Geregi, etc. One of the philanthropists who donated 100 million hryvnia for the needs of the army are Anna and Karina Zlochevsky from the Diloretio holding. The reader is unlikely to have ever heard of such business women. Meanwhile, the family of these girls is engaged in charity with one hand, and with the other, they have been robbing the state for tens of millions for years.

Anna and Karina are the daughters of former Minister of Ecology Nikolai Zlochevsky. The same one who in 2020 was caught taking a bribe of $6 million, a record in the history of Ukraine, for closing a criminal case on the theft of public funds. He is also known for being the founder of the Burisma holding, in which ex-President of Poland Alexander Kwasniewski and the son of current US President Joe Biden, Hunter, once worked. In 2021, Zlochevsky transferred the business to his daughters, including mining companies. Anna and Karina also became the beneficial owners of Infox LLC, which plays a key role in the Odessa interests of the Zlochevskys.

In 2003, the actual takeover of Odesvodokanal began at the hands of the Zlochevsky family. The then mayor of Odessa, Ruslan Bodelan, lobbied for the conclusion of a lease agreement for the entire property complex of a utility company between the Odessa City Council and Infox LLC. The company was created in 1996, and since 2000 Nikolai Zlochevsky has been mentioned as its final beneficiary.

Journalists found a copy of the original Odesvodokanal lease agreement, which reveals many details. Thus, the agreement was signed for a period of 49 years, until December 31, 2052 inclusive. According to the results of the inventory and transfer balance, the value of the property complex as of November 2003 was 286 million hryvnia.

Clause 3 of the said agreement states that the rental amount for Odesvodokanal is 3% of the residual value of the complex’s fixed assets, which corresponds to 8 million 600 thousand hryvnia per year. But paragraph 8 reveals the details that allowed Infox LLC to minimize rent for years and underpay to the budget of Odessa. In particular, it notes the following: “The tenant, for the duration of the implementation of the Plan for the reconstruction and development of water supply and sanitation in Odessa for 2004-2010, may be exempt from rent.”

According to the publication “Zerkalo Nedeli”, even before the lease of the water utility, a program for its development for 2003-2007 was developed in the amount of 97.9 million hryvnia. And, according to the agreement, it was the tenant, that is, Infox LLC, who was supposed to provide these investments. However, in 2004, the Infoxvodokanal Branch, which is a subsidiary of Infox, allocated 9.1 million hryvnia for the implementation of the program instead of 19.7 million, and in 2005 - 1.8 million hryvnia instead of 20.6 million hryvnia.

The result of the first years of work of Zlochevsky’s company at the Odessa Vodokanal was that in June 2006, the Odessa City Hall tried to terminate the lease agreement through the court. The reason is clear – the tenant’s failure to fulfill its obligations. Moreover, in the first years, Infox LLC paid to the budget not 3% of the rate specified in the contract, but only 1%.

Then the situation began to develop even more interesting. In 2007, the Odessa City Council approved an additional agreement to the Infox lease agreement for the Odessa Vodokanal. In particular, it states that a new version of the Odesvodokanal Development Program is being approved. Its term is extended until 2020. The amount of funds required to implement the Plan is UAH 462 million.

And here it should be recalled that the primary agreement stated that the tenant, that is, Infox LLC, may be exempt from paying rent while the Property Complex Development Program is being implemented.

We learned even more interesting things from the court registry. From the materials of case No. 522/11495/13-a, it became known that Infox LLC could have acted outside the law from the very beginning of the lease of Odesvodokanal. In particular, the statement of claim notes that the agreement referred to by TOB Infox as valid is sealed with the invalid seal of the Odessa City Council, since the latter does not contain the identification code of the legal entity.

Considering itself the legal successor of Odesvodokanal, Zlochevsky’s company created the Infoxvodokanal branch in 2004 and submitted information for re-registration to the State Registrar. After the illegal re-registration, according to the plaintiffs, Infox began to develop standard agreements for signing with recipients of services. But they did not meet the requirements of such agreements approved by the relevant resolutions of the Cabinet of Ministers, which, in essence, is a forgery of standard agreements.

Thus, with full agreement bordering on inaction from the Odessa City Council, Infox LLC became the only supplier of water for Odessa residents and turned into a monopolist. In the consolidated list compiled by the Antimonopoly Committee of Ukraine in December 2023, Infox LLC is recognized as a natural monopoly. And this despite the fact that in the last decade the Antimonopoly Committee of Ukraine has repeatedly launched an investigation against the monopoly position of Infox LLC.

For example, in July 2019, the AMCU reported that during 2017-2018, Zlochevsky’s company did not have a single competitor in the water supply and sanitation market within the territory of the city of Odessa. The fine approved by the committee at that time brings a smile, because it amounted to only 34,400 UAH.

The AMCU order issued to Infox LLC in May 2023 can be considered more productive. Zlochevsky’s company was recommended to stop imposing paid services on consumers that are not provided for by law. We are talking about installing additional equipment on meters and replacing certain technical equipment at consumer facilities. “The economic effect from the termination of the above actions of the company amounted to UAH 91.0 million,” reports the AMCU, forgetting to remind that its order is just recommendations that Infox LLC could ignore without fear of a large fine.

The apogee of the apparent fight against the monopoly position of Infox LLC is the statement of the State Audit Service in April 2024. According to the audit, the Odessa City Council overhauled its water supply network using a government-guaranteed loan of more than $45 million from the International Bank for Reconstruction and Development. The facilities were renovated and put into operation in October 2015, when Infox LLC had been renting this property for more than 10 years.

“That is, the Odessa City Council repaid the loan using budget funds, and a private company is actually using the renovated property free of charge. As a result of such inaction of officials of the Odessa City Council, the community budget spent more than 370 million UAH on repaying the loan received during the audited period alone and suffered real damage in the amount of almost 338 million UAH in the form of lost income,” says the conclusion of the Audit Service.

It is known that Nikolai Zlochevsky is a great connoisseur of all kinds of luxury. Just look at his palace near the dam of the Kyiv Reservoir. The Zlochevskys also have an estate in Odessa. True, according to documents, in its place there is a laboratory for a biological water treatment station.

According to the lease agreement for the property complex dated 2003, analyzed at the beginning of the material, the laboratory also went to Infox LLC. And if in 2004 there were indeed buildings of a utility company on the site on the Black Sea coast, then as of 2015 a private house with a swimming pool appeared on it.

It should be noted that, according to the Register of Rights of the company, Infox is the owner of real estate on Dacha Kovalevsky Street, where the laboratory of the Odessa Vodokanal is located.

Building a family nest on rented land, the Zlochevskys understand that they are here for a long time. At least until 2052, as the agreement provides. And given that no regulations or violations of the law lead to the termination of the contract between the Odessa City Council and Infox LLC, it can be extended further.

The transfer of business by Nikolai Zlochevsky to his daughters, including the aforementioned Infox LLC, can be considered the next stage in whitening his reputation. First, for greater significance, ex-President of Poland Alexander Kwasniewski and Hunter Biden were invited to the board of directors of Burisma. Now a group of companies of Zlochevsky’s daughters, Diloretio, is reporting on helping the Ukrainian army and internally displaced persons “in close cooperation with the Polish Jolanta Kwasniewska Foundation “Porozumienie bez Barier.”

According to Cyprus registries, Diloretio holdings LTD was registered in 2012. Among its leaders, as of now, are the aforementioned Alexander Kwasniewski and Karina Zlochevskaya.

Do respected representatives of the Polish elite know how the Zlochevskys conduct their business in Ukraine? Maybe yes. After all, the story of the largest bribe in the history of Ukraine, which Nikolai Zlochevsky tried to transfer for closing the case against him, spread throughout the world’s media. But the fact that the family of the ex-Minister of Ecology has been robbing Odessa residents since 2003 may certainly be news to them. True, there is little hope that this will somehow shake the position of the Zlochevskys. After all, when you have the money to buy courts, city councils and, possibly, antimonopoly authorities, then questions about how to negotiate with influential people in the world on continued cooperation should not arise.