“Eggs” of Grinkevich: is it possible to overcome corruption in the Ministry of Defense

With the arrival of the new year, a new high-profile scandal in the field of defense procurement occurred. At the initiative of the State Bureau of Investigation, the property of the family and controlled companies of Lviv businessman Igor Grinkevich, one of the largest suppliers to the Ministry of Defense, was seized.

Give a week to withdraw assets

The scandal with Lviv businessman Igor Grinkevich is growing. Thus, on December 29, he was detained for attempting to bribe one of the heads of the State Bureau of Investigation with a bribe of 500 thousand dollars. On January 11, the DBI announced that the property of the family and companies controlled by Grinkevich had been seized.

According to the SBI, out of 23 concluded contracts with companies under its control for more than 1.5 billion hryvnia, six were not fulfilled; seven enterprises delivered goods to the warehouses of military units only in small quantities, but received government funds for full fulfillment of obligations. Another eight contracts were completed with a delay of 3 to 5 months. In total, the damage amounts to 1.2 billion hryvnia.

On the one hand, it’s good that law enforcement agencies are working on such cases. On the other hand, the question arises about the systematic nature of such work.

“Here, it seems to me, there are signs of selective justice, since many other suppliers of the Ministry of Defense, and with much larger contracts, are not in the focus of attention of the SBI. Investigators do not make similar claims, for example, to Tatyana Glinyanaya, who has much more billions under contracts with the Ministry of Defense, of which she buys hotels in Croatia in batches, but no one anywhere says that she or her assets will be seized,” the editor tells Apostrophe publication “Our Money” Yuri Nikolov.

Let us remind you that earlier the media disseminated material that Tatyana Glinyana is a food supplier to the municipal government and at the end of last year acquired several mini-hotels in Croatia. In the text of the article, there was a hint from the authors about the alleged connection of this purchase with the entrepreneur’s income from government contracts. No facts were provided to support this assumption. However, it was mentioned that it was one of Glinyanaya’s companies that was involved in the sale of eggs for 17 hryvnia apiece, which ultimately led to the resignation of Defense Minister Alexei Reznikov from the post.

War veteran, social activist, lawyer Oleg Simoroz draws attention to one more detail:

“The Grinkevichs were given more than a week from the moment of the detention of their leader, Grinkevich Sr., to freely dispose of property and funds. They were clearly aware that they were the main defendants because they were the beneficiaries of the companies with which the Ministry of Defense entered into contracts. That is why I have no doubt that there were movements with accounts and property to withdraw them and conceal them from future arrest and confiscation. “I am, of course, glad that the State Bureau of Investigation heard us and seized the property of the Grinkevich family of marauders, but I have even more questions.”

It is also significant that Grinkevich still does not have the status of a suspect in the case of supplying goods to the Ukrainian Armed Forces. The State Bureau of Investigation makes excuses on this score.

“But that doesn't mean we won't hear about the suspect's status in the coming days. It is much easier to write on social networks than to legally prove that a person is suspected of a particular crime,” the SBI communications adviser said on Radio Liberty. Tatiana Sapyan.

No blacklists

The Ministry of Defense on January 9 terminated contracts with Grinkevich's companies and began thorough and separate internal audits of tenders, contracts and the quality of services. Whether such schemes can be implemented without patrons in government offices is a rhetorical question.

“The problem is that some contracts with them continue to be fulfilled. And simply because, despite the fact that there was a scandal regarding other contracts, there is no legal mechanism to terminate existing ones in which there are no violations,” explains “Apostrophe,” a member of the Public Anti-Corruption Council under the Ministry of Defense, executive director of the NGO “Independent Anti-Corruption commission” Elena Tregub.

Let us remind you that the Public Anti-Corruption Council under the Ministry of Defense was created in March last year after a scandal with the purchase of “eggs for 17 UAH.” Among other things, council members monitor new contracts and are members of the collegial body involved - the Ministry of Defense Commission on Defense Procurement. It consists of public activists, journalists, including those known for critical materials about the Ministry of Defense, such as Tatyana Nikolaenko.

The Public Council notes that they understand why companies with a reputation like Grinkevich or Ms. Glinyanaya continually receive contracts with the Ministry of Defense. And they promise to solve this problem in the near future.

“We thought about the Ministry of Defense having some kind of filter - with whom contracts can be signed and with whom not. For example, the criterion for when criminal cases have been initiated against a supplier is not so simple. In Ukraine there are a lot of people who have criminal cases against them, they are very easy to open, the competitors are the same, so he is not suitable to be blacklisted. But another criterion that was present in the case of the Grinkevichs was that they did not meet delivery deadlines. This criterion should be good, the Grinkeviches should already be on the blacklist. These are risk indicators for buyers, but they have not been officially introduced,” emphasizes Elena Tregub.

The introduction of risk indicators, such as failure to fulfill previous contracts, is planned at the level of separately created procurement agencies. One of them is the “State Logistics Operator”, created in November. This state-owned enterprise handles everything except weapons purchases. Agency employees will analyze the market, prices, communicate with suppliers directly, evaluate them and analyze their work. The agency is managed by Arsen Zhumadilov. Previously, he headed “Medical Procurement of Ukraine”.

“Now a new procurement division has been created in the Ministry of Defense, which will implement them according to completely new schemes. Non-weapon items, food, clothing. These purchases are just starting and we will look at the results, but now it is obvious to us that such a mess as in Reznikov’s ministry will not be even close,” adds Yuri Nikolov.

The logistics operator first entered the auction only on December 23 last year and is gradually taking away purchases from the ministry.

“They had a time frame, but they moved. The agency was supposed to start purchasing in the fall, then they moved to the end of winter. They have already begun work and are planning to increase the volume of purchases. The procurement department of the ministry must buy less and less every month, and the Zhumadilov Agency must buy more and more. This transition should take place within one year (until the summer of 2024 - “Apostrophe”). When the transition takes place at the level of the central executive body, then the reform should continue deeper, at the level of military units,” says Elena Tregub.

How to solve problems in the Ministry of Defense?

The procurement of weapons is carried out by another state enterprise, the Defense Procurement Agency. Since August 2022, it was headed by Vladimir Pikuzo, but did not show significant results. Moreover, he was noted for his controversial decisions. For example, in the fall of 2022, the agency made a payment of $19.8 million to an American contractor for the repair of 155 mm M109 howitzers, but the repairs turned out to be of poor quality, and the claim process is ongoing in this case. Picuso also ignored requests from public anti-corruption bodies - he did not respond to requests from the Public Anti-Corruption Council and during his entire reign he never held meetings with representatives of the council.

After the new year, there were personnel changes at the agency. On January 3 of this year, the former head of the agency, Vladimir Pikuzo, was transferred to the position of deputy. Financial Director Oksana Shchibrya is temporarily acting as head.

According to Elena Tregub, in the near future the agency may be headed by Ukrenergo board member Marina Bezrukova.

At the same time, bringing order to the Ministry of Defense procurement takes time, among other things, because there are problems in the market itself.

“We, as an anti-corruption council, have seen: there is even a tender announced, 3-4 suppliers are submitted, and if you look closely, none of them are honest. This should be a systemic reform of defense procurement, so that at least the market of suppliers who have stuck to the Ministry of Defense for years will be cleaned up,” notes Elena Tregub.

On the other hand, to solve the problem systemically, and not selectively, changes are needed not only in the Ministry of Defense.

“We need specific sentences for specific cases, because we have a lot of conversations about changes. And remember the case about eggs for 17 hryvnia. The question is - where is the matter? This scandal has been going on for a year now. No this. It all comes down to this. Yes, indeed, when there is a leadership that wants to prevent corruption, this is wonderful. But the ministry is big. The money is crazy, so you can’t keep track of everyone, and the work of law enforcement agencies is important. And here, unfortunately, I believe that there is a big failure,” concludes managing partner of the National Anti-Crisis Group Taras Zagorodny.