Case of "eggs for 17 hryvnias": SAPO and NABU exposed scheme of embezzlement of over UAH 700 million in Ministry of Defence
On 2 April, the National Anti-Corruption Bureau served suspicion notices to participants in the scheme to purchase "eggs for 17 UAH" and meals in the Ministry of Defence. The allegations are that the state suffered losses of UAH 700 million.
This was reported by Censor.NET with reference to the SAPO press service.
Under the procedural supervision of SAPO prosecutors, NABU detectives served a notice of suspicion to the former head of a department of the Ministry of Defence of Ukraine, the owner and directors of the supplier companies, and an individual involved in the embezzlement of public funds for the Ministry of Defence of Ukraine's procurement of food for the Armed Forces of Ukraine during the full-scale invasion of Russia.
The actions were classified under Part 5 Article 191, Part 2 Article 15, Part 5 Article 191 and Part 3 Article 209 of the Criminal Code of Ukraine.
The case of "eggs for 17 hryvnias"
Procurement fraud
It has been established that during 2022-2023, the Ministry of Defence of Ukraine provided the military with food by purchasing catering services from business entities. The essence of this service was to purchase a set of products according to a catalogue containing 409 items.
In other words, the Ministry of Defence did not purchase individual products from the 409 listed in the catalogue, but all 409, the cost of which formed the price of the kit.
This allowed the criminals to embezzle budget funds by setting inflated prices for the most popular products and lowering prices for less popular ones, while making the cost of the kit looked like the real market price.
For example, 50 per cent of the value of the total supply under the contract, which is about UAH 1.2 billion, was for just 40 out of 409 products, and their prices were inflated.
On the contrary, 27 types of products with reduced prices were supplied to the Armed Forces of Ukraine for a total of UAH 3.6 million, which is only 0.14% of the cost of such products.
The catalogue was also manipulated with seasonality.
For example, suppliers listed abnormally low prices for seasonal products in their catalogues. For example, the price of sweet cherries was only 8 UAH/kg, strawberries - 10 UAH/kg, black currants - 10 UAH/kg, etc. At first glance, the Ministry of Defence was making profitable purchases. However, according to the approved standards, the said seasonal products could not be ordered by military units at all during the term of the contracts, as they were concluded after the end of the period during which such seasonal products could be ordered.
At the same time, an official of the Ministry of Defence of Ukraine "did not notice" price manipulations with the cost of products when signing supply contracts.
Consequences of the illegal scheme
As a result, the implementation of this scheme led to the fact that between August and December 2022, two supplier companies illegally received more than UAH 733 million from the budget.
Subsequently, part of these funds was paid as dividends and used to provide repayable financial assistance to related companies. The investigation believes that the owner of the companies could have used these funds to purchase hotels in the Republic of Croatia and other real estate abroad.
After the pre-trial investigation was launched in January 2023 and the relevant information was disseminated in the media, including the purchase of eggs at UAH 17 per piece, the accomplices in the fraud reduced the prices of 11 of the most popular products. This prevented the embezzlement of budget funds in the amount of UAH 788 million.
In addition, after the NABU and SAPO submitted proposals to eliminate the causes and conditions of the product scheme, the MoD took appropriate measures: the procurement procedure has now changed, and some pilot projects have been introduced.
The investigation is ongoing, and other persons who may be involved in the crime are being identified.
What preceded it?
As a reminder, on 21 January 2023, the media reported that the Ministry of Defence could purchase food for the military at prices that are 2-3 times higher.
The agency responded by stating: "The media reports about the purchase of food for the military are misleading and manipulative. We are preparing materials for the SSU". Defence Minister Oleksii Reznikov denied the information about the purchase of food at inflated prices. According to him, there was a technical error in the document published by the media - the supplier indicated the price for a kilogram of eggs rather than a dozen.
The Ministry of Defence's catering service provider denied allegations of price gouging and invited members of the Defence Committee to the production site.
The scandal was discussed at a meeting of the Verkhovna Rada Committee on National Security, Defence and Intelligence. Reznikov was retained in his position.
The Ministry of Defence is audited by the State Audit Service.
The NABU and the SAPO are investigating the procurement information in the framework of criminal proceedings that were initiated before the publication of the journalistic investigation.
After the procurement scandal, Reznikov announced a reform of the army's food supply.
It was reported that Deputy Defence Minister Shapovalov was allowed to resign. Bohdan Khmelnytsky, deputy director of the Ministry of Defence's Department for Public Procurement and Supply of Material Resources, was also dismissed.
Later, it became known that Tetiana Hlyniana, a supplier of food to the Armed Forces of Ukraine, was the owner of four hotels in the Croatian resort city of Split.
