Construction of fortifications: one-day companies, "classified" criminal cases and juggling budgets of regional state administrations
Public attention to the construction of fortifications was initially heightened by the May Russian offensive in the Kharkiv region. When it first became clear that some fortifications existed only on paper, and the state had already spent 38 billion hryvnias on fortifications, a significant part of which went to the accounts of newly created companies with signs of fictitiousness. Now the Russians are actively advancing in the Donetsk region, and similar complaints are coming from there about "complete showmanship and imitation of activity" in the construction of fortifications. BusinessCensor investigated who is responsible for the construction and why all statements of estimates are classified. And the contractors are involved in criminal proceedings on suspicion of embezzlement of UAH 20 billion.
Against the backdrop of scandals with the absence of fortifications in the Kharkiv region, back in May, MPs created a Temporary Special Commission (TSC) on the intended use of funds for the construction of fortifications and the purchase of drones.
Mykola Zadorozhnyi, a member of the Servant of the People party, a former showman and event organizer who worked for the Kvartal 95 event agency, was appointed chairman of the commission. Recently, he received a suspicion from the NABU of extorting UAH 3.4 million in bribes for "not interfering with repair work" in the Sumy region.
His deputy was Mykhailo Tsymbaliuk of the Batkivshchyna ("Fatherland" - ed. note) faction. The commission also includes 13 other deputies.
In particular, Mykhailo Bondar, a member of the European Solidarity faction, became the secretary of the commission.
At the beginning of the commission's work, Bondar told how, on the eve of the invasion of the Kharkiv region, Volodymyr Zelenskyy and the deputies visited the same fortification site, which had been built by the local authorities "as a demonstration". In other places, something was built in a hurry to report, and in some places, nothing was done at all.
"The guys told us that when they had to reach the line where the fortifications were supposed to be, they found pits or immediately started digging something because it was a bare spot," Bondar said.
At the same time, he promised that if abuses were found, members of the commission from opposition groups would insist on the transition of the special commission to an investigative commission.
According to him, in May, the authorities agreed only to establish a special commission. And because of this uncertain status, its activities are significantly limited. The conclusions of the special commission will be advisory in nature, it can develop proposals for the government, but at the same time, it has limited access to certain documents.
Since its creation, the Temporary Special Commission has held three meetings but has not yet reached the specifics - contracts and contractors for the construction of the inclusions.
The TSC meetings were attended not by the "top" officials of the regional administrations, but by other employees who could not answer questions about either the procurement of fortifications or the contractors.
The meeting, which was to take place on 19 July, was cancelled by the head of the TSC, Mykola Zadorozhnyi, without explanation.
In addition, allegedly due to security issues, all materials of criminal proceedings and contracts for the purchase of fortifications investigated by the TSC were marked "confidential" or "for official use only". Therefore, formally, members of the commission cannot disclose information from these materials to the media, even if facts of abuse have been recorded there, Mykhailo Bondar told BusinessCensor.
According to him, it is unlikely that the commission on fortifications will meet before 20 August, when the next plenary session of the Verkhovna Rada will take place.
"The head of the TSC was given the command to do nothing and delay the process. Mykola Zadorozhnyi is now simply ignoring all the messages in the TSC's WhatsApp group," Bondar said.
Construction of fortifications: how does it work in Ukraine?
At the end of April, Prime Minister Denys Shmyhal said that almost UAH 38 billion had been allocated for fortifications since the beginning of 2024. And that "by redistributing state budget expenditures", the government had allocated more than UAH 8 billion for the construction of fortifications. This means that the total budget for fortifications is now almost UAH 46 billion.
According to Mykhailo Bondar, the main spending units for the construction of fortifications in Ukraine are the Ministry of Defence, regional administrations and the State Agency for Infrastructure Restoration and Development with its regional network.
The first line of fortification is exclusively the responsibility of the Ministry of Defence. The second and third lines are partially handled by regional military administrations.
In case when the administration of the region in which the fortifications are to be built does not have enough money for the fortifications, another regional administration that has such funding and conducts procurement for another region and engages contractors is involved in their construction. "They agree among themselves who builds what, on what site. Who is responsible for what," says Bondar.
In any case, the General Staff always acts as the customer for fortifications, which must accept them from the contractor. According to Bondar, sometimes the military does not accept these facilities because of their unsatisfactory condition, and then the local authorities that financed the construction transfer the fortifications to the balance sheet of their utility companies. For the TSCs, the regional administrations explain these facts by allegedly "lack of funds for the maintenance" of the fortifications by the military.
"All this is a false front, not tied to the terrain. (...) the positions are being dug wherever it is convenient for the excavators," Yurii Butusov, Editor-in-Chief of Censor.NET, recently told about the construction of fortifications in the most difficult currently Pokrovsk axis, "In an open field. Sometimes concrete dugouts are built, but they are not dug into the ground, they are built like old-world pillboxes in the open terrain, which are clearly visible and not camouflaged. These positions are not covered by drones. All these positions that are being dug, there are a complete show and imitation. The troops do not take up these positions, only sometimes enemy assault groups take them up when they need to escape from our fire during the next bounding when they go on the attack. Unfortunately, this is a sad reality."
According to Bondar, the regional administrations have already reported to the parliamentary commission that all fortifications are at least 85% complete. The Security Service of Ukraine has different information, having opened 30 criminal proceedings on the facts of construction abuses. The cases involve the alleged embezzlement of about UAH 20 billion. Funds were spent for purposes other than that intended, such as purchasing materials at multiply inflated prices and building facilities that only existed on paper. Under the contracts with the RMA, contractors usually received more than 70-80% of the cost of building fortifications in advance.
Cases disappear from the Register, prices remain inflated
In February this year, the Security Service of Ukraine opened a criminal investigation into price gouging in the procurement of timber for the construction of fortifications in the Kharkiv region. Until June, the rulings in this case were publicly available in the State Register of Court Decisions, but then they disappeared, the Kharkiv Anti-Corruption Centre said.
The missing case summary was as follows: several contractors "controlled by the same group of people" bought timber from state-owned enterprises, in particular from the State Enterprise "Izium Forestry" at a price of UAH 970 per cubic metre of coniferous wood (pine) with a diameter of 15-19 cm and a length of 3-4 m.
And they were sold to the Department of Kharkiv Regional State Administration, which was engaged in the construction of fortifications, at a price of UAH 4100 per m3.
The losses from this scheme could have cost the state budget about UAH 150 million in January-March this year alone.
However, as recent Prozorro procurements have shown, criminal proceedings do not stop officials from buying timber for fortifications through dubious intermediaries with huge surplus payments.
For example, BusinessCensor found the following timber procurement in the Donetsk region in June.
The Ocheretyne village military administration bought round coniferous timber with a volume of 15-24 cm and a length of 4 m from Investinprom LLC for UAH 6,500/m3.
At the same time, the Pokrovsk Municipal Council bought timber products from Investinprom for UAH 12.89 million at a similar price.
In April 2014, Investinprom sold 25-30 m long, 3-4 m coniferous-edged sawn timber (pine) to Pokrovsk and the region for 11 thousand UAH/m3.
In total, Investinprom supplied timber to the Donetsk region for almost UAH 26 million. Although this is a completely new area of activity for the company, last year Investinprom specialized in renting specialized machinery for the Kherson Municipal Council.
Investinprom LLC was established in Kyiv last year and was initially registered to a resident of Boiarka, Volodymyr Petukhovskyi, who had previously been prosecuted for manufacturing drugs. In April 2024, the company was re-registered to Tetiana Petrivna Sapehina, also a resident of the Kyiv region.
Returning to the procurement of wood in the Kharkiv region, according to BusinessCensor's calculations, the Department of Kharkiv Regional State Administration recorded in the electronic system the procurement of timber for fortifications for a total of more than UAH 415 million.
Of this amount, only UAH 30.6 million, or less than 10% of the total procurement amount, was ordered by Kharkiv Regional State Administration directly from a branch of the state enterprise "Forests of Ukraine", the lion's share was purchased through intermediary companies with signs of fictitiousness.
For example, Hertz Industry, which was established a year ago, sold more timber to the Kharkiv Regional State Administration this year than all state forestry enterprises - UAH 52 million. In the past, the company sold timber in the Kharkiv region for UAH 57 million.
Recovery service or regional state administration
Despite the fact that there are supposedly certain rules for financing procurement for the construction of fortifications, in practice each region organises it in its own way.
For example, in the Donetsk region, BusinessCensor found tenders of the local Infrastructure Restoration and Development Service, which was engaged in the construction of strongholds and made procurement for almost UAH 474 million in March-April this year without specifying the estimates and contractor.
The Department of Donetsk Regional State Administration purchased only certain materials for these defences. The local Department of Civil Protection, Mobilization and Defense Work purchased, among other things, a concertina razor wire of the Egoza type, or in other words, barbed wire for almost UAH 360 million from the notional Ukrbudinvest group, which is associated with the family of the former chief of police in the currently occupied Donetsk, Maksym Kirindiasov.
At the same time, some village councils in the Donetsk region held tenders for the purchase of materials for fortifications. For example, the Hrodivka RMA in the Pokrovsk district and the Illinivka village council in the Kramatorsk district purchased PZ-1 barrier pyramids from the S.K.S.M. Trading House LLC, owned by Kharkiv businessman and former People`s Deputy Anatolii Denysenko. They were purchased for 1790 - 1960 UAH per piece (Pokrovsk district purchased more expensive).
At the same time, in the Kharkiv region, the local Service for Infrastructure Restoration and Development was not involved in the issue of fortifications at all. Its largest tenders were for road maintenance, worth a total of UAH 8.66 billion in expected value and divided between the road favourites of the Great Construction period - Highway South LLC, Avtostrada Group LLC and Rostdorstroi LLC.
In the Kharkiv region, the centralized procurement of fortifications was carried out by the Department of Housing, Utilities and Fuel and Energy Complex of the Kharkiv Regional State Administration, which, by an incomprehensible logic, initially did not classify its contractors for fortifications, but classified all estimates.
For example, in January, a department of the Kharkiv Regional State Administration procured wood from Epicentr K LLC through Prozorro (the department even indicated in the contract the actual location of the company and that the wood was to be supplied for fortifications on the first line) for UAH 36.22 million (the specification was for UAH 38 million). The Department has classified what exactly it paid such funds for, i.e. the subject of procurement and the cost per unit of goods.
Except for a rather large contract with Epicentr, the procurement of materials for the construction of fortifications in the Kharkiv region is dominated by firms with signs of fictitiousness.
The situation is different in the procurement of "construction of fortifications", where the Department of Kharkiv Regional State Administration recorded UAH 6.4 billion in expenditures in the electronic system.
The Prozorro system lists contractors for all fortifications in the region, which allowed Business Censor to calculate the top 10 largest recipients of funds for fortifications in the region.
Rating of the largest contractors in the Kharkiv region
The first place is occupied by Trust Zhytlobud-1 PrJSC, owned by Oleksandr Kharchenko, who is a member of the executive committee of the Kharkiv Municipal Council, with UAH 996.80 million;
The second is Tech-Incom LLC, which is associated with Andrii Rudenko, a longtime deputy mayor of Kharkiv responsible for defense issues who was dismissed in April 2024, with a value of UAH 545.71 million;
The third is Stroy UA LLC, owned by Viktoriia Didyk from Dnipro, worth UAH 375.26 million;
Fourth - PE "Construction Firm " PROMTEKS", associated with former People's Deputy from Kharkiv Anatolii Denysenko - UAH 333.30 million;
The fifth is Zhylstroy-3 LLC, owned by Kharkiv residents Yurii Melnyk and Oleksandr Maleev - UAH 303.57 million;
The sixth is Project Alliance LLC, one of the owners of which is Andrii Kolos, former director of the Department of Economics and International Relations of the Kharkiv Regional State Administration, former city council deputy from the Nash Krai (Our Land) party, member of the executive committee of the Kharkiv City Council - UAH 266.39 million;
In seventh place is Vitalii Kravchenko's Business Project LLC from Chuhuiv district - UAH 237.49 million;
The eighth is Remtexnaladka LLC from Poltava, owned by a local entrepreneur, a representative of the beauty industry, Yevheniia Kornberg. Until September 2020, the owner was Oleksandr Yarovenko. In January-November 2021, the company was managed by Volodymyr Medianyk, a former deputy of the Poltava City Council, with a total value of UAH 177.68 million;
The ninth is Alliance Transbudservice Construction Company LLC, a Cherkasy-based company established in 2023 and registered to Vitalii Okhota, which, in addition to fortifications in the Kharkiv region, managed to win tenders for the construction of shelters in the Shevchenkivskyi district of Kyiv - UAH 149.98 million;
The tenth place goes to ROSTDORSTROY LLC, known since the Great Construction, a firm of former Odesa City Council deputy Yurii Shumakher and Yevhen Konovalov, with UAH 142.37 million.
