Anti-corruption Agencies Focus on Embezzlement at energy company

The newly-appointed prosecutor of the Specialized Anti-Corruption Prosecutor’s Office (SAP) has begun to act and show results – SAP and NABU reveled 8 suspects in $370 mln losses suffered by state energy company Ukrnafta.

Oleksandr Klymenko, a detective of the National Anti-Corruption Bureau (NABU), became head of the Specialized Anti-Corruption Prosecutor’s Office (SAP) on July 28. Just over a month later, on September 2, NABU and SAP announced that eight people have been informed that they are suspects in the seizure of property and funds belonging to Ukrnafta to the value of more than 13.3 billion hryvnias ($370 m). The draft documents regarding this case were compiled  in the fall of 2019 and only signed only after the appointment of the newly elected head of SAP in July 2022.

Ukrnafta is a Ukrainian oil and natural gas extracting company, the country’s largest oil and gas producer, in which the state has a 51% stake. Ukrnafta is also the operator of a nationwide chain of petrol stations. The press center of NABU informs that “the suspected persons include a former chairman of the board of Ukrnafta; former deputy head of the department for sales of oil, gas and oil and gas processing products of PJSC Ukrnafta; former head of the department of control over accounting and supplies of oil and petroleum products of PJSC Ukrnafta; former directors of 5 commercial enterprises, оne person was detained.”

A Belgian citizen named Peter Vanheke served as chairman of Ukrnafta’s board of directors between 2011 and August 2015 who, according to numerous media sources, was loyal to oligarch Ihor Kolomoisky, who in 2021 came under U.S. sanctions because of alleged involvement in large-scale corruption crimes. Vanheke was dismissed from his position in July 2015, and Briton Mark Rollins was appointed in his place though the contract was only signed in the fall of 2015.

According to the investigation, between March and August 2015, several LLCs were recognized as winners at oil auctions. Ukrnafta concluded sales contracts and supplied raw materials for 10.7 billion hryvnias ($295 m).

According to the regulation of the Cabinet of Ministers, the oil supply is carried out only after full payment by the customer. Ukrnafta had no legal grounds to supply products without first receiving payment in full. However, Ukrnafta delivered and processed the raw materials at the Kremenchuk Refinery, and the manufactured oil products were then sold at gas stations throughout the country.

In addition, in July 2015, Ukrnafta concluded 52 contracts for the purchase of oil products with another LLC with delivery dates until the end of 2015, and paid more than 2.57 billion hryvnias in an advance payment. Later, additional agreements were concluded, which extended the delivery dates until the end of 2018. However, as a result, Ukrnafta never received the oil products. As the detectives established, the spent funds were transferred abroad to the accounts of several offshore companies.

The total value of property and funds illegally seized in these two episodes comes to more than UAH 13.3 billion hryvnias ($370 m).

In addition, after the probes carried out by NABU, more than 3.5 billion hryvnias ($36 m) has already been reimbursed to Ukrnafta. These funds were used to repay the debt that arose due to illegal actions carried out by several persons. The draft documents for issuing to suspects regarding this embezzlement case were compiled  in the fall of 2019 and only signed only after the appointment of Oleksandr Kuzmenko the newly-elected head of SAP in July 2022.

Oligarch Ihor Kolomoisky reportedly has a stake of 42% in Ukrnafta, while the state of Ukraine owns a 51% stake.