Ukraine uncovers $40 million EMBEZZLEMENT SCHEME involving Defense Ministry officials and private arms manufacturer

01/31/2024 / By Richard Brown

The Security Service of Ukraine (SBU) has uncovered a major embezzlement scheme involving high-ranking officials and a private arms maker.

According to Russia Today, the scheme involved high-ranking officials of the Ukrainian Ministry of Defense (MOD) and the private munitions company Lviv Arsenal. The conspirators attempted to steal 1.5 billion hryvnias (approximately $40 million) in state funds designated for the acquisition of mortar shells for Ukrainian troops in the conflict with Russia.

The eponymous firm based in western Ukraine received an order for 100,000 rounds from the MOD in August 2022. However, the company allegedly failed to deliver the munitions. Instead, it transferred the funds to a foreign company affiliated with an entity based in the Balkans, which ultimately did not supply any mortar shells to Ukraine. (Related: Where are the tens of billions being spent in Ukraine really going? Analysis dares to ask the tough questions.)

The SBU identified key figures in the scheme:

Aleksandr Liiev, former head of the MOD’s Department of Military and Technical Policy, Development of Armaments and Military Equipment
Toomas Nakhur, incumbent head of the aforementioned department
Yury Zbitnev, Lviv Arsenal founder and CEO

One of the suspects was detained by SBU operatives while attempting to cross the border out of Ukraine. Meanwhile, Zbitnev said the person responsible for the ammunition contract has been terminated. He added that his company has been collaborating with the MOD to return the funds to the state for more appropriate purposes.

The suspects are facing fraud charges, which carry a potential sentence of up to 12 years in prison, along with property confiscation. According to the Ukrainian prosecutor general, the stolen funds have been seized and will be returned to the defense budget – a move upheld by a Kyiv appeals court.

Ukraine’s military, defense ministry plagued by CORRUPTION

Ukrainian Deputy Defense Minister Dmytro Klymenkov issued a statement regarding the matter on Jan. 27. “The MOD continues to fight uncompromisingly against those who embezzle from weapons procurement,” he said. “We have no place for corrupt officials.”

The recent revelations underscore the challenges posed by corruption in the procurement and supply of essential military equipment for Ukrainian forces. Corruption within the MOD and the Ukrainian Armed Forces has been an ongoing concern during the conflict with Russia, and this incident adds to a series of corruption scandals involving the ministry.

In another case in December, a senior defense ministry official was detained over allegations of embezzling $40 million related to an artillery shells contract.

Ukrainian President Volodymyr Zelensky has taken actions to address corruption, dismissing officials in charge of regional military recruitment centers and firing then-Defense Minister Oleksii Reznikov in September, citing the need for new approaches amid ongoing scandals. Rustem Umierov replaced Reznikov in the MOD.

Amid these developments, Ukraine has faced increasing pressure from the U.S. to tackle government corruption. Washington has reportedly tied certain types of economic aid to Kyiv’s progress in reforming its institutions, as reported by CNN in December.

Moscow meanwhile escalated its aggression, launching drone and missile attacks on both civilian and critical infrastructure across Ukraine, the Ukrainian Air Force reported on Jan. 28.

Russia targeted the central Poltava region using two ballistic missiles fired from its Iskander ballistic missile system. Filip Pronin, the region’s governor, reported an industrial site in Kremenchuk was hit, causing a fire. As of writing, there are no preliminary reports of casualties, Kyiv stated.

Additionally, three surface-to-air missiles were launched over the Donetsk region in the east. In the southeast Zaporizhia region, a drone attack hit an infrastructure site, according to its governor Yuri Malashko.

Visit Corruption.news for more stories about embezzlement in Ukraine.

Watch the late Gonzalo Lira expose how corrupt Ukrainian oligarch Igor Kolomoysky, who was jailed for embezzlement, funded Ukrainian President Volodymyr Zelensky and the neo-Nazi Azov Battalion.

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