Case File

Missing Mortar Rounds in Ukraine

Author
Alex Fischer*
Published on
February 11, 2025
Image
photo credit armyinform.com.ua CC BY 4.0
photo credit armyinform.com.ua CC BY 4.0

Contents

Contents

top

Introduction

Introduction

contents

As Russia’s invasion of Ukraine continues, issues of corruption inside Ukraine have become amplified. In early 2024, the Deputy Energy Minister was dismissed for a ‘large-scale corruption scheme’ involving a $500,000 bribe, and the Agriculture Minister detained in a multi-million dollar corruption inquiry. In 2023, the Defence Minister was dismissed following a series of corruption (fraud and money laundering) charges. The issue of corruption in Ukraine is not an isolated one, and in the context of the current war, even more devastating.

The Ukrainian State Bureau of Investigation (SBU) has launched an inquiry into five individuals connected to a deal involving the Ministry of Defence and the company Lviv Arsenal. The investigation centers on a contract in which Lviv Arsenal was to supply mortar rounds to Ukraine. The company received a 97% advance payment, contingent on the delivery of the rounds within two months. However, the mortar rounds were never delivered, and the purchase price was substantially higher than the prevailing market rate at the time.

Subsequently, a portion of these funds were transferred from Lviv Arsenal to the account of Sevotech (a Slovakian intermediary and supplier), and also to WDG Prompt (a Croatian company). Allegedly, money never reached the account of Elmech Sintermak, the manufacturer in this case. Sevotech and WDG Promet have other contracts with the Ministry of Defence that are also under scrutiny.

The mortar rounds in question were never delivered, and the purchase price was significantly higher than the market rate at that time. According to EU Reporter, "This round was contracted for UAH 10,200. By comparison, in June 2022, Ukrainian Armour supplied this caliber for UAH 3,700, and in August, Ukrspetsexport supplied it for UAH 6,100."

Regarding the non-delivery of the rounds, a successful civil claim has been filed against Lviv Arsenal, with Lviv Arsenal being ordered to pay back the amount plus penalties and fines for non-delivery of paid ammunition. Lviv Arsenal appealed this finding, but lost the appeal. The SBU has since stated they have seized the funds, and are ‘resolving’ the return of this money to the Ukrainian budget.

Lviv Arsenal have replied to the question of non-delivery by ‘blaming’ the third parties, namely Sevotech, stating that they did not have an export licence for the goods. How was this not clarified upon signing the contract?

Inside Ukraine, notices of suspicion have been issued to the five primary individuals involved, but these legal proceedings remain unresolved. Potential penalties that the prosecution may seek include up to 12 years in prison and possible confiscation of the defendants' property.

This case focuses on the circumstances surrounding the deal, and the subsequent prosecutions starting against five individuals. However, it is also worth noting that some journalists have also made allegations that the other companies involved (Sevotech and WDG Promet) have links to Russia, and that this case goes further than individual corruption. Further, there are allegations regarding the conduct of third party WDG Promet and the purchase of a production plant in Bosnia and Herzegovina, which is alleged to have been purchased with funds from this case.

Case Details

Case details

contents
Seller country
Ukraine
Buyer country
Ukraine
Equipment sold
Mortar Rounds: 100,000 (120mm and 82 mm) (undelivered)
Deal value
Up to 1.5 billion Ukrainian hryvnias (4,0615,500.00 USD at time of contract (October 2022)
Sum involved in corruption
It could be argued that the full amount of the deal is in question, as the product was never delivered
Start year
2022
Outcome status
Legal Investigation Ongoing

Actors

Actors

contents

  • Lviv Arsenal: Ukrainian arms company; seller of ammunition; not much publicly available information.

  • Sevotech: Slovakian arms company; manufactures military communications equipment; third party receiving funds; has other direct supply contracts with the Ministry of Defence.

  • WDG Promet: Croatian arms company; specialises in the maintenance, reconstruction and development of military equipment, third party working with Sevotech.

  • Oleksandr Liiev: former head of Department of Military and Technical Policy, Development of Armaments and Military Equipment of the Ukrainian Ministry of Defence (otherwise translated to the ‘procurement’ branch of Defence).

  • Toomas Nakhur: head of Department of Military and Technical Policy, Development of Armaments and Military Equipment of the Ukrainian Ministry of Defence; allegations related to the facilitation and concealment of actions of other involved parties.

  • Yuriy Zbitnev: founder and CEO of Lviv Arsenal; reported to be one of the youngest members of the Verkhovna Rada of the Ukrainian SSR in 1990.

  • Oleksandr Khoroshayev: representative of Sevotech.

  • Ukraine's SBU security service: branch of the Ukrainian government; conducted investigative work in this case.

Timeline

Timeline

contents
2022
  • JunThe Ministry of Defence and Lviv Arsenal prepare a draft contract for the supply of mortar rounds.
  • 10 OctLviv Arsenal and Ministry of Defence signed a contract regarding the sale of 100,000 mortar rounds.
  • 17 NovFunds in the form of advance payments were sent from the Ministry of Defence to the accounts of Lviv Arsenal. A portion of these funds were subsequently transferred to Sevotech, and later to WDG.
 
  • The mortar rounds were never delivered.

Outcomes

Investigation Outcomes

contents
 
  • There have been both commercial and criminal proceedings in this case.
2023
2024
  • 5 FebThe High Anti-Corruption Court (HACC) imposed house arrest on the Director of Lviv Arsenal, Yury Zbitnev.
  • NovThis was cancelled and the Appellate Chamber of the HACC sent Zbitnev into custody. Zbitnev is suspected of appropriating someone elseʼs property and abusing his official position (Part 5 of Article 191 of the Criminal Code of Ukraine).
  • 12 FebOleksandr Liev was also detained while attempting to leave Ukraine and was placed in custody. Bail was set at UAH 50 million (approximately $1,317,000).
  • MarLiev was released from custody after a Court hearing.
  • AprThe decision to release Liev from custody was reversed. However, he was not placed back in custody, as the original custody period had already run out.
  • 5 SepOleksandr Khoroshayev has also been reportedly detained in Czechia and remained in custody.
  • 17 AprSBU officials announce that defence officials will appear in court.
2033
  • A number of the parties to this case have already been subject to preventative measures.
 
  • A total of five individuals have been served notices of suspicion in this case, pertaining to alleged embezzlement of funds. The notices were issued under Article 191.5 of the Criminal Code of Ukraine. Among those served notices are two former heads of the Department of Military and Technical Policy, Development of Armaments and Military Equipment of the Ukrainian Ministry of Defence (Oleksandr Liev and Toomas Nakhur), the CEO of Lviv Arsenal (Yury Zbitnev), the company's Commercial Director (Oleksandr Khoroshayev), and a representative of an international firm (name currently undisclosed).
 
  • These five individuals have been served notices by the Court, in ongoing criminal proceedings. The prosecution may seek penalties of up to 12 years in prison and possible confiscation of property. The criminal proceedings are ongoing, and the outcome remains uncertain at this time.

References

References

contents

  • *Alex Fischer is a pseudonym, our author prefers to be anonymous, their identity is known to the CT.

  • OCCRP. "Ukraine Uncovers Embezzlement Ring Involving Defense Ministry Officials." OCCRP, March 14, 2024. https://www.occrp.org/en/news/ukraine-uncovers-embezzlement-ring-involving-defense-ministry-officials.

  • Nechepurenko, Ivan. "Ukraine Says Corruption Case Involving Defense Officials Highlights Need for Reform." New York Times, January 28, 2024. https://www.nytimes.com/2024/01/28/world/europe/ukraine-corruption-defense.html.

  • France24. "Ukraine Uncovers $40 Million Embezzlement, Bogus Arms Deal Implicates Defense Officials." France24, January 28, 2024. https://www.france24.com/en/europe/20240128-ukraine-uncovers-40-million-embezzlement-corruption-bogus-arms-deal-defence-officials.

  • EU Reporter. "The Czech Footprint in the Corruption Scandal with the Supply of Weapons to Ukraine." January 29, 2024. https://www.eureporter.co/world/czech-republic/2024/01/29/the-czech-footprint-in-the-corruption-scandal-with-the-supply-of-weapons-to-ukraine/.

  • Kyiv Independent. "Transparency International: Court Doesn’t Detain Ex-Defense Ministry Official Accused of Embezzlement." March 14, 2024. https://kyivindependent.com/transparency-international-court-doesnt-detain-ex-defense-ministry-official-accused-of-embezzlement/.

  • Telegram. "FightCorruptor Telegram Channel." Transparency International Ukraine post on Lviv Arsenal case. https://t.me/fightcorruptor/3394.

  • Telegram. "FuckCorruption Telegram Channel." Post about Lviv Arsenal corruption case. https://t.me/s/fuckcorruption?q=%D0%9B%D1%8C%D0%B2%D1%96%D0%B2%D1%81%D1%8C%D0%BA%D0%BE%D0%B3%D0%BE+%D0%B0%D1%80%D1%81%D0%B5%D0%BD%D0%B0%D0%BB%D1%83.

  • Security Service of Ukraine. "SBU Exposes Defense Ministry Officials and Managers of Lviv Arsenal in Embezzlement of Nearly 1.5 Billion Hryvnia on Ammunition Purchases." January 28, 2024. https://ssu.gov.ua/novyny/sbu-za-spryiannia-minoborony-vykryla-chynovnykiv-oboronnoho-vidomstva-i-menedzheriv-lvivskoho-arsenalu-yaki-vkraly-maizhe-15-mlrd-hrn-na-zakupivli-snariadiv.

  • Ukrainian Judiciary. "Court Case No. 113923715 on the Lviv Arsenal Embezzlement." Unified State Register of Court Decisions, October 23, 2024. https://reyestr.court.gov.ua/Review/113923715.

  • YouTube. "Ukraine Corruption Case Involving Lviv Arsenal." YouTube, video, 4:20, posted by Kyiv Post, March 14, 2024. https://www.youtube.com/watch?v=z28AjWL36Rk.

  • “Bosnia Investigates Alleged Purchase of Plant for Ukraine's Defence Ministry’s Funds Allocated for Mines”. European Pravda, October 31, 2023. https://www.eurointegration.com.ua/eng/news/2023/10/31/7172553/.

  • “Who Disrupted Supply of Weapons to Ukraine.” Censor.NET, October 5 2023. https://censor.net/en/resonance/3447570/who_disrupted_supply_of_weapons_to_ukraine.

  • “Ukraine's Defense Ministry Officials Accused of Corruption in Ammunition Purchases.” The New York Times, January 28, 2024. https://www.nytimes.com/2024/01/28/world/europe/ukraine-corruption-defense.html.

  • “SBU Detains Defense Ministry Official for Allegedly Embezzling Funds.” Ukrainska Pravda, July 21, 2023. https://www.pravda.com.ua/eng/news/2023/07/21/7412314/.