12.06.2024 Fortification

How the Minister of Ecology Strilets and forest curators Bolokhovets and Smal are getting rich on fortifications and hindering Ukraine’s defense

The military is forbidden to talk about the fortifications in Kharkiv region – Ukrainian media publish this material with reference to the soldiers of the Defense Forces. The authorities will again tell the  Psychological Operations (PSYOP), but it is difficult to hide the obvious. After the Russian offensive in the north of the Kharkiv region, the picture of the state of the fortifications and, in some places, their absolute absence, became clearer.

This seemed impossible, because the government allocated billions, and the head of the Kharkiv Regional Military Administration, Syniehubov, personally reported on the preparation process and stated that the tasks had been completed by 98%. Later, it became known that most of the contractors were local government-controlled firms that set inflated prices not only for their own work but also for materials.

For example, the company responsible for the construction of fortifications is Project Alliance LLC.  It was allocated a total of UAH 933.47 million for construction for the needs of terrorist defense and fortification, as well as UAH 33 million 375 thousand for the supply of construction materials for defense. At the same time, the owners of the Project Alliance are directly linked to the Russian Federation through the Rozhkov family.

However, the largest schemes are hidden in the supply of timber. In particular, a group created by Ruslan Strilts, Minister of Environmental Protection and Natural Resources, Yuriy Bolokhovets, Director General of the State Enterprise “Forests of Ukraine,” and Viktor Smal, Head of the State Agency of Forest Resources of Ukraine, created a large-scale illegal scheme to profit from fortifications.

And as Bolokhovets himself said: “Wood is the main material for building fortifications.” Therefore, it is not surprising that the above-mentioned group actually has a complete monopoly on the management of the region’s forests and timber supplies, as it fully controls local forestry enterprises. That is why it has the unlimited right to set its own price – many times higher than market prices.

And the former head of the State Forestry Agency claimed that timber supplies to the military were free of charge and the following scheme of activity: “The military unit determines the volume, agrees with the regional military administration, then sends an appeal to the Forests of Ukraine. The wood is delivered free of charge. Wood is delivered to the front from all over the country. Almost all branches of the Forests of Ukraine are involved. Harvesting, transportation from the upper warehouses to the railway station, loading into railcars – all expenses are covered by the company.”

But there is a nuance – the price. In 2023, the Department of Housing and Communal Services, Utilities and Fuel and Energy of the Kharkiv Regional State Administration bought wood from state forestries. And cooperation almost stopped when newly registered companies entered the arena.

Thus, the Kharkiv Regional Military Administration purchased timber at prices that were several times too high. For example, a contract for the supply of 3544.5 cubic meters was concluded with one of the companies at a price of UAH 8,028 per 1 cubic meter. For comparison, on February 26, 2024, the Department of Housing and Communal Services, Utilities and Fuel and Energy of the Kharkiv Regional State Administration concluded a contract for the purchase of wood (excluding delivery) with the state enterprise “Forests of Ukraine” (Zmiiv Forestry Branch) in the amount of 2075.3 cubic meters for UAH 6.86 million. The average price per 1 cubic meter is UAH 3303.8.

In fact, it becomes obvious that even after the emergence of the so-called “privateers,” state forestry enterprises continue to supply timber for fortifications. At the same time, state-owned enterprises do so directly. However, in order to increase the price of the wood and its transportation and to capture most of the budget in the pockets of Bolokhovets, Smal and Strilets, unknown legal entities come into play – newcomers and manipulations with unloading, moving goods, etc. Interestingly, now, all the equipment, such as manipulators and trucks, has suddenly disappeared from state-owned enterprises, and they are “forced” to pay separately for renting them from private companies. That’s when the process of money circulation begins through conversion centers and fraudulent schemes.

A few examples: the average cost of wooden logs with a diameter of 100 mm ranges from UAH 1300 to UAH 2950 per 1 cubic meter. At the same time, representatives of the Kharkiv Regional State Administration claimed that they buy wood for the construction of fortifications at the average price in Ukraine – UAH 5500 per 1 cubic meter of logs, including logistics costs.

In addition, the Marinka military administration buys wood for UAH 4900 per 1 cubic meter. The agreement includes the supply of goods. Prices for the Donetsk town of Selidove are also lower than Kharkiv’s

TED and wood supply

TED LLC is the main supplier of wood for the construction of fortifications to state-owned and municipal enterprises (according to the Prozzoro electronic public procurement system).

TED LLC is an absolute winner in tender proposals, most of whose customers are state-owned enterprises located in the Donetsk region. At the same time, TED supplies timber at prices that are several times too high and of inadequate quality.

In addition, TED conducts dubious business activities aimed at withdrawal and legalization of the proceeds of crime, tax evasion, and cash withdrawal to controlled fictitious legal entities and individual entrepreneurs. “TED is a fictitious entity created for the purpose of embezzlement, misappropriation, conversion of budget funds, and participation in conversion centers. It does not carry out any other business activities, has no fixed assets, labor resources, equipment, personnel, or capital to fulfill contracts.

Let us consider the business activities of TED. During 2023, TED LLC entered into the following agreements:

  1. Taxpayers provided services for the purchase of timber for a total amount of: UAH 41,938,947.38.
  2. PJSC “AK Kyivvodokanal” (Kyiv) for the purchase of uncut boards for the total amount of: UAH 3,987,289.99.
  3. PJSC “ZAPORIZHSTAL” (Zaporizhzhya region) for the purchase of timber for a total amount of: UAH 596,159.9.
  4. SE “RESEARCH AND PRODUCTION COMPLEX OF GAS AND TUBE BUILDING “ZORYA” – “MASHPROEKT” (Mykolaiv region) for the purchase of cut boards for a total amount of UAH 410,019.44

In other words, the company receives the vast majority of its revenues from the budget or through companies that fulfill budget orders.

Regarding expenses. During 2023, TED LLC (EDRPOU code 42940293) entered into the following agreements:

  1. State Enterprise “FORES OF UKRAINE” (Kyiv) for the sale of forest resources for a total amount of UAH 14 151 320.57.
  2. AIDIA TECH LLC (Kyiv) for the sale of forest resources for a total amount of UAH UAH 13 312 657.55.
  3. State Enterprise “Klavdievskaya Forest Research Station” (Kyiv region) for the sale of round timber for a total amount of UAH: UAH 3,176,900.
  4. Individual entrepreneur Donets Vasyl Sergiyovych (Cherkasy region) provided transportation services for a total amount of UAH: UAH 2,443,333.36.
In fact, the company purchases forest materials from the State Enterprise “FORESTS OF UKRAINE” and other forestry enterprises, which are affiliated and controlled by officials of the State Agency of Forest Resources of Ukraine, at a reduced price. Subsequently, as a result of winning multimillion-dollar tenders, the company sells the said forest materials to state-owned enterprises at an inflated price, thereby generating its own “profit” at the expense of budget funds.
Subsequently, the budget funds received by TED are withdrawn for cash, through controlled, affiliated enterprises, individual entrepreneurs and offshore companies, as well as by concluding fictitious contracts, in particular, the provision of certain transportation services that are not actually performed and serve only as a means of legalizing funds.
Thus, Bolokhovets, Smal and Strelets, abusing their official position, by prior conspiracy, using TED LLC, embezzled and misappropriated budget funds in the execution of contracts by creating fictitious income and expense parts, fictitious VAT accrual, not delivering goods or delivering them at prices that are several times too high, conducting transactions through shell and affiliated companies under their control in order to evade taxes and further legalize and withdraw budget funds through a number of controlled companies within the conversion center.
We have repeatedly submitted materials to law enforcement and regulatory authorities regarding the criminal activities of TED. Although, the Poltava City State Bureau of Investigation registered the information in the URPTI under No. 62024170020001288 on the fact of poor quality construction of fortifications. However, no pre-trial investigation has been conducted.
Nevertheless, we have already sent repeated materials.

Who controls the costs of fortification?

The Verkhovna Rada created a Temporary Special Commission on the use of budget funds allocated for the construction of fortifications and the manufacture and purchase of unmanned aerial vehicles for the military. However, this did not make any contribution to the process of countering the distribution of the budget among the “forest watchers.” In fact, we have yet another association for distraction and pseudo-fighting.
Perhaps the TSC members are also involved in the schemes, and that’s why they are silent about such rapid overstatement of the cost of timber?
However, one thing is clear: Ukraine’s forests and timber are monopolized by top officials, so the speed, quality, and effectiveness of building fortifications in all strategic areas depends on them. Instead, the creation of thousands of “special commissions” will not help stop the Klondike.
Therefore, we demand an urgent response from the authorities, a thorough investigation of the activities of Bolokhovets, Smal and Strilets and, of course, taking measures against them, depriving them of influence and total control over the process of building fortifications to prevent them from profiting from the security of the entire state. Perhaps it’s time to think about who is interested in the rapid fall of the frontline?

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