A political corruption scandal revealed by bne IntelliNews in 2017 has erupted into a potent threat to Ukraine’s Prime Minister Volodymyr Groysman. Groysman’s protegé, Miroslav Prodan, the head of Ukraine’s State Fiscal Service, is the highest target of a criminal investigation into massive customs fraud and bribery in Groysman’s home region of Vinnytsia. 

bne IntelliNews enquiries suggest the unfolding drama may have already claimed its first victim — a shadowy figure who knew the financial secrets of top powerbrokers in Ukraine. 

As criminal investigators arrived at the door of a Vinnytsia apartment in early October 2017, panic broke out inside: how to conceal hundreds of thousands of dollars in cash paid in bribes. The solution was desperate but nearly worked: a bundle of envelopes containing $105,000 dollars flew off the balcony and landed in bushes in the darkness below. An accomplice waited below to collect — but then so did the police.

Investigators alleged the money was bribes paid to the head of Vinnytsia’s department of the State Fiscal Service via a relative of one of his subordinates. The bribe-givers were a cluster of car importers operating the same scheme: importing tens of millions of dollars worth of microbuses and trucks from shell firms in the UK and elsewhere.

In reality the vehicles were imported from Germany and Poland. The scheme with the shell firms was used to falsify the value of the vehicles declared at the Ukrainian border, and thus reduce customs payments.

Photos from the raid posted by Prosecutor General Yury Lutsenko on Facebook showed envelopes containing thousands of dollars of bribes from firms pencilled on them: TOV Nord-Vest and TOV Skrairem. Customs records show these together had imported to Ukraine around 200 trucks in 2017 from a Scottish registered shell firm, Rix Europe LP.

 

The police raid had immediate national significance — the acting head of Ukraine’s state fiscal service Miroslav Prodan had been head of the Vinnytsia fiscal service department until 2016. The current head alleged to have been taking the bribes, Ruslan Osmolovsky, had been Prodan’s deputy. The two are socially close, turning out for the same five-a-side football team. 

Prodan in turn is a favourite of Groysman, mayor of Vinnytsia from 2006-2014, who had backed him for the crucial post.

Miroslav Prodan, the head of Ukraine’s State Fiscal Service

Investigators closed in on both Prodan and Oslomosvsky in July 2018, searching their apartments and questioning and searching their drivers, leading to Osmolovsky being declared a suspect. The Prosecutor General’s office said in a statement that a "a criminal organisation — was formed on the territory of Vinnytsia, which, according to the investigation, included officials of the State Fiscal Service authorities … In particular, in 2015-2016 the members of this criminal organisation ensured the appointment of their representatives to the most important posts in the bodies of the State Fiscal Service of Ukraine,” as quoted by Interfax Ukraine.

Prodan’s former deputy Ruslan Osmolovsky (Source: Vinnytsia Agency of Investigative Journalism)

Prodan said he had nothing to hide. "We already had cases of clarifying relations in public between the heads of law enforcement agencies … It did not produce results. Everyone lost. If they have questions for me, I am ready to give them an answer," he responded in a post on Facebook.

“Prodan will remain acting head of the tax service as long as I remain prime minister,” Groysman said defiantly earlier in July, as quoted by Interfax Ukraine.

Death of a strawman

In closing down the Vinnytsia operation, Ukraine’s prosecutor general was only following in the footsteps of bne IntelliNews. As early as April 2017, a bne IntelliNews investigation in collaboration with the Vinnytsia Agency for Investigative Journalism had revealed the Vinnytsia customs fraud scheme and interviewed two of its alleged organisers: Prodan’s sidekick Osmolovsky, and low-profile local businessman Yury Chabanyuk, now deceased.

“We are one of the largest importers of used vehicles, second largest in Ukraine,” Chabanyuk said of the business he claimed to run as director of a local firm, Skif Ukraina, one of the alleged bribe givers. “We are the biggest tax payers in Vinnytsia region in the automotive branch after [President Petro] Poroshenko,” he added, saying the business had an annual turnover of around $12mn.

Chabanyuk denied in the interview there was anything illegal in the business, but declined to name its owners. 

Local businessman Yury Chabanyuk, now deceased (Source: Vinnytsia Agency of Investigative Journalism)

Two separate sources in Vinnytsia who requested anonymity used the same ominous phrase to describe Chabanyuk’s backers: “bandits from the 1990s”. Investigations by bne IntelliNews and Vinnytsia Agency for Investigative Journalism showed he was linked to Vinnytsia’s politically influential professional boxing scene.

“There are no bandits anymore,” Chabanyuk answered. “Now they are all public figures.”

“This is the first time I have seen this name,” head of the Vinnytsia fiscal service Osmolovsky claimed in the 2017 interview, referring to Chabanyuk. 

But in the weeks following the October 2017 police raid on Osmolovsky’s underlings, it was ‘all change’ in the structure of the shadowy automotive import scheme: Chabanyuk was removed from his Ukrainian directorship at Skif-Ukraina in December 2017, and the UK shell firm Madison Motor Factors Limited was wound up.

Then in early January 2018 during the Orthodox Christmas season, Chabanyuk’s wife found him dead at home. Doctors diagnosed the 43-year old had died of cardiac arrest. No investigation was opened into his death. 

A source requesting anonymity told bne IntelliNews and Vinnytsia Agency of Investigative Journalism Chabanyuk had been seen maltreated and manhandled out of his office into a waiting car on the same day. 

Chabanyuk’s widow Inga declined to give an interview. “I don’t want the same to happen to me as happened to him,” she explained. 

Offshore owner

bne IntelliNews got on the trail of Chabanyuk due to his ownership of Seychelles-registered offshore firm Berly Trade, according to leaked files obtained by Organised Crime and Corruption Reporting Project. 

Founded in July 2014, after the change of government in Kyiv, millions of dollars in government-level corruption money flowed through Berly Trade and three sister Seychelles firm registered at the same time, Itaco Alliance, Mirex Trade and Avers Trade.

The head of Ukraine’s state defence holding Ukroboronprom, Yury Tereshchenko, moved funds via Berly Trade to buy his son a luxury apartment in London, while first deputy prosecutor Mykola Gerasimiuk moved funds via Itaco to purchase real estate in Croatia. In both cases the money moved via the offshores was likely originally obtained as bribes, according to the OCCRP investigation 

Drug money to Turkey, funds for state tenders and money to secret accounts in Switzerland all moved through these firms, as well as payments to China and elsewhere for imports. 

All four Seychelles offshores banked with Latvia’s ABLV. Ukraine has requested their financial information from the Latvian authorities. In February 2018 US anti-money laundering regulators Financial Crimes Enforcement Network accused ABLV of ‘institutionalised money laundering,’ referencing the OCCRP investigation among others. As a result ABLV has closed.