Anonymous letters complaining about the way that information technology companies run their business in Ukraine caused a series of unexpected searches in order to find suspicious data.
However, the way law enforcement conducted those searches either partially paralyzed the companies or stopped their work.
IT firms were accused of pirated content, tax evasion, hacking and even terrorism.
Police have conducted 15 searches this year, triggering conflict between the managers of top Ukrainian tech firms and the Ukrainian Interior Ministry and Security Service of Ukraine, known as the SBU. These two law enforcement agencies conducted the searches.
None of the searches has led to any criminal charges or even any ongoing criminal investigations, at least ones that are publicly announced.
At least five tech companies were searched in September: the Ukrainian branch of IT outsourcing company Luxoft in Dnipropetrovsk on Sept. 1, the smart TV provider Divan.TV in Kyiv on Sept. 17, the Kharkiv office of the software development company NIX Solutions, an affiliate of the Mac security software company Intego on Sept. 22, and the Internet provider Bershnet in Vinnytsa on Sept. 25.
The main problem with the searches, according to Andriy Kolodyuk, the founder and CEO at Divan.TV, is that neither the SBU nor the Interior Ministry know how to go through IT offices without doing harm to their operations.
According to IT managers, the police confiscated servers, office equipment and some personal laptops during their searches. Some IT firms are have been forced to operate without vital information that was saved on the confiscated servers, causing them daily loss of money and reputation.
After the row over the searches of IT offices broke out, Economy Minister Aivaras Abromavicius held talks with representatives of IT businesses in Ukraine on Sept. 24. As a result, several decisions were taken, and a memorandum on collaboration penned. According to the document, tech companies will be obliged to provide access to the information the authorities request, but it will be provided in a “civilized way,” wit the data being copied, and servers remaining in place.
“An exchange of letters and phone calls has been in process since the meeting,” Deputy Economy Minister Maxym Nefyodov, who is now in charge of relations between the parties, told the Kyiv Post by phone on Sept. 29. “Eventually decisions will be made, but no further roundtables have been planned so far.”
IT is the industry in Ukraine that has suffered the least in the current crisis, and one into which foreign investors are still willing to plow money. Vitaly Nuzhny, the CEO of Luxoft Ukraine, says the IT industry accounts for three percent of Ukraine’s gross domestic product. It earned the country $5 billion from exported goods and services in 2014, according to Horizon Capital.
But industry managers say unlawful searches could scare off potential investors and force the best tech professionals to seek a better life abroad.
Some have dubbed last month “Black September,” and nicknamed it the AITO or the Anti-IT-Operation, comparing it in dark humor with the government’s Anti-Terrorist Operation in the war zone in the Donbas.
Denis Dovgopoliy, the managing partner at the GrowthUP Group, says the searches won’t harm just the individual firms affected, but the IT industry as a whole.
“An outflow of entrepreneurs and engineers from the country is happening right now. I don’t think this process will involve more than 15 percent of the market. But the problem is that it’s the most talented who will leave,” Dovgopoliy said.
One of the starkest examples is the 908 tech company, which in the middle of September transferred almost all of its employees from Dnipropetrovsk to Wroclaw, Poland.
But Dmytro Shymkiv, the deputy head of the Presidential Administration of Ukraine, doesn’t think all IT companies are operating entirely innocently, and that some searches are justified.
“IT builds new technologies, and we have plenty of fine stories, but we also have biggest underground market for selling cracked software, and (selling) hacked access to networks,” Shymkiv told Interfax news agency on Sept. 25.
And law enforcement isn’t showing much regret for the latest wave of office searches either.
“We act within the authority of law, and the findings of the courts, based on convincing evidence,” SBU press secretary Olena Hitlianska told the Kyiv Post on Sept. 30. “We work in different spheres and try to clean up each one. The IT industry is not an exception. They’re criticizing us, while we’re just doing our job.”
This video was created by fake Ministry of Victory as a reaction to recent events in Ukrainian IT industry – burst of searches of IT offices. It shows the importance of the industry for the country. However, the opinion presented here is subjective. There’re no facts protecting law-enforcement’s side. Translated by the Kyiv Post.
Kyiv Post writer Denys Krasnikov can be reached at [email protected]. The Kyiv Post’s IT coverage is sponsored by AVentures Capital, Looksery, and SoftServe.
