The Euro 2012 football championship is still 133 days away from coming to Ukraine and Poland, yet accusations and criminal investigations are intensifying over Kyiv’s $570 million reconstruction of Olympic Stadium.
At the center of the talk is AK Engineering, the state-owned stadium’s general contractor. The company figures in three criminal investigations, two of which involve the purchase of imported stadium seats and sewage system, together worth millions of dollars.
In both import deals, AK Engineering eschewed doing business with an official supplier or distributor of the products located in Ukraine or abroad.
Instead, AK Engineering subcontracted the work to firms that, in turn, found intermediary entities to place orders through an elaborate procurement chain.
Authorities last year in Kyiv and Cherkassy launched criminal investigations into some of these firms on suspicion that that they “misspent public money,” “inflated the value of procured products,” or “evaded paying value-added taxes.”
In October, the Kyiv Pechersk District Court granted investigators access to three AK Engineering bank accounts that were used to purchase a German-made sewage system for nearly $15 million, according to a court document obtained by the Kyiv Post.
The documents obtained by the Kyiv Post allege some of these intermediary firms “have signs of being fictitious companies” that “couldn’t have” or “didn’t actually conduct import transactions.”
Volodymyr Artiukh is the founder and former general director of AK Engineering. Since June 2010, AK Engineering has received hundreds of millions of dollars in government orders and completed the 70,000-capacity stadium in time for the Nov. 8 Ukraine-Germany friendly match – under a tight schedule with three-shift work crews totaling some 2,000 employees.
Artiukh didn’t respond to several Kyiv Post interview requests in November and December.
However, when asked why he bypassed established product distributors and instead did business with companies who didn’t have the ordered products, Artiukh told popular news portal Ukrainska Pravda he wouldn’t have made the tight deadlines, and that he had to conduct competitive bids.
Artiukh’s AK Engineering became the Olympic Stadium’s second general contractor in June 2010 in a no-bid tender after Deputy Prime Minister Borys Kolesnikov took charge of infrastructure projects.
Kolesnikov’s lawyer, Ivan Shakurov, was the founder of an AK Engineering subsidiary, but left the company soon after Ukrainska Pravda linked him to Kolesnikov, Artiukh told the online news portal. Kolesnikov has denied having any link to AK Engineering and has rebuffed allegations that AK Engineering received preferential treatment when getting appointed as the general contractor of Olympic Stadium.
Artiukh hails from Donetsk. Kolesnikov and a large portion of President Viktor Yanukovych’s government are from this region. Kolesnikov is in charge of getting the country ready to co-host the Euro 2012. Volodymyr Kovalevsky, director of the Euro 2012 National Agency, is subordinated to him and is also from Donetsk.
All three are acquainted with each other, according to Artiukh. Artiukh and Kovalevsky together worked on building Donetsk’s five-star Donbass Palace hotel for Rinat Akhmetov, Ukraine’s richest man and a longtime backer of Yanukovych.
Kovalevsky of the Euro 2012 National Agency didn’t respond to a Kyiv Post interview request.
German sewage system
Roediger Vacuum, the German manufacturer of the sewage system installed at the Olympic Stadium, has partners and distributors in more than 50 countries, including one in Kyiv.
However, AK Engineering chose Pivdensantekhmontazh instead, which didn’t have the sewage system and instead went through at least three business entities to purchase the equipment and sell it to AK Engineering.
The German project manager for Ukraine at Roediger, Christian Ruester, declined to say how much money his company received, including the volume and quantity of equipment it had supplied to Ukraine.
Pivdensantekhmontazh paid some $15 million to a Dnipropetrovsk company named Diola, which in turn gave the money to Donzapchastynaprodukt. That company took part of the money and purchased the German sewage equipment through two individuals, who allegedly had their signatures forged on customs declarations, and cashed out the rest, according to a Kyiv Pechersk District Court document.
The director of Roediger’s partner office in Kyiv, Ihor Cherednychenko, said it had provided only technical support on its side for the deal but that the German company had sold the sewage equipment directly. He didn’t provide further comment, but added that he didn’t have the experience to handle such a large order from the Olympic Stadium.
Authorities are investigating whether public money was misspent and allege the value of the sewage system was inflated, according to an Oct. 26 court document obtained by the Kyiv Post.
Oddly, a dead-end hyperlink exists to the Pechersk Court ruling dated Oct. 26 on the government’s electronic registry of judicial rulings. In fact, as of Jan. 17, all hyperlinks to court rulings made by Pechersk district court in criminal matters dated Oct. 26 lead to dead-end web pages on the government’s electronic registry of judicial rulings.
In addition, the public information division of the Interior Ministry didn’t respond to an e-mailed inquiry.
Intermediary company Diola registered in Dnipropetrovsk, according to court documents, isn’t located at the addresses it has filed with the state registry of businesses. It is going through bankruptcy proceedings in court and has a director whose whereabouts are unknown.
The court document says Diola has signs of being a “fictitious company.”
The first company along the sewage system procurement chain, Pivdensantekhmontazh, is registered in Odesa.
Stadium seats
AK Engineering purchased stadium seats through a multi-company procurement chain, not directly from Australian seat supplier Starena. The company has offices in Sydney, Athens, Cairo, and London as well as more than 30 worldwide distributors.
Starena’s website lists the recently reconstructed 70,000-seat Olympic Stadium, and Lviv Arena as its “current” stadium seating projects. Lviv’s new stadium has a capacity of 35,000 and was commissioned in late 2011.
Although it’s unknown how much AK Engineering paid for the seats, Kharkiv’s Metalist soccer club owner Oleksandr Yaroslavsky said on Dec. 1 that he paid $2,500 for each of the 38,000 seats of that city’s re-constructed stadium, which will host three group matches in the Euro 2012.
Tax police in Cherkassy allege that Spetspostach, the company that eventually sold the seats to AK Engineering, avoided paying $475,000 in value added tax in December 2010 because it had “deliberately” inflated the VAT credit amount. Its director, Oleh Barkar, faces the charges.
In turn, Spetspostach had purchased the seats from Vailis. However, Cherkassy court documents say Vailis doesn’t exist and couldn’t have imported and handled the imported stadium seats. The importer was Brovary-registered company Pershiy Fond Proektnoho Investuvanya
Earlier, Ukrainska Pravda was told by the Euro 2012 National Agency that the matter had been closed. But a Dec. 6 letter addressed to the Kyiv Post from the Cherkassy tax authorities said the case was still in pretrial investigation.
Spetspostach, according to government registrar documents, was founded by a charity foundation registered in Dnipropetrovsk. Four co-founders hail from that city, three from Kyiv and one from Yekaterinburg, Russia.
Registered in Kyiv Oblast’s Vyshhorod, Vailis was founded by a Russian citizen registered in Moscow. Cherkassy court documents describe Vailis as having all the signs of being a “fictitious company.”
“Vailis doesn’t have the necessary capacity to conduct economic activity. Absent are key assets, technical personnel, production assets, warehouse space and means of transportation. Therefore, the aforementioned contract [with Spetspostach] has signs of being worthless,” reads an Oct. 11 Cherkassy Oblast Appellate Court ruling.
Criminal case under way
In July 2010 the Security Service of Ukraine, known by the acronym SBU, launched a criminal case against AK Engineering and Artiukh just one month after AK Engineering took over as Olympic Stadium’s general contractor.
Artiukh and another individual are under investigation for what authorities allege is forging documents and concealing some $3 million of government money that was supposed to be used to renovate an office building near Kyiv’s St. Sophia Square in 2009.
Authorities allege the building was never renovated, and the money disappeared through a chain of companies, the last being a Dnipropetrovsk company whose director turned out to be a “bum,” according to an Ukrainska Pravda article that cited Kyiv’s Pechersk Court documents.
According to the Pechersk Court documents obtained by the Ukrainian news web portal, AK Engineering was hired by the financially troubled Rodovid Bank in 2009 – then under government administration during the financial crisis – to renovate an office building on 4 Rylskiy Lane, near Saint Sophia Square.
However, Artiukh told Ukrainska Pravda that he resigned as director of AK Engineering as soon as the SBU opened a case against him but still remained directly involved in the construction of Olympic Stadium. Artiukh told the online newspaper that he remains with AK Engineering as an honorary director.
Artiukh had even spent three days in pretrial detention starting on Nov. 8, 2010, after being released under a travel ban, according to Ukrainska Pravda. He did, however, vaguely say that he had “returned all the money” in a Nov. 28 Ukrainska Pravda interview. He avoided giving detailed responses about the SBU case against him in the interview, and claimed his trust in the client was abused.
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Kyiv Post staff writer Mark Rachkevych can be reached at [email protected].
Kyiv Post staff writer Vlad Lavrov contributed to this story.
