Large-scale Misappropriation of Hostomel Recovery Funds – Investigation

Hostomel Village Military Administration (the Administration) allegedly transferred up to Hr. 150 million ($4 million) to fake companies and entrepreneurs intended for the recovery of Hostomel – a town severely damaged by the Russian invasion. Suppliers largely failed to provide high quality repair works, as reported following an investigation by Bihus.Info on June 5.

Journalists analyzed budgetary transfers for recovery, extending back to summer 2022, taken from the governmental web-portal on the use of public finances.

All contracts had been concluded by the Administration directly with suppliers of its choice, without an open and competitive bidding and procurement process.

Around ten fake entrepreneurs were identified, many of which were registered just prior to the conclusion of the contracts. One limited liability company was registered by an ex-priest in Rivne region, another by a pensioner living in Mykolaiv, and a third by a resident of Donetsk region living under Russian occupation since 2014 and openly supportive of the full-scale invasion of Ukraine.

Deputy Head of the Administration, Mykhailo Koval, explained the selection of suspicious companies by “the absence of local suppliers” and “urgent need.”

The data about Hostomel contracts disappeared from the web-portal immediately after a media interview with Koval but was later restored.

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Dubious Hostomel deals could have caused losses worth over Hr. 5 million ($135,000) as reported by the Economic Security Bureau after a number of searches of the Administration and offices of fake suppliers on June 5. The Bureau’s detectives initiated a criminal investigation into the misappropriation of budgetary resources.

The Bihus.Info investigation points to a number of “corruption schemes” that could be used as part of the large-scale recovery of Ukraine, as concluded by Transparency International (TI) Ukraine on June 6. These include the selection of contractors without thorough checks and anti-corruption safeguards; forgery of acts, in particular regarding scope of works; and poor quality or incomplete performance of works.

“Hiding information about reconstruction work without justification is unacceptable. And it simply goes beyond any limits when this is done so as not to track corruption schemes in which officials are involved,” emphasized Ivan Lakhtionov, deputy executive director of Innovation Projects for TI Ukraine.

Head of Hostomel Village Military Administration Serhiy Borysuk was dismissed by the order of the President of Ukraine on June 8. The order does not cite reasons for his dismissal.