Kyiv mayor Klitschko is lobbying the purchase of Belarusian buses to the detriment of the Ukrainian industry while standing to gain UAH 120 million from the scam

In March 2020, the media reported that Kyiv City State Administration permitted ME Kyivpastrans to purchase 200 Belarusian buses on conditions of leasing for a total of EUR 50.7 million. PJSC Ukrgasbank is the lessor, although the name of the real supplier of the buses was omitted. Despite the fact that several deputies of the Kyiv City Council broached the subject of purchasing Ukrainian buses, which would have provided an opportunity to support Ukrainian industry in conditions of the crisis and keep jobs, mayor Klitschko insisted on the purchase of the Belarusian buses which has a serious financial underlying reason.

On March 12, 2020, Kyiv City Council approved a decision On Granting Consent to ME Kyivpastrans for the purchase of buses on conditions of financial leasing. The decision was signed by mayor Vitaliy Klitschko.

According to the document, the municipal enterprise was granted permission to purchase buses under the financial leasing agreement with Ukrgasbank; the total of 200 buses with approved specifications:

• Length no less than 11.9 m (MAZ-20315) – 80 vehicles;
• Length from 18.9 m (MAZ-215069) – 120 vehicles.

The value of the subject of leasing should not exceed €50.7 million, with the down payment amounting to 20% of the specified amount.

The term of leasing – not more than 36 months upon the date of signature of the first certificate, but no later than December 31, 2023. Compensation of interest rate on the loan – 11.5% annual.

Reimbursement of the cost of the subject of leasing is covered by the Kyiv budget through approval of the corresponding decision by KCSA for budget allocations for the Transport Infrastructure Department of the KCSA executive body for the specific year.

In turn, Kyivpastrans must obtain approval of the EBRD for the new financial liabilities stemming from the financial leasing agreement. The specified amount must be approved and planned in the draft budgets for 2021-2024.

On April 15, 2020, KCSA Transport Infrastructure Department sent a letter to the Chair of Standing Commission of Kyiv City Council for Transport, Communication and Advertising (Aleksey Okopniy) with a request to approve the draft financial leasing agreement of ME KYIVPASTRANS for the purchase of MAZ buses in 2020 from Ukrgasbank, which is attached to the letter.

The specified financial leasing agreement (clauses 2.13-2.14) envisages:

• If the lending amount for MAZ-203015 exceeds UAH 5.3 million, the lessee shall pay for the difference between the amount of additional payment of the lessor for MAZ-203015 and the amount specified in this clause of the agreement.
• If the lending amount for MAZ-215069 exceeds UAH 7.6 million, the lessee shall pay for the difference between the amount of additional payment of the lessor for MAZ-215069 and the amount specified in this clause of the agreement. The additional payment will be classified as the down payment of the lessee.
• If the total amount for MAZ buses exceeds UAH 1.7 billion, and the current Kyiv budget, which envisages the purchase of the vehicles, is not amended properly, confirming additional financing, the lessor shall supply MAZ buses in the amount proportional to the paid amount of the down payment and amounts of the final settlement of the Lessor under the purchase and sale agreement.

Under the Specifications, attached to the agreement, the total of 200 buses for the amount of €50.7 million will be purchased, which is the equivalent of UAH 1.5 billion. Therefore, the price specified in the agreement is not final and can be increased.

According to the leasing payment schedule, in the period from May 15, 2020 until December 31, 2023, ME KYIVPASTRANS will have to pay UAH 1.6 billion, including the leasing interest. The draft agreement specifies that Ukravtotorg is the seller of MAZ buses. Notably, the interest of the mayor’s office towards this company hasn’t been clear from the beginning.

However, on April 29, 2020, Maztransservice LLC, the official MAZ dealer, which sold more than a hundred buses, also sent a commercial offer to the Chair of Standing Commission of Kyiv City Council for Transport, Communication and Advertising. In their letter, the company informed that they have been operating in the market since 2003, and have already worked with Kyivpastrans, having supplied 520 buses, including:

• 185 buses in 2012;
• 50 buses in 2016;
• 49 buses in 2017;
• 8 buses in 2019.

At the initial stage of consideration of the leasing project, Maztransservice LLC informed the KCSA about the price quote, but, clearly, that quote was ignored.

As per the amount planned in the budget — €50.7 million, the official MAZ dealer will be able to supply 220 buses on conditions of leasing for the term of 44 months. That’s 20 vehicles more.

In other words, for the same amount of money, 20 more buses will be supplied, which in price equivalent is €4 million or more than UAH 120 million, which is a lot of money. Furthermore, according to the letter, no changes in prices are stipulated.

Nevertheless, it was Ukravtotorg that was chosen as the seller of MAZ vehicles, with NEON CITY GROUP LLC being its founder and Maria Chatziantona, a citizen of Cyprus, - the ultimate beneficial owner. She became the company’s UBO on May 7, 2020. Before that, a certain Larisa Svyatosh was the owner of the company.

Ukravtotorg is an entity of interest in a criminal case, due to which the company’s accounts were frozen.

The Main Investigation Department of the Prosecutor General’s Office of Ukraine is carrying out a pre-trial investigation in the criminal proceedings No. 42018000000002085 dated August 23, 2018, on the charges of the criminal offenses under Par. 3 of Art. 212, Par. 2 of Art. 205, Par. 2 of Art. 209, Par. 2 of Art. 364 of the Criminal Code of Ukraine; the information about them was entered into the Unified Register of Pre-Trial Investigations on the charges of:

• Evasion of taxes, fees or other compulsory payments by officials of a number of businesses, where they resulted in actual non-receipt of grand amounts of funds by the budget;
• Sham business, that is the establishment or acquisition of business entities (legal entities) to cover illegal activities, repeated;
• Legalization (laundering) of criminally obtained money, committed by a group of persons upon their prior conspiracy;
• Abuse of authority or office to gain unlawful benefits, contrary to the official interests, where it caused grave consequences.

Therefore, the Commission initially had information about the price quotes in the market but chose the company involved in the misappropriation of funds.

The difference of 20 buses is, in fact, the corruption element in this procurement. The only hope is that it gets shut down and the organizers are held accountable.

Andrey Pshenichniy for dubinsky.pro