Armoured Swindlers

After the imposition of martial law Serhiy Pashynskyi, Head of the Defense Committee of the Verkhovna Rada, together with his partner Ivan Vinnyk, Deputy from the Petro Poroshenko Bloc, decided to raider two more facilities that were part of the concern ‘Ukroboronprom’.

The purpose of the aforementioned raiders is taking the public enterprise ‘KARZ’. The enterprise is engaged in sale of non-residential facilities and land at 10 time underrated prices and it’s all done within the framework of reorganization. So it would let Serhiy Pashynskyi and his partners earn up to 10 mln USD only out of the plant’s land.

The bidding is scheduled for December 28, 2018. So the connected to Mr. Pashynskyi companies will try to buy KARZ on the pretext of the operational needs for accomplishing orders for manufacturing armored vehicles ‘Varta’.

The public enterprise ‘KARZ’ (Kyiv Vehicle Repair Plant) is part of the Military-Industrial Complex of Ukraine that is engaged in repairing and re-equipment of vehicles and specialized machinery for the needs of Ukraine’s Ministry of Defense.

The Ministry of Defense of Ukraine owned KARZ till December 2010; however, the plant was included in the state concern Ukroboronprom after the concern was established.

On February 17, 2014 it was decided to declare KARZ bankrupt and initiate its liquidation thereby providing extensive opportunities for embezzlement. Since the enterprise KARZ was established in the period of the UkSSR, the military didn’t pay much attention to such trifles like registration of right to immovable property or land-use permits. As a result, there are more than 70% of KARZ property cannot be tracked in the registers today.

It enables to perform a rather simple swindle that’s just the kind of thing Serhiy Pashynskyi and Ivan Vinnyk would do: to estimate the property at the lowest price possible and put it up for an auction during the bankruptcy proceedings that are carried out under the control of these same individuals as well.

For today the account payables of KARZ are 13.08 mln UAH. Due to this fact there were initiated ‘well-controlled’ bankruptcy proceedings and the needed evaluation of the property is being carried out by the ‘partner’ appraiser at the underrated prices.

According to the statement No. 072-30/532 made by Kyiv State Financial Inspection dd. March 20, 2014 regarding the public enterprise KARZ, it was indicated that its total assets value had comprised 110.8 mln UAH for November 30, 2013 including the tangible assets in the amount of 80.4 mln UAH.

The property of KRAZ is exposed to an auction. However, the bidding will take place not on the online platforms like SETAM or Prozorro but it’s been placed at the community exchange in order to avoid hundreds of interested bidders. Such actions result into the following:

• minimal publicity of such a sale;

• an auction ad is published in the newspaper that can be bought straight from the printing house (or the ad can be placed on the website of the Supreme Economic Court of Ukraine among a thousand of other ads).

Even if someone will get to know about the auction and decide to participate, he’ll be immediately stopped by the land category since this land is intended for defense purposes as it is indicated in the State Geodesy Cadaster (in fact the land category will be changed on the future winner’s request).

So only the partner-companies will do biddings in the end. After that the ownership for the property is usually registered at the Administrative Services Centre (ASC) based on the auction protocol. The registration of the documents at Kyiv Municipal Administration is carried out further. They are a rental agreement/a certificate to the ownership of the plot (for servicing other facilities located within this plot of land).

For today KARZ is selling two different property complexes through the commodity exchange ‘Ukrainian Specialized Timber Yard’.

The first auction is initiated for selling the property of the state enterprise KARZ. The immovable property including the 860 sq.m recreation center ‘Ozertse’ (its buildings and 35 facility objects) at the address 26 Stolychne Highway, Kyiv is exposed for bidding. The land, the recreation center is located on, will be passed to the buyer as a lease. The total land area is not indicated in the tender offer.

The initial price of this lot is fixed at 2.3 mln UAH. The auction will be held on December 29, 2018. An average price of the land in this district is approximately 5k USD per hectare or 140k UAH. The market value of 1 sq.m in this location varies from 5k UAH to 40k UAH excluding the value of land.

So the market value of the facilities is 4.3 mln UAH by the most conservative estimates that exceeds their value at the commodity exchange 2 times.

The second auction is initiated for selling the property of KARZ consisting of 20 non-residential objects with the total area of 11.4k sq.m at the address 1 Vasylenka Street, Kyiv. The land where the objects are situated belongs to KARZ based on the right to continued use of the land. The objects take 9.8 hectares of the territory so they will go to the possession of the new owner completely.

Analyzing the land value of the nearby existing facilities, one can find out that a 27 hectares plot of land that is located 1km away from KARZ facilities is up for sale at a price of 22.4 mln UAH and that’s not a single example. Any other plot of 14 hectares in the area is up for sale at 4.2 mln UAH.

So the land value with the facilities included is 280k UAH her hectare or 280 mln UAH in total that is 10 mln USD and this number appears by the minimal estimates. However, this lot is exposed for an auction at the price of 29 mln UAH that is 10 times less than its market value.

This second auction is going to be held on December 28, 2018 as well. So the whole process of bankruptcy and reorganization of the enterprise looks rather logical as it leads to embezzlement of KARZ assets.

Head of the Defense Committee of the Verkhovna Rada Sarhiy Pashynskyi and his deputy head and deputy of the Petro Poroshenko Bloc Ivan Vinnyk are supposedly interested in KARZ within the framework of their business on production of armoured vehicles for the Armed Forces of Ukraine.

In particular, LLC Ukrainian Armoured Vehicles has got a state warranty for 272 mln UAH while its statutory capital is only 11.8k UAH. This amount of money is fixed for the company to produce an armoured vehicle Varta and deliver it to the army, security and military services.

Such an armoured vehicle was created in 2015 at the enterprise ‘Ukrhlavpak’ established in the early 2000s by Iryna Pinchuk. The whole period of its functioning the company was producing and wholesaling plastic packaging but in June 2015 it changed its specialization and started business on armoured vehicles production and was renamed as ‘Ukrainian Armoured Vehicles’.

The statutory capital of the firm was 11.800 UAH and its total staff included 30 employees (these numbers has been like this till now). Vehicle assembly is the weakest point of Serhiy Pashynskyi’s enterprise since Varta adopted the base chassis of the Belarus vehicle МАЗ-5434 in its assembly that was designed in 1959 as a log truck (don’t you find it so much fun that KARZ is being sold through the timber yard?).

In addition, such a flaw is not only technical but also a political one as the assembly of МАЗ-5434 includes the Russian engine ЯМЗ-236 produced at Yaroslavl Motor Plant.

So at first sight Mr. Pashynskyi badly needs his own capabilities to retain the possibility of order fulfilment; but most likely it is nothing more than a smoke screen.

Together with Mr. Vinnyk they are actually considering the deal on KARZ assets privatization only as a way to seize the land in the center of Kyiv in order to use it for their future construction projects.