By RFE RL
By Natalie Sedletska. Valeria Yehoshyna, Heorhiy Shabayev and Kira Tolstyakova
(RFE/RL) — It was a $41 million government payout to a company co-owned by a fitness trainer and a basketball team executive to repair part of Ukraine’s lifeline in its nearly yearlong struggle against Russia’s invasion: public roads in the southeastern region of Dnipropetrovsk. And it made up part of Kyiv’s highest such payout for all of war-torn Ukraine — to a region estimated to have suffered comparatively minimal damage.
Following reports by Schemes, the investigative unit of RFE/RL’s Ukrainian Service, and Ukrainska Pravda that established personal ties between the trainer who co-owned this company and the regional governor, Ukraine’s Specialized Anti-Corruption Prosecutor’s Office opened a criminal probe into the matter in November. On December 26, the National Anti-Corruption Bureau of Ukraine (NABU) searched the governor’s office, the company’s headquarters, and other sites related to the case, Schemes has learned.
Amid an uptick in such probes and prosecutions, the first deputy chairperson of parliament’s anti-corruption policy committee, Yaroslav Yurchyshyn, asserted that Ukraine is fighting a war on corruption alongside its war against Russia, which launched a large-scale invasion in February.
Yet despite prosecutors’ scrutiny, the exigencies of war mean that the government contract with the company, Budinvest Engineering, the official reasons for Kyiv’s disbursement of record-setting funds to Dnipropetrovsk, and confirmation of the contractor’s actual work remain under wraps.
‘Losses Of Dnipropetrovsk…Are Not Significant’
The money for Budinvest Engineering came as part of Ukraine’s Great Reconstruction initiative – episodic disbursements of state funds, often without public tenders, to rebuild infrastructure devastated by the 2022 war. A September 2022 assessment by the Ukrainian government, the World Bank, and the International Finance Corporation estimated the total cost of “reconstruction and recovery” at $349 billion, more than 1.5 times Ukraine’s 2021 gross domestic product, and said that figure was expected to grow.
In July, the government requested foreign assistance for the restoration of some 51,200 kilometers of damaged roads.
A draft report from the National Council for the Recovery of Ukraine from the War, an advisory body under President Volodymyr Zelenskiy’s office, reportedthat a shortfall of nearly 74.2 billion hryvnyas ($2 billion) in public funding for roads meant that Ukraine had “virtually no funds” to pay for road construction, reconstruction, repair, and maintenance.
But that did not appear to be the case for Dnipropetrovsk, a strategic industrial hub bordered by the frontline regions of Zaporizhzhya, Donetsk, and Kharkiv. Between March and October 31, Dnipropetrovsk paid road contractors 2.31 billion hryvnyas ($63 million) – Ukraine’s highest rate of public spending on road work, according to an analysis of data from the state procurement site E-Data.
That rate is higher than the combined total spent during the same period on road work in areas that have ranked among the Russian military’s most frequent targets: the capital, Kyiv, and surrounding areas; the border regions of Kharkiv and Sumy; and the vulnerable Black Sea region of Odesa.
Yet, as of September, less than 1 percent of the estimated $26.6 billion in war damage to Ukrainian roads had occurred in Dnipropetrovsk, according to an October 2022 damage assessment compiled by the Kyiv School of Economics, in association with Zelenskiy’s office and the Ministry of Infrastructure, among other government bodies.
“In terms of road management, the losses of Dnipropetrovsk region are not significant compared to other regions where active hostilities took place,” a Kyiv School of Economics spokesperson said in October.
Dnipropetrovsk’s road repair payments, however, were significant — equal to all other government transfers to Dnipropetrovsk for the same time period, according to E-Data.
Sixty-five percent of this payout — 1.5 billion hryvnyas ($41 million) — went to Budinvest Engineering, which until early November was co-owned by Yana Khlanta, who media reports, sources in the region, and evidence gathered by Schemes indicates was the girlfriend of the governor of the Dnipropetrovsk region, Valentyn Reznichenko. The financial news site Nashi Hroshi first reported in September about the regional government’s payments to this firm.
At the time, Budinvest Engineering — founded in the regional capital, Dnipro, in 2015 — was equally co-owned by Khlanta, an expert powerlifter employed as a trainer at the city’s Human fitness center, and Pavlo Chukhno, the vice president of the Dnipro professional basketball team Prometey and a business partner of entrepreneur Volodymyr Dubinskiy, who is wanted by the U.S. Federal Bureau of Investigation for alleged mortgage fraud in California.
Khlanta and Chukhno each owned a 49 percent stake. The firm’s director, Dmytro Litnarovych, owned the remaining 2 percent stake.
Neither Khlanta nor Chukhno has any known expertise in road construction.
Information from Ukraine’s State Tax Service shows that, in 2020-21, Khlanta worked for a company owned by Reznichenko, Seventh Consulting Group, while the State Border Guard told Schemes that she traveled abroad on the same flights as Reznichenko or on separate flights with the same destination six times during that period, including on her birthday in 2021. Khlanta also traveled abroad four times by herself in a Kia Sportage car owned by Seventh Consulting Group.
Several sources within Reznichenko’s professional circle, speaking on condition of anonymity because of the sensitivity of the subject, told Schemes that Khlanta is the divorced governor’s girlfriend.
Following publication of the Schemes report, Ukraine’s Specialized Anti-Corruption Prosecutor’s Office, a unit subordinate to the Prosecutor-General’s Office, announced the start of a criminal inquiry on suspicion of abuse of power and the laundering of illegally obtained property in connection with the regional government’s payments to Budinvest Engineering.
The firm, along with other Dnipropetrovsk public contractors, already faced questions from the Bureau of Economic Security, which investigates financial crimes, about the alleged diversion of state funds to a potential front company, Schemes has learned.
According to court records, Budinvest Engineering has been the target of criminal investigations in the past, including cases in which it was suspected of embezzlement of public funds and of substandard work.
Wait Until The War Ends
The official reasons for Dnipropetrovsk choosing Budinvest Engineering for its publicly financed road work and the locations of the actual road repairs remain unknown. Amid the Russian invasion, now in its 11th month with no sign of an end, government agreements with contractors are no longer public.
Schemes shared the findings of its investigation into the ties between Reznichenko and Budinvest Engineering with the office of Zelenskiy, who appointed Reznichenko to his post in 2020, and the deputy head of the president’s office, Kyrylo Tymoshenko, who oversees infrastructure reconstruction.
Schemes asked how the central government monitors the use and allocation of state budget funds for infrastructure reconstruction. By law, Ukrainian officials have one day to report to their superiors – in this case, the president – about a conflict of interest in their duties.
But the presidential press service responded that providing information about state payments for such projects is impossible amid the ongoing war with Russia. In an e-mail, a spokesperson said that Zelenskiy’s administration cannot respond to Schemes’ questions about these payments until the war ends.
Senior presidential adviser Mykhaylo Podolyak subsequently told RFE/RL’s Ukrainian Service that Zelenskiy’s administration was not refusing to comment but would wait until the criminal investigation had established whether “violations of financial discipline” or “elements of corruption” had occurred.
A Specialized Anti-Corruption Prosecutor’s Office representative told Schemes in November that Reznichenko was not a suspect or an accused individual in its inquiry at that time.
However, on December 26, NABU detectives searched Reznichenko’s office and those of the regional department that handles procurement for road work, as well as other Dnipropetrovsk departments, three unrelated sources from Dnipro and national law enforcement agencies told Schemes.
Searches also occurred at Budinvest Engineering’s office and at Chukhno’s office, as well as at the premises of other public contractors.
Neither NABU nor the Specialized Anti-Corruption Prosecutor’s Office has commented about the searches.
Reznichenko has not commented publicly about the inquiry, Budinvest Engineering, or evidence of a relationship with Khlanta. Before the start of the prosecutors’ probe, Schemes repeatedly contacted him to ask about his apparent ties to Khlanta and the company. Phone calls, text messages, and e-mailed questions to his administration and press secretary went unanswered. A trip to a country house that Reznichenko reportedly owns also proved unfruitful.
A Dnipro native, Reznichenko, 50, worked as a vice president of UMH Group, one of Ukraine’s largest media companies, while Zelenskiy, co-founder of the studio Kvartal 95, was still producing television content. He had run the Dnipropetrovsk region for over four years when Zelenskiy reappointed him to the post in 2020.
Reznichenko’s links to the presidential office extend beyond Zelenskiy, however. An informal adviser to the governor, former UMH Group advertising manager Yuriy Holyk, terms himself one of the originators of the Great Reconstruction “ideology” and a “consultant” for its projects.
Holyk, a former informal adviser to the head of Ukravtodor, which oversees the upkeep of Ukraine’s highways, regularly attends government meetings, chaired by Tymoshenko, the deputy head of Zelenskiy’s office, with senior Ukrainian officials and international partners about Kyiv’s reconstruction plans. Holyk also features in official photos of Tymoshenko’s trips into the regions to inspect infrastructure.
On December 26, NABU detectives also searched Holyk’s residence in Kyiv’s Konyk gated community, Ukrainska Pravda journalist Mykhaylo Tkach reported. Law enforcement sources confirmed this information to Schemes.
Schemes asked Holyk via a messaging app why the region had received such a large portion of state funds for roadwork and what had influenced the selection of Budinvest Engineering as a contractor. The app indicated that the message was read, but there was no response.
Citing the war, Zelenskiy’s press service declined also to discuss what role Holyk plays, if any, in government discussions about the allocations of funds for road repairs.
“The office of the President of Ukraine is not the administrator of local budgets,” a spokesperson said, adding that “local authorities” and “relevant ministries” handle this issue.
At the local level, the questions about the Dnipropetrovsk government’s payments to Budinvest Engineering and about the ownership of the firm itself continue.
One week after the announcement from the Specialized Anti-Corruption Prosecutor’s Office about its inquiry into the Dnipropetrovsk government’s payments to Budinvest Engineering, Khlanta disinvested entirely from Budinvest Engineering, according to Ukrainian business profiler YouControl.
Ninety-eight percent of the company is now owned by Chukhno, the vice president of Prometey, the professional basketball team that he co-founded with Volodymyr Dubinskiy, the Dnipro businessman wanted, along with his older brother, Leonid Dubinskiy, by the FBI.
An arrest warrant was issued in 2012 for the two after a federal court in California charged them with mail fraud.
Prometey’s website describes Chukhno and Volodymyr Dubinskiy as “business partners.”
The team’s home page prominently touts Budinvest Engineering as its main sponsor.
Reached by Schemes by phone, Chukhno, the beneficiary owner of Budinvest Engineering, declined to discuss details of the funds the firm has received from public coffers since the invasion or his business ties with Dubinskiy. After listening to a Schemes journalist’s questions, he stopped answering the phone and directed Schemes to his press secretary, who did not respond to submitted questions.
Budinvest’s director, Dmytro Litnarovych, still holds the remaining 2 percent stake in the company. Litnarovych did not respond to mobile-phone calls from Schemes.
Through a messaging app, Schemes tracked down Volodymyr Dubinskiy, often identified by Ukrainian media as the actual owner of Budinvest Engineering, to ask whether Chukhno holds shares in the firm on his behalf, and what ties, if any, Dubinskiy has to Reznichenko.
But though Dubinskiy received the message, he did not respond.
Ukrainian media have reported that the Dubinskiy brothers own some 20 different firms that have won public tenders for services in the regional capital, Dnipro, including for road repairs and cleaning.
Budinvest Engineering’s website contains general information about its repair of highways and streets, an array of truck and machinery photos, and even a musical video about its road work. But the site does not provide details about the road repairs the company has executed at taxpayers’ expense.
Law enforcement previously has investigated the company, following allegations of shoddy road repairs and money laundering through sham companies, according to court records. In 2019 , during Zelenskiy’s first year in office, the firm featured in a State Bureau of Investigation probe into regional officials’ alleged embezzlement of public funds for road repairs.
Budinvest Engineering did not respond to questions Schemes sent to its official e-mail address. The phone number listed on Budinvest’s website was not in service when a Schemes reporter called.
At the company’s Dnipro headquarters, the security guard refused to say how to find managers who could answer Schemes’ questions about the company or to answer such questions himself. Guards at a second Budinvest Engineering location in Dnipropetrovsk region, an asphalt-concrete factory in the city of Novomoskovsk, stated that no managers were on the premises.
Information from Ukraine’s public finance portal, E-Data, raises questions about three areas of Budinvest Engineering’s 2022 operations as a state contractor.
Ukrainian law requires companies to report to tax officials all of their monthly purchases and sales. However, tax records for the first nine months of 2022, seen by Schemes, indicate that three of Budinvest Engineering’s key subcontractors — BNM LLC, DZMK LLC, and Maxi-Bud Plus LLC — did not always purchase supplies in the same quantity that they told tax officials they had sold to Budinvest Engineering.
As of November 2, for instance, BNM, a timber wholesaler and concrete manufacturer, had bought a total of 1,300 tons of sand, crushed stone, and a crushed-sand mixture. However, official records filed with tax authorities accessible on E-Data show that during this same period, it sold almost 100 times that amount – over 100,000 tons – of these supplies to Budinvest.
Since BNM is not a factory, it could not produce these additional supplies itself.
Its registered phone number was not working at the time of Schemes’ investigation, and the firm could not be contacted for additional information.
According to data filed with the government, Budinvest purchased two allotments of crushed stone, used for building and repairing roads, from the subcontractor Maxi-Bud Plus shortly after Russia’s invasion in February. One purchase, in May, was for 1,258 hryvnyas ($34) per ton; the second, in June-July, for 1,466 hryvnyas ($40) per ton.
Documents from the tax service, however, show that Maxi-Bud Plus bought this same type of crushed stone from manufacturers at prices at least six times cheaper – 185 and 233 hryvnyas ($5 and $6.30) per ton, respectively.
But a security guard at the entrance to the building, which houses some 40 firms, had never heard of either company. “We have many companies here that only rent offices, pay, and take something away once a year,” he said, referring to mail.
Schemes could not contact either company at the phone numbers listed in their business registrations.
In 2021, the State Tax Service listed Maxi-Bud Plus as a “risky taxpayer” since, despite a reported profit in the millions of hryvnyas, it only employed one person. The Dnipropetrovsk District Administrative Court later struck down that categorization.
Ukraine’s 2023 budget includes 64.3 billion hryvnyas ($1.74 billion) for the State Road Fund, a tax-financed stash for the upkeep, reconstruction, and repair of public roads. And Kyiv’s interest in financing road repairs appears centered on encouraging foreign investment.
But some observers caution that the rush to rebuild comes with risks of potential malfeasance: Despite its persistent efforts to combat graft, Ukraine in 2021 ranked second only to Russia in the region for public perceptions of corruption, according to Transparency International’s annual index.
A transparent procurement process, clear goals, independent overview and auditing mechanisms are among the recommendations of the Brookings Institution, a Washington-based think tank, for Ukraine’s reconstruction campaign.
Ukraine maintains it is aware of the stakes. The Specialized Anti-Corruption Prosecutor’s Office in 2022 secured 25 convictions out of 42 cases that went to court, Reuters reported.
As yet, the office has not commented on the December 26 NABU searches connected to the Budinvest Engineering case.
Written by Elizabeth Owen based on reporting by Schemes.
- Natalie Sedletska is a Ukrainian investigative reporter and executive producer of Schemes, an investigative unit of RFE/RL’s Ukrainian Service.
- Valeria Yehoshyna is a journalist for Schemes (Skhemy), an investigative news project run by RFE/RL’s Ukrainian Service. Yehoshyna was recognized as one of the “Top 30 Under 30” by the Kyiv Post in 2019 and has won a number of awards, including the top investigative prize at the Mezhyhirya Festival in 2018. Her investigations have also been short-listed in many other contests in Ukraine and internationally.
- Heorhiy Shabayev is a journalist with Schemes (Skhemy), an investigative news project run by RFE/RL’s Ukrainian Service. He is a graduate of the Institute of Journalism at Taras Shevchenko National University of Kyiv and the author of a dozen investigations into corruption in the government, the construction industry, and in large state-owned enterprises.
- Kira Tolstyakova is an editor for Schemes, the investigative unit of RFE/RL’s Ukrainian Service.