family contract for 5 billion

how ukraine’s agrarian fund became the target of ‘grey cardinals’ from the yanukovych era

economy minister fymofiy mylovanov (left) and bluebay market asset management senior strategist timothy ash (right) texting during a investor forum held in mariupol, ukraine on october 29, 2019

under the pretext of fighting against corruption, ukraine’s economy minister tymofiy mylovanov last week removed the head of the most efficient state trader pjsc agrarian fund andriy radchenko. the replacement is a person from member of parliament’s serhiy lovochkin’s orbit.

kyiv. so far, the most controversial personnel decision of the economy minister tymofiy mylovanov has been the removal of the pjsc agrarian fund board chairman andriy radchenko. mylovanov said he was motivated to make this decision by “claims of law enforcement agencies,” as well as because of the alleged “non-transparent work” of the state-owned enterprise. who will become the new head of the agrarian fund? no official decision has been made and, so far, there is no official document for removing radchenko from his post.

agricultural market decision-makers say mylovanov will appoint hennadiy supykhanov will replace radchenko at the behest of ukrainian agribusiness club president alex lissitsa. supykhanov is the son of former agrarian policy minister borys supykhanov under ex-president leonid kuchma during the late 1990s.

mylovanov has sidestepped media questions about these plans.

however, supykhanov jr. by his actions has backed this claim. on october 23, he submitted his declaration to the national agency on corruption prevention (nacp) as a candidate to head agrarian fund.

according to unofficial information circulating in government quarters, mylovanov’s deputy taras vysotsky, lissitsa’s protégé, intends to correct this “blunder.” vysotsky’s key task will be organizing the visibility of a possible competition for vacant post. in addition to supykhanov, two additional candidates for will compete for the position. lissitsa currently plays the role of “grey cardinal of the agricultural sector” and trusted “bag man” of the economy ministry’s agri-business portfolio.

as a former executive of the agroton company, lissitsa has ties to borys supykhanov, the founder and member of the supervisory board of agroton (the company in which lissitsa himself was the youngest managing partner). agroton formally belongs to yuriy zhuravlev, who now lives in occupied crimea.

supykhanov sr. has a motive for seizing control of agrarian fund, since this state enterprise operates according to a “developed” business model for allocating fertilizers and oil products to farmers in exchange for grain.

to achieve his goal, borys supykhanov is generously reimbursing all lissitsa’s expenses for “raiding” the state-owned enterprise. the fuel-for-grain scheme has been well documented in media reports. (the scheme failed for supykhanova sr.: using his position as deputy minister of the agro-industrial complex, he used his private company grain of ukraine as a “gasket” for selling fuel from russia to ukrainian farmers). ultimately, ukraine’s agricultural sector in 1999 was left without resources for harvesting grain, leading to supykhanov sr.’s resignation.

the cost of “building materials” for the people

supykhanov jr. has also exactly distinguished himself as a successful manager in the state sector of ukraine’s agro-industrial complex. over the last decade he has officially headed the nihynsky and murafsky state-owned quarries, (they were not officially on the balance sheets of the former agrarian ministry, although they are non-core state-owned enterprises).

nihynsky quarry posts uah 7 million in tax arrears with an authorized capital of uah 5.8 million. the latter reports uah 2.01 million of tax debt with uah 296,000 of authorized capital.

judging by the declarations on personal property filed by hennadiy supykhanov decades later, in 2018 and 2019, there is ample evidence of corruption and illegal enrichment. his declarations beg this question: how did the unsuccessful young director of two unprofitable state-owned enterprises with debts and a modest salary acquire property and real estate worth hundreds of thousands, if not millions, of dollars?

judge for yourself. in his declaration for 2019, supykhanov jr., as murafsky quarry director, reports uah 2.4 million of debt on a loan taken in 2012 from llc people’s loan (narodna pozika — information about the enterprise itself can be found here). the loan amount has increased, as we will see later. it is noteworthy that the guarantee for the loan is a 188 square meter apartment in kyiv with an estimated value of only uah purchased in 2003. moreover, as follows from the declaration, supykhanov jr. had nothing to spend the loan money on: he declared a house in ivankovychi (kyiv region) worth uah 956,000, purchased in 2009, as well as a self-propelled gravel sorter worth uah 178,000.

he also declared “only” 5% of shares worth uah 50 in golden lend company, which has a grain trading profile. its shareholders also include ex-member of parliament vasyl shpak, who was arrested for fraud at ukragrolizing, the main shareholder of which was kuwaiti sheikh nasser al-mutayri. according to the opendatabot resource, the main beneficiary of golden lend with a grain trade turnover exceeding uah $ 5 million was supihanov jr. this was before the formal sale of shares. it is noteworthy that the salary of the soe director was not included in the declaration as a source of income.

in supykhanov jr.’s declaration as candidate for acting agrarian fund board chairman, the debt amount to people’s loan has increased to uah 5.5 million. in addition, the declaration “reveals” uah 64,000 of salary received as director of the murafsky quarry (a piddling uah 5,300 — not enough to buy shares in grain trading companies owned by arab sheikhs), uah 6,600 of state assistance for the birth of a child (!), as well as a 1,500 square meter land plot bought in 2009 for uah 60,000 (with a market value of $150,000). supykhanov jr. also declared uah 50 from the sale of his golden lend shares and uah 200,000 from the sale of “movable assets” (obviously, the same self-propelled gravel sorter). in addition, he acquired uah 3 million of cash. it also turned out that the declarant’s wife owns a land plot of 48.4 thousand square meters (five hectares worth), the date of purchase and cost of which is not indicated. she is also the owner of the suva 78 company, founded in december 2018, with an authorized capital of uah 1,000. the company is profiled as a retail clothing outlet.

it is noteworthy that borys supykhanov in his e-declaration does not indicate his allegedly unpaid position as golden lend director.

the “oddities” in the declaration, according to our sources, are explained by supykhanov’s connections with lovochkin’s entourage, using the position of a career director for illegal enrichment in conjunction with capital developers. some uah 3 million is actually income from these “schemes,” with the uah 5.4 million loan as a corruption reward, but disguised as insider lending. this is exactly what the young man decided to “launder” in his declaration. it is inconceivable that supykhanov sold for uah 50 a controlling stake in a grain company with a uah million turnover back to a sheikh. remuneration for his “front-line role,” according to our sources, would be at least $250,000.

the actual controller of the people’s loan, supykhanov’s “creditor,” is yehor rusyn, an associate of oleksandr puzanov, one of lovochkin’s top lieutenants in kyiv politics. rusyn in 2015 headed the supervisory board of kyivenergoholding, according to lovochkin’s quota, and, until the end of 2018, owned the pechersky apartments company. according to opendatabot, the company profile is the transfer of real estate for rent or ownership, but the company does not conduct transparent activities and the amount of tax payments did not exceed several thousand hryvnias per month.

the director of people’s loan is serhiy malomuzh, who also owns 7% of the company siluet ltd llc, which has exactly the same profile as pechersk apartments and also does not conduct its activities transparently. moreover, malomuzh appears as one of the founders of the ecopark osokorki organization (which participated in a raider attack against patriotika residential complex belonging to the ukrbuda facility. for rusyn and malomuzh, hennadiy supykhanov was interesting as a supplier of limestone from his quarries at discounted prices. the limestone is used for production of building materials.

the very fact of the bankruptcy of the quarries headed by supykhanov indicates that he has become an “insider” supplier of resources to developers. otherwise, there is nowhere to take tax debts above authorized capital with a profitability of ukraine’s mining industry of more than 40%.

the situation will be supplemented by information compiled in 2015 by ukraine’s economic development ministry, when hennadiy supykhanov was already in charge of murfafsky quarry. the enterprise in 2014 posted uah 100,000 in losses when only seven people were employed by the quarry. the enterprise was supposed to be put up for privatization in 2015, but local armed criminal structures conducted their own “privatization” by sacking employees. it is noteworthy that what remained was a self-propelled gravel sorter. let us suppose that hennadiy supykhanov “pocketed” not only the income of the enterprise, but also this ill-fated sorter, and even registered it for himself (and he, in the end, had to include it in his 2018 declaration).

fathers and sons

the career path of ex-minister’s son did not begin with sheikhs. as a top official during the kuchma era, borys supykhanov reveled in his own impunity, like many public servants at that time. he attracted his son to the “criminal business” himself…

supykhanov jr. began his career in the 2000s as a manager at closed joint-stock company grain of ukraine, cjsc interagro cjsc and cjsc agro nova. according to media reports, the ultimate beneficiary of these enterprises at the time was supykhanov sr., then agriculture minister. by the way, a factor of the notorious bankruptcy of bank ukraina in 2000 was the failure to repay $17 million on a loan issued by interagro.

in 2004–2005, immediately after orange revolution, the supykhanov jr. landed on his feet and took a highly paid position as the head of the state quarantine inspectorate. according to media reports, taking advantage of his official position, he organized a “scheme” for the supply of grain to elevators of ukraine’s state reserve, deputy head of which was mykhailo hrach, who had informal connections with supykhanov sr.

the same grain of ukraine, headed by supykhanov jr., was the “gasket” for the “scheme.”

but these are trifles, in comparison with the corrupt influence borys supykhanov had on grain export from ukraine during the early 2000s. external deliveries of agricultural products could not pass by the warehouses of the state quarantine inspectorate, where fumigation of grain was supposed to take place. this procedure, as well as its control, was not clearly defined, which gave a lot of room for maneuvers with the collection of corrupt rents. no one knows for sure what rent amounts were collected on this “scheme.” what is known is that supykhanov sr. lost his post in 2005 after his son-in-law, starokostyantynivsky district state administration head (khmelnytsky region), was convicted of selling stolen “donated” gravel to grain of ukraine.

in 2006, again, borys supykhanov was needed by the members of party of regions, who were seeking to establish full control over ukraine’s agricultural sector. some media outlets explained this decision as follows: in 2003–2004, supihanov sr. was an adviser on agrarian issues to prime minister viktor yanukovych along with mykola suprun, whose wife, lyudmila suprun, co-founded of the aforementioned interagro.

only after receiving the post of first deputy minister of agro-industrial complex did borys supykhanov undertake to restore his influence by placing “his” people in the state quarantine inspectorate. he also restored the scheme under which grain was supplied to the state reserve committee through the “layering” of grain of ukraine. this was a fat jackpot, worth uah 400 million in tenders.

in 2008, supykhanov sr. was “demoted” to the post of deputy minister of agriculture. in 2010, supykhanov sr. resigned from the civil service and co-founded agroton. this is where his path intersected with alex lissitsa, a young, trained-in-germany english-speaking prospective manager with an mba degree from a decent western business school. lissitsa became the “public face” of the company, instead of mere “regional official.”

the 2019 elections opened up new and hitherto unprecedented opportunities to borys supykhanov. multilayered acquaintances are no longer needed to create influence patterns. it is enough a former subordinate who has “his” deputy economy minister in charge of agriculture to get his son to “enter” the largest and most efficient state grain trader specializing in grain purchases and fertilizer deliveries to farmers.

as a functionary of the agro-industrial complex, supykhanov sr. said he wanted to organize a “fertilizers in exchange for grain” business in an interview with media back in the 1990s. if his efforts culminate in success, it’s easy to predict the demise of agrarian fund. the supykhanov father-and-son duo would have access to the agrarian fund’s uah 7 billion in assets in the form, mainly, grain in warehouses and highly liquid fertilizers (uah 1.5 billion worth). moreover, through their former top manager alex lissitsa, whom the media already has confidently dubbed the “shadow minister of the agro-industrial complex” under the authority of mylovanov, they have lobbied the new “formal” minister with the idea that agrarian fund should simply be liquidated. it’s not difficult to guess at what “discounts” the commodity stores of the once successful state agricultural trader will be sold.

the one aspect of this sordid story that remains unclear is the role of timofiy mylovanov himself. in the company of so-called mazhery (well-endowed progeny of former corrupt ukrainian officials), supyhanov jr. was heard recently in a kyiv restaurant boasting that he successfully passed an interview with mylovanov, because the new “hipster minister” admired his nifty jacket. mylovanov even inquired about the brand so he could by one himself.

it is difficult to believe ukraine’s new minister of economics, trade and agriculture did not take an interest in the biography of either supykhanov sr., who watched over the agro-industrial complex under yanukovych the prime minister, or the biography of his son, whose two-decades long career path is a classic example of a state budget pilferer.

there is one aspect of this story which remains a mystery. why did timofiy mylovanov trust the recommendations of his old kyiv school of economics partner alex lissitsa and regard the person wearing a nifty jacket an interview with as a “new face”? do we chalk this up to mylovanov’s inexperience and naivet? or is there another explanation?

the russian-language version of this article appears here.