The theft of funds allocated for road construction in Ukraine is a well-established system that operates effectively under any government. “Great Construction” became the perfect cover for it: billion-hryvnia tenders, convenient contractors, and shell companies through which money ended up in the right pockets.

A striking example is Budinvest Engineering, which rapidly joined the ranks of Ukravtodor’s top favorites precisely when the political influence of Yuriy Holyk and Valentyn Reznichenko was growing.

Today, Holyk is already a former coordinator and is hiding abroad, but the scheme they built is still worth recalling. We are publishing this investigation.

Case «Budinvest Engineering», which broke into the Top-10 favorites of Ukravtodor during the period of Holyk-Reznichenko’s political weight growth.

It all started with Dnipropetrovsk region, where it also blossomed.

Five years ago, Reznichenko’s team made a splash across the country. The media showed that the most beautiful kindergartens with schools and the longest roads were being built there, creating the impression of a flourishing oasis against the backdrop of wartime Ukraine. At the same time, glamorous publications never mentioned the bad details that sometimes accompanied the “big Dnipropetrovsk construction”.

For example, the Dubinsky brothers’ entourage earned gigantic margins on solar panels for the same schools. Or how the Dnipropetrovsk OGA paid for asphalt one and a half times more expensive than neighboring regions. At the same time, large budget allocations were already being directed to the region for the repair of local roads by the company “Avtomagistral-Yug”, which was facilitated by the head of the budget committee of the Verkhovna Rada Andriy Pavelko. And the fact that Governor Reznichenko was a business partner of the head of the Presidential Administration Borys Lozhkin was absolutely not superfluous.

In 2019, the new president Volodymyr Zelensky listened to the ideas of Yuriy Holyk, who provided PR for Valentyn Reznichenko, and allowed him to scale the Dnipropetrovsk experience to the whole country. This is how the “Big Construction” appeared. And behind it emerged – and “Big Theft”.

At the end of 2019, “Avtomagistral-Yug” and five other largest contractors of Ukravtodor at that time created the National Association of Road Workers of Ukraine. And they began to receive up to 70% of contracts for the repair of state roads. However, the authorities ignored all accusations of creating a cartel, and Yuriy Holyk, as a “consultant of the Big Construction”, even publicly spoke out for the cartelization of the industry.

At the same time, sources of “Our Money” recommended taking a closer look at the company “Budinvest Engineering”, which allows the apologists of the Big Construction to receive not only moral satisfaction. We took a closer look. And the dynamics of the company’s life turned out to be extremely interesting.

A mountain of billions

LLC “Budinvest Engineering” was founded in 2015, shortly after Holyk-Reznichenko came to the DnOGA. The company entered local tenders in 2017, but only accelerated in 2018. In 2019, with the change of power and after Reznichenko’s resignation, the company slowed down. But simultaneously with Reznichenko’s return to the regional state administration – it hit the tenders again. And began to collect not by handfuls, but by armfuls. In eight months of 2021 – it has already tendered 7.5 billion hryvnias.

The secret is simple. “Budinvest Engineering” without any problems passed the qualification sieve of Ukravtodor, and the local Road Service sometimes stands on its ears to prevent extra competitors. For example, in this case one company complained about discriminatory tweaks that made its participation in the auction impossible at a price of 400 million. And the AMCU even agreed with this and ordered the Ukravtodorovites to remove the discrimination. But they made completely different changes to the tender documentation than required. It’s like if you ordered someone to “paint the window outside blue”, and they painted it inside green and replied: “Well, you wanted a painted window? Here!” After such a trick, the complainant understood everything and no longer tried to stand in the way of Ukravtodor’s favorites.

Also, “Budinvest” received the green light from “Avtomagistral-Yug”. This company in the Dnipropetrovsk region took 90% of contracts since the times of the first governorship of Reznichenko-Holyk. But this year it gave “Budinvest” contracts for 5.6 billion hryvnias, acting as a sparring partner for the daring newcomer. Almost 2 billion more this year came from the bodies of the Dnipropetrovsk OGA and even the Dnipro city hall. And these are not the last tenders that are in play. So the right end of the graph will rise even steeper and make everyone who remains on the sidelines envy such incomes.

And there are many of them. “Budinvest Engineering” with its billions of contracts this year has already broken into the Top-10 favorites of Ukravtodor. In terms of cash received from Ukravtodor – already also on the verge of the top ten.

Thus, “Budinvest Engineering” should enter the list of the largest firms in the country next year (because road contracts are stretched over time), and its beneficiaries will become billionaires.

Giant margin

A source of “Our Money” provided data on the cost of building materials from our heroes – they are striking with markups.

For the first half of 2021, “Budinvest Engineering” paid its counterparties 726 million UAH for various building materials and services. Of these, exactly half, 360 million UAH, went to four suppliers “Dikat”, “Smart Lux Company”, “BNM”, “Kirmikom” for asphalt. Another 25 million UAH went to them for bitumen emulsion, and 94 million UAH for other building materials (sand, crushed stone, curbs, SFOV, etc.).

These are classic “gaskets”, where the concentration of margin (the difference between the purchase price of the goods and its normal cost) occurs, which unscrupulous market participants later like to convert for distribution in “gratitude envelopes”.

According to the calculations of “Our Money”, building materials on the way to “Budinvest” rose in price on average by 100% from the initial price of manufacturers. These building materials accounted for 65% of all payments to “Budinvest”. That is, if half of the funds paid for building materials turned into a margin, this amounts to 30% of all payments to “Budinvest”.

Recall, earlier we calculated the marginality on road tenders for 2020. Then, due to the closed data of Ukravtodor, we gave a cautious estimate of overpayments – from 10 to 40%. Thus, the data on the rise in the price of building materials in the “Budinvest Engineering” chain by an amount constituting 30% of all payments to the firm significantly clarifies our previous estimate.

Price increase scheme on examples

Building material is produced by real plants LLC “Krinichansky Asphalt Concrete Plant” and LLC “Tsarychansky Asphalt Concrete Plant” ABC. They sell the goods to “gaskets” at the manufacturer’s price. “Gaskets” immediately resell this product to “Budinvest Engineering” at 1.5-2.5 times more expensive. And already at this price, “Budinvest” repairs Ukravtodor and DnOGA roads. That is, it is at this – already inflated – price that the state pays for the work of “Budinvest”. At the same time, the margin remains not on real plants and not on the general contractor, to which they can easily come with a check. But on penny “gaskets”, which can be “folded” from time to time, receiving an additional opportunity to save on VAT.

Here are a few examples of such price markups through the company “Dikat”. It appeared in the “Budinvest” schemes this year, replacing another liquidated company “Reniks Torg”.

Asphalt on June 11, 2021, “Dikat” buys from “Tsarychansky ABC” fine-grained asphalt concrete mix type A grade 1 for 1750 UAH/ton prices for goods are indicated without VAT. And on the same day sells asphalt of the same brand to “Budinvest” for 2750 UAH. That is, on “Dikat” asphalt rose in price by one and a half times. In total, asphalt accounted for 45% of all “Dikat” cash flow.

Emulsion on April 8, “Dikat” buys from “Krinichansky ABC” bitumen emulsion EKS-50 for 12,250 UAH/ton, and on May 5 sells it to “Budinvest” for 20,000 UAH. That is, on “Dikat” emulsion rose in price by 1.6 times.

SFOV mix on May 17, “Dikat” buys from “Krinichansky ABC” ready-made SFOV mix (SPS S7-70%), treated with a complex binder (cement 3.5%, emulsion 2%), for 600 UAH/ton. And on May 21 resells to “Budinvest” for 1,323 UAH. That is, on “Dikat” the mix rose in price by 2.2 times.

Curb on January 19, “Dikat” buys from “Krinichansky ABC” curbs size 1000*20*8 for 100 hryvnias per linear meter. The normal price of the manufacturer, on “rozetka” such curbs are sold for 166 hryvnias. And on February 8 resells them to “Budinvest” for 250 UAH. That is, on “Dikat” curbs rose in price by 2.5 times. Of the total price of the curb 250 hryvnias, a hundred went to the manufacturer – and the rest remained as a margin on the intermediary “gasket”. How to further withdraw the margin and distribute it in envelopes is already a matter of technique.

And by the way, such a price markup scheme is also used by “Avtomagistral-Yug”. Journalists’ materials have already become materials of criminal proceedings of the SBU and the National Police.

Formal founders

There is no doubt that the four intermediary firms from Dnipro perform the role of “gaskets” between the manufacturing plants and the contractor of the “Big Construction”.

LLC “Firm “Dikat” with a statutory fund of 50 thousand UAH is registered to some Sergey Sergienko. LLC “Smart Lux Company” with a statutory fund of 1 thousand UAH – to some Ilya Pashchenko. LLC “Kirmikom” with a statutory fund of 50 thousand UAH – to some Stanislav Filip. LLC “BNM” with a statutory fund of 5 thousand UAH – to some Dmitry Tokarev. We talk about these businessmen as “some”, since there is no data about them in open sources, and there are almost no other firms registered to them.

Whereas the founders of the general contractor and manufacturing plants are generally understandable.

Yana Khlanta 

In LLC “Budinvest Engineering” 2% of the statutory fund of 1 million UAH belongs to the director of the firm Dmitry Litnarovich, and 49% each are owned by fitness trainer Yana Khlanta and the director of LLC “Sports Club “Prometey” Pavel Chukhno. However, do not be surprised that these sports people received billions for asphalting.

Pavel Chukhno’s relative Elena Chukhno is also a co-owner of the Tsarychansky and Krinichansky asphalt concrete plants, which are the manufacturers of building materials for “Budinvest Engineering”. The second co-owner of these plants is Ksenia Shipulina in “Krinichansky ABC” a 25% share belongs to the firm “Dendi-Invest” of the Mykhail Brodsky family.

Well, then everything is simple. The founder of the same sports club “Prometey”, headed by Pavel Chukhno, is Vladimir Dubinskyi. Shipulina is a co-founder of the public organization “Sports Academy of Vladimir Dubinsky” together with Vladimir and Leonid Dubinskyi. Plus, there are many other business intersections between the Chukhno, Shipulina, and Dubinskyi families.

The Dubinskyi brothers

Screenshot of the current wanted notice for the Dubinskyi brothers from the FBI website.

Vladimir and Leonid Dubinskyi, not to be confused with the well-known servant of Igor Kolomoisky, Oleksandr Dubinskyi – these are well-known people in the Dnipropetrovsk region. They started business in Dnipro in the 90s. They had their own local TV channel “VLD-Brothers”. In the early 2000s, they emigrated to Israel, and then to the USA. After the FBI’s interest in their activities due to a construction scam in Sacramento, they returned to Ukraine in 2009. According to official data from the Department of International Police Cooperation of the National Police in the Dnipropetrovsk region, the Dubinskyi brothers have been on the international wanted list since 26.03.2013 with the aim of arrest and extradition for committing fraud on the territory of the USA. They have Ukrainian citizenship, so their extradition to America is impossible.

The Dubinskyi brothers became so popular during the first entry of Reznichenko-Holyk into the Dnipropetrovsk OGA during Poroshenko’s time that when Holyk and Reznichenko returned to power under Zelensky, such slides with “billion-dollar” pictures were passed to the President’s Office about them:

Still, Zelensky is more believed not by some pictures, especially those that write the word “corruption” in relation to citizens, against whom there is not a single court decision confirming corruption charges. Much more is believed to the Deputy Head of the President’s Office Kyrylo Tymoshenko, who oversees the “Big Construction”, deals with Holyk within its framework, and is responsible for appointing governors, including Reznichenko. Kyrylo Tymoshenko is the son of Vladlen Tymoshenko – this is a deputy of the Dnipropetrovsk regional council from “Servant of the People” and the director of the shopping center “Passage” Hennadiy Korban. And Hennadiy Korban, in turn, regularly communicates with the Dubinsky brothers specifically on tenders in Dnipro.

There is hope that law enforcement will answer the question “how does the growth of Holyk-Reznichenko’s political influence lead to the hegemonic successes of the Dubinsky entourage?” If not under this president, then at least under the next one. As NABU has already done with the previous head of Ukravtodor.

Author: Yuriy Nikolov, “Our Money”