The story of how the crusade of Groysman against smuggling affected the extortion system of the State Fiscal Service when exporting walnuts.
The partners of Groysman namely former Head of the State Fiscal Service of Ukraine Myroslav Prodan and his backup Oleksandr Vlasov together with Serhiy Tupal’s’kyi, Director of the Customs Duties Administration Department of the State Fiscal Service, cover the contraband of walnuts.
One of the most profitable businesses in Ukraine on walnut export gives miserable revenues to the budget due to involvement of the aforementioned personalities. Something around 90% of export operations stays in the shadow.
According to the investigation of mine, the shadow market can be controlled by the customs ‘overseer’ that is Serhiy Tupal’s’kiy who is known as a right-hand man of Myroslav Prodan. Tupal’s’kiy organizes export of goods at underestimated customs value and it is done only through the foreign-economic activity parties that are under his control.
A lot of readers may be surprised to know that export of nuts is much more profitable than export of fruit as its earning capacity can exceed 400%. Ukraine has the highest rate at walnut delivery in Europe and is holding its position in the top five world’s largest countries in the field of walnut growing.
However, only 10% of walnut export is legal. All other exporters resort to short-lived dummy corporations used for walnut delivery worldwide and for walnut customs value underpricing.
To understand how nuts are exported it is necessary to refer to history.
Walnut export business has always been corrupt. Till the revolution in 2014 walnut smuggling schemes had been run by people from the family of Yanukovych through the customs office in Kherson. The ruling was performed by Head of the Customs Service Ihor Kaletnyk and People’s Deputy Vitaliy Khomutynnik.
In order to export walnuts every exporter had to pay 10-12k USD per one 20 ton truck to a short-term (dummy) company. That very company was the one to document customs formalities. For instance, in the period from October 2015 to April 2016 there was exported 30.1k tons of walnuts out of the total yield of the year 2015 for 1.7 billion UAH. Total amount of money those enterprises paid to the budget as taxes comprised 25.5mln UAH. At that time First Deputy Head of the State Fiscal Service Serhiy Bilan reported that the amount of tax revenues had to be ten times bigger comparing to what had been paid namely not less than 261mln UAH. So the rest of the money found its way into the pockets of those who covered the schemes and was also paid for the backup from the Security Service of Ukraine.
Extortion at the customs disappeared after the revolution but not for long.
In the end of 2014 Khomutynnik was the one to resume the old scheme with the help of his protégé Volodymyr Skorobahach, Deputy of the Town Council in Kharkiv and Head of the Deputies’ Group ‘Young Regions’ (Molody Regiony). He was an overseer of the contraband and tax pits in Kharkiv oblast and started to control walnuts export at Odessa Customs Office. Skorobahach was also interested in export and import of meat.
In the beginning of 2015 Anatolyi Makarenko, new Head of the Customs Service, tried to establish new rules of walnuts export within one customs office. But there was nothing said about legalization. The name of Makarenko was mentioned in the scandalous correspondence of Khomutynnik containing the sum of 15 000 USD that customs officers made out of one truck of walnuts and 10 000 USD out of that sum went to the pockets of the Security Service of Ukraine.
Makarenko was replaced by Kostyantyn Likarchuk known as the protégé of Ihor Kononenko. But Likarchuk was almost instantly discharged after the assignment due to the conflict with Roman Nasirov. And Roman Nasirov became the head of the Fiscal Service of Ukraine owing to Borys Lozhkin, though that same Khomutynnik was backing the appointment of Nasirov as well.
And only after Nasirov had been dismissed, the opportunity to lead the Fiscal Service of Ukraine was given to the man of Volodymyr Groysman and it was Myroslav Prodan. So here Volodymyr Groysman joined the fight for the customs office and no surprise why Vinnytsya customs house became the principal walnuts export channel where Prodan had already applied successful schemes of walnuts export.
At the same time the company called Labor Rehabilitation Center of ATO Soldiers and known as the main walnuts exporter, was forced out of the market. And according to the media information, Khomutynnik and Skorobahach were accused of complicity in pressing it out.
So Khomutynnik and Groysman faced competition in 2015. Since the middle of 2015 the firms close to Prodan and Groysman had offered customs clearance for 6-9k USD and as a result Vinnytsya became the main walnut checkpoint.
However, in 2015 Mikheil Saakashvili burst into the walnut business as a newly assigned governor of Odessa oblast. He assigned Yuliya Marushevs’ka to a position at Odessa Customs Office and Odessa became the main checkpoint of walnuts in 2016.
According to the information in media, LLC Ukrainian Shipping Service was one of the leading companies exporting walnuts in 2016. It exported 1.4k tons of walnut kernels and 527 tons of inshell walnuts. In that period there was one more leading exporter of walnuts through Odessa Customs Station called Orkont Company. The company was registered in September 2015.
Private enterprise Shlyah-Kontrakt dealt with walnuts export earlier and was the main business competitor of Khomutynik so he initiated informational attacks against it applying the administrative resources. As a result Shlyah-Kontrakt was replaced by the firm with a stainless reputation called ‘Orkont’.
Having discharged Marushevs’ka from Odessa Customs Office, her place was taken by Oleksandr Vlasov. He updated customs schemes by introducing innovations. Some groups of goods were administered at the customs tariff with a ‘discount’ of 30%. For having that ‘discount’ the importer company had to bring a kickback in cash. And the ones from the Security Service of Ukraine had their shares in that dirty business as well. According to media sources, export of walnuts and amber at Odessa Customs Office in 2017 was controlled by the Security Service of Ukraine.
As at 2018, there have been only 4 companies that were designated as official walnuts exporters. In 2018 their total amount of output they had exported for 7 month brought 67mln USD in. The rest of the market is following the smuggling schemes that is why they used to open fictitious firms. These firms let 10 trucks with walnuts pass and in 2-2.5 months their live period is over.
So Ukraine gets no foreign currency earnings out of the walnuts export at all. If we consider that legal walnuts export business covers only 10% of the total export, contraband levels may reach 600mln USD for the first half of 2018.
In accordance with the version of the source that was involved in that kind of business, the Security Service of Ukraine does not have control over walnuts export today. Regarding the information provided by the source, the main part of the contraband is carried out through the customs station in Odessa and is under control of the State Fiscal Service.
One part of the contraband goes through the customs station in Kyiv and Chernivtsi. But when it comes to the latter one it goes on a nonpermanent basis as only secure companies they are dealing with can export goods through that customs station. Customs offices in Cherkasy, Zakarpattya, Mykolayiv and Vinnytsya are also involved.
Today such kind of customs services cost from 4k USD to 7k USD for one truck with a total weight of 20 tons. In order to transport inshell walnuts in compliance with the smuggling scheme entrepreneurs must pay 4k USD. If it comes to walnut kernels, the price is increased up to 6.5-7k USD (the price depends on walnut caliber, quality and volume) for one truck with a total weight of 20 tons.
The aforementioned information is supported by a number of investigations in media. According to them, 18.24k tons of inshell walnuts have been exported through the customs office in Odessa and this number is the highest one among all other customs stations. The Customs office in Chernivtsi (6.68k tons) and Zakarpattya (1.51k tons) are in the top list as well. The walnut contraband has often been connected with Prodan, former head of the State Fiscal Service, and the people of his surroundings. Earlier he was Head of the State Fiscal Service in Vinnytsya. The Security Service of Ukraine searched that very customs office in the beginning of July, 2018 and apartments of the people forming Prodan’s closest surroundings were also searched.
It is rather difficult to track walnut contraband as the main fictitious firms involved in it are in operation from 3 month to one year. Smugglers usually work on a turnkey basis. They have their own companies, accounts and can even provide transportation services if needed. If the client uses a non-cash payment they provide a cash-out. This service costs 2.5% of the transfer sum.
In the course of my interaction with experts I found a website platform of one company that was intended for walnut smuggling. The company’s name is UkrNUTS. This company deals with buying and selling of walnuts (inshell walnuts and walnut kernels), pumpkin seeds and beans. It is also involved in the export of walnuts.
There are no any details about the company (settlement accounts, Sort codes, EDRPOU Identification etc.) on the website at all with the exception of phone numbers and an e-mail address. So it is just a platform accepting orders that can be executed through any fictitious short lived firm.
We contacted UkrNUTS under the guise of exporters and the representative of the company confirmed that export clearance of walnuts was performed through Odessa Customs Office. The price for such a service was 5.3k USD for one truck with a total weight of 20 tons.
When we asked the representative why there were no any details about the company we were dealing with the answer was the following: ‘Walnuts export clearance would be done through other company and not that one’. They said if we were satisfied with the price the director of that other company would contact us and briefly explain how the exporting procedure would be accomplished.
According to the data we have, that platform was controlled by the officials from the State Fiscal Service. For today there are 10 short lived firms they are using for accomplishment of all the needed operations.
Global Trade Company was one of such firms in 2018. It appeared in Odessa in November 2017 and for such a short period of operation the company had already changed three owners, its name and legal address. Its authorized capital was 100k UAH and as it was pointed out the company was generally a mediator in trading goods of wide range. It was its main kind of activity. Nowadays the company’s name is LLC PIVDEN’ TRADE GROUP and it is registered in Kyiv. The owner of the company is Abdalla Ahmed Abdalla Abuelfadl.
LLC Torsiongros belongs to Abdalla Ahmed as well. This company was involved in a number of criminal cases concerning tax evasion and financial and economic activity on legalization (laundering) of income obtained by criminal means. The registration addresses of Global Trade Company and LLC Torsiongros coincide.
Such a scheme is led by Myroslav Prodan’s protégé named Serhiy Tupal’s’ky, Head of the Customs Duties Administration Department of the State Fiscal Service, when Vasyl Poyizd (from the Anti-Smuggling Department) takes no actions.
Export competitors ignoring cooperation with the principal scheme-makers of Odessa and Kyiv customs offices are being terminated by tax police of Kyiv.
After the resignation of Prodan the customs situation stays the same. His partners are in charge of the whole contraband system in the country just like they were before.
Officially his place is temporarily taken by Oleksandr Vlasov whom I mentioned before and who was removed from his position as Head of Odessa Customs Office for the period of the internal investigation being accused of stealing 37 containers with fabric and other goods.