Ukrainian investigators say they uncover fraud in arms procurement

(Reuters) – Ukraine’s SBU security service and the Defence Ministry said on Friday they had uncovered a scheme for fraudulent purchase of artillery shells that involved embezzlement of the equivalent of nearly $40 million.

Corruption in Ukraine, more than 30 years after the end of Soviet rule, has become an even more crucial issue as Kyiv proceeds with its application to join the European Union.

Incidents of corruption in the military, including in procurement, have sparked several prominent scandals.

A statement issued by the SBU said the corrupt scheme focused on contracts to procure artillery shells.

A contract to secure the shells at higher than market prices had been abandoned by the defence ministry’s recently created procurement agency and a new deal struck eliminating intermediaries and significantly reducing the price.

But a senior ministry official, it said, had extended the previous contract and funds totalling nearly 1.5 billion hryvnias ($40 million) were deposited in accounts belonging to the intermediary firms.

The official, the main suspect in the case, was removed from his duties, legal proceedings have been launched against him and attempts are under way to recover the money.

A Defence Ministry statement said the scheme was uncovered last week and an audit confirmed the illegal activity. Searches were conducted within the ministry and at other premises.

($1 = 37.5200 hryvnias)

(Reporting by Ron Popeski and Oleksandr Kozhukhar; editing by Jonathan Oatis)