Since the mid-2000s, the company Shelf had been Ukraine’s top producer of fuel dispensers for filling stations. Then, in 2014, Russia invaded and the Donbas towns of Debaltseve and Yenakieve, where Shelf was based, quickly fell to Moscow and its proxy fighters.
Shelf’s founders, Armen and Timur Kechiyan left the Russian-occupied territories. They decided to relaunch their business in Kyiv Oblast and bring their old employees there.
But in 2017, the Kechian brothers found themselves facing a strange and serious accusation from the Security Service of Ukraine: financing separatism.
But the brothers’ predicament was much more common than many would expect, according to participants in a July 9 roundtable on SBU accountability and civil control.
The powerful security agency presents its work as protecting national security, but its relations with business often resemble an extortion racket, participants said. And several reformist parliamentarians involved in the event believe the SBU desperately needs reform.
Your money or your business
Although the Kechian brothers had escaped the Donbas separatists, their business was not free from danger.
Their encounter with the SBU began in January 2017, when the agency searched their offices and their homes and confiscated computers. The agency even carried out a search of their mother’s home, during the course of which her shoulder blade was broken.
Such searches, often carried out by men in balaclavas, are known as “maski shows” in Ukrainian and can have a chilling effect on business, halting a company’s operations in its tracks and scaring off partners and clients, both local and international. In December 2017, a law passed limiting the police’s ability to search companies’ offices, but such the “shows” remain a problem.
Next, the authorities froze Shelf’s bank accounts, leaving the company unable to pay salaries and forcing Armen Kechiyan to pay for electricity out of his own pocket. All construction at the company’s Kyiv Oblast sites had to be halted, he told the Biznes Tsenzor site in March 2017.
“I tried to contact media and society in every possible way,” Kechiyan said at the roundtable. “We published what we were asked for. We have no secrets, we pay our taxes.”
Two months after they published the details of their case, their assets returned to them — albeit in a broken condition.
Not an isolated incident
One might expect that separatism charges could stick to the Kechian brothers because they hail from the Donbas and, one way or another, are personally connected to a territory no longer under Ukrainian government control.
But they are not the only ones facing such accusations.
Organized by the Economic Strategy Center, the Bidrodzhennya Foundation, and the Friedrich Naumann Foundation, the SBU reform roundtable brought together Ukrainian parliamentarians, both local and international experts, and business people who had fallen victim to SBU predation. There were a lot of stories to tell.
Dmytro Chirich, who works in the field of liquid petroleum gas, said at the roundtable that his companies had faced accusation so of financing terrorism in the Donbas, despite having no operations in the region.
Oleksiy Antonov of the Pavlovsky Business Center, recounted that one of the center’s enterprises, which exported over 6000 tons of honey a year mostly to the United States and the European Union, also came under pressure from the SBU.
Although customers had never complained, the SBU attempted to find antibiotic residue in the honey, Antonov said. After they failed at that, they began looking for pesticides. When the company demanded that the SBU allow the cargo to be exported, “we were told that, since it is incredibly important for Ukraine to maintain its image [abroad], the SBU is responsible and must deal with these matters,” Antonov explained.
Although the enterprise was able to eventually speed the resolution of its case after reaching out to a parliamentarian, it could not fulfill all its commercial obligations and lost customers.
Medical company Diavita, the only firm on the Ukrainian market providing pharmaceuticals for prenatal dialysis, also faced pressure from the SBU. That’s likely because the company is the only one providing the medications directly without an offshore third party, manager Iryna Kozhukarenko told the roundtable.
Such schemes involving offshores have traditionally been used by drug importers to jack up prices during the procurement process, allowing them to move large amounts of state funds out of Ukrainian tax jurisdiction. The drug providers weren’t the only ones to pocket the money; they also passed it on to corrupt officials who helped them win import tenders.
Diavita responded to the SBU pressure by appealing to parliamentarian Sergii Leshchenko, who played a central role in the roundtable, and disclosing their predicament to the public. The company’s problems are now nearly resolved, according to Kozhukarenko.
But the situation helped the company better understand corruption in Ukraine.
“We saw that direct contracts are a hot point, totally opposed by law enforcement,” she said.
Reform
Parliamentarians Leshchenko and Mustafa Nayyem, both former investigative journals, believe they have the answer to this problem. In March, they and 18 other MPs registered draft law no. 8050 in the Verkhovna Rada.
The bill proposes sharply limiting the SBU’s responsibility for investigating white-collar crimes. Specifically, it would remove investigating economic crimes and corruption from the SBU’s priority tasks, prohibit the agency from intervening in economic activity unless that activity poses a direct threat to national security, and remove anti-corruption and organized crime units from the service.
It would also hand responsibility for investigating the financing of terrorism and money laundering to the state agencies responsible for tax enforcement.
Nayyem believes the SBU is simply too powerful. It is the one law enforcement body all other law enforcement fears, a tradition that dates back to the Soviet KGB. When the SBU enters a case — even one it did not initiate — it becomes a hegemon, Nayyem said.
Its abilities to gather information reach far beyond those of even the Prosecutor General’s Office. And, according to his sources, the SBU’s economic crimes unit does not subordinate to agency head Vasyl Hrytsak. There are similar issues in other law enforcement agencies with economic crimes units, Nayyem says.
He believes that economic crimes must be investigated by a civil agency inside the Finance Ministry or the Economy Ministry. If it discovers a crime, it would then pass the case on to law enforcement. Such an approach would avoid raids on businesses before criminal charges are pressed.
But SBU spokesperson Olena Hitlyanska says that her agency has fewer complaints than other law enforcement bodies — an assessment that comes from Ukraine’s business ombudsperson, Algirdas Šemeta. She feels this information does not reach people like Leshchenko and Nayyem.
Individual cases of corruption can occur, “but we respond to them,” Hitlyanska says. “Even if other [law enforcement] bodies detain our employees, we always cooperate. But these are isolated cases.”
Nayyem acknowledges that the SBU reportedly receives fewer complaints, but believes the problem is that the agency uses national security, patriotism, and the fight against separatism to mask its extortion of money from businesses.
This makes it particularly powerful. “When you’re saying that someone is doing dirty business, it’s not good,” Nayyem told the Kyiv Post. “But when you’re talking about separatism, people are blind.”
Politicians fear coming to the suspects’ defense, he added, because the accused individuals “become toxic.”
Shelf’s Kechian knows this well. Both the Ukrsibbank and Credit Agricole banks have refused to work with the company.
“They don’t want any business with separatists,” Kechian said at the roundtable. “Since they say this, I assume our case is not closed.”
