Boris Ostapyuk: The Elusive Ukrzaliznytsia Plunderer. Part 1
Why is Ukraine's rail transport the most wretched and unprofitable in Europe? This question should be addressed to one of the former heads of Ukrzaliznytsia, Borys Ostapyuk. After all, it was he who turned the railway network into a vehicle for his own corruption schemes. He was caught repeatedly, fired for it, and even placed on the wanted list—but he always returned and rose to even higher positions. Now he dreams of making a comeback, with the help of his influential patrons and accomplices from the People's Front and Batkivshchyna parties.
Where do the rails of corruption come from?
Borys Yaroslavovych Ostapyuk was born on March 31, 1961, in the village of Sloboda, Kolomoisky District, Ivano-Frankivsk Oblast. His early life is full of large gaps and contradictory "versions." This is entirely logical for a man who regularly found himself at the center of corruption scandals and tried to clean up his past in order to return to power with a clean slate.
According to Ostapyuk's current official biography, he graduated from the Dnipropetrovsk Institute of Railway Engineers (now the National University of Railway Transport) in 1987 with a degree in railcar construction, where he also earned two additional degrees in 2001 (in rolling stock and special equipment) and 2003 (in organizational management). This biography does not reveal what Borys Ostapyuk did between graduating from high school (1976 or 1978) and entering university (1982). It does state that in 1987, Ostapyuk began his career as a foreman at the Lviv passenger car depot, where he worked until 2000, rising to the rank of manager. This information is indirectly confirmed by Ostapyuk’s apartment in Lviv (at 11 Syaivo Street), where he was registered with his wife Ivanna and children Boris and Yulianna.
However, another, earlier version of Borys Ostapyuk's biography can be found in the media. It states that after eighth grade, he enrolled in the Chernivtsi Railway Technical School (now a transport college), then served in the army, and began working in 1981 at the Volnovakha depot of the Donetsk Railway. He then entered the Dnipropetrovsk Institute of Railway Engineers, after which, until 2000, he worked not only at the Donetsk and Lviv Railways, but also in management positions at the Dnieper Railway (in the mid-90s). If this version of Ostapyuk's biography is true, it follows that later, for some reason, he deliberately concealed part of his past. But why? What did he do at the Dnieper Railway?
However, it is reliably known that Ostapyuk embarked on the slippery path of corruption in Lviv, since by the time he arrived in Kyiv, he was already a member of the so-called "railway mafia," created in the 90s at the Lviv Railway under the protection of its then-director, Georgy Kirpa.
Georgy Kirpa
In 2000, both versions of Ostapyuk's biography converge into one line – when he took up the position of First Deputy Director of the State Enterprise for Logistics and Technical Support of Railway Transport "Ukrzaliznychpostach". According to information received Skelet.Org from Ostapyuk’s circle (he himself “lost” all this information), and before his appointment to this position, he specialized in supplies and repairs, which is a real gold mine in Ukrzaliznytsia.
The fact is that the corruption schemes surrounding Ukrzaliznytsia (UZ) have their own specifics. This state-owned enterprise has a monopoly on freight and passenger transportation services, for which it collects payments, and also owns the railway network, cars and locomotives, stations, and depots. UZ cannot transfer these functions and property rights to enterprises outside its structure, much less to private firms. So how do corrupt officials feed themselves from this? Primarily by embezzling Ukrzaliznytsia's funds through the tender procurement system, through the repair of tracks, rolling stock, and stations, and through the provision of secondary services (passenger services, ticket sales). Therefore, positions in supply and repair facilities management at Ukrzaliznytsia have always been very lucrative, especially on the Lviv Railway, where entire clans have risen from this position, seeking to take over the entire Ukrzaliznytsia. That is why so many people from the Lviv Railway administration and from the western region in general were at the head of the Ukrainian railways: Georgy Kyrpa, Vasyl Gladkikh, Vasyl Melnychuk, Mykhailo Kostyuk, Borys Ostapyuk.
The late Georgiy Kirpa was the "father" of all these railway clans, just as Leonid Kuchma was the "father" of many Ukrainian oligarchic groups. For example, it was not without Kirpa's help that the clan of Mykhailo Kostyuk and the Dubnevych brothers rose to power: he facilitated their track repair business and personally reaped dividends from it. They competed with the clan of Borys Ostapyuk, who also owed his rise to Kirpa. Thus, when Kirpa transferred to Kyiv in 2000 as deputy head of Ukrzaliznytsia, Ostapchuk immediately arrived in the capital with him, receiving the position of deputy director of Ukrzaliznytsia Postach. And when Kirpa became general director of Ukrzaliznytsia in 2001, Ostapyuk immediately became director of Ukrzaliznytsia Postach.
Maxim Burbak
Gradually, Ostapyuk built his own clan: it included his old acquaintances from the Lviv Railway and even a couple of fellow villagers. He always places his team of trusted people in key positions and has his own corrupt connections with high-ranking officials, politicians, and major businessmen. Among his strategic partners (and accomplices) over the past few years are Maxim Bourbak и Leonid Yurushev, Thanks to whom he received the position of CEO of UZ in 2014, and on whom he still relies, hoping to return to that position again. And, as is well known, both of these individuals are extremely close to the leader of the People's Front, Arseniy Yatsenyuk.
Railway "overseer"
So, from 2000 to 2002, Borys Ostapyuk headed Ukrzaliznychpostach, and from 2002 to 2005, he held the positions of First Deputy Head of the Main Passenger Department of UZ, and then Head of the Main Directorate of Logistics and Procurement of UZ. This meant that numerous procurement and payment flows passed through him.
It was a golden age: Ukrzaliznytsia CEO Heorhiy Kirpa lobbied President Kuchma for the need to "reform" the industry, asking for permission to raise fares and increase state subsidies—while his subordinates actively "sawed up" the railway's multi-billion-dollar budget. Borys Ostapyuk was among them. Although the media has retained almost no information about his frenetic activities during this period, some remains can be found—for example, the "underwear scam." Kirpa declared his intention to improve service on passenger trains, and began charging a fee in addition to the ticket price for this. In reality, nothing changed: the carriages were dirty, stuffy in the summer and drafty in the winter, and the linens were old and washed-out.
In December 2004, Georgiy Kyrpa committed suicide, taking many secrets of Ukrzaliznytsia with him to the grave—including the secrets of Ostapyuk's early schemes. But while the Maidan proved fatal for Kyrpa, for Borys Ostapyuk, on the contrary, it paved the way to new heights. In 2005, he became deputy general director of Ukrzaliznytsia, and in October of that year, he created the state-owned enterprise Ukrzaliznychpassservis. Although Ukrzaliznychpassservis owned 100% of its shares, Ostapyuk served as the company's director until its liquidation. Ukrzaliznychpassservis assumed the functions of servicing passenger rail transport—meaning, with the help of this enterprise, Ostapyuk maintained this lucrative sector under his personal control. And then the corruption "miracles" began!
But, preserving the chronology, we should first mention one incident that Ostapyuk tried to erase from his biography. After all, you won't see in it that on September 7, 2006, by order of the new Yanukovych government, he was dismissed from his post as deputy director of Ukrzaliznytsia, and returned to his post only on December 26, 2007, by order of the Tymoshenko government. But this almost eighteen-month gap in his management record doesn't exist because Ostapyuk, through the Kyiv District Administrative Court, secured a ruling that his dismissal in 2006 was illegal, and even defrauded the state of his salary for that period (his salary was about 8 hryvnias per month). However, even more important for Ostapyuk was to "erase" the reason for his dismissal. And it, according to Skelet.Org, consisted in the fact that the deputy director of Ukrzaliznytsia was caught in corruption on an especially large scale: in 2005-2006, Boris Ostapyuk provided a “preferential tariff” for freight transportation for Intertrans CJSC and T-Trans LLC (EDRPOU 32829313), causing Ukrzaliznytsia damages in the amount of almost 150 million hryvnia!
The director and de facto owner of Intertrans was Mykola Kovzel—an extremely interesting figure, one of the legends of Ukrainian corruption! He also started out at Lviv Railway, but in the food and commercial sector. His mother was close friends with Kirpa, so she arranged for her son to work in the Lviv Railway's logistics department, where he founded various commercial firms in the 90s. When "Uncle Zhora" transferred to Kyiv in 2000, Mykola Kovzel took over Intertrans State Enterprise (a closed joint-stock company since 2004), one of Ukraine's largest transport companies, and soon took control of it. T-Trans LLC is also linked to him (according to some reports, Kovzel used it to siphon profits from Intertrans). Until the end of 2004, Kirpa provided Kovzel with preferential treatment; since 2005, Borys Ostapyuk has provided them. And judging by the scope of Kovzel’s activities (he drove a Rolls-Royce Phantom, bought with Intertrans money), he was then one of Ostapyuk’s main “companions”.
Nikolay Kovzel
Nikolai Kovzel also has a brother, Petro, who became a judge of the Kyiv District Administrative Court in 2007 – not without the help of Nikolai Kovzel, who, according to media reports, practically "bought" him the position from BYuT member Vasyl Onopenko (then head of the Supreme Court). And it was this newly appointed judge, Petro Kovzel, who ruled that Ostapyuk's dismissal was unlawful!
Kovzel's company, T-Trans, also had a director, Oleksandr Danilchuk, who was then the head of the Rivne branch of the BYuT (YuT) party and, from 2006 to 2010, the head of the Rivne Regional Council. Through him, Kovzel himself became close to Yulia Tymoshenko (they even had houses next to each other in Koncha-Zaspa), and was twice elected as a people's deputy (in 2006 and 2007) on the BYuT list (both times buying himself seat #53). This explains why Borys Ostapyuk was hastily reinstated on December 26, 2007, literally within the first hours of the new Tymoshenko government.
Returning to his post, Boris Ostapyuk also demonstrated incredible activity in the final days of the outgoing year, and within just two days, he had once again placed his people in key positions. The adage "time is money" rang true for the railway's corrupt officials, as they were discussing the closure of old annual budgets and estimates and the approval of new ones. And so, on December 28, 2007, Ostapyuk assembled a new Ukrzaliznytsia Tariff Commission (UZ Order No. 634-C of December 28, 2007), which hastily reinstated the "reducing coefficients" on freight rates for Intertrans CJSC and T-Trans LLC.
In 2008-2009, Boris Ostapyuk returned to his "underwear schemes," which he carried out through Ukrzaliznychpassservis and a number of commercial contractors. Among them, Development 21st Century LLC, co-owned by Leonid YurushevShe began winning tenders for laundry and train car cleaning services, but simply making money wasn't enough for Yurushev, and Ostapyuk wouldn't get much out of it either. So they devised another scheme: initially, Development 21st Century would win tenders fairly, offering a lower price, but then the contract terms would be renegotiated, and the company's services would almost double! According to sources, Skelet.Org, Ostapyuk worked with other commercial contractors using the same scheme.
But the scam didn't stop there. If Development 21st Century and the other companies contracted by Ostapyuk had performed the services themselves, they would have had to maintain a large staff and spend money on equipment and inventory. To avoid these expenses, Yurushev and Ostapyuk resorted to a scheme typical of the 90s: conductors and employees continued to clean the cars (as had been the practice since Soviet times), but they were also hired as "moonlighters" for Development 21st Century and other companies. Thus, the fees for the services were transferred to commercial entities, while the floors in the cars were swept by Ukrzaliznytsia conductors, who were paid a nominal fee for the job.
Another of Boris Ostapyuk's "brilliant discoveries" during this period was bribery for the timely provision of rail transport services. To avoid the appearance of a banal bribe, everything was handled practically legally: cargo was processed through shell companies (some owned by his relatives), which took around 5% of the shipping cost. This amounted to up to 150 million hryvnias per month, which was then distributed among the participants in this scheme and also paid to Ostapyuk's "protectors" and patrons. Furthermore, UZ management profited handsomely from insurance (more on this later).
Sergey Varis, for Skelet.Org
CONTINUED: Boris Ostapyuk: The Elusive Ukrzaliznytsia Plunderer. Part 2
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