Despite being Ukraine's smallest region, Bukovyna is no less corrupt than its larger counterparts. Tax officials, who traditionally skim the cream off local businesses, are a key part of the operation. Read on to learn more about the work and livelihood of Vitaliy Shpak, head of the Main Directorate of the State Tax Service in Chernivtsi Oblast.
The career path of this "certified" manager from the urban-type settlement of Chechelniki in the Vinnytsia region—Vitaliy Shpak's only education was at the Ternopil Academy of National Economy—who unexpectedly rose to the rank of head of the regional tax office, deserves a separate story. Without any formal education, let alone in accounting or economics (a degree in management doesn't count; those are mostly found in markets and shawarma joints), Shpak found himself in the right place at the right time: the Vinnytsia region tax office. Just four years later, he became the chief tax officer of the Illinets district, and then, having become close friends with the then head of the Vinnytsia regional tax office, and later the infamous acting head of the State Fiscal Service. Miroslav Prodan, Shpak went up.
Under Prodan's protection, Shpak was appointed head of the State Tax Service in Chernivtsi Oblast in May 2016, where he established himself quite comfortably. Petro Poroshenko left, Zelenskyy took over, and Shpak remained quietly in office. However, in 2018, officers from the Prosecutor General's Office and the Security Service of Ukraine (SBU) conducted searches of the main office of the State Fiscal Service in Chernivtsi Oblast and the Chernivtsi Customs Office. Shpak and his subordinates were suspected of protecting nut export schemes that caused over 300 million hryvnias in losses to the state. His senior colleague, Prodan, also figured in this scheme, and he even temporarily left Ukraine. For a time, Shpak even had to take a backseat – from November 2019 to June 2020, he served as deputy head of the regional State Tax Service, but later regained his position. And the flows, including those related to nuts. But more on that below...
At first glance, Shpak's life seems unremarkable. His declaration is unremarkable, but it follows the traditional practice for Ukrainian officials of registering property in the names of relatives. A 102-square-meter apartment in Vinnytsia is registered to his mother. She also owns a Toyota Camry, which, according to the declaration, cost 750 hryvnias, while its showroom price at the time was over a million. A Nissan Qashqai and a Toyota Avensis are registered to his mother-in-law, Galina Petrovna Pashchenko. Considering Shpak has never been involved in business, it's difficult to explain where the career official got the money to buy this property. After all, even if you look at his official income for the last few years, the tax official earned a modest 347 hryvnias in 2019, compared to 335 hryvnias in 2018.
Overall, however, compared to his colleagues with their expensive VIP apartments and cars, Shpak appears more than modest. It appears that this unassuming demeanor of Bukovina's chief tax collector stems from his desire to lead a deliberately democratic lifestyle and thereby conceal his real financial successes in the shadow economy from his superiors.
However, Shpak's declaration reveals gaps that lead to some very interesting schemes. The fact is, according to his official declaration, the head of the regional tax office owns a residential building in the village of Verkhni Petrivtsi in the Storozhitsky District of Chernivtsi Oblast, as well as an apartment in the Vodogray residential complex at 33/392 Vorobkevycha Street in Chernivtsi. However, note that these properties are being used free of charge. The house is registered to Ivan Skipor, and the apartment to Svetlana Chukhlebova. In other words, the official doesn't pay a penny for them. Where does this charity come from, and who owns these properties?
Residential complex "Vodograi"
It turns out that Shpak was assisted in securing housing by the company "OOO Construction Company "Vodograi" (EDRPOU code 39714715). Its owner is Vasyl Zazulyak, currently the deputy mayor of Chernivtsi. It's no coincidence that Shpak is living rent-free in a luxury apartment in a new residential complex. According to law enforcement sources, this happened for a reason: Shpak refused to conduct an audit of this company, despite the tax authorities' preliminary assessment of losses to the state amounting to 8.79 million hryvnias.
Vasily Zozulyak
But the developer "Vodograi" is far from the only "cash cow" that allows Shpak to live comfortably without declaring any significant assets (to avoid exposure). For example, the head of the Chernivtsi Oblast tax office's "donors" include the farming enterprise "Elita" (EDRPOU code 31013842) with a statutory capital of 200 hryvnias, the companies "Kelmentsi Agro" (EDRPOU code 35194329), and the agricultural enterprise "Ukragro" (EDRPOU code 35964284). Their owner, Viktor Nedilsky, is quick to thank his benefactor for assisting him in registering "correct" tax invoices and keeping the agricultural firm off the list of "risky" enterprises. Moreover, such tax leniency comes at a high cost to the state. For example, in 2020, Nedilskyi's three enterprises, while selling products with VAT of over UAH 155 million, paid only about UAH 2,5 million in value-added tax to the budget. Such "savings" at state expense allow them to buy luxury Land Rover Range Rovers. The agribusinessman bought just such a vehicle, giving it the prestigious license plate AA7000MH.
It's no surprise that, in addition to receiving thank-you envelopes, Shpak regularly travels abroad with Nedilsky on vacation, and also goes skiing with him in Bukovel.
There are other companies "friendly" to Shpak. These include, for example, Madis-Trans (EDRPOU code 36751267) and Dioler Bukovyna LLC (EDRPOU code 33688879), which the tax authorities have "forgiven" a number of violations. For example, Dioler Bukovyna faces criminal charges (No. 42020260000000231) opened by the Chernivtsi Oblast Prosecutor's Office under Part 2 of Article 364 of the Criminal Code for "optimizing" tax assessments between 2016 and 2020. Now these would-be businessmen are "willingly" sponsoring the head of Bukovyna's main tax collectors.
And this is only the top of the constructed corruption-fiscal pyramid.
Within the tax service itself, Shpak also created a whole vertical of trusted individuals. For example, one of them is Tax Police Colonel Sergei Gakman. Until May 2020, he was used to "ticket" individuals involved in the smuggling of excisable goods (alcohol and tobacco products), as well as individuals who were caught in criminal cases for tax evasion. The sums involved are small ($1-2 per month), but reliable, as there are dozens of such "clients."
Hackman is on the left.
Shpak and Gakman's business relationship had long since developed into a friendship, cemented by weekly visits to the local bathhouse complex and hotel and entertainment establishment "Kozatsky Khutor."
Its owner, well-known Chernivtsi businessman Yuriy Kushnir, has been successfully minimizing his tax liabilities through Shpak for several years, providing entertainment for officials. Incidentally, Kushnir is a defendant in a case being investigated by the National Anti-Corruption Bureau of Ukraine (NABU) under Article 369 of the Criminal Code for bribery of an especially large amount to an official. As we can see, the businessman has considerable experience dealing with officials like Shpak.
Another business project of Yuriy Kushnir's is also worth mentioning: a group of companies united under the brand name of a regional network of 50 gas stations, "Euro Nafta." According to the group's recent financial statements, its tax efficiency is close to zero. Simply put, petroleum product sales, subject to VAT, for 2020 amounted to almost 170 million hryvnias, while value-added tax payments were only around 4 million. But the most interesting thing is happening with profit tax: for 2020, sales by profit for the group of companies amounted to over 160 million hryvnias, and of this amount, less than 20 hryvnias were paid into the budget.
Additionally, the Euro Nafta gas station chain has the lowest fuel and lubricants revenues in Ukraine. Law enforcement officials say this is due to the sale of petroleum products without cash registers. Meanwhile, the tax service has been completely oblivious to any violations.
We are confident that the reasons for such successful "minimization" are clearly known to the chief tax officer of the Chernivtsi region, Vitaliy Shpak.
Natalia Chernivchan
Shpak's first deputy, Natalia Chernivchan, deserves special mention. Being married, she has taken over not only Shpak (who, as a reminder, is also married) but also bribes from businesses that frequently run into legal trouble. Tax departments under her control conduct audits, uncovering violations and levying significant fines. However, to ensure that business owners do not incur any liability, they turn to Chernivchan to resolve their problems.
Apparently, with these illegally earned funds, Natalia Chernivchan's husband, Vyacheslav, bought a 2019 Volkswagen Passat, which costs no less than one million hryvnias.
Another key figure in Shpak's team is his predecessor as head of the regional tax service, now the "rank-and-file" head of the organizational and distribution department of the State Tax Service, Serhiy Lesnik. His successes could be recounted at length, but overall, his collaboration with a number of retail chains—Nyva stores, Bukovyna Trek, and others—generates profits for the tax authorities and leaves a hole in the budget, which, according to some estimates, amounted to approximately 5-7 million hryvnias in 2020 alone. It's clear that the lion's share of these funds was transferred to Shpak.
Our hero's team also includes a "nuts" specialist. Despite the problems with the SBU in 2018, the Chernivtsi Oblast tax service continues to pursue this lucrative business. Nut exports offer enormous opportunities for illegal profits. According to sources close to the "gray" businessmen involved in the nut business, Shpak's supervisor for this matter is Ruslan Anfilofiyev, head of the regional tax service's operational department. Since 2016—the transfer of the current head of the regional tax service from Vinnytsia Oblast—Anfilofiyev has served as the head of the operational department of the State Fiscal Service Main Directorate in Chernivtsi Oblast.
Shpak is on the left, Anfilofiev is on the right
Nuts are a highly profitable commodity. This is evidenced by the fact that the kickback for customs clearance and export amounts to $10-$15 per truckload (20 tons of nuts), or $0,5-$0,75 per kilogram. In 2019, the State Bureau of Investigation opened a criminal case against 11 people, including two tax police officers who worked under Anfilofiev. The latter, incidentally, defended himself by claiming he signed the documents unaware of his subordinates' "criminal plans."
Investigators discovered that tax authorities assisted businessmen in exporting large quantities of walnuts through the fictitious companies they controlled: Budeksimtorg, Buk Expo Group, Agro Expo Ua, Mervins, and Euro Business Group. The products were shipped to EU countries and the Middle East using forged shipping documents. According to preliminary estimates, this scheme resulted in a loss of 258 million hryvnias to the state budget.
Interestingly, Anfilofiev was removed from office in June 2020, but already in February of this year, the head of the State Fiscal Service of Ukraine Vadym Melnyk appointed the "nut-lover" Anfilofiev as head of the Financial Crimes Department of the State Fiscal Service Directorate in Chernivtsi Oblast. Thus, Shpak's people found themselves back in the cushy chairs.
However, the rest of the schemes have so far been carried out quietly—without leaks and, most importantly, without the knowledge of senior management. And, in principle, the underground millionaire style of Koreiko from "The Golden Calf" still allows Shpak to continue his work while remaining out of Kyiv's spotlight. After all, as the saying goes, money loves silence. But that's for now...
Oleg Yatsenyuk, for "ORD"
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