You can't defeat the tender mafia, but you can lead it. Have you heard that Ukrgazvydobuvannya CEO Oleh Prokhorenko's salary is a MILLION UAH per month?! The highest in Ukraine. And why all this? So that a Harvard graduate can resist the temptation to buy equipment at inflated prices. But everyone steals in their own way. Prokhorenko buys consultants' services: expensive and plentiful. He conducts audits. He optimizes. He knows how to buy high-tech equipment from a two-person firm. In short, he's a typical new-wave "reformer" who boldly blurs the line between layman and professional.
Reformers by pull
The emergence of all sorts of exotic characters at the largest state-owned companies, such as rocker Wojciech Balczun at Ukrzaliznytsia or McKinsey investment consultant Oleh Prokhorenko (nicknamed "Donut" in business and club circles) at PJSC Ukrgazvydobuvannya, was meant to signal the burning of bridges with the shameful Soviet past and the transition to a new European level of development.
But everything new, as the saying goes, is well-forgotten old. Balchun may have had no previous experience with his current place of work. But Oleg Prokhorenko was recruited to Naftogaz back under Yuriy Boyko—at the height of the anti-people regime.
At that time, in 2011, the Ministry of Energy and Coal Industry planned an IPO for Naftogaz of Ukraine. They needed a lead manager for the initial public offering—an international entity. McKinsey & Company, where Prokhorenko was a partner, was chosen as the consultant. As a consultant for McKinsey & Company, he hadn't achieved success with the IPO, but he quickly became acquainted with Naftogaz's management. And at the right moment, they remembered him.
Prokhorenko's backers had to work hard to secure the position of head of Ukrgazvydobuvannya. First, they ousted Serhiy Kostyuk, who had been appointed just a few months earlier. Then, they pushed through a decision to abolish public competitions for candidates to head state-owned fuel and energy companies, as Prokhorenko, an investment consultant, had no chance of qualifying due to a lack of the necessary experience.
He had barely settled into his new role when a scandal erupted: Alexey Tamrazov, disgruntled with his successors, revealed the size of "Ponchik's" salary: 1 million 3 thousand hryvnias per month. This included 322 thousand hryvnias as a salary, 161 thousand as a bonus for work intensity, 440 thousand as a performance bonus, 48 thousand as a bonus for access to state secrets, and other benefits.
The backlash was so strong that Prokhorenko wrote an entire blog explaining why his salary (before bonuses) of 398 hryvnias isn't high. He forgot, however, to explain why his deputies can't earn less than 500 hryvnias per month, and his secretary can earn 44 hryvnias (including all bonuses).
And what's his main argument? Aside from all the blah-blah-blah about the loan our hero took out to study at Harvard University Kennedy School of Government from 2005 to 2007, and now the entire country has to pay off his debts, he insists that, thanks to his honesty and integrity, he saves hundreds of millions of hryvnias, almost billions, on tenders. And thus, he fully covers his expenses.
Is that true?! Oh, no! But first, a small digression.
Launch Bilyaga!
Roman Bilyaga, the director of procurement at Naftogaz Ukrainy, is considered the key figure in tender procurement matters. Unlike Prokhorenko, he didn't graduate from Harvard, but after studying at the Vinnytsia Polytechnic, he gained invaluable practical experience in procurement and logistics on the tender committees of TNK and Rosneft. It's a well-known place, especially for Russian law enforcement agencies. Only crystal-clear people work there. And they're all liberals. They spend their days and nights on Bolotnaya Square. They don't take kickbacks. They wouldn't even hear of such a thing.
Bilyaga, judging by the articles incriminating him and the correspondence posted online, is "Ponchik's" senior guardian, who, thanks to his Harvard education, only pronounces the phrase "coiled tubing units" twice. To coordinate with Bilyaga, a young man from Gaztron-Ukraine, Sergei Fedorenko, was appointed Prokhorenko's deputy. He's a conscientious fellow. He tells everyone he was born in a remote village in Polesia, near the border with Belarus. The next time the prosecutor's office comes, he can crawl over to "Batka" and hide in the bushes.
Together, they hybridized Prozorro's electronic bidding with two-stage bidding and analytical support, using dynamics and images to show how the previous procurement differs from the new, reformed system.
In reality, these difficult-to-pronounce terms and diagrams conceal complex technical work to promote their own. Fedorenko's subordinates, under Bilyaga's dictation and with Prokhorenko's blessing, draw up product specifications and tender requirements in such a way that only pre-selected suppliers can deliver.
At the same time, they “put the brakes” on the current legislation and actually put their internal departmental documents, which they themselves draw up, above it. Moreover, each tender participant is forced to sign a Declaration “On the acceptance of the minds of conducting procurement procedures”, where he must sign an agreement to play by the imposed rules of Bilyaga and Fedorenko, and not by the laws of Ukraine: “I confirm that you are aware of the rules of the procurement procedure established by PJSC “Ukrgazvydobuvannya”, as well as I am fully aware that the designated procurement procedures are carried out strictly in accordance with the internal procedure for the procurement of goods, work and services approved by PJSC “Ukrgazvydobuvannya”.
Bilyaga himself denies all of this in an interview, as well as the authenticity of the correspondence in which he discusses Ukrgazvydobuvannya tenders with managers. But facts are stubborn things.
So, instead of purchasing the equipment directly from the manufacturer, the winners were chosen as intermediaries: SCEUROGASSYSTEMSS.RL (Romania, reportedly affiliated with the fugitive Onishchenko's companies), PKInvest SRO (Czech Republic), and Internet Systems LLC (Ukraine). And in the latter case, the question arises: after all, they're purchasing not just wires, but high-tech equipment. And what has the IT sector come to when these companies are buying equipment that's completely irrelevant to their core business?
The last structure is clear: a co-founder from Chernihiv, a fellow countryman of Oleg Prokhorenko, is photographed with a certain Oksana Prokhorenko and his classmates from School No. 1. And it doesn't matter that Internet Systems LLC officially employs two people—the owner and the director—and that they don't manufacture any gas-powered compressor units. Childhood friends and fellow countrymen need help.
But foreign companies—that sounds impressive. Moreover, in his interview, Bilyaga named them as reputable Western contractors: SC EURO GAS SYSTEM SRL (Romania), ThyssenKruppMannex (Germany), Denimexinc USA (USA), KATT Gmbh (Germany), China Petroleum Technology & Development Corporation Co., Fidmash (Belarus), Dost Petrol (Turkey), ELBUD (Poland), and many others.
But we haven't seen the Americans we've announced yet. There's a company called General Electric, which failed to qualify. It's hard to understand how the world's number one company can fail to qualify for tenders held by Ukrgazvydobuvannya, while something as obscure as Internet Systems can. We're not buying paper and wire, after all, but complex, high-tech equipment that must operate reliably for thirty years. And the criteria by which such companies are selected, while General Electric is not, raise serious doubts. Is this a betrayal or a victory?
Let's take another of their "victories": purchasing hydraulic fracturing services from yet another Romanian. They're trumpeting from the rooftops that they pulled it off incredibly cheaply. However, price isn't the only measure of quality. Efficiency is also a factor. Who should you buy such a service from? The company that invented it, or those willing to work cheaply at the expense of quality? Interestingly, Schlumberger, the company that actually invented the technology, refused to participate in the Ukrgazvydobuvannya tender, considering it a "reproductive online game." So who ultimately benefited? Ukraine, which supposedly "saved" money by purchasing a cheap and, as it should be, low-quality service from a low-cost carrier? Or someone else?
In Soviet times, such actions were called "sabotage." It's unacceptable to purchase high-tech services or equipment at the expense of quality, as the inevitable losses will eventually have to be compensated. So is this a "betrayal" or a "victory"?
Suppliers from Romania and the Czech Republic are winning tenders. It turns out, however, that they belong to an association of small businesses. They've been gearing up for supplies to nuclear power plants for a while now. I don't know about the Romanians, but the Czech company that won the last tender, PK INVEST sro, is a one-man show. His name is Peter Klokner. He graduated from university in Kharkiv in the late 80s. Knowing Russian, he founded a company that brokered supplies of various equipment to CIS countries, and has been doing so ever since. He doesn't manufacture anything. The website was last updated in 2013—for the St. Petersburg Energy Forum. Overall, he's a fantastic contractor. Power!
Our dear advisors
While Bilyaga and his henchman Fedorenko are busy with equipment procurement, "Ponchik" personally oversees consulting procurement. He's an expert in this field, knows people and companies, and can compile invoice analysis or write off hundreds of thousands of hryvnias for the redistribution of job responsibilities.
Therefore, three months after his arrival at Ukrgazvydobuvannya, several tenders for consulting services were announced. The most interesting was for management consulting (technical audit) worth UAH 37 million, which went to the American company PetroSkills, represented, as it turned out, by Russian citizen Iskander Diyashev.
In his interview, Prokhorenko insisted that no contract had been signed. "I did meet with PetroSkills. We did consider them as the technical auditor. But no contract was signed. We agreed with Deloitte and the US State Department that they would engage technical consultants under their contract. If it were possible to do this work with donor funds, I would certainly choose that option."
— Do you know Iskander Diyashev, who represented this company?
"I met him at the Adam Smith energy conference in early March. He had no influence on the decision-making process..." he said.
However, Newfolk analyst Gennady Kobal wrote on Facebook that a contract existed, and the winner was determined... without a tender, back in the summer—immediately after Oleh Prokhorenko took over the management of Ukrgazvydobuvannya. To this end, Ukrgazvydobuvannya's top managers amended the "Procedure for the Procurement of Goods, Works, and Services" well in advance.
Quote:
“My previous post about Ukrgazvydobuvannya and 37 million UAH. banned. I think it’s unfair to deprive people of the ability of the nobility to work in a sovereign company. That's why everything is new - let's steal, let's go! This time I will be as politically correct as possible, I think #olegofriends deserve it ;-)
I am talking about purchasing services from “technical audit and technical support”. Today new facts and details have emerged. Recently, Ukrgazvydobuvannya and the American PetroSkills signed an agreement for a “technical audit” for UAH 37 million, at a price of UAH 4 million. More expensive than planned earlier. The investigation showed that money is being taken by all the same individuals with whom the Ukrgazvydobuvannya organization organized the conference in the spring of 2015.
The first attempt to conduct an audit was back in September 2015, and in the next month the work of the new servicing company under the supervision of Oleg Prokhorenok. The plan is simple and stupid, “Ukrgazvydobuvannya” is planning to contract services from “technical audit”, technical requirements (qualifications) are registered in such a way that only one can approach it company.
As it became clear later, the technical department was prepared by Iskander Diyashev, a long-time friend of Kerivnyk from Ukrgazvidobuvannya. In the sickle, Mr. Diyashev arrived in Ukraine, visited Ukrgazvidobuvanna, lit a samovar, drank tea in a saucer, grizzly bagels, and the very next day the company began preparing for the tender for the purchase of services "technical audit".
Formally, when the competition was announced, it was understood that Goragovo Energy Engineering Corporation (an American company represented by Iskander Diyashev) would be united in the tender, then after two tests it would be possible to hold a tender with one participant. However, another company LLC “Triskel Energy Ukraine” showed up unexpectedly for the auction and confused the cards with woe to the merchants from “Ukrgazvidobuvannya”. Although Triskel Energy’s application was rejected as one that did not meet the qualification requirements, the auction had to be cancelled. Focus on the tender with one participant without going into detail.
Here you also need to add a few important points. Judging by the published correspondence, the Ukrgazvidobuvannya not only knew that a revolution was taking place, but also directly took part in it. Thus, the deputy of the head of the board, Oleksandr Klimov, wrote in a letter to the first defender of the head of the board of Ukrgazvidobuvannya, Oleksandr Romanyuk, that Iskander Diyashev “is immediately completing his (technical department) work on assignments and unique skills of team members.” Moreover, among the candidates nominated by Goragovo Energy as participants in the project was Oleksandr Klimov, who also worked at Ukrgazvidobuvannya. For example, Goragovo Energy Engineering Corporation, a small company from the USA, represents in Ukraine the citizen of Russia Iskander Diyashev.
Kickbacks and a backup airfield
And there are countless such stories at Ukrgazvydobuvannya. Why does Prokhorenko, with a salary of UAH 1 million, need consultants to reform the procurement system, manage performance, create a project office, and so on? Why does he tell everyone the US State Department is funding this, when in reality, no one is providing anything?
It's very simple—consulting services are very easy to steal from. A consultation isn't like a compressor; you can't touch it. But it costs a lot of money. Some of it mysteriously disappears.
The fact that Prokhorenko had no experience in equipment procurement does not protect the country or taxpayers from unjustified expenses. The exact figures will, of course, be revealed by the investigation. The prosecutor's office, the SBU, and so on practically live at Ukrgazvydobuvannya. There are searches and inspections. There were previously 11 criminal cases, but their number is growing every day, so there may be more.
Meanwhile, "Donut" regularly speaks to journalists and explains that all investigative actions concern his predecessors. Some property is being seized in the Onishchenko case. They're looking for traces of criminal activity. But none of this has anything to do with the current reformist leadership.
Bullshit! The standard American tactic is to keep a toothy smile on your face no matter what. Prokhorenko already has plenty of trouble, and there's more to come. What do you expect? He's got to earn his big salary.
Understanding this, our hero, as an experienced financial consultant, is likely building a backup plan outside the country. For example, in Lithuania. There, Elena Kobets, the legal director of PJSC Ukrgazvydobuvannya, owns a company called "Saulės grūdai," registered in a residential area of Vilnius. It has already been covered in the media, and we found it in the Lithuanian business directory. This company's main activity is servicing and "optimizing" clients' taxes. That's right.
Interestingly, Olena Kobets was implicated alongside Prokhorenko in a scandal involving unpaid bills for accommodation at the Chervona Ruta government-owned boarding house in Kozyn. Espresso TV reported that the highest-paid person in Ukraine had skimped on paying the bill for a suite for 61 days. Instead of UAH 133,285, he paid only UAH 2304. The report stated that "hotel employees claim Prokhorenko wasn't staying alone in the room, but with Olena Kobets, director of the legal department at Ukrgazvydobuvannya."
As inquisitive citizens, we certainly don't care who the married head of a state-owned company spends the night with. But as taxpayers, we'd like to be sure that the cozy atmosphere of the boarding house wasn't the setting for the fate of government funds stolen from tenders and their transfer to foreign accounts. Just in case, we booked a ticket to Vilnius.
To be continued, perhaps
Sergey Nikolaenko
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