NABU, SAPO expose massive army food procurement scheme

NABU and SAPO have uncovered a large-scale embezzlement scheme involving the procurement of food for the Armed Forces of Ukraine by the Ministry of Defense during russia’s full-scale invasion.

 The suspects are:

• the former head of a department within the Ministry of Defense of Ukraine;
• the owner of affiliated supplier companies;
• two executives of supplier companies;
• an individual.

The actions of the suspects fall under Part 5 Art. 191 (misappropriation), Part 2 of Art. 15, Part 5 of Art. 191 (attempted misappropriation), Part 3 of Art. 209 (money laundering) of the Criminal Code of Ukraine.

According to the investigation, in 2022-2023, the army food supply involved the procurement of the so-called food kits. This allowed for the ordering from an approved catalog of 409 products. However, essential items such as vegetables, cereals, meat, and water made up only 10% of the list. The rest, including spices, gelatin, and berries, were rarely or never ordered.

The price of the food kits was calculated based on the average cost of all items in the catalog. This system allowed suppliers to manipulate prices—artificially inflating the cost of high-demand products while lowering prices for unpopular or seasonal products (such as cherries or apricots in winter). At first glance, no were no violations, as the total price of the kit remained unchanged. However, potatoes, supplied in thousands of tons, cost a fortune, while seasonal berries and fruits, which were rarely ordered, were priced at mere pennies.

As a result of these fraudulent schemes, between August and December 2022, two supply companies, both controlled by the same owner, illegally generated over UAH 733 million in excess profits, as confirmed by a comprehensive forensic merchandising and economic examination.

A part of these funds was later siphoned off under the guise of dividend payments and financial assistance to affiliated companies. This money, in particular, was allegedly used by the company owner to purchase hotels in Croatia and other real estate properties.

A senior official at the Ukrainian Ministry of Defense facilitated the scheme by "overlooking" price anomalies in the procurement catalog while signing contracts.

Following the launch of the pre-trial investigation in January 2023 and media reports highlighting the procurement of eggs at 17 UAH apiece, the scheme participants lowered the prices of 11 key food products. This prevented the embezzlement of an additional UAH 788 million in state funds.

Moreover, after NABU and SAPO proposed measures to eliminate the loopholes enabling the scheme, the Ministry of Defense implemented changes to the procurement process and certain pilot projects.

The investigation is ongoing, with NABU and SAPO working to identify other individuals involved in the scheme.

The crime was uncovered with the assistance of the State Audit Service of Ukraine.