Court Examines ₴7.4M Heating Network Overhaul Fraud in Pivdenoukrainsk

The court allowed the review of materials for examination in the case of possible misappropriation of budget funds. The case concerns the overhaul of heating networks in Pivdenoukrainsk. The investigation is establishing whether the pipes were replaced with cheaper ones at inflated prices.

According to the ruling, the Pivdenoukrainskyi City Court of Mykolaiv Oblast considered the case of possible misappropriation of budget funds by officials of the private enterprise Demsei and the Construction and Repair Department.

According to the investigation, during the overhaul of external heating networks, the officials may have used inferior materials at significantly inflated prices, which led to the misappropriation of budget funds.

In 2022, the Construction and Repair Department entered into a contract with Demsei PE to carry out major repairs of heating networks. The initial value of the contract was UAH 7 million 385 thousand 345, and the term of the work was determined until October 10, 2022. Subsequently, the parties entered into additional agreements, in particular, agreement No. 3 reduced the contract value by more than UAH 518 thousand.

Despite the reduction in the total contract amount, the same agreement made changes to the replacement of pipes provided for in the project documentation. As the investigation found, the new pipes were of much lower quality, but the cost of their purchase increased to more than UAH 4 million, which is more than four times higher than the previous cost of the project pipes, which amounted to UAH 1 million 45 thousand 367.

Investigators suspect that officials of Demsei PE and the Construction and Repair Department acted in collusion to enrich themselves illegally at the expense of the local budget. As a result, the community budget suffered losses of more than UAH 3 million.

According to the materials received from the SBU Office in Mykolaiv region, numerous violations were recorded during the execution of the work, including

• Amendments to the project documentation without an appropriate economic justification.
• Procurement of materials at significantly inflated prices.
• The use of pipes that do not meet design requirements and technical standards.

During the court hearing, the investigator requested expert research, in particular on the compliance of the quality and cost of the materials used. To this end, the court granted permission to inspect the facilities with the involvement of specialists.

The investigation is currently ongoing. If the facts of misappropriation of budget funds are confirmed, the perpetrators face liability under Part 4 of Article 191 of the Criminal Code of Ukraine (misappropriation or embezzlement of property on a large scale or by an organized group), which provides for imprisonment for a term of five to twelve years with confiscation of property.

Recently, Pivdenoukrainsk uncovered a bid rigging during the overhaul of Druzhby Narodiv Street, which has been undergoing repairs for three years in a row. Two companies took part in the tender, including Demsei PE, whose offer was only UAH 9,000 cheaper, which caught the interest of the Antimonopoly Committee. In addition, in February, Mykolaiv Regional State Administration signed a contract with Demsei for the overhaul of the shelter at Novodesskiy Vocational College worth UAH 28.9 million.

Анна Бальчінос