Network of companies wins hundreds of millions in municipal tenders in Dnipropetrovsk


The following is an abridged version of a story originally published in Russian by a Dnipropetrovsk-based online publication Buro UA. The original story is found here.

What started five years ago as a promising reform of municipal housing maintenance in Ukraine’s fourth biggest city, turned out to be a beginning of the rise of a shady business group.

A network of firms connected to brothers Leonid and Vladimir Dubinsky preys on the city budget of Dnipropetrovsk, getting sweet deals and endorsement of the authorities.

Introducing private contractors

In November 2011, Ivan Stupak, then powerful deputy governor of Dnipropetrovsk Oblast, announced the beginning of a reform of the municipal system of housing and utility companies. For Stupak, it was a start of his campaign: he was running to parliament in a single-constituency district in Dnipropetrovsk, supported by the ruling Party of Regions.

The idea, backed by Stupak, was to strip the duty to do the repair works from the ineffective municipal housing agencies, known as zheks, to private contractors. He promised the citizens a significant improval of the quality of services, with brigades of repairmen on duty day and night to fix any problem with water supply, electricity or drainage.

Since many were unhappy with the quality of the services provided by the zheks, the promised change was met with hope.

Soon after Stupak’s announcement, the local zheks were approached by the representatives of a new firm, called Communal Housing Maintenance Company, in Russian abbreviated as KUKZH, and demanded that the zheks signed them up as contractors for repair works. All the zheks of the district signed the deal in November 2011.

The new zheks then started transferring most of the money they collected as maintenance fee from the citizens to the contractors.

Several directors of zheks independently told Buro UA that the contractors used Stupak’s name to force them to sign up the new firm. Some also said that Oleksandr Burchak, the head of the KPZHREP of the district (a municipal company that oversees the zheks) and a former CEO of KUKZH, also forced them into the deal with his former firm.

Burchak denies it.

“Who told you that anyone was forced to sign the contracts? The only goal was to improve the quality of the services,” Burchak told Buro UA. “I don’t understand – what is a problem?”

The problem was that there was more than a good intention in the initiative.

Success in Dnipropetrovsk

Five zheks tried to rebel against the new scheme that was forced on them.

Their employees penned a joined complaint about the pressure, addressed to president, Verkhovna Rada and other top authorities. They complained about the pressure and wrote that the new contractor works without a license, the whole scheme is illegal and leads to wasting over Hr 692,000 a month.

The letter also claimed that Burchak was telling the employees of the zheks that KUKZH will win the state tender for municipal housing maintenance in January 2012 and hire them, while those who refuse to cooperate will lose their jobs.

On Nov. 30, 2011, the city council of Dnipropetrovsk assigned the maintenance of all the apartment houses in the Babushkinsky district to a new municipal company, Zhylservis, and cut the staff of the zheks. And KUKZH became the monopolist in repair services in the district.

It was the first victory of the brothers Leonid and Vladimir Dubinsky, who stood behind KUKZH. Since then, they built a small empire of businesses that prey on the city budget.

Deputy governor Stupak was only the cover-up. He was winning the votes by promising new quality of house maintenance, while Dubinskys made money.

Leonid and Vladimir Dubinsky couldn’t be reached for comments: both didn’t answer repeated phone calls.

In the time from 2011 to 2015, all the district municipal companies of Dnipropetrovsk signed up private contractors to conduct all the repairworks in the city’s 6,000 apartment buildings.

The several firms that got the lucrative deals were KUKZH, Avers, Energiya TM, Spetskommunhoz, Spetsinterservis.

Together they allocated the estimated Hr 20 million in monthly maintenance fees that the citizens pay to the municipal companies and those forward to their private contractors.

From the first glance, the contractors are independent companies. But in reality, they are connected with each other through the repeating owners, CEOs and addresses, and can be traced to Dubinsky brothers.

Connecting the network

On a deeper look, all the companies that won lucrative repairworks contracts in Dnipropetrovsk are connected to one another and associated with the Dubinsky brothers.

Avers was started in Kyiv in June 2010. Its CEO and founder is Sergiy Plastamak. The company’s address is in Dniprodzerzhynsk, a satellite city of Dnipropetrovsk. Since 2013, the company has been in the process of shutting down.

Energiya TM was also started in Kyiv in August 2011. In 2012 its address changed to 22 Shynnaya St. in Dnipropetrovsk. According to the state registry, its founder is American citizen Arkady Masarsky, and CEO – Ruslana Galay.

KUKZH is the oldest of them. It was started in October 2009 in Dniprodzerzhynsk. Its founder and CEO is Vladimir Trukshyn, a citizen of Lithuania. The firm’s address is at 68 Kalinina St. in Dnipropetrovsk.

Avers used to share an address – 82 Dzerzhinsky St. in Dniprodzerzhynsk – with the Dubinsky House, one of the few companies known to be directly founded by the brothers.

Today, the Dubinsky House is named Gropers and is located at 22 Snynna St. in Dnipropetrovsk – the same address with Energiya TM. Energiya’s former owner Kseniya Shypulina is now an owner of Gropers.

The address of Leonid Dubinsky in the owners registry – 12V/71 Guli Koroliovoy – matches the address of Svitlana Ivanets, the co-owner of Avers.

Also, a former CEO of Avers, Eduard Kovalenko, is one of the three co-founders of the charity fund Yediniy Gorod (United City) in Dniprodzerzhynsk. Other two co-founders? The Dubinsky brothers.

Spetskommunhoz, created in 2011, also used to share the address with two other companies and had the familiar names among former owners and CEOs – Shypulina and Kovalenko.

The company is owned by Tetiana Shchebetova and headed by Hennadiy Zayats, former top manager in the municipal housing companies.

The network started with KUKZH, the utility repairment company that will later take over a central district in Dnipropetrovsk. One of the former CEOs of the company, Olena Nelga, was at the same time the CEO of a municipal company Tsentralne owned by the Dniprodzerzhynsk city council.

In 2011, the council has passed the control over the municipal houses administered by Nelga’s Tsentralne to a private company. It was KUKZH. And a year later, the city council allowed KUKZH to alienate the municipal property as a debt payment.

Dniprodzerzhynsk city prosecutor’s office several times issued official letters protesting against the deals between KUKZH and the city, considered them illegal. The letters were considered at the city council meetings and dismissed by the majority of the council deputies.

Leonid Dubinsky was the deputy director of KUKZH in the end of 2011, when the firm was forced as a contractor on the local zheks. His brother Vladimir Dubinsky was a member of the company’s supervisory board, being at the same time an advisor to the mayor of Dniprodzerzhinsk Stanislav Safronov.

Many thought that KUKZH owed its rise to the backing of Safronov. There is no proof of it, but the brothers did have a warm relationship with the mayor. In June 2011, they placed a paid story in a local newspaper Kstati to congratulate Safronov on his 55th birthday. The story was signed “The Dubinsky House.”

The scheme

The companies allegedly associated with the Dubinsky brothers act in a single scheme.

First, a company gets signed up as a contractor for houses maintenance in a district, thus receiving all the money paid by the apartment owners as the maintenance fee. Previously, the payments went to the local zheks.

For the citizens it means getting less services for the same money. The maintenance fees are determined by the Cabinet of Ministers in accordance with the number of workers of a contractor, which is usually a municipal zhek. A private company normally employs less repair workers than a zhek, meaning that the clients overpay – and the private contractor profits.

And if the apartment owners neglect paying the maintenance bills, the municipal company that signed the private contractor gets in debt. Then, the contractor can legally alienate the property of the municipal company as a debt payment, as it happened in Dniprodzerzhynsk.

As of early 2015, the municipal company Zhilservys-2 owed private contractors Hr 9.59 million, out of which Hr 3.9 million was overdue.

After KUKZH got signed to do the repair works in Babushkinsky district, in 2012-2013 Energiya TM won contracts with Kirovsky and Chervonogvardiysky districts. In 2014 and 2015 the firms of the Dubinsky brothers got signed up for repairworks in three more districts – Leninsky, Samarsky and Amur-Nizhnedneprovsky. Now they controlled six out of eight districts of the city of 1 million people.

Dubinsky’s Energiya TM got a contract in Amur-Nizhnedneprovsky district right after Burchak, who was accused of helping another firm take over another district in 2011, got transferred to the municipal housing company of Amur-Nizhnedneprovsky.

Once again, a lawmaker and former deputy governor Stupak publicly endorsed the new contractor.

And once again, the municipal housing companies soon got in debt. The newly-created Zhylservys-9, operating in Amur-Nizhnedneprovsky district, got in a Hr 9.4 debt in just first six months of its work in 2014.

The situation in other districts is similar: the municipal companies owe millions to the private contractors linked to Dubinsky brothers.

Side project: Aqueduct constructing

Among other firms allegedly associated with the network are Mistokombud, founded in September 2014, and Budmaks Company, established in February 2014. Both firms were founded by the former employees of Energiya TM and, like Energiya, they have won city’s tenders for utility repairments.

From September to December of 2015, Mistokombud received over Hr 9 million in the maintenance fees, while Budmaks Company got Hr 3.5 million. Budmaks also got a Hr 11.7 million order for repairment works from the DGTS, a municipal company operating the city’s central heating systems.

But this is small comparing to the latest success of Budmaks Company. In March, it won two tenders to build aqueducts in Dnipropetrovsk Oblast by 2018. The contracts are worth Hr 104 million.

In both tenders, Budmaks had only one competitor. It was Mistokombud.

Voices of criticism

Lawmaker Vitaly Kupriy, elected in Dniprodzerzhynsk, has been publicly criticising the Dubinsky brothers’ lobby in Dnipropetrovsk since 2011.

Kupriy said that the occupation of the utility repairs market by the private companies associated with the brothers aimed to fill the pockets of the Party of Regions, which, he says, the Dubinskys were members of.

Local media in Dnipropetrovsk reported that the brothers are connected to several U.S.-registered companies, some of which have legal problems. Two companies, Truxel Properties LLC and and Samia Forest LLC, are being investigated for an alleged fraud worth of $22 million.

“All the budget money that are allocated for the development of the region ends up in the companies associated with the Dubinskys,” Kupriy said in a Facebook post in March.

Another Dnipropetrovsk lawmaker Maksym Kuryachiy claimed that the companies connected to Dubinskys illegally allocated Hr 25 million in utility payments.

Kuryachiy said in 2015 that he forwarded the information he had to Prosecutor General’s Office of Ukraine, but they never looked into it.



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