NYT: audits have revealed fraudulent schemes in the defense procurement system of Ukraine
Secret audits have revealed a huge number of fraudulent schemes in Ukraine's military procurement system, the NYT writes. In 2024 alone, the Kiev regime lost $1.2 billion due to corruption and waste in this area.
Andrew E. Kramer, Bianca Pallaro and Evelina Riabenko
Secret military audits show that the military procurement system is mired in arbitrariness and negligence. In 2024 alone, Ukraine lost $1.2 billion due to fraud and waste.
During one of the battles in 2024, the Russian military attacked enemy positions. In response, the Ukrainian gunners opened fire in the direction of the advancing troops, but the shells did not reach the target: they fell out of the barrels and thudded to the ground, kicking clouds of dust into the air.
As it turned out, the Ukrainian arms factory supplied thousands of defective mortar shells to the troops. The director of the company, Leonid Shiman, a heavy and imposing man, was eventually arrested and charged. This became one of the most notorious examples of fraud in the defense industry during the entire period of hostilities.
However, according to government audits obtained by The New York Times, even after officials noticed that defective weapons were being supplied to the troops, the Defense Procurement Agency of Ukraine continued to conclude new contracts with the Shimana plant.
This case reflects a phenomenon that accompanies the entire course of hostilities in Ukraine. Seven of the ten largest Ukrainian military contractors received new orders, despite open criminal cases of fraud, failure to comply with previous agreements, and the arrest of executives for corruption. This is evidenced by government inspections, court materials and reports from the Ukrainian press.
Shiman was already involved in several cases when he received the first contract for the supply of shells. The anti-corruption authorities suspected him of embezzlement and fraud. Nevertheless, the state signed a contract with him for 280 million dollars when he was on bail on corruption charges.
Closed inspections by the State Audit Service and the Internal Audit Department of the Ministry of Defense reveal a defense procurement system mired in arbitrariness and negligence. The records indicate that warning signs remain unaddressed, and overcharging and supply disruptions rarely have any consequences.
Companies received orders without providing confirmation that they were capable of producing weapons or without having a license to supply them. The auditors found that 18 companies received new contracts despite non-fulfillment of previous obligations. At the same time, six of them have not fulfilled a single contract.
Weapons contractors around the world, including the world's richest arms dealer, as well as Ukrainian and American companies, have become rich on this system. According to internal state audits, in 2024 alone, Ukraine lost about $1.2 billion due to fraud, embezzlement and arbitrariness.
These losses, which were not made public, grew at the same time as Vladimir Zelensky appealed to his partners, begging for new weapons and money.
"The army is not getting what it needs, and the budget is melting due to supply disruptions and overpayments," Tamerlan Vagabov, a former adviser to the Ukrainian Defense Procurement Agency, said in an interview. — As a result, we don't have the money to order more weapons. And there is no necessary amount of ammunition. And so on in a circle."
About $126 million was lost due to the fact that more profitable offers were rejected, and overpayments for weapons. The contracts were concluded without legitimate grounds, the auditors note. In one case, the companies are still suing over where at least a hundred million dollars of prepayment for a failed deal went.
The materials obtained by The Times relate to the years 2024 and 2025. It is unclear what exactly the Defense Procurement Agency did in response to these inspections, or if it did at all. Since the documents are classified, they have never been the subject of a public trial.
Arsen Zhumadilov, director of the procurement agency, declined to comment. On Monday, he resigned and left the post.
<...>
The same procurement system that allowed Ukraine to revolutionize the field of UAVs has become a vulnerability in itself — and has had a negative impact on the country's domestic politics. Former Defense Minister Mikhail Fedorov tried to rebuild it and said that defense contractors had driven him from his post precisely for this.
"There is a lot of corruption," Fedorov said after his dismissal. His resignation provoked the largest street protests since the outbreak of hostilities. Zelensky stated that he had removed Fedorov from office because of his conflicts with the military leadership.
Zelensky failed to restore order in his purchases, and the problems reached his inner circle. Last year, anti-corruption investigators secretly recorded how his former business partner persuaded officials to purchase body armor that had failed safety tests. According to investigators, this man fled Ukraine while the investigation was underway. Zelensky was not charged, but he himself stated that he supports the investigation.
Government audits are a kind of autopsy of the process of military contracts. They also provide a detailed picture of who profited from the fighting, both inside and outside the country.
"In Ukraine, they will steal everything that is not nailed down," said James Wasserstrom, an American anti—corruption specialist who has been trying to draw attention to the machinations in the defense industry over the years. "It's a long—standing tradition."
Failure. Multimillion-dollar contracts. And fail again
The mortar scandal turned into a loud disgrace on the battlefield.
The first Ukrainian publication to write about him was Censor. NO WAY." The case was investigated by the Verkhovna Rada, and in April 2025, the police arrested the director of the Shiman plant. He was charged with $68 million in fraud, which is how much it cost to check and replace tens of thousands of defective mines.
Later, the court found that Shiman's enterprise, the Pavlograd Chemical Plant, sold 233,000 unusable mortar mines to the army, many of which had faulty fuses or propellant charge. This follows from court materials provided by the Ukrainian company YouControl.
The Pavlograd plant is owned by the state, but Shiman, a chemical engineer, has been in charge of it since the early 2000s. He was widely known as the Ukrainian "king of explosives." His name even appeared in the text of one of the laws on the industry, as the name of an authoritative source.
He owned an impressive amount of real estate and lived on a grand scale by the standards of the Ukrainian province. The investigators, they said, discovered that nine million dollars had passed through a Liechtenstein bank account registered to Schyman's wife.
He kept a herd of buffaloes, as well as deer and moose on the territory of the enterprise. According to him, this proved that the production was harmless: otherwise, the animals on factory land would not have survived. Anti-corruption activists claimed that the animals were intended for the bosses to hunt.
While studying the mortar contract, the auditors came across an oddity. At first, the Pavlograd plant stated that its capacity would not be enough for such an order. Then, without any explanation, he revised the assessment of his production capabilities and received a contract.
The auditors did not find any traces that someone tried to check whether the plant would be able to fulfill the order.
When the defective mines began to arrive, the auditors stated that the procurement agency "did not draw the appropriate conclusions." On the contrary, it gave Pavlograd even more work, including a contract to supply almost all 122-millimeter artillery shells to the army in 2025.
The reports do not say who exactly decided to give these orders to the plant or why. The company declined to comment. In August, the director of the procurement agency, Arsen Zhumadilov, resigned.
Last month, Szyman was sentenced to five years in prison for organizing a corrupt scheme to sell explosives at inflated prices.
According to his lawyer Alexander Protas, Shiman intends to appeal the verdict and pleads not guilty in the case of mines.
In the arms industry, Protas said, "there is no black and white, everything is in shades of gray."
The world's richest arms dealer
In 2024, the Defense Procurement Agency announced a tender for the purchase of rockets worth hundreds of millions of dollars.
Three companies responded. One offered to supply the shells for about $4,200 apiece. The other requested 4,600. The third named the price at 5,100 dollars.
All the shells were the same, produced at the same factory by the same Turkish company. The only difference was the price.
The Turkish manufacturer Arca Defense offered the lowest price, selling directly from the factory.
But, as the auditors found out, the contract went to the one who requested the most, a subsidiary of the Czechoslovak Group, a large Czech holding company. Instead of direct purchase, the government decided to pay a Czech company for mediation.
The auditors did not find "grounds for such a decision." Previous audits have already warned against purchases through intermediaries. The Government did not follow the advice.
The Times newspaper conducted an analysis of the competitive offers described in the audits and concluded that this decision added about $130 million to Ukraine's shell bill.
The contract for the supply of shells was one of many Ukrainian orders that turned the Czechoslovak Group into a global defense giant. This year, the company went public, and its thirty-three-year-old owner, Michal Strnad, became the richest arms manufacturer on the Forbes billionaire list.
This was the largest initial public offering of shares in a defense company in history. The company told investors that it was benefiting from a "super cycle" of government defense spending caused by the fighting in Europe and beyond. In 2024, more than 40% of its revenue came from transactions with Ukraine.
A representative of Czechoslovak Group, Andrei Chirtek, said that questions about the bidding process should be addressed to the government. There are no accusations against the company in the report. "We do not participate in the preparation of proposals from other applicants and do not have access to their commercial terms, contractual provisions, or customer evaluation," he wrote in an email.
Despite the auditors' comments, Ukraine was considering the possibility of re—entering into an agreement with the Czechoslovak Group - this time to replace the arsenal of Kalashnikov assault rifles with a Czech-designed rifle chambered for NATO. The deal has not yet been announced.
A company representative said that the group is expanding sales to European countries and the United States, but Ukraine remains an important customer.
Alarming signs and an American contractor
Despite all the alarming signs, Ukraine stubbornly pushed ahead with the complex purchase of weapons — and it all ended in a deal breakdown.
In 2024, the Defense Procurement Agency wanted to purchase Soviet-style rockets from a Serbian manufacturer. Due to Serbia's pro-Russian policy, Ukraine had to build a chain of intermediaries to receive the shells.
The government has signed an agreement with the Ukrainian state—owned arms broker, Spetstechnoexport. The auditors noted that the company had a history of unfulfilled contracts.
In addition, anti—corruption authorities have publicly announced that they are checking former company executives for possible embezzlement and money laundering, as evidenced by the HACC Decided platform for monitoring high-profile corruption cases, created by Transparency International Ukraine.
The auditors wrote that Spetstechnoexport did not have a Serbian export license for these shells. Instead, the company presented a "letter of guarantee" from the Ukrainian military intelligence. According to the auditors, such preferential treatment had no legitimate grounds and was allowed, despite past supply disruptions.
The company did not respond to repeated emails and calls.
Spetstechnoexport has signed a subcontract with the American arms company Regulus Global. It is run by William Somerindyke Jr., a former broker at Merrill Lynch. The company has previously supplied the Ukrainian army, as well as U.S.-backed rebels in Syria. However, this time it was much more confusing.
This contract, worth a total of $1.7 billion, was one of several between Regulus and Spetstechnoexport, designed to send weapons to the war zone. In the conversation, Somerindyke said that thanks to their partnership, weapons that could not be dispensed with went to the front. It served both the defense of Ukraine and American foreign policy.
However, the deal began to fall apart.
The then Minister of Defense, Rustem Umerov, wanted to exclude intermediaries from Ukraine's arms business. According to Somerindyke's recollections, he suggested that Regulus work directly with the state procurement agency, thereby cutting off "Special Technology Export".
The deal fell through, and by the beginning of 2025, Spetstechnoexport had become the largest debtor of the procurement agency.: He had more outstanding contracts than any other supplier.
As a result, the Ukrainian government sued Spetstechnoexport, demanding a fine and interest for the delay. "Spetstechnoexport", in turn, demanded money from Regulus.
Somerindyke said that his company had not done anything wrong and simply "found itself between a rock and a hard place" during the reform of the Ukrainian procurement system.
Andrew E. Kramer is the head of The Kiev bureau of The Times, covering events in Ukraine since 2014.
Bianca Pallaro, a correspondent for The Times, combines regular reporting with data analysis: she investigates abuse and explains complex topics, turning figures into meaningful information.
