On June 25, 2024, the investigating judge of the High Anti-Corruption Court (HACC) lifted the arrest of regional gas companies, affiliated with Firtash. This was reported on June 28, and within a few hours, the Pechersk court heroically restored justice and imposed an arrest on the assets again.
Olena Duma, the head of the ARMA, was critical of the HACC jury: “The issues of further revenues to the national budget and bringing criminals to justice are under threat.” This is surprising because Olena Duma should understand the main tasks of criminal proceedings, which are not reduced to filling the national budget but consist in due process of law.
On July 3, the court decision was made public, so we decided to find out more about the motives of the investigating judge to lift the arrests of this property of Firtash.
Spoiler alert: the problem is not in the HACC decision, but in the fact that the SBI investigators recognize everything that they would like to transfer to the ARMA as “material evidence.” The Pechersk court, imposing the arrest, does not really want to understand the details, which in turn threatens the entire investigation.
Why were Firtash-affiliated regional gas companies seized?
The SBI is investigating a case of budget losses of almost UAH 1.5 billion in favor of fugitive oligarch Dmytro Firtash. What about the case?
According to the legislation, gas distribution network (GDN) operators had to pay funds to the state annually if they used public property in their work. But, as the SBI found out, in May-June 2017, the then officials of the Ministry of Energy and Coal Industry, in collusion with regional, city gas companies, concluded contracts with 37 private operators, including 26 owned by Dmytro Firtash, in which they effectively agreed to the free use of public property. In three years, the state thus suffered losses of UAH 1.488 billion.
The scheme of Firtash & Co., according to the prosecution, consisted in the fact that an official of the Ministry of Energy and Coal Industry signed separate protocols of disagreements with a part of the GDN operators. Under them, such payment for the use of public property by regional gas companies was provided only if these costs were included in the gas tariff structure. That is, the regional gas companies, in order not to fulfill the legal agreement, concluded agreements with the state and changed the whole principle of these deductions in such a way as not to pay anything to the state at all. It is clear that the tariff was not changed then, and therefore the budget was losing money. Of course, this contradicted the Law of Ukraine on the Natural Gas Market and other documents.
In May 2022, investigating judges of the Pechersk Court seized the shares of the mentioned 26 regional gas companies affiliated with Firtash due to the fact that they were recognized as material evidence in criminal proceedings and became the subject matter of a criminal offense. But no analysis was carried out at that time to determine whether the investigator recognized such actions as material evidence.
Then, unfortunately, the court confined itself to general phrases, which led to the HACC decision to lift the arrest on June 25, 2024. The Kyiv Court of Appeal, which reviewed the decisions of the Pechersk Court on this arrest, did not correct the mistakes either. We assume that this happened because making the concept of “material evidence” flexible is a common practice in the work of the Pechersk court, and the case is high-profile, so the decision to arrest must have helped to score reputation-related points for the pre-trial investigation body and greater publicity to the case itself.
What the HACC decided
Such shortcomings in the work of the prosecutor and the court did not go unnoticed. Therefore, the shareholders of 14 foreign and Ukrainian companies associated with Dmytro Firtash appealed to the Anti-Corruption Court with a motion to lift the arrest, as it had been imposed illegally. The investigating judge of the HACC analyzed the actual circumstances of the investigated criminal offense and indicated that the shares could not be material evidence in it.
The fact is that a certain object can be material evidence when it:
- was an instrument of a criminal offense;
- has retained the traces of a criminal offense;
- contains other information that can be used as evidence of the fact or circumstances established during criminal proceedings.
Thus, in the case of the Firtash’s regional gas companies, it was not established from the materials of the criminal proceedings that the arrested shares somehow met the specified criteria, and the prosecutor in court did not prove it either. Moreover, the fact that ordinary non-documentary registered shares belong to a certain person can be confirmed without their seizure.
Therefore, the judge found the prosecutor’s arguments that the crime was committed due to the management of regional gas companies by the shareholders, including the issue of their influence on the signing of the protocols of disagreements, to be invalid.
After all, 1) the alleged unlawful actions of the shareholders are not the subject matter of this criminal proceeding, 2) the prosecutor did not provide any evidence of the influence of the shareholders on the officials of the regional gas companies regarding the conclusion of protocols of disagreements both at the time of the seizure of property in 2022 and at the time of consideration of these motions.
Therefore, according to the investigating judge of the HACC, the seizure was unreasonable because the seized objects were not and could not be material evidence in the criminal proceeding.
Why was this case considered by the Anti-Corruption Court?
Everyone was surprised why the HACC heard the case under the SBI’s investigation. But the investigating judge explained in a separate ruling that, based on jurisdiction, judicial control in criminal proceedings should be carried out by the investigating judges of this court.
All because the case is being investigated due to the alleged commission of a criminal offense under Art. 364 of the Criminal Code of Ukraine (abuse of office), and the amount of damage caused to the state represented by the Ministry of Energy and Coal Industry of Ukraine is UAH 1,488,645,641.22. In addition, officials of the Ministry of Energy and Coal Industry were probably involved in its commission, which is the reason for this case to be heard by the High Anti-Corruption Court.
This also indicates that it should have been the NABU rather than the SBI investigating the case. The likely consequence of such a “mistake” is that all the evidence collected by the SBI may be declared inadmissible.
What is the problem?
The main issue is the quality of investigators’ work in high-profile cases. Everyone remembers how the SBI and some other law enforcement agencies like to conduct high-profile searches with many photos, but there are no results in the form of indictments or court verdicts.
In this case too, it was important to seize the shares of the regional gas companies affiliated with Firtash and transfer them to the ARMA, whereas the confiscation of assets is an unattainable task for them. Let me remind you of the notorious fate of the Odesa oil refinery, which at one time was very loudly “confiscated” during the time of Lutsenko’s office as the Prosecutor General.
Therefore, it is necessary to improve the quality of the investigation and put more effort into the collection of evidence, so that the decisions of the investigating judges are justified and can withstand verification by international courts. When it comes to such “hardened” figures as Dmytro Firtash, even more attention should be paid to the quality of the investigation.
In addition, in one of the materials, we mentioned that the transfer of only material evidence to the ARMA forces investigators and courts to make the definition of material evidence excessively “flexible” and transfer to the ARMA what is not actually material evidence.
In this case, the prosecutor said in the HACC hearing that the shares in the regional gas companies could be subject to special forfeiture, but again, he did not prove this at the stage of seizure.
Therefore, I wonder if the investigators of the State Bureau of Investigation and the Pechersk Court corrected their mistakes when seizing it anew. Because we will again end up reading the news about the high-profile lifting of the arrest by the investigating judges of the HACC at the motions of the owners of the shares in regional gas companies. This may lead to the fact that it will be impossible to apply special forfeiture altogether.