Belgian dredging giant involved In #Ukraine corruption scandal

The well-known European Jan De Nul Group has become the centre of a corruption scandal in Ukraine. In November 2016 the Ukrainian government was forced to cancel a major tender for dredging works in the sea port of Yuzhny to the amount of nearly $50 million because of an offshore scandal which caused an enormous outcry in Ukrainian press and among industry experts, writes Gary Cartwright.

As it turned out, the well-known European company Jan De Nul Group - through its Ukrainian subsidiary Jan De Nul Ukraine - was involved in that fraud attempt.  It is no secret that the former Soviet Union is still rife with corruption, and Ukraine is no exception. But the fact that the corruption scandal hit such a famous western business group is puzzling. A tender to carry out dredging works in the biggest Ukrainian port was announced at the beginning of 2016. Several domestic and international companies filed applications, including Jan De Nul Ukraine. However, during the tendering process, a subsidiary of the Belgian giant suddenly changed ownership and sold its controlling stake to two Cypriot companies - Medіt Consortium Drezhіng lіmіted and Havoret Іnvestments lіmited.

The parent of one of these companies is Tyron Business Holding Corp, registered in the British Virgin Islands, making it almost impossible to identify the ultimate beneficiaries of Jan De Nul Ukraine. This situation is completely contrary to Ukrainian legislation.

Given the fact that there is war in the east of the Ukraine, all state projects need to be fully transparent to minimise the risk of misusing budgets for the financing of terrorism and separatism. However, in spite of the prohibition of national legislation to take part in public tenders for companies with unknown owners, Jan De Nul Ukraine passed qualification and even won the contract, leaving thus a shadow on the reputation of a clean European business.

Igor Tynynyka, the Ukrainian head of another European dredging giant, the Dutch Van Ord Group stated that the offer of Jan De Nul Ukraine contained the most unfavorable conditions offered to the Ukrainian government .

“The tender was pre-planned. Jan De Nul Ukraine purposefully dragged it. There were three proposals which passed qualification and the customer - Ukrainian Sea Ports Administration - selected the most expensive one. We believe that the bidding procedure was not transparent, and the regulations of the anti-corruption legislation area were violated. There have been proposals cheaper at at least $ 4 million. Other companies offered to implement dredging within 6 months while Jan De Nul Ukraine proposed a period of 29 months," Tynynyka said.

Not surprisingly, the tender has caused a strong suspicion of corruption, in a country which needs to be seen to be addressing such issues in its aspiration to come ever closer to EU standards, with question marks over government circles.

According to famous journalist and member of Ukrainian Parliament Serhiy Leshchenko, the company Jan De Nul Ukraine is associated through offshore trails with another Ukrainian MP Sergey Faermark. Leschchenko considers this as the reason for the transfer of a controlling stake in the company and the lack of clarity over who are the ultimate beneficiaries.  According to Igor Tynynyka, many experts in the field of dredging wonder how, as a global brand, Jan De Nul could allow its subsidiary in Ukraine to commit such a questionable corporate restructuring.

“Jan De Nul - this is a great reputable European company. But its Ukrainian affiliate actually has only two people on a payroll. The director was replaced actually after tender qualification in mid-July. Moreover, the new director is a former assistant to Sergey Faermark," Tanynyka said.

Following a decision of the Anti-monopoly Committee of Ukraine on 3 November the outrageous tender was canceled. But how has a respected, fair and transparent European business allowed itself to be drawn into questionable schemes of Ukrainian corruption?

This is a question that needs to be answered by Jan De Nul executives themselves. It is up to them whether to withdraw the company's representatives from Ukraine, or to force them to give up offshore schemes and to disclose the ultimate beneficial owners.

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