Small privatization experience on the example of Vinnytsia Institute of Land Management: inconsistencies and a winner with a “flavor”

In Ukraine, the process of reducing the state’s share in the economy has been going on for years. Enterprises that are difficult to compete with private business due to their state ownership are being privatized. This is what happened to the Vinnytsia Institute of Land Management. And it would seem that everything is fine, and the institution should get a second wind – however, there are a number of questions both about the privatization process and what happens after it. UNN tried to understand the situation. 

On February 23, 2024, the State Enterprise “Vinnytsia Scientific Research and Design Institute of Land Management” officially became private property. 

At the time of privatization, the institute was headed by Yaroslav Yaroslavsky, who is currently managing the process of termination of the legal entity, and also heads Derzhzembank LLC (founded by the State Property Fund of Ukraine). We have already written about this “Derzhzembank”, as well as about the strange circumstances of the appearance of Yaroslavsky’s wife Svitlana’s company with the same name as the privatized institute. We will briefly return to this topic in this publication. 

But now a little history.

In December 2022, the State Property Fund included the single property complex (SPC) of the Vinnytsia Institute of Land Management in the list of small privatization objects. 

The single property complex of the Institute of Land Management included:

• 1.5 hectares of land and 6.7 thousand m² – premises in Vinnytsia, Khmelnytskyi and Chernivtsi regions;

• a fleet of 21 cars;

• office equipment and special equipment, software;

• a recreation center in the village of Sataniv, Khmelnytskyi region.

In October 2023, the State Property Fund began to exercise the powers of the owner of the state institute. Already in December 2023, the Vinnytsia branch of the State Property Fund decided to privatize the SPC of the institute. And in February 24 of that year, this complex was sold at auction to IVAI DEVELOPMENT GROUP LLC for more than UAH 54.6 million. In April of the same year, an agreement was signed with this company to transfer the property. 

And everything seems to be going smoothly. But if you delve into the history of the process, some inconsistencies arise, which in turn raise questions. 

Profitable/loss-making instituteYaroslav Yaroslavsky headed the institute in 2016. And in 2018, the institute came into the view of the Antimonopoly Committee. The administrative board of the Vinnytsia Regional Territorial Office of the AMCU stated in its decision that the institute, together with two other business entities, coordinated its actions in the land management services market in the Vinnytsia region. 

The decision also indicated that the institute has a 10.9% share in this market and, as follows from the context of the decision, was the largest business entity in the field of land management in the region. Industry leader! 

Maybe something changed by the time the company was transferred for privatization? If you read Yaroslavsky’s interview, which he gave after the auction for the sale of the SPC, the institute continued to work successfully. 

As the director of the institute explained at the time, the decision to change the form of ownership was not due to financial or managerial difficulties – the state put the institute up for privatization in order to optimize financing and increase its competitiveness in the market.

Our team was and remains a reliable partner. We have certificates and licenses that allow us to perform work throughout Ukraine. In addition to our region, we work in Kyiv, Odesa, Rivne, Khmelnytskyi, and Chernivtsi regions. We have long-term projects. We continue to work on them

It was also mentioned that the Vinnytsia Institute actually pulled similar, but loss-making structures in Khmelnytskyi and Chernivtsi (which became branches of the institute in Vinnytsia a few years earlier). 

“We just shared our experience and methods of work with our neighbors,” – said Yaroslavsky, answering a question about how they managed to save these subsidiary structures.  

But here we come to the inconsistency. 

The description of the lot at the auction for the sale of the institute states that as of the end of September 2023, accounts payable amounted to more than UAH 5.4 million (including UAH 837 thousand of salary debts). And among the terms of sale, the following is indicated: repayment of salary debts, to the budget in the amount that will be on the date of transfer to the buyer of ownership of the SPC of the State Enterprise “Vinnytsia Scientific Research and Design Institute of Land Management”. 

So, was the institute really successful at the time of sale? If so, where did the million-dollar debt come from? And wage arrears, and such that they will accumulate in the future? 

So, whose LLC is it?”We are still a state enterprise today. When we enter the reorganization, everything will remain as it was. But now it will be “LLC”. The name remains, the rights and obligations remain. (…) The whole process does not stop, only the form of ownership will change,” – explained Yaroslav Yaroslavsky in an interview after the completion of the auction for the sale of the institute. 

Yaroslavsky said this in April 2024, and already in June his wife Svitlana Yaroslavska became a co-founder of Vinnytsia Scientific Research and Design Institute of Land Management LLC, registered at the same address in Vinnytsia as the state institute. 

Has the form of ownership changed from state to “Yaroslavsky’s property”? 

And where is the winner?It is interesting that in the structure of the LLC, which is managed by Svitlana Yaroslavska, there is no trace of the winner of the auction for the purchase of the SPC of the state institute. There are traces of her husband’s deputy in the state institute, Andriy Evpak, through his wife Viktoria, who acted as a co-founder of the LLC, but there is no trace of the winning company – “Ivai Development Group”. 

IVAI Development Group LLC was registered in September 2022 and was initially called Prom Invest Lux LLC, later – Pegas 2022 Trading House LLC. 

The main activity of the company is construction. 

In less than three years of its existence, the company has changed managers and beneficiaries several times. At the same time, these same people are founders or managers of many other companies – some are involved in dozens of enterprises of various profiles. 

At the end of 2023, Serhiy Chereshnevyi, a resident of Vinnytsia, became the head of IVAI Development Group LLC. And the founder and ultimate beneficiary is Yevhenii Yatsukov – he is also the beneficiary of Hipanis Plus LLC, which has been renting part of the premises in the building where the Vinnytsia Institute of Land Management is located since 2019, for a cafe. 

In addition, Yatsukov is the founder, beneficiary and manager of ZhK-Garant LLC. This company appears in criminal proceedings investigated by the police under Part 3 of Art. 191 of the Criminal Code of Ukraine (Appropriation, embezzlement or seizure of property by abuse of office – actions committed repeatedly or by prior conspiracy by a group of persons). 

The pre-trial investigation established facts that may indicate the commission of embezzlement of budget funds by officials of the Department of Capital Construction of the Vinnytsia City Council in collusion with officials of ZhK Garant LLC during the procurement of works on the overhaul of the civil defense structure – the shelter of the Vinnytsia City Clinical Hospital No. 1 at 96 Khmelnytske Shose Street in Vinnytsia and the overhaul of the civil defense structure at 34a Zamostyanska Street in Vinnytsia

But let’s get back to Ivai Development Group itself.  In the company’s open financial statements for 2024, we see the company’s financial obligations in the amount of over UAH 60 million. This is not a bank loan, but probably funds provided, for example, by the founder of the company. Most likely, it was these funds, the origin of which should be investigated, that were used to purchase the SPC of the Vinnytsia Institute of Land Management. And without them, the company would hardly have had the financial capacity to purchase this property. 

Logically, in order to recoup such significant expenses, the company tried to sell part of the property – we are talking about buildings located in Khmelnytskyi and Chernivtsi. And they were put up for sale. 

However, both auctions ended in nothing. But it is obvious that this is not the last attempt to sell at least part of the property complex. It is also obvious that despite assurances that the profile of the Vinnytsia Institute of Land Management will be preserved, which Yaroslav Yaroslavsky voiced after the auction, referring to the new owner, the building in Vinnytsia will most likely eventually go under the hammer. 

Indirectly, this possibility is confirmed by a court case filed by the Main Department of the State Geocadastre in the Vinnytsia region. This state structure leased part of the premises of the Vinnytsia Institute of Land Management. According to court documents, on September 10, 2024, Ivai Development Group LLC sent a letter to the State Geocadastre in the Vinnytsia region demanding that the premises they use be returned by September 31, 2024. In addition, the Vinnytsia State Geocadastre was informed that from December 23, 2024, the premises they use will not be provided with heat, water and electricity. 

According to our information, the Department of State Geocadastre won in the court of first instance, but the litigation continues on appeal. 

But the letters sent by Ivai Development Group to the Department of State Geocadastre look like an attempt to free the premises from “tenants”, probably for the purpose of further sale of the building. And it is unlikely that in this context we are talking about preserving a profitable (or not quite?) Institute of Land Management. Moreover, a LLC-“namesake” has already been so successfully registered, which, quite by chance, is registered in the name of Mr. Yaroslavsky’s wife.