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Automatically translated version. May contain inaccuracies compared to the original.
They couldn't divide the money: Kyiv “GIOC” and Odesa “Hertz” got tangled in “billing” contracts
Kyiv municipal enterprise “GIOC” is actively litigating with its contractors – Odesa LLC “Hertz” and LLC “FC ‘Hertz’.”
Over the past two years the parties have been unable to reach an agreement on the terms of contracts for providing billing services in Kyiv (sale of electronic tickets and acceptance of utility payments). Because of this, the municipal utility and the named companies now have mutual financial claims totaling more than 15 million hryvnias. It is obvious that the main reason for this situation is that the relevant agreements were drafted so that their terms could later be interpreted in different ways. Notably, LLC “Hertz” is currently headed by former GIOC chief Vitaliy Kozubskyi (in the collage on the right), under whom these contracts were signed and who is an accused in a criminal proceeding regarding multi-million “budget embezzlements” during the implementation of the municipal elevator management system.
As KV has learned, over the course of 2020–2022 years the municipal enterprise “Main Information and Computing Center” (“GIOC”) has been actively litigating with its contractors LLC “Hertz” and LLC “Financial Company (FC) ‘Hertz’.”
We are talking about at least 8 lawsuits in which the Kyiv municipal enterprise acts both as plaintiff and as defendant. In these proceedings GIOC demands that the courts recover 5,4 million hryvnias from the named companies, while LLC “Hertz” and LLC “FC ‘Hertz’” are trying, in turn, to recover 9,7 million hryvnias from this municipal enterprise. At the first-instance court level almost all these proceedings ended unsuccessfully for both sides – the courts denied their claims. However, most of these legal disputes are currently being considered by appellate and cassation courts.
For example, on 15 July 2022 the Commercial Court of Odesa region denied GIOC’s claim against LLC “Hertz” to recover 442,6 thousand hryvnias. The municipal enterprise considers these funds an “overpayment” that the company unlawfully received as a fee of 1% of the cost of electronic tickets sold for travel on Kyiv public transport (according to the contract dated 20 January 2020).
In court the plaintiff’s representatives explained that the debt amount arose because LLC “Hertz” during January–June 2020 sold tickets through self-service payment terminals and the “Personal Cabinet” information system, which are municipally owned in Kyiv and maintained by GIOC, and that the company had no authority to do so. Nevertheless, the municipal enterprise’s legal arguments did not convince the court.
GIOC also sought to recover 3,4 million hryvnias from LLC “FC ‘Hertz’.” The same Commercial Court of Odesa denied the municipal utility on 4 August 2022. GIOC also considers these funds an “overpayment” that its contractor unjustly received when collecting utility payments from Kyiv residents from July 2018 to June 2020.
Under the relevant agreement dated 7 August 2017, LLC “FC ‘Hertz’” effectively acts as an intermediary between PrivatBank and GIOC in receiving the above payments, for which the company receives a percentage of each payment. GIOC believes the contract refers to 0,5%, whereas LLC “GIOC” allegedly indicated 1% in the acceptance certificates, and therefore received more money than necessary. However, GIOC’s lawyers have not yet been able to prove their claims in court.
The only successful claim, at least for one side, is the case initiated by LLC “Hertz” to recover 8,9 million hryvnias from GIOC. The Commercial Court of Kyiv granted these claims on 2 June 2021, and the case is now under consideration in the Cassation Commercial Court.
According to LLC “Hertz,” this debt arose for services it provided in IT support of the software for the “Automated Fare Collection System” (“ASOP”). Under the contract dated 7 May 2020, the company was to receive, among other things, 1% of payments made by passengers using electronic tickets from GIOC. However, during August–December 2020 the municipal enterprise did not transfer these funds to its contractor.
In court the municipal enterprise’s representative argued that LLC “Hertz” misinterprets the contract terms. Allegedly, the company believes that 1% should be calculated from the amount passengers paid to top up transport cards regardless of whether they used transport services. GIOC, however, was confident that the percentage should be calculated from amounts paid by passengers who actually used transport services. These arguments were not supported by the court.
Note that in all cases the disputes essentially arose from different interpretations of contract terms. Accordingly, one can assume these agreements were deliberately drafted so that their implementation methods and potential income amounts could later be manipulated. For example, courts only disputed “incorrect” contract performance for certain periods, which suggests nothing prevented the parties from acting as they pleased throughout the entire contract term.
Millionaire monopolists
According to the public procurement database Clarity-Project, since 2016, when the Prozorro system came into force, LLC “Hertz” has signed 60 contracts with various state and municipal bodies in Ukraine totaling more than 316 million hryvnias. Major clients include the Kyiv municipal concern “Center of Communal Service” (15 contracts totaling 146,6 million hryvnias), the above-mentioned municipal enterprise GIOC (18 contracts totaling 143,6 million hryvnias), and the municipal enterprise “Kyivpastrans” (2 contracts totaling 18 million hryvnias).
In turn, LLC “FC ‘Hertz’” in recent years received 8 contracts from budgetary bodies in Ukraine totaling 174,7 million hryvnias. The vast majority of these funds – 174,3 million hryvnias – the company is expected to manage under a contract with municipal enterprise “Kyivteploenergo” dated 1 January 2022. Under that agreement, LLC “FC ‘Hertz’” must, until 31 December of the current year, provide financial consultations to that enterprise, accept citizens’ payments on the enterprise’s website, process them for further transfer to the enterprise, and so on.
As KV has repeatedly reported, LLC “Hertz” and LLC “FC ‘Hertz’” are effectively monopolists in the Kyiv billing services market (acceptance of payments for various services online, e.g., via bank cards) contracted by KMDA-controlled structures.
These companies implemented and maintain the aforementioned ASOP, as well as the “Automated System for Acceptance and Accounting of Utility Payments,” the “Unified System of Automated Accruals for Payment of Communal Services,” and others. Such agreements were most often signed with Kyiv municipal enterprises without competitive procedures because the companies hold copyrights and intellectual property rights to the programs, formally leaving them without competitors in Ukraine.
This active cooperation allows LLC “Hertz” and LLC “FC ‘Hertz’” to receive not only budget funding in Kyiv for contract execution but also to earn various fees – for example, the ones currently under litigation. Exact figures for such income are not available in open sources, but most likely amount to tens or even hundreds of millions of hryvnias per year. For this and other reasons, some officials have repeatedly expressed doubts about the appropriateness of using intermediaries for accepting various payments by Kyiv municipal structures.
For example, in 2016 councilman Denys Moskali (elected in the 8th and 9th convocations from All-Ukrainian Union “Fatherland”) sent an appeal to KMDA demanding explanation on what grounds private companies began accounting for and accepting payments for housing and communal services in the capital. Among such companies he named LLC “Hertz.” Moskali pointed out that these companies’ service costs are significantly higher than GIOC’s, and that the billing percentages are going “into the pockets” of private entities (previously they de facto remained in the city treasury because GIOC received them).
Similar questions were raised in 2019 by MP Oleksiy Kucherenko (All-Ukrainian Union “Fatherland”) to Kyiv Mayor Vitali Klitschko. The MP informed the city head that residents were concerned that payment details on bills for building maintenance and adjacent territories, as well as on cash receipts for buying electronic transport tickets, listed the details of the private firm LLC “FC ‘Hertz’” rather than the direct service providers – municipal enterprises. Kucherenko was also interested in what percentage this LLC receives for services, how much it has already collected, and whether it received Kyiv residents’ personal data.
Moreover, in 2017 KMDA auditors reported that as a result of receiving utility payments through intermediaries (including LLC “Hertz” and LLC “FC ‘Hertz’”), the economic benefit went not to GIOC, as it should have, but to the intermediaries. These and other factors led to GIOC underreceiving income in 2014–2016.
Heads of Kyiv municipal structures justify cooperation with LLC “Hertz” simply – allegedly they themselves cannot perform the work. For example, in 2020 Andriy Shcherbyna, director of the municipal concern “Center of Communal Service,” said that GIOC does not have a financial license from the National Bank, and therefore cannot carry out financial operations. “Theoretically GIOC can obtain such a license, but it would cost a lot and would be a burden on consumers,” Shcherbyna said.
Who receives the income
According to the analytics system YouControl, Odesa LLC “Hertz” was founded in December 1999. The company’s director is listed as Vitaliy Kozubskyi (in the collage on the right), the founder is a company with foreign investment “Avers,” and the ultimate beneficiaries are Hennadiy Besedovskyi, a resident of the town of Tatarbunary in Odesa region, and Odesa resident Kostyantyn Tkach (in the collage center). LLC “FC ‘Hertz’” was registered in Odesa in April 2015. Its director is Hanna Sushkina, its founder is the above LLC “Hertz,” and co-owners are the same Besedovskyi and Tkach.
Note that from March 2021 to July 2022, the director of LLC “Hertz” was listed as Odesa resident Dmytro Nikitin. He was previously, until July 2022, listed among the company’s co-founders. Nikitin is a former deputy chairman of the Odesa Regional Council in 2007 and 2008.
In 2015 advisor to the Prime Minister of Ukraine (Arseniy Yatseniuk) Oleksandr Malin (who served as deputy head of the Odesa ODA during the presidency of fugitive president Viktor Yanukovych) promoted Dmytro Nikitin for the head position at state “Ukrposhta.” According to Odesa-media, Kostyantyn Tkach and Dmytro Nikitin are among the hundred most influential Odesa residents.
Additionally, LLC “Remus-S,” owned by Tkach, was the client for construction of a “five-story administrative building with leisure infrastructure” on the slopes of the elite Odesa neighborhood Vidrada, which several years ago sparked public outcry and attention from law enforcement.
In 2021 the Dumska.net outlet (linked to MP Oleksiy Honcharenko, a member of the European Solidarity faction, who before the Revolution of Dignity was a member of the Party of Regions and deputy chair of the Odesa Regional Council for that party) reported that Nikitin and Tkach are partners of Volodymyr Halanternyk – a deputy of the Odesa regional council of the 5th convocation from the Our Ukraine party, a multi-millionaire, a well-known Odesa businessman who owns, among other things, the Pryvoz market and the “7-th kilometer” market, and who now resides in London.
In 2021 the publication Novoye Vremya called Halanternyk the “unofficial master of Odesa.” He received that characterization after becoming a figure in a criminal proceeding over illegal appropriation of land owned by the Odesa community. At the end of 2021 Halanternyk was suspected and arrested in absentia. Several high-ranking officials, including Odesa Mayor Hennadiy Trukhanov, were also notified of suspicion. According to preliminary investigation data, this group caused damages to the Odesa community amounting to 689 million hryvnias.
The current head of LLC “Hertz,” Vitaliy Kozubskyi, is not unfamiliar to GIOC. From November 2015 to May 2016 he worked as deputy head of the planning and finance department of GIOC, and from 13 July 2016 to 12 July 2020 he headed the enterprise, replacing Valeriy Misan.
Note that Vitaliy Kozubskyi is currently an accused in a criminal proceeding over possible “budget embezzlements” committed by GIOC leadership. As KV reported, in 2018 GIOC lost approximately 20,8 million hryvnias during the implementation of the “Operational-dispatch service for the housing stock and systems of management, control and ensuring the safety of elevator equipment” complex. Several other persons came under law enforcement scrutiny, including the head of contractor LLC “Ukrainian Business Communications” Yehor Burgomistrenko. The indictment against the case figures is under consideration by the High Anti-Corruption Court of Ukraine. That court session on the matter was supposed to take place on 26 October 2022, but whether it occurred is not specified on the “Judicial Branch of Ukraine” website or in the State Register of Court Decisions.
However, Vitaliy Kozubskyi categorically denied all charges against him in an interview with KV.
After Kozubskyi’s dismissal, since 12 July 2020, the duties of GIOC director have been performed by the enterprise’s first deputy director Oksana Mysak.
This municipal enterprise is subordinated to the Department of Information and Communication Technologies (ICT) of KMDA, which since 27 August 2021 has been headed by Oleh Polovynko. Previously, from 3 March 2017 to 29 April 2020, this structure was headed by the scandal-ridden Yuriy Nazarov. During Nazarov’s tenure, the Kyiv municipal enterprises subordinate to the ICT Department received hundreds of millions of hryvnias for “digitalization” of Kyiv, which often led to scandals. One such case is a criminal proceeding on embezzlement of budget funds during the implementation in the capital of a street lighting network management and control system.
Since 2 April 2021 the activities of the KMDA ICT Department have been overseen by KMDA deputy head for local self-government powers Petro Olenych.
Document: PDF proof of the original version of the news item "Не поділили гроші: столичний “ГІОЦ” та одеський “Герц” заплутались в “білінгових” підрядах". It records the publication content at the moment of the first scan, the preservation date and the source: ANTIKOR.
