Ukraine accuses defense company of embezzling $40 million

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Ukrainian intelligence services said they had exposed a defense firm’s $40 million embezzlement scheme to buy mortar shells as the government sought to underline its commitment to fighting corruption at a at a time when American military aid is at a standstill.

Officials at the Lviv Arsenal defense company attempted to siphon 1.5 billion Ukrainian hryvnias, or $40 million, from the state budget that had been earmarked for the purchase of 100,000 mortar shells, a said the intelligence agency, the Security Service of Ukraine. The Department of Defense cooperated with the investigation, which involved some of its current and former top officials, the intelligence agency, known as the SBU, said in a statement.

The company was awarded the contract and funds for purchases in the summer of 2022, several months after Russia launched its full-scale invasion of Ukraine.

“However, he never sent a single tour to our country, while moving money in the shadows,” said an SBU statement posted Saturday on the social messaging app Telegram. He said five people had been charged, but their identities had not been released. It was not immediately possible to contact the company, which Ukrainian media reported was not well known.

The war, and the tens of billions of dollars in military aid that accompanied it, proved a boon for Eastern European defense companies, but Ukraine’s allies in the United States and in Europe have increased pressure in kyiv to show that it can protect itself against corruption. Proving that Ukraine’s institutions are capable of effectively fighting corruption is also key to the government’s strategic goals of joining NATO and the European Union.

The problem has become more acute for the kyiv government amid an impasse in Washington over sending additional reinforcements. aid to Ukraine, with House Republicans tying funding to efforts to secure the U.S.-Mexico border. Some US lawmakers have also demanded stricter accountability for funds.

Ukrainian President Volodymyr Zelensky replaced his defense minister in September and fired the heads of military recruiting offices a month earlier, in moves that experts say were aimed at showing the government is aggressively tackling mismanagement and possible corruption at the within the powerful ministry.

The need to improve government institutions has increased given the lack of progress made by Ukrainian forces in the war against Russia. The failure of Ukraine’s counteroffensive last year to make significant progress has made a protracted conflict more likely. Ukrainian analysts say that as Ukrainians come under increased pressure on the battlefield, it has become imperative for the government to ensure its key warfighting institutions are well managed.

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