Secret audits show Ukraine lost $1.2 billion to fraud, waste in 2024 defense procurement - NYT
Ukraine lost about $1.2 billion to fraud, waste and mismanagement in defense procurement in 2024 alone, according to classified government audits obtained by The New York Times.
The reviews, conducted by Ukraine's State Audit Service and an internal Defense Ministry auditing department, cover 2024 and 2025 and have not previously been subject to public scrutiny. The NYT said it was unclear what, if anything, the Defense Procurement Agency did in response to their findings.
Seven of Ukraine's top 10 military contractors received new orders despite open criminal investigations for fraud, failures to deliver on previous deals or the arrests of executives on corruption charges, according to the audits, court records and Ukrainian media reports.
Auditors also identified 18 companies that signed new deals despite defaulting on previous contracts. Six had failed to fulfill a single contract.
About $126 million was lost by bypassing lower bids and overpaying for weapons, while contracts were also awarded without legal justification, according to the audits.
Defective mortar rounds
One case involved the state-owned Pavlohrad Chemical Plant, which supplied the Ukrainian military with 233,000 unusable mortar rounds, many with defective fuses or gunpowder propellant.
Auditors found that the plant had initially said it lacked the capacity to fulfill the order, but later changed its assessment without explanation. They found no evidence that officials had tried to verify whether the factory could fulfill the contract.
After faulty mortar rounds began reaching the military, the Defense Procurement Agency "did not draw proper conclusions," auditors said. Instead, the plant received additional orders, including a contract to supply nearly all of the military's 122-millimeter artillery rounds in 2025.
The plant's director, Leonid Shyman, was arrested in 2025 and was sentenced last month to five years in prison in a separate case involving a scheme to sell explosives at inflated prices. He plans to appeal the conviction and maintains his innocence in the mortar case, his lawyer told the NYT.
$130 million added to rocket deal
In another case, the Defense Procurement Agency sought bids in 2024 for hundreds of millions of dollars' worth of rocket artillery.
Three companies offered the same rockets, manufactured by the same Turkish company, at prices of about $4,200, $4,600 and $5,100 each. Turkish manufacturer Arca Defense submitted the lowest bid, offering to sell directly to Ukraine.
The contract instead went to the highest bidder, a subsidiary of Czech defense company Czechoslovak Group, which acted as an intermediary.
Auditors found "no justification for the decision." An NYT analysis of the competing bids found that buying through the intermediary added about $130 million to Ukraine's bill.
The audit did not accuse Czechoslovak Group of wrongdoing. A company spokesperson said it had no access to competing bids or their commercial terms and that questions about the procurement decision should be directed to the Ukrainian government.
Deal collapses despite warning signs
The audits also examined an attempted purchase of Soviet-style rockets from a Serbian manufacturer. Because of Serbia's close ties with Russia, Ukraine relied on intermediaries to arrange the deal.
The government contracted with Ukrainian state-owned arms broker Spetstechnoexport despite its history of unfulfilled contracts. Auditors also found that the company did not have the required Serbian export license and instead submitted a guarantee letter from Ukraine's military intelligence agency.
The auditors said the preferential treatment had no legal justification.
Spetstechnoexport subcontracted U.S. weapons company Regulus Global. Then-Defense Minister Rustem Umerov later sought to remove intermediaries from the deal and asked Regulus to work directly with the Defense Procurement Agency.
The deal ultimately collapsed. By early 2025, Spetstechnoexport had become the procurement agency's largest debtor, with more unfulfilled contracts than any other supplier, according to the audits.
Regulus said it had done nothing wrong and had been "caught in the middle" of changes to Ukraine's procurement system.