Manhunt for man who used Scots firm in arms deal

Now authorities in the country have issued a warrant for a man who was No. 2 at the government enterprise which made the aircraft.

In an international wanted notice updated last week, the National Anti-Corruption Bureau or Nabu, said it was looking for Igor Suntsov, the former first deputy director of the Kharkiv Aviation Plant in north-east Ukraine.

Suntsov has not been seen since August. Local media reports in Kharkiv say he is out of the country. He has, in his absence, been formally arrested.

The former official has been accused of sending 30 million Hryvna - about 2 million dollars and half a million euros - to a Scottish limited partnership or SLP called Portvilla Trading.

The money was supposed to be an agency fee for the $60m export of two Antonov An-74 military transport planes to the Kazakh secret service. The payments were made between 2013 and 2015.

As The Herald reported back in 2017, the Kazakhs said they had had no contact with Portvilla and, according to prosecutors, the business had played no role in the deal.

Suntsov is just the latest high profile figure in Ukrainian business and politics to be linked with the abuse of SLPs or other “offshore companies” in Ukraine.

His factory - once a significant and militarily strategic employer - has struggled in recent years. Workers - who have suffered late wage payments - are furious about what they call the “30 million” scandal.

The Kharkiv plant has been politically important too. Suntsov’s old boss, Anatoliy Myalitsa, rose up through the Soviet ranks to be a member of the central committee of the Communist Party under Mikhail Gorbachev.

He then went on to be a “hero of Ukraine” - an official honour - and the country’s industry minister. All while working in one capacity or another at the Kharkiv plant. Myalitsa died earlier this year.

Corruption at an institution as economically and politically and strategically important as the Kharkiv plant is a serious business.

But it is the alleged use of a British shell company to skim from an arms deal that got policy-makers in the UK worried.

Back in 2017 then SNP MP Roger Mullin was so alarmed by reports of SLP abuse in Kharkiv arms deals that he called for then security minister Ben Wallace to investigate the case.

Now an ambassador for the Transparency Task Force - linked to Transparency International, Mr Mullin warned that opaque shell firms still posed a danger.

"It is six years since I first raised concerns about SLPs at Westminster. Despite some limited progress, it is still the case that SLPs are far too easy to use for international criminal activity, the case of Ukraine being but one example,” Mullin said.

“There is a fundamental problem in that the UK government have always been reluctant to close the areas that make it easy to use SLPs for criminal activity. "The Scottish Government does not have the powers to deal with SLPs, but they do have a voice and I hope will use it to put serious pressure on the UK government to act.

“To have Scotland's name dragged into such criminal enterprises harms our reputation. The corrupt and criminals involved in using SLPs to cover their tracks must be laughing all the way to their banks at the ineptitude of the UK government and those agencies that are supposed to prevent using our financial vehicles for criminal activity.”

Westminster is responsible for primary legislation on Scots corporate law. UK officials have acknowledged the problem. In 2017 they announced that SLPs would have to declare beneficial owners. This - along with a crackdown on offshore banking in the Baltic states (where SLPs like Portvilla had their accounts) - brought a reduction in the number of new partnerships being formed.

However, abuse continues. A major EU-wide investigation in to multi-million-euro investment frauds this year traced proceeds of crime to SLPs run out of Ukraine. Some of the victims were British. The SLPs were formed after the first reforms.

The UK Government has vowed further moves to toughen up the rules around SLPs and how they and other shell firms are policed. Some critics say these are too little, too late. Others say they are a good start.

Portvilla Trading is still on the books at Britain’s corporate register, Companies House. It has never complied with new rules under which it should have named any beneficial owners.

Until late 2017, it was registered at a flat in Edinburgh which has been home to thousands of SLPs and other enterprises.

Its official address was them moved to that of an accountancy firm in Douglas, South Lanarkshire.

There is no suggestion that the address providers knew anything about the alleged criminality carried out by any entity they host.

Another Douglas-based SLP remains at the centre of another major and live arms corruption investigation in Ukraine. Fuerteventura Inter, like Portvilla Trading, has been under investigation by Nabu for years. The firm took a $2m cut on a $14m 2015 export contract for ammunition to the Middle East.

The SLP was dissolved in 2019 but never complied with rules under which it should have named anyone with a controlling stake.

Journalists at Skhemi or Schemes, an investigative programme on Ukrainian TV backed by US-funded Radio Liberty, this September linked a local businessman to Fuerteventura Inter.

However, investigations in to the affair are ongoing.

There have been convictions for skimming with SLPs.

Last year the son of the boss of a wood processing plant in Belarus was jailed for four years for skimming 400,000 euros from export contracts using an SLP called Great Import/Export and a Lithuanian shell firm. His father, Vladimir Shulga, was earlier imprisoned for five years for abuse of office.

Great Import/Export was officially based - just like Portvilla Trading and Fuerteventura Inter - in Douglas, South Lanarkshire.