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Open letter to the President of the United States of America «On acts of corruption in the use of international charitable money provided for Ukraine at the expense of US taxpayers

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President of the United States of America

The President.
The White House.
1600 Pennsylvania Avenue, N.W.
Washington, DC 20500.

Dear Mr President!

We pay our sincere respect to you and inform you about an independent journalist investigation carried out regarding possible acts of corruption in the use of international charitable money provided for Ukraine at the expense of US taxpayers.

Today, a number of humanitarian projects are being implemented in Ukraine, and significant donor money is being provided for the purpose of carrying out activities in the area of public health, first of all, in fighting TB and HIV/AIDS.

In particular, this concerns grants allocated by the Global Fund to Fight AIDS, Tuberculosis and Malaria.

The grants are being embezzled, most of them are received in Ukraine by two non-governmental organizations, with very poor government control. Their effectiveness is low, and this fact is concealed with triumphant calls and reports. US taxpayers' money is taken out of their pockets and put into those of men of business. The Global Fund's control mechanisms don't work and don't react to signals of misuse.

We ask you to take control of allocation of money by the United States to the Global Fund and to prevent its embezzlement and inefficient use in Ukraine.

We provide you with the materials on the independent journalist investigation regarding preventing charitable money granted to the state of Ukraine by the Global Fund to Fight AIDS, Tuberculosis and Malaria from being used by private individuals to get profit.

These materials have also been sent to the Global Fund's donor countries.

We ask you to take account of the submitted materials in your work.

Head of the Board of "Health Without Borders" International Journalist Association

IGOR GORBASENKO

Head of the board of the Charitable Organisation "The Ukrainians Against TB" Public Movement" Foundation

VITALII RUDENKO

On the prevention to use donated money provided by the Global Fund to get private profit

  • To: Global Fund to Fight AIDS, Tuberculosis and Malaria
  • President of Ukraine
  • Chairman of the Verkhovna Rada of Ukraine
  • People's deputies of Ukraine
  • Prime Minister of Ukraine
  • Minister of Health of Ukraine
  • Members of the National Council on TB and HIV/AIDS Control
  • Heads of regional state administrations of Ukraine
  • Heads of the departments of health of oblast state administrations of Ukraine
  • Ministry of Foreign Affairs of Georgia
  • Ministry of Foreign Affairs of Moldova
  • Ministries of Foreign Affairs of donor countries of the Global Fund to Fight AIDS, Tuberculosis and Malaria
  • Embassies of donor countries of the Global Fund to Fight AIDS, Tuberculosis and Malaria
  • Bill & Melinda Gates Foundation
  • Catholic Relief Services
  • Comic Relief
  • (PRODUCT) REDTM and Partners
  • Standard Bank
  • Takeda Pharmaceutical
  • United Nations Office in Ukraine
  • UNAIDS Country Office in Ukraine
  • WHO Country Office in Ukraine
  • United Nations Children's Fund Office in Ukraine
  • International Monetary Fund Resident Representative Office in Ukraine
  • World Bank Country Office in Ukraine
  • Delegation of the European Union to Ukraine
  • USAID Mission in Ukraine
  • USAID (USA)
  • Council of Europe Mission in Ukraine
  • Interested parties
  • Mass media

Dear Sirs and Madams,

We provide you with an independent journalist investigation regarding the prevention to use donated money granted by the Global Fund to Fight AIDS, Tuberculosis and Malaria and other donors to get private profit.

Yours sincerely,

Igor Gorbasenko , the  member of the National Union of Ukraine's Journalists

CENTER "100% LIFE". LIES AND REALITY

Independent journalist investigation

Igor Gorbasenko,  the member of the National Union of Ukraine's Journalists.

The materials presented in the independent journalist investigation are based exclusively on documents, articles in mass media and speeches by officials of "The All-Ukrainian Network of People Living with HIV" Charitable Organisation.

Part 1.

GOOD INTENTIONS.

In May this year, a number of printed mass media and web sites published presentation materials of "The All-Ukrainian Network of People Living with HIV" Charitable Organisation about the opening in Kyiv of the non-state, non-profit-making medical center "100% Life" whose founder and member is the All-Ukrainian Network of People Living with HIV (the stated materials are attached hereto).

The center is positioned by the senior officials of the All-Ukrainian Network as "a unique project of evolution of the patient community that will provide an alternative in receiving services, international treatment protocols, state-of-the-art drugs, and, most importantly, there'll be no stigma and discrimination towards all patients, irrespective of their status".

The Network's senior officials – head of "The All-Ukrainian Network of People Living with HIV" Dmytro Sherembey, head of the Network's policy and advocacy department (as of the date when the news was published at network.org.ua – author's note) Vitaly Tkachuk and others stressed that the Center was a non-profit-making one, saying that "profit won't be accumulated in someone's pocket, it will be re-invested in medical services, in expansion, since the owner of this center is "The All-Ukrainian Network of People Living with HIV" Charitable Organisation".

Funds for it were allocated by the Global Fund to Fight AIDS, Tuberculosis and Malaria and Expertise France 5% Initiative; equipment for the center was contributed by Elena Pinchuk Foundation.

The organisers invited first deputy mayor of Kyiv Mykola Povoroznyk to attend the opening ceremony. According to estimates by the Network's head (head of the coordination council of the All-Ukrainian Network of PLWH Dmytro Sherembey – author's note), 50,000 USD invested in the clinic will become several millions in 20 years. At the same time, money spent at the clinic by a patient will become a service for somebody who also wants to live rather than the owner's profit. Thus, by providing primary-level medical services, the center will receive financing from the state based on the "money follows the patient" principle. Also, the center can provide a number of diagnostic and medical services at rates that will later be determined by the state for the secondary level. This money will be used to develop the medical establishment.

The fist such center abroad will be set up in Moldova – they have liberal laws. Georgia and Kazakhstan are also interested, says head of the coordination council of the All-Ukrainian Network of PLWH Dmytro Sherembey.

The good, altruistic objectives of the newly-created Center and their scale have aroused genuine interest, attracted attention and made us turn to the origins – the legal basis of this center and, first of all, the Articles of Association of the Medical Center "100% Life".

And here, first questions and unexpected answers came up.

Answer one: non-profit-making organisation. A view through the prism of Ukraine's laws.

clause 133.4.1 of the Tax Code defines the requirements an organisation should meet to get the status of a non-profit-making one:

"whose constituent documents prohibit distribution of income (profit) received or its part among the organisation's founders, members, employees (except for their labour remuneration, charging of single social contribution), members of its management bodies and other persons related to them".

So what is behind the attempt to deceive the Ukrainian and international community, senior government and municipal officials?

Is it an intention to conceal concrete natural persons' enrichment plans behind the declared non-profit-making status?

Answer two: Overview of the Articles of Association of the Medical Center "100% Life" (The Articles of Association of 2017 are attached hereto).

Distribution of income into private pockets is described in the most sincere way in section 12 of the Articles of Association titled "Procedure for payment of dividends to the Company's members".

Yet the subject of "non-profit-making status" runs through the entire Articles of Association.

Section 1 "General Provisions" has the message: "For doing entrepreneurial activity and getting profit";

Section 2 "Rights and Obligations of the Company's Members" declares:

"The Company's members have the right to take part in distribution of the Company's profit and get their share of dividends".

Right here, the categories of "pockets" are given into which profit received should be distributed. "Members of the Company can be legal and natural persons that are Ukraine's residents, non-resident legal persons, foreign nationals, stateless persons that have been admitted to the Company in accordance with the established procedure and comply with the provisions of these Articles of Association".

That is, a structure was built using the Global Fund's money and officially registered in Ukraine which is intended, according to its Articles of Association, to bring profit into private pockets.

While the Global Fund's money accumulated from donors, first of all, US taxpayers, are provided for the state of Ukraine, not for private pockets.

Perhaps, I'm being too naive, but I want to believe this.

Participating in the opening of the Center "100% Life" in Kyiv were, in particular, state officials – first deputy head of Kyiv City State Administration Mykola Povoroznyk, Director General of the State Institution "Centre for Public Health with the MoH of Ukraine" Volodymyr Kurpita and UNAIDS Director Jacek Tyszko.

They all became hostages of and unwitting participators in the untruths told by the senior officials of the PLWH Network.

Unfortunately, a web site created as part of the US Government and the Global Fund cooperation initiative / Leadership, Management and Governance Project helped to spread the lies.

The web site of the State Institution "Centre for Public Health with the MoH of Ukraine".

The article is titled "The first non-profit-making Medical Center "100% Life" has been opened in Kyiv".

An excerpt from it: "The medical center is a non-profit-making establishment. Some of the medical services for patients will be guaranteed by the state as provided for by the medical reform. All money received from services provided for a fee (for example, certain tests) will be used to develop services for patients".

And what are these services for a fee that are timidly referred to at the web site of the State Institution "Centre for Public Health with the MoH of Ukraine" as "(for example, certain tests)"?

First, let me cite clause 3.1 of the Articles of Association: "The Company is a healthcare institution".

And put here a number of the provisions of Article 4 of the Articles of Association regarding the subject of the Company's activity:

-          activity of insurance agents and brokers;

-          collection, processing and/or disposal of production waste and secondary resources;

-          pecuniary and financial mediation;

-          wholesale trade for fee or based on contract;

-          providing the services of saunas, facial rooms and massage rooms;

-          doing foreign economic and other activities not prohibited by the existing legislation.

This makes me assume that the "healthcare" declared by the Company can be gradually substituted with the more profitable areas of activity, with money going into private pockets.

Part 2.

You can get an idea of the existing nature of income distribution at the medical center "100% Life" based on information about the center's activity in Poltava.

According to an article (by Yana Kazymyrenko) placed on the web site AFEW international, "the Poltava clinic was opened in the autumn of 2016". "The Poltava clinic became profitable as early as six months after opening. Narcology has turned out to be in the highest demand, says Yaroslav Blyakharsky, head of the social entrepreneurship division of the PLWH Network".

The PLWH Network providently doesn't make a detailed report on the results of the Center's financial activity in Poltava available to Ukraine's general public.

Not surprisingly.

The Articles of Association of the Center established by "the open and transparent" Charitable Organisation "The All-Ukrainian Network of PLWH" that only declares good objectives contains section 13 "Commercial Secret and Confidential Information".

And there're once again questions that are to be answered.

According to the information provided, the Poltava center reached the breakeven point in half a year. And then – profit. It's clear that money had been invested earlier that precede profit.

There're questions once again: What amount of money? Who financed the creation of the center in Poltava? Who's a member of this establishment in Poltava?

How has the establishment's profit been used, what dividends have been paid and to whom? (Reaching the breakeven point in half a year is superprofit by the international standards.)

Ukraine's general public still remains in the dark about this.

Perhaps, Ukraine's tax authorities are able to find answers to these questions.

It should be noted that the Company's authorised capital provided by "The All-Ukrainian Network of PLWH" is still 2,000 UAH (less than 80 USD).

And although profit, according to the information, was received, the authorised capital hasn't been increased since the date when the Poltava clinic was registered in 2017.  (The Articles of Association of 2017 and 2018 only differ in the organisation's address and year of registration stated on the first two pages of the Articles of Association. Pages 1 and 2 of the Articles of Association of 2018 are attached hereto).

In accordance with the Law of Ukraine "On Limited Liability and Additional Liability Companies", the Company is liable for its obligations with all the property it possesses.

And there're once again questions to be answered.

So what property does the Company "100% Life" have in Poltava and Kyiv, and what property belongs to its establisher, the PLWH Network?

The question is not an inane one, given that Section 5 of the Articles of Association "Foreign Economic Activity" reads: "The Company has the right to get foreign currency credits from foreign investors". And credits are usually given on a security and repaid with interest.

And one more question: If the Center in 2018 again underwent the procedure of state registration with a legal address in Kyiv, what status does the Poltava establishment with the same name have? Who's its owner now?

Answers to these questions aren't known to Ukraine's general public. So, naturally, they are to be examined.

Part 3.

The Global Fund and the PLWH Network's commercial activity

The issue of financing by the Global Fund of the commercial components of the grant assistance for the PLWH Network should be a separate subject.

Several years ago, proposals regarding grants for Ukraine were prepared and submitted in English, without translation into Ukrainian, which made it impossible for Ukraine's public to get familiarised with them.

But if grants by the Global Fund are publicly discussed in some way or another, funds for implementation of the Network's commercial projects still aren't made public.

It's known that proposals for obtaining financing from the Global Fund for Ukraine are approved in writing in the name of the state of Ukraine by a Vice Prime Minister of Ukraine.

Before that, they're approved by the National Council to Control TB and HIV/AIDS with the Cabinet of Ministers of Ukraine.

How much money raised from donor countries and intended for the state of Ukraine has the Global Fund invested in the Network's commercial activity?

We're publicly readdressing this question to the Secretariat of the National Council whose functions are performed by the Ministry of Health of Ukraine.

At the same time, we're sending the Ministry of Health of Ukraine a written request for public information, in accordance with Ukraine's legislation.

And we hope that acting Minister Mrs Ulana Suprun will honestly and sincerely answer this question.

Some history.

The Global Fund previously invested money in the PLWH Network's commercial operations.

The PLWH Network already ran commercial projects using the Global Fund's money.

I'd like to cite an official report by the Office of the Inspector General of the Global Fund to Fight AIDS, Tuberculosis and Malaria ("Audit of grants provided by the Global Fund for Ukraine", GF-ОІG-10-016  of 3 August 2012).

«The All-Ukrainian Network of People Living with HIV/AIDS

  1. The Network initiated a number of profitable projects through three grant agreements with the Centre for Social Entrepreneurship Development (98% of which belongs to the Network). They include setting up a cafe, a car wash, trade in parquet and leasing a pond for 20 years (the only remaining project). The total financing of these projects was 900,000 UAH (approximately 113,000 USD). But in part (detailed information isn't available – author's note) due to the crisis in Ukraine in 2009, the cafe, parquet manufacture workshop and car wash were closed down.
  2. Such projects should have generated profit, but at this social enterprise the situation was different. The Office of the Inspector General noted that projects were suspended after a certain period of time on a regular basis, and the company every year accumulated losses, having used about half of its capital. Primary assessment of the benefits of these business projects turned out to be unsatisfactory ».

And once again, questions arise.

According to the Report by the Office of the Inspector General, the pond still was an object of commerce at the time of the inspection. What has become of it? Who does it belong to? What income did this object of commerce bring? How has this income been used?

As regards the cafe, car wash and trade in parquet, the Office of the Inspector General doesn't go into details about what became of them.

But these commercial projects have the material component, namely equipment, premises etc. that must have been the PLWH Network's property.

They were either completely neglected or sold. If they were sold, to who, for what amount of money (compared to that invested by the Global Fund), who owns them now and how has the money been used by the PLWH Network?

It is obvious that in this project "100% Life" the PLWH Network as the establisher and public organisation that declares openness and transparency, instead of making public its achievements with pride and detailed financial results in all the areas of its activity, tried to conceal all information in the mists of commercial secret and confidentiality.

It can be assumed that the reason for the information shroud is the possibility of distribution of income into private pockets provided for in the Articles of Association of "100% Life".

It is believed that interested persons and organisations won't have difficulty getting through this shroud – in full compliance with Ukraine's legislation and in the interests of the state of Ukraine.

There're also questions to the Chairman of the Board and the Executive Director of the Global Fund.

Had the Global Fund's officials got familiarised with the constituent documents of the PLWH Network's commercial project "100% Life" before investing money in the commercial projects of the Network of People Living with HIV? At least just to know into whose private pockets it's planned to put money of US and other countries' taxpayers that is transferred to the Global Fund.

We put the same questions to the country's top officials, taking account of "attraction of budget funds" declared in section 4 of the Articles of Association as a subject of the Company's activity.

In other words, to whose private pockets?

We ask the same questions to the top officials of Ukraine's oblasts and cities regarding state and municipal funds that can be invested in the planned creation and activity of such centers in oblasts and go into private pockets.

But it's unlikely that these will only be the pockets of all those 240,000 people with AIDS in Ukraine who need direct financial support and of whom the senior officials of "The All-Ukrainian Network of People Living with HIV" tell so much.

And what's much more real: Will we see among dividend recipients over the course of time the well-familiar surnames of the senior officials of the PLWH Network, the Ministry of Health of Ukraine, officials of the Cabinet of Ministers of Ukraine, senior officials of the administrative bodies of Ukraine's oblasts and cities who favour or turn a blind eye on this?

I have no intention to treat the provisions of the Articles of Association of the PLWH Network's commercial project "100% Life" as planning to embezzle public funds of the United States and other donor countries through the Global Fund and organising criminal money traffic.

To sum up, in order to make impossible such treatment of the activity of the PLWH Network's commercial project "100% Life", it will be appropriate to address public officials and senior officials of non-governmental organisations who do decision making.

Based on the aforesaid, we call on:

- the donors of the Global Fund, first of all, the United States, in order to shorten the program and management risks to revise their attitude to the Global Fund's initiatives regarding the PLWH Network's commercial projects at the expense of taxpayers of the countries that provide donor assistance for Ukraine and those providing the payment of the revenue in a form of the dividends to the participants of the above- mentioned projects.

- the Global Fund to withdraw the money invested in the PLWH Network's commercial project "100% Life", and then changes should be officially introduced in the Articles of Association of the Center as a non-profit-making organisation;

- the PLWH Network to remove distribution of dividends among members from the Articles of Association of the Center "100% Life";

- the PLWH Network to report in detail to the general public, including at the web site of the Ministry of Health of Ukraine, about spending of the money earned as a result of implementation of the project in Poltava and Kyiv, as well as about the objects and money received and spent previously, according to the report by the Office of the Inspector General of the Global Fund.

-  the mass media which covered the activity of the Center as a non-profit-making one to make a denial;

-          the relevant law-enforcement agencies, the governmental agencies of the financial control and monitoring in accordance with Ukraine's legislation, to review the materials that are submitted and, to inform the general public about the results of review of the issue.

-  regional governors and city mayors to bear in mind when receiving applications for money from the PLWH Network and the Center "100% Life" that the Articles of Association of the Center provide for distribution of profit into its members' and establishers' pockets;

There's no doubt that it's unfair when enrichment of certain persons is planned at the expense of gratuitous charitable aid provided for the entire population of Ukraine who'll get access to these funds.

P.S.

It is a matter of the great concern and anxiety the fact that the governing bodies and supervisors of the Global Fund are closing their eyes and do not even respond to neither state registered actions with signs of corruption of the main recipients in Ukraine set out in the Audit report according to  the  results of the internal audit of the Ukrainian Health Ministry in the Public Institution “Public Health Centre of the Ministry of Health“ on September 08,2017  N.13-15/06, nor to the violation of the Codes of Conduct for the management leaders and key recipients established in 2012 by the Global Fund itself.

It is also alarming that in the above circumstances the leaders of the Ukrainian National Council (Coordination Mechanism of the country) which directs the activities of the country, is closing its eyes and does not respond   to the above mentioned issues.

It is the lack of the effective reactions from both the Global Fund and within the country on the backdrop of an unsustainable epidemic danger, forcing us to appeal to the international community, and in the first place to the Global Fund’s donors for the appropriate response and support.

Igor Gorbasenko, journalist, the member of the National Union of Ukraine's Journalists, the member of the Country Coordinating Mechanism of Ukraine on the issues of the combatting of TB and HIV/AIDS under the Cabinet of Ministers of Ukraine since 2008 up to 2018, the author of the number of journalist investigations concerning the efficacy of the combatting of tuberculosis and HIV/AIDS in Ukraine.

Vitalii Rudenko  Head of the board of the Charitable Organisation "The Ukrainians Against TB" Public Movement" Foundation

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