The collapse of the Kyivmiskbud pyramid: some will build palaces, while others will be left homeless

The collapse of the Kyivmiskbud pyramid: some will build palaces, while others will be left homeless

“Those who promise us paradise on Earth have never created anything but hell.”
Karl Popper

Anotation

In this article, I:

1. analyze the transformation of the construction industry in Kyiv over the years of “independence” from a sector that meets the needs of the members of the territorial community of Kyiv for quality housing into a large construction pyramid;
2. focus on the company Kyivmiskbud JSC as a key example of construction pyramids;
3. consider the socio-economic consequences of privatization and changes in the management system of municipal services.

In my research, I refer to data from journalistic investigations, legislative acts, and economic indicators.

The main task of the article is to seek solutions that will stop the “feast during the plague” and help affected investors obtain their square meters, allowing the residents and the territorial community of Kyiv to permanently rid themselves of the mafia in power, chaotic construction, and effectively utilize the material and financial resources of Kyiv in the interests of its citizens. The construction mafia has appropriated not only the investors’ money but also the resources of the city community, including land.

Introduction

The situation in the construction industry of Kyiv has reached a critical point. Construction pyramids such as “Elita Center,” Ukogroup (Voitsekhovskyi), “Arkada,” “Ukrbud,” and others have led to economic and social problems. We are now witnessing a “great harvest.” On the ruins of these collapsed construction pyramids, palaces for the Ukrainian “elite” are being built, while affected investors risk being left homeless and impoverished. The moment for justifying the collapse of construction pyramids is particularly convenient, as all problems can be blamed on Russian aggression and the economic crisis. However, the true cause of these issues lies in the systemic problems of state and local governance (public administration).
All public administration reforms over the years of “independence” have turned public governance into mechanisms for siphoning resources out of the state—financial and land resources. Construction pyramids are one of the old schemes for extracting money from citizens.

All construction pyramids in Kyiv were created and controlled by the Kyiv authorities. This management system allows for huge amounts of money to be obtained in a short time, which investors voluntarily invest in pyramid projects. Then, the creators of the pyramids destroy them, the funds are funneled into offshore accounts, and investors and Kyiv residents become tools of political manipulation. The authorities promise to complete their housing using local and state budgets, and the deceived people become an electorate that is easily manipulated, forced to do what benefits those in power.

Historical Context

The History of the Creation and Development of the Kyivmiskbud Pyramid

The company “Kyivmiskbud,” established in 1955 as a state enterprise, aimed to provide Kyiv residents with quality and affordable housing. For decades, this organization successfully fulfilled its mission, becoming a symbol of reliability and quality in the construction industry. However, the privatization process that began in 1995 led to significant changes in the company’s structure and objectives.
The transformation of “Kyivmiskbud” into a construction pyramid was driven by the desire of officials and the company’s management to extract as many resources from the company as possible.

In 2004, “Kyivmiskbud” was reorganized (privatized) into a private joint-stock company (PJSC), leading to:

1. the illegal alienation of property from Kyiv residents;
2. the reorientation of the company’s activities exclusively towards maximizing profits and the illegal withdrawal of the company’s assets;
3. the loss of control over the company’s activities by the territorial community.

The German philosopher Jürgen Habermas wrote about similar processes: “The system world colonizes the lifeworld.” This statement accurately reflects the situation where the personal economic interests of a group of private individuals begin to dominate the public interests of society, which they are obliged to respect.

Mechanisms of Investor Deception

The process of deceiving investors in the construction sector has several key aspects:

1. The creation of the construction pyramid became possible due to the introduction into people’s consciousness of the false notion about the economy: the private owner is an effective owner. However, the real efficiency of such owners lies in maximizing profits in offshore accounts rather than building housing for investors. At the moment when the diminishing cash flow equals or is already less than current operating expenses, and when management and officials have nothing left to extract from the company, and a financial disaster for the enterprise is clearly on the horizon, it becomes profitable to bankrupt the company, shift the responsibility for building apartments onto the residents of Kyiv, and flee abroad with the stolen money. This is exactly what has been done.
2. The concept of “effective public administration” focused on results and efficiency. In theory, this implies that the authorities should act in the interests of society and utilize resources as effectively as possible. In practice, however, this leads to the alienation of state and communal property in favor of the private interests of officials and their curators, to avoidance of responsibility, the creation of construction pyramids, increased tariffs, and a decline in the quality of public services.

An important aspect of the problem is that PJSC “Kyivmiskbud” is a private joint-stock company. According to the legislation, the participants (founders) of the company are not liable for its obligations, which further complicates the protection of investors’ rights and opens up space for fraudsters.

Shareholders are not liable for the obligations of the company and bear the risk of losses associated with the company’s activities only within the nominal value of their shares. In the event of illegal actions by the company or other shareholders, no sanctions that limit their rights can be imposed on shareholders.
(source: LAW OF UKRAINE “On Joint Stock Companies” Art. 3).

Alienation of Kyiv Residents’ Property: “Kyivmiskbud” – A Private Company

The privatization of “Kyivmiskbud” began in 1995 when the enterprise became an autonomous state communal enterprise. The territorial community of Kyiv began to lose control over the enterprise. The main goal of the company became profitability rather than providing residents with quality housing.
In 2004, the company was reorganized into a private joint-stock company (PJSC) (source: founding documents of PJSC Kyivmiskbud).

This transformation led to a number of negative consequences, including the emergence of so-called “construction pyramids” and violations of investors’ rights, ultimately alienating the property of Kyiv residents.

From this point on, “Kyivmiskbud” began to operate exclusively in the interests of the company’s management, officials, and other participants of the criminal organization.

The transformation of “Kyivmiskbud” into a private joint-stock company in 2004 marked the final transition from a socially-oriented model of the company’s operation to a model focused on profit maximization, the withdrawal of the company’s assets to offshore accounts of the criminal organization created by the company’s director Kushnir and officials (hereinafter referred to as the “Kushnir criminal organization”) (source: journalistic investigations by BIHUSinfo and others: Estates in Koncha-Zaspa and a “don’t care” attitude towards investors: how the head of “Kyivmiskbud” created an empire for himself).

What the Authorities Offer to Investors

1. Confiscation of the assets of the “Kushnir” criminal group is not proposed. Law enforcement agencies are not investigating the activities of the “Kushnir” criminal organization and the officials associated with it, as their interests are intertwined with those of these criminal structures.
2. The Kyiv authorities propose to recapitalize “Kyivmiskbud” with 2 billion hryvnias (source: Kyivmiskbud is bankrupt. Why did people end up without apartments, and Igor Kushnir became a multimillionaire?), convincing investors that this will help complete housing construction. However, this move is more of a distracting maneuver aimed at turning investors against Kyiv residents, forcing the latter to cover the company’s debts from the city budget. Media reports already indicate that at least 24 billion hryvnias are needed to complete construction (source: Kyivmiskbud outlines the scale of the developer’s financial problems). Thus, two conflicting groups are being created: deceived investors and Kyiv residents who demand an increase in the city’s defense budget.
3. The authorities are creating a third conflicting group. Delays in allocating funds for the repair of strategic bridges — Metro and Paton — may lead to their destruction (source: Two bridges in Kyiv could collapse at any moment — what is destroying them). This threatens the loss of two more bridges over the Dnipro (two bridges have already been destroyed during the war). At the same time, the Kyiv authorities have closed two other bridges to ordinary Kyiv residents, allowing access only to selected “servants of the people” with special passes. Meanwhile, all traffic has been redirected to the emergency bridges, increasing the load on them threefold and accelerating their wear and tear, significantly raising the risk of catastrophe.
   The destruction of the bridges and the loss of lives will create a third conflicting group — the families of the victims. In the event of a disaster, the Kyiv authorities may blame the investors of “Kyivmiskbud,” allegedly stating that they “forced” the authorities to allocate funds for completing construction instead of repairing the bridges. Thus, the principle of “divide and rule” is being used to manipulate and control the fragmented groups of Kyiv residents.

Conclusion

The history of “Kyivmiskbud” illustrates how a successful state enterprise transformed into a tool for the enrichment of individuals at the expense of urban resources and the funds of ordinary citizens. It is crucial to find a solution that will restore the rights of affected investors and protect the interests of Kyiv residents, preventing further deterioration of the social and economic situation in Kyiv.

What actions (reforms) are necessary

To effectively manage municipal property and protect the rights of members of the territorial community, comprehensive reform of the local self-government system is needed.

In the current situation, criminal structures, including private construction companies and monopolies (energy and gas), have essentially seized control of public resources and infrastructure. This has led to the creation of construction pyramids, increased building density at the expense of parks, squares, and courtyards, as well as increased tariffs in favor of private monopolists. Officials, colluding with the owners of private structures, illegally transfer communal property (infrastructure) into private hands, which belongs to the territorial community. As a result of such actions, public interests are ignored, communal infrastructure is destroyed, monopolists continue to raise tariffs, and Kyiv residents find themselves defenseless hostages of a corrupt system.

The criminal transfer of communal and state property into private hands in Ukraine is referred to as “privatization.”

For 30 years, Ukraine has undergone reforms aimed at alienating public property (state and communal) and power (state and local self-government). Property and power have been dispersed among thousands of autonomous legal entities, creating a network system of rent-seeking and further draining of resources from the country. Meanwhile, the leadership of these autonomous legal entities is not interested in fulfilling the functions assigned to them by the state and/or territorial communities. Their interests are focused on the personal benefit of management and the controlling officials.
Autonomous legal entities use:

1. public property (autonomous from the will of the Ukrainian people: communal, state enterprises, private joint-stock companies with state and local self-government shares …);
2. public authority (autonomous from the will of the Ukrainian people: administrations, courts, police …);
3. public policy (autonomous from the will of the Ukrainian people: local councils, the Verkhovna Rada, the President, the Cabinet of Ministers …).

These reforms led to the following consequences:

1. the Ukrainian people do not govern or control either the authority or the property;
2. a network system of distribution of property and authority has been created, which is under the control of mafia groups;
3. the system of autonomous legal entities has become a rent-generating structure, draining resources from Ukraine in the interests of the mafia;
4. Ukrainians receive controlled, incomplete, and unreliable information from some autonomous legal entities (e.g., the Verkhovna Rada, the Cabinet of Ministers, local councils, etc.). Systematic deception has led to the fact that for all 34 years of independence, presidents, deputies, and officials have created structures that are not accountable to citizens and have used them for personal enrichment and bribery of voters during elections.

An example of an autonomous legal entity that uses public property is “Kyivmiskbud,” which demonstrates how the resources of the Kyiv territorial community have been directed towards enriching the criminal organization “Kushnir.” Members of this organization include deputies, officials, and the leadership of Kyiv.

Can we be sure that after the recapitalization of “Kyivmiskbud” by 2 billion hryvnias, the buildings will be constructed?

No! There is a high probability that the money will be stolen, and further recapitalization will again be needed.

Tens of thousands of deceived investors from other construction pyramids, using the experience of Kyivmiskbud investors, will also demand that the people of Kyiv build apartments for them. We get a unique scheme: “management of the pyramids, officials, and deputies steal investors’ money, while the people of Kyiv use their funds to build apartments for the deceived investors.” Something is clearly wrong with this scheme.

Can we be sure that law enforcement agencies will protect citizens’ rights—the stolen money will be returned, the guilty will be held accountable with asset confiscation, and the houses will be completed?

No! The police do not perform the functions assigned to them by the Constitution, as they represent autonomous legal entities. The task of the police (an autonomous legal entity that uses public authority) is to provide a limited set of police services in certain areas, while the quality and volume of these services are not established by citizens. These structures were created and are controlled by entities that are not Ukrainian, and their tasks are also set without the participation of the Ukrainian people.

An example of an autonomous legal entity that uses public authority autonomously from the will of the Ukrainian people is the Holosiivskyi Police Department, led by Colonel of Police Kochkadyamyan Araik Henrikhovych.
The activities of this autonomous legal entity are independent of the control of Ukrainians and operate in their own interests and those of their clients (including representatives of the authorities):

1. Ignoring citizens’ statements.
   Statements from citizens are often ignored, and pre-trial investigations are not conducted (only formal responses are provided). The police partially execute court orders: information is entered into the Unified Register of Pre-Trial Investigations to create the appearance of an investigation, after which the criminal proceedings are closed without notifying the applicant.
2. Falsification of criminal cases. Innocent individuals are brought to criminal responsibility through manipulation of evidence. Items from the crime scene (photographs, tools of the crime, descriptions of the scene, body camera recordings, etc.) may disappear from the case materials or not be recorded at all, and investigative experiments are falsified.

Example: A person visits a law firm for an appointment with a lawyer, where they are attacked by a hired assassin (killer), prepared by the lawyer of the law firm. The assassin brutally beats the person with a knuckleduster, while the lawyer, acting as a witness, describes in detail how they prepared the assassin for the attack. However, employees of the Holosiivskyi Police Department seize all documents and evidence from the crime scene, stage a new crime scene within the Holosiivskyi Police Department, and conduct a falsified investigative experiment there. As a result of these manipulations, the victim of the crime becomes the accused, and the criminal becomes the victim. The motivation of the police is to serve the interests of the “servants of the people.”
If someone thinks that an ordinary person can appeal, for example, to the State Bureau of Investigations (SBI) to hold police officers accountable for falsifying cases against the innocent, that is a misconception. The SBI also has its own “Kochkadyamy,” such as the Deputy Head of the Second Investigation Department of the Territorial Office of the SBI in Kyiv, Major Artem Spuskanuk, who not only ignore citizens’ statements but also court orders.

What needs to be done to solve the problem of unfinished buildings for deceived investors, prevent the destruction of infrastructure in Kyiv, and stop the embezzlement of material and financial resources, land, and green zones?

1. Reorganization of the management system. In Kyiv, there are more than 2000 autonomous legal entities, the management of which uses public resources and authority beyond the control of Kyiv residents. The first step to improvement is to merge all autonomous legal entities into a single legal entity of public law called “Territorial Community of Kyiv,” which is managed and controlled by the residents of Kyiv themselves.
2. Conducting an inventory. A thorough inventory of municipal property, material and financial resources, as well as powers, needs to be carried out to ensure full transparency and efficiency in their use.
3. Accountability of the territorial community for construction. The responsibility for the quality and timelines of commissioning residential, office, and production facilities should lie directly with the Territorial Community of Kyiv. This is only possible if the construction is carried out by the community itself, which controls and manages finances in the interests of investors and residents.

Conclusion: All construction in Kyiv must be carried out solely by the territorial community, ensuring high quality and benefiting the residents of the city. If necessary, the territorial community can engage contractors; however, project management must remain under its control.

In the upcoming articles, I will examine in detail the necessary reforms of the urban legal system and the urban economy aimed at the development of the city in the interests of Kyiv residents, not the criminal structures that have usurped power in the city.