Illegal logging in forests managed by the state-owned enterprise ‘Forests of Ukraine’ may not even be the most costly crime in which the company is implicated. State auditors have found that it makes extensive use of a scheme to outsource forestry services. However, the audit has revealed that some contractors are effectively ‘ghost’ companies with no staff at all.
Alla Basalaeva, head of the State Audit Service of Ukraine, spoke about this in an interview with the publication ‘Glavkom’.
Billions of state funds — to private contractors
To siphon off state capital, the state-owned enterprise ‘Forests of Ukraine’ uses a crude but, unfortunately, effective scheme. This involves delegating basic forestry services to private businesses.
“Billions of hryvnias in public funds are received by contracting organisations (individual entrepreneurs or third-party legal entities), while the government enterprise 'Forests of Ukraine's' own equipment is leased out to the same contractors at very low rates, or it is partially left idle,” explained Alla Basalaieva.
In figures, such dubious contracts look quite substantial-just during 2025, the regional branches of the state enterprise wrote 10 billion UAH into contracts for silvicultural works and timber harvesting.
However, verifying how the public funds were spent turned out to be not so simple. According to Basalaieva, auditors failed to do this because they simply could not find the contractors at their registration addresses. This appears to be a classic shadow scheme-on paper, the work has been completed, but the data on actual expenses are inaccessible.
Millions of Trees Planted Without Human Involvement
The Head of the State Audit Service provides a telling example of a constellation of legal entities that was awarded contracts totaling 450 million UAH. All twelve companies are connected to a certain Babenkо-through family ties of the owners and other relationships. At the same time, eleven of them turned out to be phantom enterprises, absent both at their legal and physical addresses.
On paper, phantom employees of phantom companies performed quite real work. For instance, one of these companies declared it had planted 2.4 million trees. However, there’s a catch-officially, only one person is employed by the company. Another company managed to plant as many as 3.5 million trees without having a single employee on staff.
With zero employees, another enterprise from the Babenkо group reported harvesting 21,000 m3 of timber.
“Most likely, the work was carried out by locally hired workers who were paid in cash, bypassing payroll taxes,” commented Alla Basalaieva regarding this anomaly.
The official notes that the declared achievements of "Forests of Ukraine" could have been significantly higher if the intermediary companies' scheme had been eliminated. All audit materials will be forwarded to law enforcement agencies.
EcoPolitic previously reported that, according to the State Bureau of Investigation, only in 2025, crimes resulting in 546 million UAH in damages, involving forestry sector officials, were identified.
Водночас заробітні плати у department directors and branches of SE “Forests of Ukraine” are higher than those of ministers. The highest earning was received by the executive director of the state enterprise-over UAH 18.5 million.
How “Forests of Ukraine” is losing millions compensating damages due to improper forest management was covered separately by EcoPolityka in an individual article.
