New Head, Old Problems — Steps to Save ARMA

For a month and a half, Olena Duma has been heading the Asset Recovery and Management Agency. However, despite all the assurances of her competence and willingness to truly renew the institution, the trends we have noticed indicate otherwise. What exactly is wrong -- find out in our material.

When on June 28, the selection commission for the ARMA Head finally decided on the winner of the competition, we were, to put it mildly, shocked. It is sad that the selection, which lasted almost 2 years, ended with choosing a candidate who so did not meet either the requirements of the law or the needs of society. In addition, we can already say that even before the appointment of Olena Duma as the new Head, the Agency was on the edge of the abyss, which could be its end.

The latest personnel changes are unlikely to stop this process. For those not in the know, it may seem that we in Transparency International Ukraine are supercritical in our assessment of the prospects of Olena Duma in her new position and the future of the Agency in general. The first voiced decisions of the new Head can even be considered as a counter-argument -- allegedly, the dust has settled, and now we see the first steps towards real results.  But in fact, updating the ARMA leadership can lead to grave, even irreversible consequences, which is especially inappropriate when there is a full-scale war in the country.

Let me explain everything step by step.

In a month and a half, the ARMA Head has not refuted doubts about her professionalism and integrity

First of all, before Olena Duma took up her new position, we and other members of the public had well-founded doubts about the professionalism of the candidate elected by the commission. 

Since the beginning of her work, the Head of the Agency Olena Duma has confidently taken a course to increase her own recognition. Of the 45 news items on the ARMA website published since the beginning of her tenure, more than 30 mentioned her quotes or that she had given instructions to sort something out.  It gets ridiculous when the news about the launch of the seized business quotes Olena Duma stating there are no analogues of the ARMA in Ukraine.

In general, there are no analogues of any central executive body in Ukraine and the functions of these bodies should not be duplicated, so it is unlikely that such clarification carries a significant content load. Still, there is this mention.  Unfortunately, some instructions and initiatives of Olena Duma raise doubts as to her profound understanding of the specifics of the ARMA's activities.

For example, her initiatives to bring the mechanisms for the sale of seized assets in line with the requirements of the Law On Public Procurement remain unclear. These are fundamentally different processes: in the first, the state sells the seized property, that is, it wants to get the highest possible price, and in the second, it buys the property, that is, it seeks to buy it as cheaply as possible. The position of Olena Duma is nowhere near different from the previous interim leadership of the ARMA in opening the Register of Seized Assets. Both do not strongly express a desire to be responsible for the decision to open the register.

At one time, Dmytro Zhoravovych referred to letters from the SSU and other bodies recommending limiting access to such a service. Unlike the previous head, Olena Duma highlighted the reasons why the SSU, in a letter dated May 2, 2022, recommended limiting public access to the data in the Register. According to the text, access was closed in order not to reveal information about the description and characteristics of the seized property, including critical infrastructure facilities, indication of settlements and asset location streets.

In accordance with Art.

25 of the Law on the ARMA, information that allows establishing the coordinates of assets should not be in the public domain. That is, restrictions on open access to the Register were applied unreasonably. The fact that the Head of the ARMA should not shift the responsibility for opening access to the Register was also emphasized by MPs at a meeting of the Anti-Corruption Committee on July 13, 2023.

To some extent, the newly appointed leader's statements that the practice of scandalous sales of ammonia, potassium, grain sowing in a non-transparent way and at low prices is a thing of the past also look populist. Despite all her publicity, Olena Duma has not confirmed whether the ARMA appealed to the law enforcement agencies about the alleged commission of criminal offenses under these facts, for example, regarding the results of inspections of the sale of property. Moreover, it is unclear from the content of the above-mentioned news how exactly the head of the ARMA plans to ensure the high-quality sale of the seized property -- no changes have been introduced to the regulatory acts. There is little confidence in the newly appointed leader's activities after the news that "the ARMA begins the formation of the largest interregional rehabilitation hub in the history of Ukraine, with dozens of equipped centers throughout the country." After all, the Agency manages not its own assets, but private ones.

Therefore, the functions of reorganization or transformation of the seized property of the Federation of Trade Unions do not fall within the competence of the ARMA. Moreover, in the same news, it is reported that after the announcement of tenders, seizures of certain objects were canceled. This calls into question the possibility of implementing large-scale projects with assets regarding which there is no permanent powers.

Moreover, to put it mildly, it is strange that Duma initiated the creation of a commission for external control over the activities of the National Agency. After all, this lies outside the competence of the head of the Agency.  The personnel policy of the new ARMA Head is interesting. Thus, according to the Agency, 11 employees have already resigned since June 30, 2023.

Of these, 3 are heads of offices and 3 -- heads of departments. Instead, 11 new officials were appointed, of which 7 are in the positions of chief specialists (as of early August 2023).  The journalists' publications also analyzed the background of the newly appointed advisors to Ms.

Duma. None of them worked in the field of recovery or management of seized assets. The integrity of the Head of the Agency is also questionable, primarily in terms of her political bias. This is described in detail in our statement after the announcement of Duma as the winner of the competition.

Moreover, some journalistic materials published after the appointment of Duma confirmed our doubts about the head of the Agency.

The new Head will still have to deal with the Agency's long-standing problems

Even before the start of interviews with candidates for the Head of the ARMA, we stressed that the new head would face especially difficult challenges. These problems have been accumulating for more than a year, which in the end even led to doubts whether our country needed such an inefficient institution at all. Today, after the election of a new Head, it is just as difficult for the Agency to find supporters because the institution is in conflict with so many stakeholders. 

There are complaints about the work of the Agency both from the public, the expert environment, and law enforcement agencies, as well as from the parliament.  Thus, the public and the expert community expect the ARMA to effectively perform its functions and be transparent in its work, as well as the absence of corruption manifestations, of which we have seen a lot over the years of the institution's existence.  Despite numerous recommendations from CSOs, including ours, the changes in the Agency were implemented extremely slowly, no matter how much the ARMA leadership declared its readiness for such changes.

Actually, that is why all these almost 4 years we have been waiting so much for a new leader. However, as we can see, the tendency towards good words in the absence of good deeds persists. For its part, law enforcement agencies would be happy if the ARMA provided information on asset tracing in a form that could be used as evidence in criminal cases, rather than requiring additional investigative actions.

However, the Agency limited itself to clarifying the legislation on the possibility of using materials designated as "for official use." In addition, the interaction of law enforcement agencies and the ARMA before transferring property to the Agency's management is important. However, planning before the transfer of property to the ARMA is not provided for by law, and therefore these procedures often take place carelessly, and sometimes do not take place at all.

The Parliament generally shares all the above-mentioned comments, which also include the requirements for the economic efficiency of the Agency.  MPs present at the meetings of the temporary commission of inquiry on economic security asked reasonable questions about the fact that the delays and shortcomings in the work of the ARMA with the seized assets can be the basis for lawsuits from the owners of such assets with claims to compensate for damages caused by the inaction of the state. Unfortunately, they already doubt that they will receive answers or specific action plans to correct this situation.

Moreover, there are initiatives to supplement the list of grounds for dismissal of the ARMA head with a new one -- non-disclosure of the register of assets transferred to the Agency's management. The new head of the institution will be given time until December 1, 2023, if the draft law is voted for. Unfortunately, the appointment of the new head can contribute to the implementation of key risks in the work of the ARMA. Here are the main ones.

• Transfer of the function of managing seized assets to the SPFU. This year, it has repeatedly been mentioned, and we stressed that the formal transfer of this function to a new body, without error analysis, will not change the situation for the better.

  However, it is currently difficult to imagine how the new leadership of the ARMA could work on errors, so the issue of transferring some functions to another institution becomes relevant again.

• Non-professionalism in defending the position of the ARMA with other stakeholders. The perception of this body in the parliament now depends on the ability of Olena Duma to argue and prove the position of the ARMA. But doubts about the professionalism of the new head of the Agency, expressed by some MPs, show that previous mistakes in communication may be repeated. 
• Observance of secrecy in sensitive areas of the Agency's work. The ARMA not only manages seized assets, but also recovers them at the request of law enforcement agencies.

  This happens within the framework of the pre-trial investigation when the defendant may not know about such a search of their property. Therefore, the leakage of such information can prevent its further conduct. The political connections of Olena Duma and doubts about her impartiality do not allow ensuring that there are no levers of influence on her.

***

That is why the Head of the ARMA must overcome the challenges in her work. Regardless of which body will perform the function of managing seized assets, it will be necessary to eliminate the existing problems.  Among them are:

• lack of planning before the transfer of property to the ARMA;
• non-transparency of competitive determination of managers and sellers of seized assets, as well as their sale in general;
• the need for the manager of the seized corporate rights to coordinate their actions in the management body of the legal entity with their owner;
• blocking actions on the management of seized assets through the decisions of courts of non-criminal jurisdiction;
• lack of publicity of the Unified State Register of Assets Seized in Criminal Proceedings.

We have been voicing this improvement plan for several years.

But now, as before, there is little hope that it will be realized. After all, the head of the ARMA cares more about public promotion of her engagement in various initiatives, although some of them do not relate to her powers at all. Such populist trends in the absence of real steps on the part of the head of the Agency are alarming.

Unless these issues are corrected, the management of seized assets will remain a field for abuse filled with corruption risks.

To make matters worse, it will create new problems, whose solution we might not see at all due to the general sentiment of society that the ARMA can no longer be saved.

Kateryna Ryzhenko, Deputy Executive Director of Transparency International Ukraine for Legal Affairs