When Russian troops advanced into the trenches in eastern Ukraine in 2024, Ukrainian artillery positions fired back. However, the shells did not explode near the enemy, but fell out of the launch tube feebly, or landed with a muffled sound and stirred up a puff of smoke. The investigation found that a local Ukrainian arsenal supplied the military with thousands of inferior mortar shells. This incident became one of the most high-profile defense industry fraud cases during the Ukraine-Russia war. Leonid Shyman, the head of the arsenal, was eventually arrested and prosecuted.
However, a confidential Ukrainian government audit obtained by The New York Times shows that the Defense Procurement Agency continued to award new contracts to Seaman's factories despite officials identifying flaws in the weapons. According to audit reports, court records and Ukrainian news reports obtained by The New York Times, this phenomenon is common on the battlefield in Ukraine. Seven of the top ten military contractors have been able to obtain new orders even though they faced open criminal investigations for fraud, failed to perform previous contracts, and even had their CEOs arrested for corruption.
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Take Seaman as an example. When he won his first mortar contract, he was already facing multiple investigations by anti-corruption agencies for suspected embezzlement and fraud. The government even handed him a contract worth US$280 million (approximately NT$8.9 billion) while he was on bail awaiting trial on corruption charges.
A confidential review by the State Audit Service and the Defense Department's internal audit department has revealed that Ukraine's military procurement system is riddled with serious mismanagement, with warning signs ignored and few consequences for overbilling or non-delivery. Some companies were awarded contracts without proving their supply capabilities or lacking delivery licenses. Auditors even uncovered 18 companies that had defaulted on previous agreements but then signed again, six of which never even fulfilled any of the contracts.
This system, riddled with holes, has enriched the pockets of arms dealers around the world, including Ukrainian and American companies. Internal government audits show that in 2024 alone, Ukraine lost approximately US$1.2 billion (approximately NT$38 billion) due to fraud, waste and mismanagement. The huge and never-disclosed losses mount as Ukrainian President Volodymyr Zelenskyy pleads with allies for more weapons and financial aid.
Tamerlan Vahabov, a former consultant to the Defense Procurement Agency, said bluntly in an interview: "The army does not get the supplies it needs, and the budget is shrinking due to non-deliveries and overpayments. The result is that we have no money to order more weapons and insufficient ammunition. This has become a pattern that keeps repeating itself."
The New York Times pointed out that these audit reports covering 2024 and 2025 are like an "autopsy" report on the military outsourcing process. For example, in a 2024 rocket launch case worth hundreds of millions of dollars, the Defense Procurement Agency ignored the lowest bid from the Turkish manufacturer Arca Defense and instead awarded the contract to the subsidiary of the Czech Group (Czechoslovak Group), which had the highest bid and acted as an intermediary. Auditors stated that this decision was "without justification" and resulted in Ukraine paying approximately $130 million more.
This procurement process, which supported Ukraine's fight in the early stages of the war and promoted the drone revolution, has now become Ukraine's Achilles' heel, even shaking domestic politics. Former Defense Minister Mykhailo Fedorov, who had tried to overhaul the system, said after his dismissal that there was "serious corruption internally" and claimed that he was forced to step down by defense contractors. The incident triggered the largest street protests since the war began.
Although Zelensky has repeatedly declared that he will crack down on corruption, he has failed to effectively clean up the procurement system, and the problem has even spread to his inner circle. American anti-corruption expert James Wasserstrom said emphatically: "In Ukraine, anything that is not crucified will be stolen. This has been a long-standing tradition."
