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Tank maker paid Ukrainian broker to secure $92M,
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Roshel Inc. countersuing ex-employee for $11 million in damages for “defamation, malicious falsehood” and breach of contract
Published May 02, 2023 • Last updated 5 minutes ago • 7 minute read
FILE: Canadian-made Roshel Senator armoured-personnel vehicles, part of Canada’s military aid to the country. Photo by Roshel
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OTTAWA — Canadian defence company Roshel allegedly committed “illegal acts” and broke anti-corruption laws to secure a sole-sourced, $92-million contract with the federal government for armoured vehicles destined for Ukraine, according to a former executive’s lawsuit.
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The Canadian Commercial Corporation (CCC), the federal Crown corporation overseeing the deal, says it is “deeply concerned” with the claims and had asked Mississauga-based Roshel Inc. to cease production for nearly one month while it investigated the allegations of “corruption and bribery” with the Department of National Defence.
“Upon learning of the allegations, CCC advised Roshel to suspend work under the contract (on March 16). Work was suspended and the audit commenced,” spokeswoman Susannah Denovan Fortier said in a statement.
The audit is ongoing, but because the vehicles are “urgently needed in Ukraine,” CCC advised Roshel to resume full production and deliveries to Ukraine on April 12, she added.
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The company vehemently denies any allegations of wrongdoing.
The CCC’s audit is related to allegations that Roshel paid cash to a former Ukrainian official to “influence decisions made by the Ukrainian government and/or military” that culminated in Canada’s purchase of 200 of the company’s vehicles in January to be sent to Ukraine, according to a lawsuit filed on Feb. 28 by Anton Sestritsyn.
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Sestritsyn, who was the company’s vice-president of business development from June 2022 until his resignation in February, is suing Roshel and its president, Roman Shimonov, for $1.5 million for wrongful or constructive dismissal.
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In his lawsuit, he claims the company failed to pay him a $460,000 commission for helping broker the deal with the government and instead “misappropriated” the money for “unlawful purposes” that break international and Canadian anti-corruption laws. He also wants the court to order an accounting and tracing of all money sent by the government to Roshel as part of the $92-million deal.
In a statement, Roshel and Shimonov’s lawyer, Asher Honickman, said the allegations are “utterly false” and “highly defamatory.” In a statement of defence, the company said it never promised Sestritsyn any form of bonus or commission in his contract.
Last week, the company filed a countersuit against Sestritsyn demanding a total of $11 million in damages for “defamation, malicious falsehood” and breach of contract.
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“Roshel and Mr. Shimonov have conducted themselves with the utmost honesty and integrity in their business dealings generally and in relation to the contracts referenced in the Statement of Claim in particular. Mr. Sestritsyn is a former employee of Roshel who resigned after Roshel refused to accede to his baseless and extra-contractual demand of approximately $460,000,” Honickman said in a statement.
The National Post first reported in January on questions being raised about how Roshel managed to secure the $92-million contract with the Canadian government for 200 of the company’s Senator armoured personnel carriers (APC) for Ukraine without any competition.
At the time, the government said all procurement guidelines had been followed. Shimonov said the company had already sold 300 Senator APCs directly to Ukraine in August 2022 and that Roshel was the only supplier who could offer “extensive after-sale support” and the ability to service vehicles on the ground.
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Defence Minister Anita Anand’s office also said in January that the request for Roshel’s Senator APCs came directly from Ukrainian Defence Minister Oleksii Reznikov.
But in his lawsuit, Sestritsyn — who was directly involved in brokering the deal with the federal government — alleges that the company paid a former Ukrainian government official, Pavlo Barbul, cash to push the Ukrainian government and military to favour Roshel’s equipment. Roshel denies the claim.
According to a U.S. State Department report, Barbul was charged with large-scale embezzlement in 2019 relating to allegations of a fictitious procurement contract during his time as head of Ukraine’s state-owned defence company SpetsTechnoExport until 2018.
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Barbul did not respond to requests for comment sent to his LinkedIn and personal Facebook pages.
Sestritsyn alleges that Barbul’s job was to arrange procurement contracts for Roshel’s equipment to the Ukrainian government. He claims Barbul dealt with Oleksandr Liev, the acting head of military equipment procurement at Ukraine’s Ministry of Defence, as part of his work for Roshel.
Sestritsyn says it was Liev who signed an earlier August 2022 contract on behalf of the Ukrainian government with Roshel for 300 Senator APCs.
Six months later, Liev resigned after being accused of pro-Russian views by the head of Ukraine’s Anti-Corruption Center.
“Mr. Barbul’s role on behalf of Roshel was that of a ‘deus ex machina’ in lobbying Ukrainian officials at the direction of Roshel and/or Mr. Shimonov. Mr. Sestritsyn believes that Roshel and/or Mr. Shimonov paid cash to Mr. Barbul in order to influence decisions made by the Ukrainian government and/or military in favour of Roshel,” reads the lawsuit.
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In its statement of defence, Roshel said it had hired Dynamic Systems, the company where Barbul worked, to assist in finding sales opportunities in the Commonwealth of Independent States (which includes Ukraine) in exchange for a contract price commission.
But it denied that Barbul had ever engaged with a Ukrainian official, including Liev, on the company’s behalf.
“At all material times, Roshel conducted business through official channels, and all of its mandates are supported by documentation,” reads the company’s defence. Roshel and Shimonov “deny that they have engaged in any illegal, unethical, dishonest or corrupt acts.”
The company also said that Sestritsyn never expressed concerns about “anything unlawful or untowards about Roshel’s business dealings” while playing an “important role” coordinating the company’s contracts. It was only when Sestritsyn demanded to be paid a 0.5 per cent commission on the deal that he began expressing concerns about the company’s behaviour, Roshel alleges.
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But Sestritsyn says he only discovered Barbul’s role with the company on Feb. 10, weeks after Canada agreed to purchase 200 Senator APCs for Ukraine, during a discussion with Shimonov during which the company president allegedly “reneged” on his promise of a commission.
“As justification for his refusal, Mr. Shimonov told Mr. Sestritsyn in Russian, ‘You realize Pavlo is not doing this for free. I need to pay Ukrainians,’” reads the lawsuit.
Sestritsyn also claims that Shimonov, who is also Ukrainian, considered in early 2022 that a Russian invasion of Ukraine “would be extremely lucrative for Roshel and for Mr. Shimonov personally.” He says Shimonov hoped Canada would purchase a “large number of APCs” for Ukraine in that case.
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The company admitted in court documents that it “hoped” that Canada would aid Ukraine if Russia launched an invasion, but denied it had anything to do with financial motives. The company says the hope was born of Roshel and Shimonov’s commitment to the defence of Ukraine against Russian aggression.
Shimonov’s alleged hope was not in vain, as shortly after Russia invaded Ukraine in February 2022, Roshel hired lobbying firm Earnscliffe (where Sestritsyn worked at the time) to broker a deal for eight APCs to be sent to Ukraine from the Canadian government.
In April 2022, Sestritysn says a contract was signed at a cost of $325,000 per unit, whereas the company says it was $370,000.
His lawsuit alleges that when Canada purchased 200 more Senator APCs less than one year later, the price had jumped nearly $100,000 to $464,650.
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In its statement of defence, Roshel admits the vehicles increased in price but do not specify by how much. The company said the increase was due to higher price tags for a Ford 550 chassis (which is what the Senator APC is built on), materials like glass and steel, shipping costs as well as employee overtime to get the vehicles built quickly.
“The basis for the price increase was explained to CCC with supporting evidence and CCC agreed to it,” the company argues.
Sestritsyn also says the company “benefited” from the fact the sale was sourced through the Canadian Commercial Corporation instead of regular military procurement.
“As a result, the procurement process for Roshel was shorter and less rigorous than the normal bidding process,” reads his lawsuit.
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Roshel admitted that it did benefit from a shorter procurement process via CCC in both the first eight vehicle deal with Canada in April 2022 and the 200 APC deal in 2023.
In a statement, CCC said it conducted a “due diligence review” of Roshel that included an Integrity Compliance Assessment and a legal search and financial review of Roshel’s operations, but only in Canada.
But the Crown corporation admits that it amounts to Roshel filling out a questionnaire as well as signing a certificate of compliance that confirms all the information supplied is accurate.
“We are committed to fulfilling our mandate with a high standard of integrity — and retain the right to undertake steps to ensure contract compliance,” CCC spokeswoman Denovan Fortier said.
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In its countersuit, Roshel claims Sestritsyn made off with confidential and proprietary company equipment and documents after his departure, including some he allegedly transferred to his personal email. He also allegedly refused to relinquish control of WhatsApp groups the company used to communicate internally or take any calls from Shimonov.
“Mr. Sestritsyn resigned at the most critical and crucial time with respect to the Roshel-Canada Contract and Roshels’ support of Ukraine more broadly, and he did so with the knowledge and intent that his departure would undermine” the deal, reads the company’s statement of defence.
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