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Concerns over BIG Lottery international funding

An Open Letter to Big Lottery about funding for oligarchs and derivative prolects

Dear Sirs,

As I've recently become aware BIG Lottery had been running an intiative to fund development international communities. I understand that this has ended.

Having applied for Big Lottery funding in the past I have concerns which I wish to express to you.

We are a social enterprise operating since 2004 in Ukraine where the primary focus of our work became the plight of children living in institutional care and on the streets. In October 2006 we'd introduced our proposal for a 'Marshall Plan' strategy to their government and by March 2007 policy decisions to support our childcare reform recommendations had been adopted as government policy.

These included the creation of 400+ rehab centres for disabled children and increases in fostering allowances with the aim of placing avery child in a family home, as argued in the proposal:.

"The point, again, is very simple: to protect safety, health, and security of each and every child in Ukraine. There is absolutely no reason why this cannot be done. EveryChild’s research, published less than a year ago, provides an excellent starting point. Dzherelo Children’s Rehabilitation Center in Lviv has years of experience and available expertise in caring for severely disabled children. It is noteworthy that Dzherelo must rely on private funding because Ukraine’s state budget will not pay for or support a program that is in every way superior to official state care. Many of Dzherelo’s clients are able to remain with their own families, and are transported by minivan to and from Dzherelo’s modern care facilities for basic, periodic medical treatment such as physical and occupational therapy."

One of the greatest risks facing Ukraine was and still is the alarming rate of HIV infection and we drew attention to this, both in our strategy plan and a subsequent entry for the European Citizens Consultation in 2008:    

"We see a staggering array of social problems arising directly from poverty, including but not limited to tens of thousands of children in orphanages or other state care; crime; disrespect for civil government because government cannot be felt or seen as civil for anyone left to suffer in poverty; young people prostituting themselves on the street; drug abuse to alleviate the aches and pains of the suffering that arises from poverty and misery; HIV/AIDS spreading like a plague amidst prostitution, unprotected sex, and drug abuse; more children being born into this mix and ending up in state care at further cost to the state; criminals coming from poverty backgrounds, ending up as bandits, returning to communities after prison, with few options except further criminal activity. These are all part and parcel of the vicious negative cycle of poverty, and this threatens to destroy Ukraine, if Ukraine is defined in terms of people rather than mere geographic boundaries."

During our time in Ukraine the rate of HIV infection had doubled, in spite of hundreds of millions of dollars having been invested in precention programs like the Anti Aids Foundation, run by Elena Franchuk.  

Due to corruption issues, many of those infected go untreated. This is confirmed by a report from an anti corruption organisation in 2013, which reveals how much of the fundings simply disappears.   

In 2008, we'd called on USAID for support, not only for childcare reform but an anti-corruption network comprising the grassroots civic action organisations whod helped us expose the extent of this corruption:

"Although the PN reality is perhaps the absolute worst part of all things in Ukraine stemming from RICO, it is far from the only part in the same vein. There is also the much more visible matter of kids in “regular” orphanages and kids living on the streets and in sewers. Orphanages have been another money-maker via selling “top” kids to foreign adoptions. Kids with lesser market value (over seven years old and/or serious health issues) were shunted to lesser quality, out-of-the-way orphanages. Kids with no market value were tossed aside completely, i.e., PN facilities a.k.a. Death Camps, for Children. President Yushchenko rightfully suspended foreign adoptions for a period of time because orphanages were normally operated more like livestock farms with product for sale. It’s mostly not the staff who are any sort of problem in these orphanages, although redundant independent evidence strongly indicates that sometimes arrangements have somehow been made for adults to come in and “play” with children of their choosing during the night. More often it comes down to even the best, most sincere staff having had their hands tied regarding what little they could do for the children assigned to them, because so much money was displaced as to leave comparative crumbs for caring for the kids. Once orphanage children reach the age of seventeen, they’re booted out into the world with hardly any preparation to deal with it. If kids are attractive enough, they can be (and are) taken into prostitution rings and rented out for sex work. If they got a bit of training at night in their orphanage, they are better prepared for sex work. (In Kharkiv, militia runs that operation. For Donetsk and Donbass, it’s Donetsk mafia. Variations on the same theme play out across Ukraine.) Street kids are street kids mainly because they consider living in orphanages until seventeen worse than living on the streets and sleeping in sewers. Of course they also have access to street drugs to take the edge off their miseries. That coupled with unprotected sex and inevitable prostitution produces an HIV/AIDS factory. In Ukraine at this moment, HIV is a pandemic and getting worse."

It had take 5 years from publication of Death Camps for Children for this story about a place caled Torez to reach mainstream media. One may imagine how much more could have been done with support in raisign awareness at least.

In 2008, I wasn't aware of this international funding and neither I imagine were most of the British Public when your support for a project in Ukraine run by Sir Elton John and Elena Franchuk was announced.  Like our own work, it seems to be focussed on placing children in family homes.

Both Sir Elton and Elena Franchuk are persons of considerable wealth who might easily have funded their own initiatves. Franchuk was reported as having spent £80 million a few years ago on a house in Kensington, yet this philanthropy seems to depend on the millions of hopefuls, many struggling to make ends meet, who pin their hopes on winning the lottery.

I didn't apply to fund our work in Ukraine  What I did apply for was BBC Village SOS and a proposal for a community hub in which I introduced the business model which we had brought to the social enterprise community in 2004.   

Ours is a business which operates autonomously for social benefit and derives from a 1996 paper which set out the concept of a business which invests a least 50% of profit in community objectives, while distributing no dividends. In the application for Parkend village we describe the "Application of business for profit to achieve social outcomes" as our primary objective.

I understood and accepted the rejection of our plan on the basis of not demonstrating sufficient local stakeholder support and yet, the following year I learned that the Social Enteprise Mark which replicated much of this business model, aka People-Centered Economic Development.

There was no requirement for local stakeholder support nor research to discover whether this concept already existed, yet.this was the model we'd deployed to fund the work in Ukraine I've described above. In stark contrast, the Social Enterprise Mark was only a template with no history of impact.

P-CED had first been deployed in 1999, to design and source an experimental development iniitative in Tomsk Russia which was described in a 2004 interview about subsequent work for the Crimean Tatat was our business model.

"In 1996, I simply set up a hypothetical 'what if' proposition. What if some businesses decided to change their practices, or institute themselves as new enterprises completely, for the sole purpose of generating massive profits as usual and then using those profits to help people who have little or nothing? That's the way to correct and improve classic capitalism for the broadest benefit worldwide. It's now called social capitalism, or, social enterprise. I still call it the same as I did in 1996: people-centered economic development, and that remains the name of my organization and my web site.

At first, the idea seemed heresy - but not for long, simply because it made sense and it didn't step on the toes of any existing enterprises that were in business to enrich relatively few people. None of them were asked to change anything, but it left open the possibility of more forward-thinking people to step in and do business differently. Even now, I am astonished that the idea struck such a deep and sympathetic chord in so many people so quickly - especially in our top business schools, where one might have thought that they were all in it for the money, for personal wealth, with little regard to social benefit or the poorest of the poor."

Clearly Big Lottery can never be aware of all aspects of social innovation, who's engaged in what and where. At the same time, as I hope I've illustrated, projects based on the work of others are being funded to the detriment of the original such that we who take action using our own resources are undermined.

In the case of Ukraine which is now in a state of civil war, the consequences couldn't be  greater. 


Jeff Mowatt - People-Centered Economic Development UK

Background Notes

Sir Elton John's attempt to adopt an HIV positive child in Ukraine had been blocked by minister Yuri Pavlenko, a reformer of the corrupt childcare system due to Elton's age and single status.  Later however, under the Yanukovitch goverment he was able to arrange a rescue with the help of Elena Franchuk.  

Elena Franchuk is the daughter of former Ukraine President Leonid Kutchma who was deposed by the Orange Revolution of 2004. She is married to oligarch Viktor Pinchuk. Pinchuk had benefittted from the original privatisation of Ukraine's largest steel mill which, it was widely believed was obtained at a highly favourable price.

With their agenda to tackle the issue of corrupt privatisations the mill was put up for re-privatisation in 2005 and was sold to Arcelor Millal at a price of $4.8 billion.

With this money in the treasury,  founder Terry Hallman had argued, Ukraine could afford to contribute half of the investment required for a comprehensive economic development strategy, a 'Marshall Plan' in which the primary focus was placing all children in loving family homes. As e 'Death Camps. For Children' argued.

"Excuses won't work, particularly in light of a handful of oligarchs in Ukraine having been allowed to loot Ukraine's economy for tens of billions of dollars. I point specifically to Akhmetov, Pinchuk, Poroshenko, and Kuchma, and this is certainly not an exhaustive list. These people can single-handedly finance 100% of all that will ever be needed to save Ukraine's orphans. None of them evidently bother to think past their bank accounts, and seem to have at least tacit blessings at this point from the new regime to keep their loot while no one wants to consider Ukraine's death camps, and the widespread poverty that produced them..

It is to the credit of the new regime that, at least, one of the most glaring and egregious thefts of state property has been reversed vis-a-vis the reprivatization of Kryvorishtal Steel company. I argued on Maidan a year ago that this reprivatization was appropriate if the state could get at least $3 billion for the sale as a one-time windfall, then intake taxes annually on profits. Otherwise, it would be to the state's long-term advantage to hold the property as it produced a steady $600 million a year in profits. Akhmetov and Pinchuk, in an insiders' deal that was clearly rigged in their favor, had managed to pay only $800 million for the company in the initial privatization, a fraction of what it was really worth on the open market. When the reprivatization controversy was coming to a boil a year ago, speculation was that it might bring around $2 billion or maybe even as much as three times the rigged purchase price of $800 million. Nobody seemed to believe it could bring $3 billion dollars that I proposed as a minimum bid price. The actual price under what was widely hailed as an open, honest, and transparent bid and sale process: $4.8 billion, or six times what Akhmetov and Pinchuk paid.

Now Ukraine has an extra $4 billion in national budget just from that one correction alone. Which, in turn, is far more than enough to permanently solve Ukraine's orphanage problems as well as create a nationwide poverty relief program to prevent such problems in the future.

Most of these kids come from situations deriving from poverty. This money should be put exactly where it belongs, helping people who have been left with little or nothing due to massive pilfering and looting of Ukraine’s national wealth to start with. $4 billion represents only a small, partial recovery of misappropriated resources, but is enough to bring badly-needed relief. Roughly $800 million in year one is the largest expenditure for childcare reform, with annual recurring costs of about $325 million. If Ukraine’s government gets serious about helping these kids in internats and death camps, it is very likely that large donor organizations will also be willing to help out.

These are secondary means of bringing humanitarian relief. But, the primary reasons why this problem even exists must not be overlooked. Those reasons have names, and a partial listing of those names is above."

In 2011, when the Torez institution described in 'Death Camps for Children' was featured in a Sunday Times article, Rinat Akmetov had pledged to resolve the problems of instiitutional childcare, as we had proposed  

"One champion of these needy children is billionaire Rinat Akhmetov. He has set aside millions to close down every state children’s home in Ukraine by 2017 and replace it with international-standard foster homes. He is right for doing so. After all, a sizable proportion of people in Ukrainian prisons spent their childhood in state care."

That lottery funding was awarded to the Ukraine AIDS project two years before the international funding program should raise questions over Tony Blair's influence on this decision.    

Meanwhile Viktor Pinchuk has been using British courts to try and regain financial control of a mining business.    Among his circle of friends is former PM Tony Blair whose Faith Foundation has benefitted to the tune of $500,000 from Pinchuk's generosity.  That lottery funding was awarded to the Ukraine AIDS project two years befor the international funding program should raise questions over Tony Blair's influence on this decision.    

Pinchuk also hosts the Philanthropic Rountable at the World Economic Forum where Tony Blair hosted the public handwringing last year. It''s no surprise to see that the points about an alternative to traditional capitalism, delivering social outcomes are identical to those found in our 'Marshall Plan' as delivered to government 8 years earlier.

 Among those called on for support was Sir Richard Branson's Virgin Unite, after Davos 2009, when Branson called for business to focus more on social problems.  .