Privatization Irregularities Surface in Adjara as Quiet Investigation Gets Underway

FROM THE REDACTION

Constitutional Security Department still has been investigating damage caused to the budget during privatizations in Adjara.

According to the investigation, objects were sold at artificially low prices. Chairman of the government of Adjara Levan Varshalomidze sold a big object using the direct selling rule. Another object that became a subject of the investigation was bought by the sister of the state minister Kakha Bendukidze in 2005.
Privatization of the state owned property in Adjara started only in 2004 because the former head of the Autonomous Republic of Adjara Aslan Abashidze was ignoring the bidding law. One of the first privatized objects was the agriculture bazaar in Batumi. The attempt to sell it backfired because vendors were refusing to leave the place. Thereupon, special security forces interfered and a local opposition leader, who was protecting the vendors’ interests and protesting against privatization, ended up in jail.
According to the bidding documents, the bazaar (land area – 5147 m2, general area of the building – 9956 m2, credit liability GEL 200 903) was sold to JSC Delf bought for USD 110 thousand. Moreover, the company, which is owned by Bendukidze’s sister, who also owns Vake swimming pool, undertook an obligation to construct a swimming pool in Batumi for two years period.
The Batumi agriculture bazaar is one privatized property out of nine that became a subject of an ongoing investigation by the Constitutional Security Department. According to CSD, purchases prices were artificially reduced. For that reason, the department filed a lawsuit against executives of the Ministry of Economy and Finance of Adjara, charging them with abuse of authority and in August 2005 asked the Batumi City Court to subpoena the bidding documents from the local government.
Although the CSD has not made its allegations public, Georgia Today learned about the investigation from court papers it unofficially obtained in November 2007. Additional evidence came from other documents provided by various state bodies, confirming that the department was carrying out the investigation.
These initial nine papers reveal an request made by Chkhutunidze, the senior investigator for highly important cases of Department II of the First Administration of the CSD, to subpoena bidding documents from the Ministry of Finance and Economy.
The CSD had the following motive: “Lawsuit launched according to Part I of Article 332 of the Criminal Code of Georgia regarding abuse of authority by some executives of the Ministry of Finance and Economy of the Autonomous Republic of Adjara revealed that during privatization of various objects initial selling prices of the objects were artificially decreased and for that reason the state budget suffered a lot.” This motivation has been named in the petition asking to subpoena the papers related to the privatization of all the objects.
In the beginning of December, Georgia Today contacted Prosecutor’s office of Adjara, General Prosecutor’s Office of Georgia and the Constitutional Security Department of Georgia, asking whether or not a privatization-related investigation was underway.
The first two bodies responded that there was no preliminary investigation in the Prosecutor’s Office of Adjara related to bidding for those places. However, Adjaran Investigation Department of the Constitutional Security Department of the Georgian Ministry of Internal Affairs provided the information (although taking longer than the legally mandated 10-day reply period) telling that Criminal Case No 089050029 was underway in relation to the privatization of those objects.
One of the objects was sold according to the direct sale rule. Documents of Vocational Education Center located at 2/21 Vazha Pshavela St. in Batumi revealed some irregularities. The bidding document says that the object was sold in 2006, but the law enforcement bodies became interested in it a year earlier.
Order No 71 issued by the Chairman of the Government of the Autonomous Republic of Adjara stated that this object was directly sold to Nurol insaat ve tikaret Anonim Sikret (A.S), the company founded by Nurol Holding. This document was issued by the Ministry of Economy and Finance of Adjara.
Ownership certificate on that object was issued on October 10, 2006. Pursuant to the agreement, former vocational education center’s building (total area 6124 m2) together with land area of 8940 m2 was sold for the Georgian lari equivalent of $450,000. Moreover, according to the terms and conditions of the agreement, the buyer was obliged to construct a five-star hotel with a minimum of 150 rooms on that territory and make a $20 million investment in it.
Why was the CSD calling back the bidding documents a year before the privatization occurred in 2006? The dating inconsistencies suggest that the sale of this object may have been legally registered a year after the actual transaction with Nurol Holding’s daughter company took place.
Other privatized objects whose investigation in underway was sold on auction.
The investigation, counting from the date of court order, has been underway for more than two years and four months now and has not been finished yet. It is unclear who, if anyone, was charged with abuse of authority and why the investigation has been still underway.
It is interesting that Kakha Shavadze, who was Adjara’s Minister of Economy and Finance on August 31, 2005, when the investigators first filed court documents, voluntarily resigned on January 26, 2006.
Alexander Bezhandze, who was the Minister of Economy and Finance in Adjara in 2004 and 2005, also decided to leave office of his own volition.
Natela Tsiklashvili, who has been the Minister of Economy and Finance of Adjara since 2005, and Levan Varshalomidze, who has been the Chairman of the Government of Adjara since 2004, have retained their positions.