World Bank puts Armenian fraud case on hold

Sunday September 30, 2007
The Observer

Britain wants action on reports that a water project is mired in corruption. Heather Stewart reports

Britain is urging the World Bank to investigate allegations of corruption and embezzlement in a $35m (£17m) water project in Armenia, which the Washington-based body says are only of 'medium priority'. Bruce Tasker, a British whistleblower, says he has presented the bank with evidence of large-scale fraud in a project to improve the water supply in the Armenian capital Yerevan, but it has so far refused to carry out a full-blown investigation.

With its conciliatory new boss Robert Zoellick at the helm, the World Bank is keen to make a fresh start after the humiliating departure of Paul Wolfowitz earlier this year. Wolfowitz stormed into the bank promising to crack down on corruption, but ended up being embroiled in an ethics scandal of his own concerning lavish pay rises for his girlfriend, Shaha Riza.

Persuading the world's richest countries that their taxpayers' money is being well spent is a critical part of Zoellick's job, but the Armenian case is just one of a backlog of allegations waiting to be examined by the Bank's Institutional Integrity Department - or INT, as it is known.

INT wrote to Washington-based pressure group the Government Accountability Project (Gap), which is backing Tasker's claims, saying the case was 'rank ordered "medium" priority, and as such remains in a queue pending the availability of investigative resources'.

The British Ambassador in Armenia has written to the World Bank, urging it to carry out a full investigation.

'We've run into a wall,' said Gap's director, Bea Edwards. 'We have extensive documentation. It involves high-level government officers, a lot of money and basic services. What else do they want? They've been completely unhelpful.'

She says the Armenian case is important, because it could point to potential problems in the way other World Bank projects are run, particularly in the former Soviet Union.

Tasker is a British engineer appointed by an Armenian parliamentary commission investigating the Yerevan scheme. He claims that as soon as he began to examine the details of the project, it became clear that it was riddled with corruption, 'from start to finish, from top to bottom. The fact is it was not an isolated case of a few thousand dollars here or there, it was tens of millions of dollars.'

The original purpose of the project was to repair Yerevan's pipelines, and improve the water supply to households, but he says that by the time the work got under way it had shifted to installing water meters instead.

Tasker claims contractors were able to pocket up to $10 profit on the sale of each meter by charging customers for installation. His commission was told that the average number of water meters per customer was 1.5.

The bank's failure to pursue the allegations underlines the critical findings of a panel chaired by former Federal Reserve chairman Paul Volcker, which revealed serious weaknesses in the way the way INT investigates allegations of wrongdoing. INT is run by a Wolfowitz appointee, Suzanne Folsom. Volcker's team found that the unit had achieved 'some notable successes', but warned of 'serious operational issues and severe strains in relations' with other parts of the bank, and said its work had sometimes contributed to 'counterproductive relations' with both donor and recipient countries.

Wolfowitz's critics had accused him of cracking down hard on alleged corruption in countries where the US has a political axe to grind, but turning a blind eye to problems in more friendly regions of the world.

Jeff Powell, of pressure group the Bretton Woods project, said it was still too often left to politicians to decide which allegations to pursue. 'This case is indicative of the fact that senior management and the board of the World Bank have not taken seriously the issue of corruption,' he said.

A World Bank spokesman said he would not comment on a specific case.

Note: Above are excerpts from the article. The full article appears here. Clarifications and comments by me are contained in {}. Deletions are marked by [...]. The bold emphasis is mine.

Corruption Survey: No Improvement

Volume 73, No. 39, September 29, 2007
Armenian Weekly, MA

YEREVAN (Combined Sources)—Endemic government corruption in Armenia has not decreased in the past year despite Armenian leaders’ assurances they are addressing the problem in earnest, according to an annual global survey released this month by Transparency International, a global NGO committed to fighting corruption.

The Berlin-based Transparency International again rated countries of the world on a 10-point scale, with zero indicating an extremely high degree of corruption as perceived by experts, entrepreneurs and ordinary citizens.

Armenia and five other states ranked 99th out of 180 nations covered by the Index. It was assigned a score of 3.0, faring slightly worse than it did in the previous CPI released one year ago. The score is based on seven corruption-related surveys conducted in Armenia by other organizations, including the World Bank.

Armenia was again judged to be less corrupt that most other ex-Soviet states, including Russia and Azerbaijan. The latter occupies 150th in the rankings. By contrast, Armenia’s other former Soviet neighbor, Georgia, jumped to 79th place, having seen its CPI score rise from 2.9 to 3.4.

Armenia’s score was taken from a combination of six surveys carried out by experts from the Asian Development Bank, Bertelsmann Transitional Index, the World Bank, the International Bank for Reconstruction and Development, the Freedom House, the Global Insight, the International Union of Merchants and the World Economic Forum.

The survey focuses on corruption in the public sector and among politicians. The organization defines corruption as “the misuse of entrusted power for private gain.”

More than half of the 180 states that were examined received scores of three or less, which indicates that funds needed for education, medicine and infrastructure are being pocketed by politicians.

Amalia Kostanyan, head of Transparency’s Armenian affiliate, the Center for Regional Development, said the findings of the latest survey are further indication of a lack of progress in the Armenian government’s stated anti-corruption efforts. She said those efforts have proved ineffectual because of their heavy emphasis on legal amendments and what she called a lack of government commitment to rule of law.

Kostanyan argued that prosecution of senior government officials on corruption charges remain extremely rare. “Risks involved in corrupt practices remain very low,” she said.

The government claims to have successfully implemented a three-year plan of actions aimed at tackling bribery and other corrupt practices. However, there is little evidence that the set of mainly legislative measures, unveiled in late 2003, has had a major impact on the situation on the ground.

Earlier this year, Kostanyan resigned from a government body monitoring the program’s implementation in protest against its perceived inactivity. The resignation followed the publication of a CRD opinion poll, which found that nearly two-thirds of Armenians believe that corruption has increased in recent years.

In a Dec. 2006 interview with RFE/RL, the late Prime Minister Andranik Margaryan admitted that his government’s anti-corruption drive has not been “as effective as we hoped.” He said Yerevan would ask Western donors to help it draw up a new strategy that “ascertain[s] mechanisms for putting the [anti-graft] legislative framework into practice.” It is not clear if his successor, Serge Sargsyan, intends to do that.

Note: Above are excerpts from the article. The full article appears here. Clarifications and comments by me are contained in {}. Deletions are marked by [...]. The bold emphasis is mine.

Kocharian Forms New Body To Tackle Tax Fraud

Armenialiberty.org, Armenia - Sep 18, 2007
By Emil Danielyan

Just days after lambasting tax authorities, President Robert Kocharian has set up an ad hoc commission tasked with helping to ensure that the Armenian government’s tax revenues reach the level of “civilized countries.”

Kocharian’s office said late Monday that the inter-agency commission will be headed by the chief of the State Tax Service (STS), Vahram Barseghian, and comprise officials from the presidential administration and the State Customs Committee (SCC). Representatives of the police, the National Security Service and the Prosecutor-General’s Office will also sit on the body.

A statement by the presidential press service said its main function will be to crack down on widespread tax fraud and curtail the huge informal sector of the Armenian economy. It said the commission held its first meeting, chaired by Kocharian, earlier on Monday.

Kocharian was cited as demanding a “serious fight against shadowy economic activities.” He reminded commission members that Armenian tax revenues still make up a disproportionately low share of Gross Domestic Product despite having risen considerably in recent years. They must strive to make sure that Armenia’s tax/GDP ratio comes close to that of “civilized countries,” he added, according to the statement.

The proportion was below 14 percent last year and will at best reach 15 percent this year, one of the lowest indicators in the former Soviet Union.

“The amount of taxes we collect is small,” Prime Minister Serzh Sarkisian said late last week. “To begin with, we must first raise it to the level of medium-income countries. This will be one of my most important tasks.”

Kocharian set up the special body five days after accusing the STS and the SCC of failing to combat tax evasion, tolerating corruption within their ranks and giving privileged treatment to some businessmen. He told the two bodies to suggest concrete ways of addressing these problems and instructed law-enforcement authorities to “identify and strictly punish tax and customs officials engaged in favoritism.”

Many of Armenia’s wealthiest entrepreneurs are believed to grossly underreport their earnings, ranking suspiciously low on the lists of leading corporate taxpayers regularly released by the STS. Some of the so-called “oligarchs” have close ties with Kocharian and Sarkisian.

Note: Above are excerpts from the article. The full article appears here. Clarifications and comments by me are contained in {}. Deletions are marked by [...]. The bold emphasis is mine.

Opposition Figure Unexpectedly Set Free

Armenialiberty.org, Armenia - Sep 7, 2007
By Ruzanna Stepanian and Ruzanna Khachatrian

Aleksandr Arzumanian, a former foreign minister opposed to Armenia’s current leadership, was unexpectedly set free late Thursday after spending four months in jail on charges of being illegally financed from abroad.

Law-enforcement authorities made it clear on Friday that the charges have not been dropped and that Arzumanian may still stand trial for what they regard as money laundering. Prosecutor-General Aghvan Hovsepian said he personally ordered the surprise release in view of new facts that emerged during the politically charged investigation

Arzumanian, who has repeatedly rejected the accusations as unfounded and politically motivated, briefly spoke to RFE/RL moments after his release from the basement jail of Armenia’s National Security Service (NSS). “I was asleep when prison guards woke and told me to go home,” he said by phone.

The former minister, who set up last year a small opposition group campaigning for regime change in the country, was reluctant to comment on his release. “I came out of the prison two minutes ago and am very tired,” he said. “I can’t wait to go back to my family and kiss my child. I don’t care about anything else right now.”

Arzumanian avoided any contacts with media the next day. Family members said he will speak up next week.

Arzumanian was set free just one week after a Yerevan court agreed to let the NSS keep him under arrest for two more months, dismissing protests from his defense lawyer. The court ruled that the oppositionist could obstruct the ongoing investigation, have “illegal influence” on investigators and even go into hiding if he were to be set free.

Arzumanian, who had served as Armenia’s foreign minister from 1996-1998, was arrested on May 7 on charges of illegally receiving a large amount of money from Levon Markos, a fugitive Russian businessman of Armenian descent. His arrest came two days after NSS officers searched his Yerevan apartment and confiscated $55,400 worth of cash kept there.

They also searched and confiscated a similar sum in the Yerevan home of Vahan Shirkhanian, another former government minister and a senior member of Arzumanian’s Civic Resistance Movement. But unlike Arzumanian, Shirkhanian was not prosecuted for attempting to “legalize revenues obtained by criminal means.” Both men deny being financed by Markos.

The NSS faced more questions about the credibility of its case when a Moscow-based friend of Arzumanian’s, Aleksandr Aghazarian, publicly stated that he is the one who sent the money to the former minister. Two NSS officers and a prosecutor were sent to Moscow shortly afterwards to investigate the claims. The security agency said last month that it has asked Russian law-enforcement authorities to check their veracity and look into the legality of Aghazarian’s revenues.

“I issued the order [to release Arzumanian] because I made sure that our law-enforcement bodies have done everything in Armenia and the Russian Federation within the framework of the criminal case,” Prosecutor-General Hovsepian told reporters.

Hovsepian said he believes Russian prosecutors will take “a lot of time” to respond to their Armenian colleagues’ inquiry. “In these circumstances, I found it inexpedient to keep Arzumanian under arrest,” he explained.

The chief Armenian prosecutor insisted that Arzumanian is not a political prisoner, dismissing claims to the contrary made by many opposition leaders. He said he believes Arzumanian is guilty of money laundering.

“Those sums were sent from Russian by means of illegal bank transfers and in the name of other individuals acting as a front [for the recipient,]” Hovsepian said, adding that Arzumanian has failed to explain “the need for receving and spending those sums.”

Arzumanian’s lawyer Hovik Arsenian, meanwhile, said on Friday that his client can not be prosecuted even if the money sent to him is found to be of dubious origin. Arsenian and other critics of the criminal case argue that Armenians receive at least $1 billion in cash remittances from their relatives and friends working abroad and that Armenian law does not obligate them to prove that the money was earned legally.

Note: Above are excerpts from the article. The full article appears here. Clarifications and comments by me are contained in {}. Deletions are marked by [...]. The bold emphasis is mine.

Escape or Torture?: Police under spotlight as death of witness raises questions

May 22, 2007
ArmeniaNow.com, Armenia
By Vahan Ishkhanyan
ArmeniaNow reporter

Human rights activists have joined the number of family members and media who want to see a thorough and independent investigation into the death last Saturday (May 12) of Levon Gulyan, who died in police custody, where he was summoned as a witness to a murder.
Police claim the 30 year old husband and father of two died after falling out a second-floor window while trying to escape from police questioning.

His family and agencies that include the International Helsinki Federation for Human Rights (IHF) are suspicious of the police account of events.

On Thursday Aaron Rhodes, chairman of IHF, sent a letter to the chief of Police Service, encouraging a full investigation, citing a “past record of suspicious cases of death in police custody in Armenia and the fact that torture and ill-treatment by the police remain serious problems”.

Gulyan’s family believe their loved-one was beaten to death by police.

Whatever the cause, his death is linked to May 9, when Stepan Vardanyan, was shot dead near a restaurant owned by Gulyan in the Shengavit district of Yerevan.

Vardanyan was the son of Gagik Vardanyan, who owns a sauna near Gulyan’s restaurant. He was killed about 10 p.m. in what might be gang-related violence, as two other killings have taken place between Vardanyan’s and another clan.

According to restaurant staff, shortly before the killing, Gulyan had asked rival clan members to leave the neighborhood, and had told his staff to stay inside. Gulyan witnessed the murder, but told police he could not identify the killer.

A few hours after the killing, police took Gulyan from his home at about 3 a.m. and held him until about 10:30 p.m., demanding that he return the next day (May 11).

Gulyan returned to police at 10 a.m. the next day (May 11) and was held for 24 hours until he was released, so that he could go to vote in the parliamentary election. He was told to return in two hours.

Gulyan returned as appointed. By 6 p.m. his body was in a city morgue.

In the time after his release for questioning, Gulyan told his family that he had been repeatedly beaten while investigators demanded that he name the killer. According to relatives, Gulyan told police he wanted an attorney present. He claimed he was told by police that if he brought a lawyer, the lawyer would also be beaten. Family members, including an uncle, Hovik Papazyan, say Gulyan told them he had been beaten by Hovik Soghomonyan, deputy head of the Shengavit police department.

The family says that on the day of his death, Gulyan was picked up by Hovik Tamamyan, deputy head of criminal division in the deputy’s own car to be taken to the police department. Sayat Shirinyan, head of the police information and public relations department says Tamamyan is not connected with the case.

Tamamyan has a reputation for cruelty. Two murders are connected with his name. He gained renown in 2004 as the head of the Kentron police department, who harshly squared accounts with the participants of the April rallies, particularly as he allegedly ordered the beating of Mher Ghalachyan, a journalist of the Chorrord Ishkanutyun newspaper. There is information that Tamamyan is a friend of the Vardanyan family and wanted to immediately find the killer.

A statement by the police said: “Gulyan asked one of the department representatives for some water in one of the offices and, taking advantage of the officer’s absence, made an attempt to escape through the window, but, slipping, fell down from the first floor and died immediately of injuries received in the fall.”

Jemma Gulyan was among those protesting her husband’s death

The Gulyans maintain that he was beaten to death and was then thrown from the window.

“Why should my brother try to escape, when he twice went to the police on his own. He wouldn’t go, if he were going to run away,” says he sister Armine.

May 15th Larisa Alaverdyan, the first ombudswoman of Armenia, and director of the non-governmental organization Against Violation of Law, told a press conference summoned on the occasion of Levon Gulyan’s death that the Republic of Armenia Police must take responsibility for Gulyan’s death.

Even if the police explanation that Gulyan slipped while trying to escape were true, what conditions exist to make a cooperative witness try to escape from police questioning?

“This is a harshest violation of the basic right for life. A healthy man enters a state structure, but relatives get back his corpse,” Alaverdyan said.

Another sister, Lilit, said the family will not bury Gulyan until an autopsy has been performed by an outside authority.

Upon the request of the family, the Organization for Security and Cooperation in Europe (OSCE) has invited specialists from Denmark and Germany to do a forensic investigation.

The preliminary forensic medical examination states Gulyan’s death was the result of fatal injuries that included fractures of the skull, thorax, spine and ribs.

(The family hired three attorneys, but on May 15, all three withdrew from the case for unknown reasons.)

Police showed journalists the scene of Gulyan’s death, saying that he had fallen while trying to jump to grab a pipe some two meters from the window.

It could be argued, however, that someone attempting to flee through the window could more simply escape by jumping directly to the tin roof of the basement under the window. It also appears that someone who would have fallen reaching for the pipe, would have landed on the roof, rather than the asphalt. However, no marks appeared on the roof indicating such a fall.

The Gulyan family was accepted by deputy heads of the police Ararat Mahtesyan and Armen Yeritsyan, who promised to hold an unbiased investigation and to reveal all its findings.

However, both press and rights activists are skeptical about the possibility the guilty is found. As a rule murders committed inside the police are not disclosed. In the rare cases available, police officers are tried for alleged abuse of power and not murders.

A year ago ArmeniaNow published an article on the case of Armen Ghambaryan, who suffered a ruptured spleen while in police custody (see Accused Accusers).Neither Ghambaryan’s nor his lawyer’s protests to find the person responsible came to any result, while Ghambaryan, despite his bad health, is still in the isolation cell.

A press conference has been scheduled for 6 p.m. Saturday, during which preliminary findings of forensic specialists from Denmark and Germany will be released.

A site has been launched in connection with Gulyan’s case www.levon-gulyan.info .

Note: Above are excerpts from the article. The full article appears here. Clarifications and comments by me are contained in {}. Deletions are marked by [...]. The bold emphasis is mine.

Armenians See Increased Corruption, Shows New Survey

Wednesday 31, January 2007
ArmeniaLiberty

By Emil Danielyan and Shakeh Avoyan

Almost two in three Armenians believe that corruption in their country has increased in recent years despite declared government efforts to combat it, according to new research made public on Wednesday.

A nationwide opinion poll conducted by the Armenian affiliate of the Berlin-based Transparency International last August also suggests that Armenia’s leaders and state institutions are perceived to be corrupt by the vast majority of citizens.

Its findings are a damning indictment of a three-year plan of anti-corruption actions that was launched by the Armenian government with the blessing of Western donors in late 2003. The plan was supposed to reduce the scale of bribery, nepotism and other corrupt practices.

However, 64 percent of 1,500 families randomly interviewed across the country said those practices have become even more widespread in the past three years. Many respondents said corruption has engulfed new areas of life such as enterprise registration, enforcement of judicial acts, and conduct of elections increasingly characterized by vote buying. Graft is still perceived to be widespread in law-enforcement, tax collection, education and healthcare, the survey shows.

According to the pollsters, 62.5 percent of Armenians consider President Robert Kocharian to be corrupt. Public perception of other senior officials is even more negative, with almost two thirds of those polled describing the Armenian government ministers as “very corrupt.”

That might explain why Armenia continues to fare poorly in Transparency International’s annual surveys of corruption perceptions around the world. Armenia ranked 93rd out of 161 countries covered by the anti-graft watchdog’s most recent Corruption Perception Index released last November.

The Organization for Economic Cooperation and Development (OECD) also made a critical assessment of the results of the Armenian government’s stated anti-corruption drive. An OECD report released on December 18 noted in particular that "the number of convictions for corruption is low, especially for high-ranking officials.”

In a late December interview with RFE/RL, Prime Minister Andranik Markarian admitted that his government’s anti-corruption measures, mainly involving changes to various Armenian laws, “have not been as effective as we hoped.” He said Yerevan will soon ask Western donors to help it draw up a new strategy that will “ascertain mechanisms for putting the [anti-graft] legislative framework into practice.”

Tigran Sarkisian, chairman of the Armenian Central Bank and the only high-ranking official present at the survey’s publication, admitted that corruption is “one of the most serious obstacles to the development of our country.” “That is not a secret to anyone,” he told RFE/RL. Sarkisian insisted that the Armenian authorities are committed to tackling the problem but lack civil society support.

That commitment is strongly questioned by Armenian representatives of Transparency International and local civic groups. “Corruption is a government ideology in Armenia,” said Avetik Ishkhanian of the Armenian Helsinki Committee. “What is more, the authorities themselves foster corruption. They do so because officials mired in corruption are much more manageable.”

Respondents were also asked to suggest effective solutions to corruption. The most frequent answer, given by 22.5 percent of them, was free and fair elections.

Note: Above are excerpts from the article. The full article appears here. Clarifications and comments by me are contained in {}. Deletions are marked by [...]. The bold emphasis is mine.