Publication: Eurasia Daily Monitor Volume: 3 Issue: 71

Questions are flying about how the Georgian government operates two special bank accounts earmarked for developing the army and law-enforcement agencies. The funds were established shortly after the November 2003 Rose Revolution. Specifically, Georgian media mogul Badri Patarkatsishvili publicly charged the authorities with forcing Georgian businessmen, including himself, to contribute to these funds as part of a “state racket” (see EDM, March 31). “Businessman should be told why the money was taken, and where it has been spent and by whom…the public should learn the truth,” he added.

Before Patarkatsishvili’s broadside, Georgian NGOs had demanded that the government make these funds transparent, due to speculation that part of the money has been misappropriated. Although both funds have formally placed under liquidation many questions are waiting for answers, including the question of whether the funds have actually been liquidated.

The government, already burdened with other crises, moved to avert a new problem. On April 4, Georgian television broadcast a meeting between Defense Minister Irakli Okruashvili and an elite group of National Movement parliamentarians that is charged with monitoring government spending related to top-secret projects. Givi Targamadze, chair of the Parliamentary Committee for Defense and Security and a member of this Confidence Group, assessed the funds’ operations as “very effective.” Okruashvili said that the Army Development Fund had spent about GEL 35 million (approximately $29 million) since 2004, mostly to develop army infrastructure. However, he denied allegations that businessmen and arrested officials from the former regime were forced to contribute or allowed to buy freedom through highly controversial plea-bargain procedures.

Okruashvili’s statement contradicted a televised statement by Mikhail Machavariani, parliament’s vice-chairman, on April 2. Machavariani bluntly stated that the fund relied on monies exacted from former officials. On March 3, Nika Rurua, deputy chair of the Parliamentary Committee for Defense and Security, also confirmed that the fund survived on donations from Georgian businessmen.

During an October 27, 2005, appearance in parliament Okruashvili had justified the creation of the fund as a temporary and necessary measure, saying that it was financed by “businessmen running their businesses outside Georgia.” Sources say that Tbilisi’s summer 2004 military campaign against the separatist regime in South Ossetia was largely financed by this fund.

Until very recently the authorities assured civic watchdogs that the money accumulated in the funds came from donations from “patriotic businessmen.” Civic watchdogs often criticized the government for keeping these funds away from public scrutiny. The Georgian Young Lawyers’ Association, for example, has been unable to obtain information on the activities of this fund even within the legally established disclosure procedures.

Kakha Kukava, a parliamentarian from the opposition Democratic Front faction, said that the law-enforcement fund was even less transparent than the army fund. Kukava said that Georgian Interior Minister had refused to provide parliamentarians with information about the law-enforcement fund despite repeated requests. Kukava identified several dummy companies through which Georgian businessmen made regular payments to the funds. One of them, Golden Fleece, reportedly contributed several millions of dollars. The ruling party’s parliamentary faction turned down an opposition proposal to create a special parliamentary group to probe the operations of these funds.

However, Georgia media have uncovered some noteworthy facts around the mysterious funds. The founders of the funds are the prosecutor-general, the interior and defense ministers, and several other figures largely unknown to the public. Despite their vague agenda of reforming defense and law-enforcement structures, the funds were registered as private entities, which legally limits access to their information and, according to pundits, which leaves many loopholes for misappropriation of funds. Khvalindeli Dge daily claims that about 30 companies have regularly paid into the funds, which together had accumulated some GEL 500 million (about $277 million). The NGOs and media claim that the government has only slightly disclosed the funds’ activities and that it is impossible to audit any figures provided by the government due to the lack of transparency. Furthermore, no governmental agency, including the Ministry of Finance and the Control Chamber (parliament’s watchdog), can monitor spending by the funds because they are not part of the state budget.

The existence of secret governmental funds spending money without any civic oversight has become a vivid example of how easily President Mikheil Saakashvili’s government can deviate from such values as the rule of law and civilian control. This increasingly visible tendency has led some American officials to publicly call on Georgian authorities to put the state back on a course based on unwavering Western values. On April 4, U.S. Assistant Secretary of State Daniel Fried said that Georgia “has to become a functional, but not authoritarian” state and must not “afford military adventurism.” On April 10, the Board of Directors of the American Chamber of Commerce in Georgia, while hosting a visiting U.S. Congressional delegation, particularly underscored the “lack of independence of the Georgian judiciary and selective harassment of businesses.” However, some influential Western analysts and officials, assessing Georgia’s achievements, including reform of power agencies, have pointed to the tumult surrounding the Rose Revolution and argue that the situation around the special funds should not be over exaggerated.

(The Messenger, February 17; Regnum, October 10, 2005, April 4; Kavkaz Press March 9; TV-Imedi, April 2, 4; Civil Georgia, April 4, 10; 24 Saati, April 1, 4; Khvalindeli Dge, April 8)