Several former high ranking government officials, including ex-PM Nika Gilauri, have been summoned for questioning as part of a probe into what the Interior Ministry says was a concerted attempt by various branches of previous authorities to force Cartu Bank to bankruptcy.
Police was questioning former minister of economy and sustainable development Vera Kobalia for about four hours on Friday and the Interior Ministry said on Saturday that former Prime Minister Nika Gilauri and ex-Finance Minister Dimitri Gvindadze were summoned for interrogation as witnesses.
No one has been either arrested or charged into this ongoing investigation involving the Tbilisi-based bank, Cartu, founded fifteen years ago by Georgia’s new PM Bidzina Ivanishvili.
Less than two months before the October 1 parliamentary elections, Ivanishvili, at the time opposition leader, launched international arbitration at a World Bank tribunal against government saying that after his decision to go into opposition in October 2011, his investments, mainly in Cartu Bank, “became the target of a blatant political attack coordinated across all arms of the Georgian state”.
Ivanishvili argued that controversial legislative amendments passed in October-November, 2011, which gave the tax authorities priority over the secured claims of financial institutions, were designed specifically for targeting Cartu Bank, which eventually resulted into loss of bank’s assets worth USD 114.6 million, which it had acquired as security for its commercial loans. The controversial legislative amendments were not applied to any of other commercial banks operating in Georgia. The regulations were in force till late April, 2012. After becoming Prime Minister, Ivanishvili withdrew complaints from the international arbitration, but investigation of the case was launched by the Interior Ministry.
In an extremely rare move, on December 21 twelve commercial banks in Georgia released a joint statement condemning those controversial legislative amendments, which are no longer in force. Executives of some of those banks say that they had been raising concerns about those legislative amendments privately with the previous government, but it is the first case when these leading banks went public in condemnation of those measures.
The statement says that those legislative amendments, which were arbitrary used against Cartu Bank, posed a threat to the country’s entire financial sector. Among those twelve banks, which signed the statement are: TBC Bank, ProCredit Bank; VTB Bank Georgia; PrivatBank; Bank Republic; KSB Bank; Basisbank; Bank Constanta; Caucasus Development Bank; Investbank; Liberty Bank (in which beneficial shareholder and CEO is Lado Gurgenidze, Prime Minister in 2007-2008) and Bank of Georgia; chief executive of this latter is Irakli Gilauri, brother of Nika Gilauri, who was PM at the time when controversial legislative amendments were in force.
The joint statement of banks came four days after the Interior Ministry announced on December 17 that it was investigating “a criminal scheme” which was designed by the previous authorities, involving various ministries, Parliament and the presidency, specifically to target Cartu Bank.
Before late October 2011, commercial banks in Georgia operated under a system which enabled them to take security over pledged assets, usually real estate, for a loan and banks’ security interest ranked first in priority to any other claims over that asset – meaning that if tax authorities registered a lien over the same asset the priority over secured loans were given to banks. But in late October and early November, 2011 these rules were changed, giving priority to tax authorities over liens already held by banks. The measures also allowed the state to seize these assets that had been pledged to banks.
The Interior Ministry said that after these amendments were enforced, then Justice Minister Zurab Adeishvili, with the help from then head of the revenue service Jaba Ebanoidze and some other officials, plotted a scheme with participation of several of those government-friendly businesses, which had loans from Cartu Bank; as a result, the Interior Ministry says, assets of these companies pledged in favor of Cartu Bank were seized and put on auction. The Interior Ministry also says that auctions were in fact sham transactions in which Cartu Bank’s attempts to buy those assets back were frustrated; instead the state took over those assets and then sold them through presidential decrees to those companies which previously used those assets to secure loans from Cartu Bank.
The Interior Ministry said that several former officials, including Jaba Ebanoidze and former deputy economy minister Davit Giorgadze, as well as businessmen involved in the scheme “have cooperated with the law enforcement agencies and gave full information about the details of this criminal scheme.”
During a press conference on December 20, President Saakashvili touched upon these allegations about the Cartu Bank and said: “They say I led an attempt to force Cartu Bank to bankruptcy. Excuse me but that bank would not have existed if I had said a single word.”
The Interior Ministry has also summoned for questioning former Justice Minister Zurab Adeishvili, but the latter did not arrive as he has left Georgia after the October parliamentary elections.
Former PR Nika Gilauri told journalists after he was interrogated that investigators were asking questions about, what the authorities say was “a scheme against the Cartu Bank”.
“I responded that I was not aware of this scheme… I was the Prime Minister for three and a half years and I was in charge of economic growth… I had nothing to do with this kind of schemes [in connection to Cartu Bank],” Gilauri said.
Also on December 22 investigators questioned a former lawmaker from the United National Movement party Andro Alavidze, who was a co-sponsor of controversial legislative amendments.