Georgia: Scrutiny of tycoon's interests goes beyond Imedi

Molly Corso: 12/05/07

The pro-opposition Imedi television channel may be slotted to resume broadcasting, but the Georgian government's scrutiny of other businesses associated with tycoon Badri Patarkatsishvili nonetheless is persisting.

On December 5, nearly one month after Imedi's closure, the Georgian National Communications Commission reinstated the channel's broadcast license. The license was originally suspended for three months on November 17 – 10 days after the television station was shut down by riot police. [For background see the Eurasia Insight archive]. The ostensible reason for the closure was a government allegation that the station's leading shareholder, Patarkatsishvili, was using Imedi to promote the overthrow of Mikheil Saakashvili's administration. [For background see the Eurasia Insight archive].

While it is not clear when Imedi will actually start broadcasting again, Acting President Nino Burjanadze has called for legal barriers for the station's reopening to be lifted within the week. [For background see the Eurasia Insight archive]. The government had faced mounting international pressure to permit Imedi to resume operations. [For background see the Eurasia Insight archive].

On December 5, a Tbilisi City Court judge was reportedly deliberating if the station's assets could be unfrozen, and Imedi staffers were awaiting word that technicians could re-enter the building. No Imedi employees have been allowed in the building since November 7 – a situation that staff members say makes it impossible to predict how soon the station can resume broadcasting.

Lewis Robertson, the executive director of News Media Caucasus and director general of Imedi, was also uncertain about when the station would reopen. "This is the 28th day [Imedi is closed]," Robertson told EurasiaNet. "What does one more day matter?" He added that the government was not making any further demands on the station. National Security Council Chairman Kakha Lomaia and Prime Minister Lado Gurgenidze recently outlined conditions Imedi must meet to reopen, including filing quarterly financial reports and clarifying the station's ownership structure. [For background see the Eurasia Insight archive].

Other businesses with ties to Patarkatsishvili are facing intensive government scrutiny. The heaviest interest appears to be on Standard Bank, a retail financial institution owned by Salford Capital Partners, a London-based private equity firm, which manages Patarkatsishvili's business assets in Georgia. On November 24, Standard, one of the country's largest banks, was placed under the temporary administration of the National Bank of Georgia, a measure usually taken when there is concern about the liquidity of a bank's assets.

A National Bank of Georgia press release states that the central bank stepped in when it became apparent that Standard Bank was on the verge of bankruptcy. However, bank owner Salford Capital Partners maintains that the move represents a systematic government effort to "attack" businesses – and individuals – with ties to Patarkatsishvili.

Two other Salford assets – an Internet provider and a beverages company – have also recently been investigated by the financial police. In a separate matter, a Tbilisi amusement park leased by Patarkatsishvili was forcibly closed on November 7.

"We are very convinced that this has been a deliberate and coordinated effort by the government to attack businesses associated with Badri Patarkatsishvili," Irakli Rukhadze, managing director of Salford's Georgia operations, told EurasiaNet. "The temporary administration is not there to administer. It is there to destroy [Salford Bank]."

Rukhadze argued that Patarkatsishvili's ties to Standard Bank never went beyond loans. The bank, he asserts, was solvent when the National Bank of Georgia took over its operations.

Nonetheless, its association with the tycoon has come at an apparent cost, some observers believe. Rukhadze reports that over the past two weeks Standard has already paid out 25 percent of its total assets, or some 40 million lari (approximately $25 million) to depositors closing accounts.

Rukhadze alleged that Georgia's National Bank is pressuring existing Standard Bank clients to withdraw funds, while blocking new clients from opening accounts.

But one such large client contacted by EurasiaNet – Kazakhstani energy firm KazTransGas – states that it still has money in Standard Bank. Company officials would not comment on any attempt to pressure them.

The National Bank of Georgia did not return requests for comment.

In response, Rukhadze says that Salford is planning to sue the Bank of Georgia and current Prime Minister Lado Gurgenidze, the Bank of Georgia's former chief executive officer, for picking up accounts from Standard closed under the National Bank of Georgia's oversight. A letter to other private banks in Georgia warns that "the purchase of any of [Standard] Bank's assets" could make the institution liable for acquiring property "procured by fraud."

Official scrutiny has also turned on Rukhadze; he has reportedly been named as a suspect in a case of alleged "influence peddling" to a National Bank of Georgia employee, and as a witness in a separate money laundering case. Rukhadze denies any wrongdoing.

One Tbilisi-based attorney questioned how far Salford's lawsuit could go under Georgian law.

As long as Standard Bank is under the Central Bank's temporary administration, its fate is the responsibility of the National Bank of Georgia, noted Ketti Kvartskhava, a partner at BLC Professional Legal Services. Similarly, no other bank – including the Bank of Georgia – is liable if they accept Standard Bank clients, she said.

"No one can restrict their client to choose another bank or ... service provider," Kvartskhava wrote in an email interview.

The General Prosecutor's office could not be reached for comment on the case against Salford. Prime Minister Gurgenidze reportedly met with Salford Managing Director Rukhadze in late November, but his office has declined comment.

What the investigation will mean for Georgia's booming retail banking sector remains unclear, but one recent arrival, London-based HSBC, stressed that it is not concerned. Commented HSBC Georgia Chief Executive Officer designate Anthony Turner: "We take it all with a pinch of salt.... [W]e are not in the game of politics."

Editor's Note: Molly Corso is a freelance reporter based in Tbilisi.

Posted December 5, 2007 © Eurasianet