How the Armenian Sugar Project cost the Deputy his Job

In May, Vahan Hovhanissian, through his Parliamentary Commission, was still keen to expose as much wrongdoing as possible, and I was his man at the helm. Vahan wrote to Minister Moffsissian, confirming my authorisation to study all companies in the energy sector which were affected by the Governments Integrated Finance Rehabilitation Plan, of which there were eight, as listed by the International Monetary Fund (IMF) in their annual reports – including Haigasart.

After meeting with Minister Mofsissian, when he agreed that I could continue with the study, I set off to find Haigasart, whose registered address was on a small ally off the Komitas street. It turned out that although the address was correct, Haigasart by that time had moved to a cosy little office on the other side of Abovyan town. Eventually I found the office, where a secretary gave me the contact details of Mr. Israelian, the company’s General Director.

A meeting was arranged with Mr. Israelian at a convenient location in Yerevan and we discussed how I should approach a study in to the Governments Integrated Finance Rehabilitation Plan, which was built around his little defunct company. Mr. Israelian asked all manner of questions about my previous 10 years life in Armenia, obviously reluctant to talk about the Finance Rehabilitation Plan. The discussion quickly moved on to my involvement in the effort to re-establish Armenia’s sugar industry, which I saw he was already aware of. I explained that our group had everything ready, we just needed the support the Government had committed to in a string of letters, but which had not been forthcoming.

Mr. Israelian proposed a meeting with Mr. Meruj Michaelian, the most influential Deputy Minister of Finance and Economy, who would arrange the Government support needed for the sugar project. And that would mean I would no longer have to study his company and the Governments Integrated Finance Rehabilitation Plan.

It was clear, after having already seen all manner of wrongdoing in the Municipal Development Project that the Governments Integrated Finance Rehabilitation Plan was going to be a lot to handle for our Commission. So, after gaining approval from my Head of Commission, I agreed to a meeting with the Deputy Minister to discuss what was needed to build the new Armenian sugar industry. The Deputy Minister asked for a week to study our business plan, which included three volumes of technical specifications, contracts, agreements, a financial model, drawings of buildings on the 62 hectare site at Akhurian, plus a proposal to finance the project.

At our next meeting, which included senior officials of our sugar company, Mr. Michaelian expressed his high regard for the project, exclaiming that he was from Gyumri, and he asked for two weeks to prepare and submit the necessary documents to the President for his approval,

Two weeks passed, a month passed, three months passed, and then six months passed, with the Deputy Minister making excuse after excuse about why the President had not approved the project. In the meantime, I had been gathering details about the Government’s Integrated Finance Rehabilitation Plan. The plan was to ‘Rehabilitate’ energy sector debts, including more than 200 million dollars worth of ‘Bad’ Receivables and about the same amount of ‘Bad’ Payables, some dating back to 1996, and most of which had been resurrected for final elimination by Haigasart.

It turned out that Deputy Minister Michaelian had been appointed Head of a Commission to decide what to do with a packet of a little more than 60 billion Drams worth of old debts; about 110 million dollars, that had been left over.

The Government’s Integrated Finance Rehabilitation Plan was being financially supported by the World Bank and was subject to ‘Surveillance’ by the IMF, under a technical assistance program. The IMF was therefore monitoring all activities under the plan. On the 19^th November I met with Mr. Jimmy McHugh, the Permanent Representative of the International Monetary Fund (IMF) in Yerevan, who agreed that the old debts had already been ‘Written Off’, and he suggested that the financial scam of some 100 plus million dollars, was no doubt intended for one of the many ‘Foreign Direct Investment’ projects that were in vogue in Armenia; or to put it more plainly, for a state crony (or cronies) to take over another valuable state asset.

The term of our Parliamentary Commission had already been extended, but the extended term was also ending. So it was time to get a final commitment from Deputy Minister Michaelian. I asked him straight; will we get the approval for the sugar factory, or I will I have to report his scam. The Deputy had absolutely no intention of going through with his promise to support the sugar project and he was confident that my chances of using the information to compromise his position were negligible. But he was wrong!

On the 30^th November 2004, I detailed the findings of our commission study into the Government’s Integrated Finance Rehabilitation Plan in a letter to Mr. Jimmy McHugh, the start of a number of correspondences.

A few days after that letter, the President’s Anti-Corruption Team announced they had found that Mr. Michaelian was involved in minor financial wrongdoings, and he was removed from office. Deputy Minister Michaelian was not dismissed because he was involved in corruption, but because he allowed the details to be reported to the IMF. And the not-too-minor scam went ahead.

Later, in recognition of the excellent manner in which Haigasart disposed of more than Four Hundred Million Dollars worth of old debts, under the Government's Integrated Finance Rehabilitation Plan, the defunct company, which until 2002 had been fighting off liquidation, became a major shareholder in the state company Nairit and Mr. Israelian was appointed General Director. Nairit is now no doubt yet another Foreign Direct Investment project in the making – If it has not already been made!