MALFEASANCE IN THE GOAM AUDIT OFFICE

UNCLAS YEREVAN 000309

SIPDIS

SENSITIVE

DEPT FOR EUR/CACEN, EUR/ACE

E.O. 12958: N/A
TAGS: ECON EFIN AM
SUBJECT: MALFEASANCE IN THE GOAM AUDIT OFFICE



1. (U) Sensitive but unclassified. Please protect
accordingly.


2. (SBU) Armenian authorities arrested Levon Shahinian, the
head of the Financial Control Department of the Ministry of
Finance and Economy (the department charged with auditing
GOAM budget expenditures) February 23. He had already
resigned from his post February 18. While there has been no
official comment for the reasons for his resignation or
arrest, a Ministry of Finance official told us that he had
been told to resign on the grounds that Shahinian had hired
his own private accounting firm to conduct audits of
government ministries.

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COMMENT: POWER STRUGGLE, NOT A CRACKDOWN ON CORRUPTION
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3. (SBU) According to U.S. Resident Treasury Advisor, who
has an office in the Financial Control Department of the
Ministry, Shahinian was engaged in a power struggle over
control of the new internal audit function with another
official, Karen Brutyan, a Special Advisor who reports
directly to the Minister. It could be this fact, rather
than Shahinian's malfeasance, that led to his dismissal.
Outsourcing government contracts to your own firm is not
uncommon in Armenia, and Ministry officials surely knew of
Shahinian's arrangements with his own firm before last week.

GODFREY