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. -------------- -------------- COMMENT: POWER STRUGGLE, NOT A CRACKDOWN ON CORRUPTION -------------- -------------- ¶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