OPPOSITION OLIGARCH'S COMPANY SHUT DOWN BY GOAM

C O N F I D E N T I A L SECTION 01 OF 02 YEREVAN 000861 SIPDIS E.O. 12958: DECL: 10/28/2018 TAGS: ECON PGOV PREL PHUM KDEM AM SUBJECT: OPPOSITION OLIGARCH'S COMPANY SHUT DOWN BY GOAM REF: YEREVAN 369 Classified By: A/DCM STEVE Banks. Reasons 1.4 (b/d) SUMMARY -------------- ¶1. (C) On October 23 the GOAM closed down the operations of the Bjni company, one of Armenia's leading bottled water brands and part of the SIL Group, owned by fugitive MP and opposition supporter Khachatur Sukiasian. The action followed an October 10 order by an administrative court to confiscate AMD 3.4 billion (USD 11 million) from the company as a fine for alleged improper reporting of its water consumption. This move appears to be the latest step in the GOAM's continuing series of retaliatory steps against Sukiasian for his support of the political opposition. The company says it will appeal the ruling. End Summary. FIRM SHUT DOWN, ASSETS PUT UP FOR SALE -------------- ¶2. (C) On October 10, a Yerevan administrative court ruled in favor of the Ministry of Nature Protection (MNP),which in January 2008 had fined the Bjni company, one of Armenia's leading bottled-water brands, AMD 3.4 billion for illegal use of a natural resource. On October 23, court officers, together with masked security agents, descended on the company's premises. They sealed warehouses, confiscated vehicles, and have begun to auction off company property. All 480 employees have been placed on compulsory leave. Bjni officials said that they will appeal the decision to the Court of Cassation. A FINE FOR IMPROPER WATER METERING -------------- ¶3. (C) According to information provided by a SIL Group representative (and reported by RFE/RL),the Ministry of Nature Protection and the State Tax Service (STS) conducted an inspection of Bjni's facility in January 2008 and charged that Bjni had engaged in "illegal use of a natural resource." According to the company's lawyer, the only problem that the inspections revealed was related to the fees Bjni was paying to the GOAM for the water it consumed, starting from 2005. The STS claimed that the meter measuring the company's water intake was placed in the wrong location, thereby underreporting Bjni's intake. Bjni countered that an officer of the Ministry of Nature Protection had installed the meter. Bjni's lawyer also noted that the Ministry of Nature Protection had inspected the company in both 2005 and 2006 and had not found any violations. A STS inspection conducted in October 2006 also didn't find any violations related to the company's water usage. ¶4. (C) Bjni is part of the SIL Group, controlled by Khachatur Sukiasian, a member of the National Assembly and head of the SIL Group of companies. He is the only major oligarch to have supported the Presidential candidacy of Levon Ter-Petrosian in the February 2008 election. Shortly after he made a public announcement of his support of LTP in October 2007, the State Tax Service launched a surprise inspection on several of his companies, including Bjni. IT'S JUST A CONCIDENCE. HONEST! -------------- ¶5. (C) At the time of the inspections, the then-director of the STS told journalists that the inspections of Bjni's accounts were among 30,000 that had been conducted over the previous nine months. He claimed that SIL was simply among a group of companies under scrutiny as part of a general crackdown ordered by then-President Robert Kocharian and then-PM Serzh Sargsian to tighten the taxation system, and denied any connection between the inspection and Sukiasian's recently-announced support of LTP. BJNI NOT THE ONLY SUKIASIAN TARGET -------------- ¶6. (C) Subsequent to Sukiasian's public declaration of support for LTP in November 2007, several SIL Group companies have continued to experience problems with the State Tax Service. Pizza di Roma director Gevorg Safarian remains under arrest for allegedly understating revenues by AMD 760 million (USD 2.5 million),as does waitress Anush Ghavalian (reftel). Earlier this year SIL was effectively forced to sell Pares-Armenia, exclusive distributor of Philip Morris products, after the State Customs Committee for several months held up release of its cigarette imports, ostensibly for documentation problems (Note: Pares was the eighth-largest taxpayer in Armenia in 2007. End Note). SIL ultimately sold Pares to the Sovrano company, which is believed to be controlled by the son-in-law of President Sargsian, for several million dollars below its market value. YEREVAN 00000861 002 OF 002 COMMENT -------------- ¶7. (C) Although we cannot rule out the possiblity that Sukiasian's companies have been engaged in questionable activity -- given the prevailing business culture and the complex tangle of Armenian business laws and regulations, some degree of violations seems fairly likely -- there can be little doubt that this is a case of politically-motivated, selective enforcement. It is difficult to take seriously GOAM claims that the cases against Bjni and other Sukiasian-owned companies--including the detention of several employees--do not amount to retaliation for his support of LTP. The GOAM's continued pursuit of these cases undercuts much of its stated commitment to reform, with particular respect to judicial independence and the deployment of state agencies against political opponents. End Comment. YOVANOVITCH