Georgia: Tbilisi Lawmakers Try to Define Where Politics Ends and Business Begins
For as long as the republican form of government has existed, elected representatives have had to fight the temptation of letting private financial interests influence their political decisions. Georgia is not immune from this tendency.
Public records in Tbilisi show that businesses in which MPs from Georgian President Mikheil Saakashvili’s governing party hold direct or indirect stakes may be benefiting from valuable government contracts. Georgian law bans MPs from holding a controlling stake in a business, but allows relevant shares to be transferred to a relative or an associate during the deputy’s time in office. But given the existence of Georgia’s far-reaching kinship networks, this means, in practical terms, that an MP, even if nominally separated from an enterprise, still has the ability to exert influence over the company’s management.
MPs are required to declare each year the businesses in which they own shares, but critics maintain the mechanism intended to verify these statements, or to flag potential conflicts of interest, is weak.
Two cases help illustrate that point. Public records show that, over the past year, state tenders worth over $3.2 million [5.4 million lari] have been granted to two businesses closely connected with members of parliament from Saakashvili’s United National Movement (UNM) party -- car dealership Kia Motors Georgia and food service providers MegaFood and FoodService.
Gocha Enukidze, the deputy head of the UNM’s parliamentary faction, is listed as holding a 25-percent stake in both Kia Motors Georgia and in Iberia Business Group, which operates the largest used-car bazaar in the vicinity of Tbilisi. Enukidze also has minority interests in 26 other firms.
As a member of parliament’s Finance and Budget Committee, Enukidze has intimate knowledge of allotments and budgets for government ministries and state agencies. In 2011, official records show that four of the businesses he partly owns won government tenders worth 1.98 million lari ($1.21 million) to provide cars, car parts and service to various government entities.
In addition, in his capacity as an MP he voted for changes to the Georgian tax code that gave car importers a 50-percent discount on excise taxes paid for imported vehicles, provided that they were re-exported within a certain period. Car re-exports drive the sales at the Iberia Business Group’s car market.
Neither Enukidze nor a representative of the parliamentary committee charged with examining conflict-of-interest allegations responded to repeated EurasiaNet.org requests for comment.
Potential conflicts of interest are not limited to Enukidze. Food service, restaurant and hospitality companies owned by the family of Agriculture Committee Chair Archil Gegenava, who represents the downtown Tbilisi district of Mtatsminda for the UNM, have secured lucrative government contracts to provide food services to kindergartens, police and the military, public records show. Over the past 11 months, the two companies -- Megafood and FoodService -- have won government tenders worth 5.3 million lari ($3.25 million) combined for various supply jobs. Megafood and FoodService are listed as owned by Gegenava’s brother, Andro.
“[M]y favorite case about him was eggs,” commented opposition Republican Party co-leader Tina Khidasheli, who spent six months researching Gegenava’s family holdings. “He was winning every single competition [tender – ed] about eggs all over Georgia, from Batumi kindergarten[s] to Rustavi kindergarten[s] -- all the eggs.” [Editor’s Note: Khidasheli formerly served as board chair of the Open Society Georgia Foundation, an entity in the Soros Foundations Network. EurasiaNet.org operates under the auspices of the New York-based Open Society Foundations, another entity in the Soros network].
In a statement issued to EurasiaNet.org through his spokesperson, Gegenava denied any conflict of interest in the tenders and his role as parliament’s Agricultural Committee chair, citing the fact that he does not own a controlling share in any of his family’s businesses. As with Enudkidze’s case, officials have given no indication of opening a formal probe into Gegenava’s actions.
A EurasiaNet.org examination of publicly available records indicated that 28 members of parliament had notable ties to businesses, either as a "partner" or "shareholder," according to their 2010 declarations. Parliament overall has 150 members. Enukidze, as a partner in 27 businesses, has the most by far. Gegenava had fewer business interests - just 13 according to his declaration – but his relationship to family enterprises have been repeatedly questioned by opposition groups and media outlets.
The government’s apparent lack of enthusiasm for following up on potential conflict-of-interest cases is a red flag for anti-corruption watchdogs like Transparency International Georgia. “Because we hear so many allegations that MPs run businesses or own businesses, it is surprising to me that there has not been a single inquiry,” said Transparency International researcher Erekle Urushadze, who has reviewed anti-corruption legislation for public officials.
Mechanisms for encouraging public accountability of parliamentary members, such as public declarations of their business interests, were introduced by the UNM. The party also pushed for making bribery a criminal offense, and requiring public property and income declarations from official figures. In 2009, an anti-corruption council was established at the Ministry of Justice to coordinate Georgia’s anti-corruption campaigns.
Otar Kakhidze, head of the Justice Ministry’s Analytical Department, maintains that the government has been “vigorous in its efforts to tackle systematic corruption.” Kakhidze noted that six members of parliament and 15 ministers have been among those convicted on corruption charges since 2003, when Saakashvili came to power in the Rose Revolution.
“Many of those officials, including the MPs were from the ruling party,” he wrote. “The Government is fully committed to tackling corruption in every part of [the] state administration.”
The problem with conflicts of interests is that they can exist without crossing the line into corruption. As in other post-Soviet countries, there is “not really a . . . distinction” in Georgia between public and private spheres of activity, said Alexander Kupatadze, a former research fellow at the Tbilisi office of American University’s Transnational Crime and Corruption Center.
Car and auto supply dealership Tegeta Motors, for instance, donated more than 500,000 lari ($303,000) to Saakashvili’s 2008 presidential campaign -- five times more than the official cap, according to a Transparency International report. Its co-founder, Temur Kokhodze, was elected to parliament on the UNM ticket the same year.
Over the past three months, Tegeta Motors has won state tenders for auto parts, accessories and motor oil worth over 533,000 lari ($323,000), but no questions have been raised about a possible conflict of interest.
It may come down to a matter of time, as Georgian democracy develops further, Kupatadze noted. “At some point,” the number of these possible conflicts will decrease, he commented. But, for now, when Georgia will reach that point remains an open question.