Georgians Put the Squeeze on Local Tycoon
Pressure mounts on a businessman and opposition leader accused of fomenting a coup.
Georgians Put the Squeeze on Local Tycoon
Pressure mounts on a businessman and opposition leader accused of fomenting a coup.
The Georgian authorities have targeted a range of businesses associated with Georgian tycoon and opposition presidential candidate Badri Patarkatsishvili, in what his supporters say is a politically motivated campaign.
In the most prominent case, the Georgian commercial bank Standard Bank, which is closely linked to Patarkatsishvili, is being run by a temporary team of administrators installed by the National Bank of Georgia.
According to the National Bank, the administrators took over on November 24 for a period of 60 days because Standard Bank faced big liquidity problems.
The move against companies associated with Patarkatsishvili began on November 7, the day opposition demonstrations were violently broken up in Tbilisi. The same day, Georgian police wearing masks descended on the Mtatsminda amusement park, which Patarkatsishvili’s company Lynx had leased on a long-term basis, and evicted all the staff. Tbilisi city officials said later that the company was not keeping up with rent payments – a charge the company rejected.
On the same day, riot police stormed the headquarters of Imedi television, a company founded by Patarkatsishvili, pulled it off the air and destroyed much of its broadcasting equipment.
The government accused Imedi, which had become the mouthpiece of the opposition to President Mikheil Saakashvili, of inciting a coup d’etat. After much international condemnation and prolonged negotiations, the station resumed broadcasts on December 12, albeit on a restricted schedule because of the damage to its equipment.
The businessman’s relations with the Georgian authorities began to sour in the spring of 2006. They worsened this year after he was linked to former Georgian defence minister Irakly Okruashvili, who made a series of lurid accusations against Saakashvili, including trying to order the killing of Patarkatsishvili.
Despite the threat of prosecution hanging over him, Patarkatsishvili has been registered as a candidate in the January 5 presidential election. He has promised 1.5 billion laris (900 million US dollars) of his own money to carry out social reforms in Georgia.
In October, Patarkatsishvili had pledged to finance opposition protests against Saakashvili. He had earlier said that he would use “all his strength and resources to deliver the country from Saakashvili’s regime” and that he would spend all his resources “down to the last tetri [penny]” to achieve this.
These remarks provoked an angry response from the authorities.
“Patarkatsishvili’s putsch will not happen,” said Gigi Ugulava, the mayor of Tbilisi. The general secretary of the National Movement governing party David Kirkitadze said, “You can’t buy the Georgian people for any amount of money, and he is making a big mistake by counting on that.”
According to some estimates, the fortune of the Georgian businessman, who is now based in Britain, stands at 12 billion dollars.
Patarkatsishvili, 52, used to be a close associate of Russian oligarch Boris Berezovsky with whom he ran major Russian companies such as the carmaker Logovaz and ORT television. Moscow is now seeking to extradite the Georgian businessman on fraud charges.
In Georgia, Patarkatsishvili’s investment portfolio is managed by the British company Salford Capital Partners through its local branch Salford Georgia.
The company says Patarkatsishvili does not hold a share in Salford Capital Partners, though it admits they do work closely together. Salford Capital manages an investment fund in which the businessman invested a large sum which was used to buy assets both inside and outside Georgia, including a controlling share in the famous Georgian Borzhomi mineral water company, Georgian Glass and Mineral Waters. The fund also bought Standard Bank and Internet-provider Telenet, both of which are managed by Salford.
Salford also managed Imedi, before Rupert Murdoch’s News Corporation recently took over management of the station, the Dinamo Tbilisi football team and the Lynx company, among other businesses.
Irakli Rukhadze, the director of Salford Capital, says most of these companies have been targeted by the authorities since November 7.
“This year alone, Salford Capital Partners invested more than 200 million dollars in direct or indirect investments in the Georgian economy,” Rukhadze told IWPR. “And if they had not attacked us and put spokes in our wheels, the sum would be even greater.
“We were stripped of the Mtatsminda Park, then there was the raid on Imedi, followed by the police visits to Telenet and GG&MW and the appearance of a financial monitoring group in Standard Bank. They are still dragging me from one interrogation to another.”
Rukhadze, who is a United States citizen, was detained at Tbilisi airport on November 23, as he was leaving for Madrid with his family. He was accused of “trading influence” with another Georgian banker.
“At first it took them a long time to give me a boarding pass, then several people stopped me on the stairs and took me away for interrogation,” said Rukhadze. “I can’t go anywhere, as I have been declared a suspect.”
Asked about the liquidity problems of Standard Bank, Rukhadze claimed that clients had come under political pressure from the authorities to remove their accounts. He pointed to a National Bank report from November this year that rated Standard Bank as one of Georgia’s ten largest banks.
The National Bank in its turn has suggested that Standard Bank has an opaque shareholding structure. In a press release of December 6, the central bank asked Salford Capital to disclose the Standard Bank’s share structure, “so that we can engage in a dialogue with the shareholders regarding their plans to provide sufficient support to Standard Bank. In the event that it is different from the shareholding structure disclosed to date, this would constitute a breach of the Georgian Banking Law.”
Rukhadze accused the government of taking over the bank illegally, and Salford has now hired the international law firm Debevoise & Plimpton to represent it. Lord Goldsmith, the former British attorney general who is now in charge of European litigations at Debevoise & Plimpton, visited Tbilisi in late November.
In its letter sent to Georgian prime minister Lado Gurgenidze on November 27, Debevoise & Plimpton said the government had “embarked on a systematic campaign to target the assets in Georgia of Mr Badri Patarkatsishvili.”
The letter alleged that the Georgian state’s “unjustified seizure” of Standard Bank would, “if it continues or results in the destruction or dismemberment of the bank”, represent a breach of a Georgian-US investment protection treaty signed in 1994.
The battle over companies linked to Patarkatsishvili is likely to continue in the courts until well after the January 5 presidential election. In the mean time, the campaign against him has alarmed even those who have doubts about his political intentions.
Georgian political analyst Giorgi Khutsishvili says it is “absolutely obvious” that the tycoon’s business problems stem from his political activities. And he warned that the campaign against Patarkatsishvili might have wider negative effects.
“Of course, this has an impact on the business climate in the country. Badri Patarkatsishvili is a controversial figure, but he is also a prominent figure on whom many investors model their investments here,” said Khutsishvili.
“For potential investors, the current developments are a signal that the political risks in the country are so high that they shouldn’t bring their money here.”
Lela Iremashvili is a freelance journalist based in Tbilisi.
In the most prominent case, the Georgian commercial bank Standard Bank, which is closely linked to Patarkatsishvili, is being run by a temporary team of administrators installed by the National Bank of Georgia.
According to the National Bank, the administrators took over on November 24 for a period of 60 days because Standard Bank faced big liquidity problems.
The move against companies associated with Patarkatsishvili began on November 7, the day opposition demonstrations were violently broken up in Tbilisi. The same day, Georgian police wearing masks descended on the Mtatsminda amusement park, which Patarkatsishvili’s company Lynx had leased on a long-term basis, and evicted all the staff. Tbilisi city officials said later that the company was not keeping up with rent payments – a charge the company rejected.
On the same day, riot police stormed the headquarters of Imedi television, a company founded by Patarkatsishvili, pulled it off the air and destroyed much of its broadcasting equipment.
The government accused Imedi, which had become the mouthpiece of the opposition to President Mikheil Saakashvili, of inciting a coup d’etat. After much international condemnation and prolonged negotiations, the station resumed broadcasts on December 12, albeit on a restricted schedule because of the damage to its equipment.
The businessman’s relations with the Georgian authorities began to sour in the spring of 2006. They worsened this year after he was linked to former Georgian defence minister Irakly Okruashvili, who made a series of lurid accusations against Saakashvili, including trying to order the killing of Patarkatsishvili.
Despite the threat of prosecution hanging over him, Patarkatsishvili has been registered as a candidate in the January 5 presidential election. He has promised 1.5 billion laris (900 million US dollars) of his own money to carry out social reforms in Georgia.
In October, Patarkatsishvili had pledged to finance opposition protests against Saakashvili. He had earlier said that he would use “all his strength and resources to deliver the country from Saakashvili’s regime” and that he would spend all his resources “down to the last tetri [penny]” to achieve this.
These remarks provoked an angry response from the authorities.
“Patarkatsishvili’s putsch will not happen,” said Gigi Ugulava, the mayor of Tbilisi. The general secretary of the National Movement governing party David Kirkitadze said, “You can’t buy the Georgian people for any amount of money, and he is making a big mistake by counting on that.”
According to some estimates, the fortune of the Georgian businessman, who is now based in Britain, stands at 12 billion dollars.
Patarkatsishvili, 52, used to be a close associate of Russian oligarch Boris Berezovsky with whom he ran major Russian companies such as the carmaker Logovaz and ORT television. Moscow is now seeking to extradite the Georgian businessman on fraud charges.
In Georgia, Patarkatsishvili’s investment portfolio is managed by the British company Salford Capital Partners through its local branch Salford Georgia.
The company says Patarkatsishvili does not hold a share in Salford Capital Partners, though it admits they do work closely together. Salford Capital manages an investment fund in which the businessman invested a large sum which was used to buy assets both inside and outside Georgia, including a controlling share in the famous Georgian Borzhomi mineral water company, Georgian Glass and Mineral Waters. The fund also bought Standard Bank and Internet-provider Telenet, both of which are managed by Salford.
Salford also managed Imedi, before Rupert Murdoch’s News Corporation recently took over management of the station, the Dinamo Tbilisi football team and the Lynx company, among other businesses.
Irakli Rukhadze, the director of Salford Capital, says most of these companies have been targeted by the authorities since November 7.
“This year alone, Salford Capital Partners invested more than 200 million dollars in direct or indirect investments in the Georgian economy,” Rukhadze told IWPR. “And if they had not attacked us and put spokes in our wheels, the sum would be even greater.
“We were stripped of the Mtatsminda Park, then there was the raid on Imedi, followed by the police visits to Telenet and GG&MW and the appearance of a financial monitoring group in Standard Bank. They are still dragging me from one interrogation to another.”
Rukhadze, who is a United States citizen, was detained at Tbilisi airport on November 23, as he was leaving for Madrid with his family. He was accused of “trading influence” with another Georgian banker.
“At first it took them a long time to give me a boarding pass, then several people stopped me on the stairs and took me away for interrogation,” said Rukhadze. “I can’t go anywhere, as I have been declared a suspect.”
Asked about the liquidity problems of Standard Bank, Rukhadze claimed that clients had come under political pressure from the authorities to remove their accounts. He pointed to a National Bank report from November this year that rated Standard Bank as one of Georgia’s ten largest banks.
The National Bank in its turn has suggested that Standard Bank has an opaque shareholding structure. In a press release of December 6, the central bank asked Salford Capital to disclose the Standard Bank’s share structure, “so that we can engage in a dialogue with the shareholders regarding their plans to provide sufficient support to Standard Bank. In the event that it is different from the shareholding structure disclosed to date, this would constitute a breach of the Georgian Banking Law.”
Rukhadze accused the government of taking over the bank illegally, and Salford has now hired the international law firm Debevoise & Plimpton to represent it. Lord Goldsmith, the former British attorney general who is now in charge of European litigations at Debevoise & Plimpton, visited Tbilisi in late November.
In its letter sent to Georgian prime minister Lado Gurgenidze on November 27, Debevoise & Plimpton said the government had “embarked on a systematic campaign to target the assets in Georgia of Mr Badri Patarkatsishvili.”
The letter alleged that the Georgian state’s “unjustified seizure” of Standard Bank would, “if it continues or results in the destruction or dismemberment of the bank”, represent a breach of a Georgian-US investment protection treaty signed in 1994.
The battle over companies linked to Patarkatsishvili is likely to continue in the courts until well after the January 5 presidential election. In the mean time, the campaign against him has alarmed even those who have doubts about his political intentions.
Georgian political analyst Giorgi Khutsishvili says it is “absolutely obvious” that the tycoon’s business problems stem from his political activities. And he warned that the campaign against Patarkatsishvili might have wider negative effects.
“Of course, this has an impact on the business climate in the country. Badri Patarkatsishvili is a controversial figure, but he is also a prominent figure on whom many investors model their investments here,” said Khutsishvili.
“For potential investors, the current developments are a signal that the political risks in the country are so high that they shouldn’t bring their money here.”
Lela Iremashvili is a freelance journalist based in Tbilisi.
