Signs of Corruption in Land Privatization Process in Gardabani Municipality
Transparency International – Georgia studied a privatization process of 13,850 sq/m lots of land in the village of Teleti in Gardabani municipality and believes there are signs of corruption. Specifically, as a result of actions of the National Agency of State Property and the local self-government, parties interested in purchasing the land were given unequal treatment. Therefore, we encourage law-enforcement agencies to take notice of this case and fully investigate it.
Chronological Timeline of Privatization of Lots of Land in Teleti
In September 2015, Well3 LLC, a company engaged in drilling services, expressed interest in purchasing 13,850 sq/m non-agricultural land in the village of Teleti in Gardabani municipality (cadaster code of the property – 81.03.01.520) and the premises on the land. For this, the company submitted a request of privatization to the National Agency of State Property.
The application went through proper procedures and approvals for the privatization were given by Gardabani municipality, including by the General Meeting of the village of Teleti and the Representative of Gamgebeli to the village. LEPL Levan Samkharauli National Forensics Bureau evaluated the value of the land at 115,931 GEL. After completing these and other procedures, the Agency called an auction under Order dated 20 January 2016. A notice about this was given to the parties interested in the purchase of the land. However, the auction was invalid because no participant showed up. Transparency International – Georgia was told by the company that it did not have financial resources to buy the land at the time.
First Unsuccessful Attempt by Well3 LLC
Subsequently, on 6 May 2016, a representative of Well3 LLC submitted a request to the National Agency of State Property expressing interest to purchase a portion (3,000 sq/m) of the land registered under cadaster code 81.03.01.520. In response, on May 10, the Agency responded to the company that it could not agree to make the sale under this configuration. Next day, on 11 May, Well3 LLC submitted another request to the Agency expressing interest to purchase land with different configuration – 3,500 sq/m and other premises. According to representatives of the company, the lot was particularly interesting for them in terms of geology (its consistency is advantageous for testing drilling systems) and geography because Well3 LLC is already leasing an adjacent lot.
According to Jeffrey Kent, director of Well3 LLC, within a couple of days from submitting the request, around 14 May 2016, on Saturday, at around 9 AM, he noticed several persons on this territory. Based on the conversation he had with the persons, he determined that they were measuring the territory. During the same encounter, B.M. told the director of Well3 LLC that he was representing I.O. and they were interested in purchasing the lot. B.M. also told Jeffrey Kent that they were planning to start a business on the land and planning to purchase the land for 1 GEL. In contrast, according to the National Agency of State Property and the Administration of the Georgian Government, no administrative procedure has started on privatization of the lot for 1 (one) GEL under the state-sponsored program “Produce in Georgia”.
According to the National Agency of State Property, based on the request of Well3 LLC, it divided and registered the lot 81.03.01.520 as three separate lots on 17 May 2016. However, the company notes that the Agency never gave them any notice on this. This notice also cannot be found in the materials that Transparency International – Georgia has requested and received. A representative of the National Agency of State Property told us that the Agency is under no legal obligation to give notice of each stage of an administrative procedure to an applicant. According to the Agency, it has the obligation to send a notice to an applicant only about a termination and a subsequent determination by the Agency. In a letter dated 1 June 2016 (which was later specified in a letter dated 9 June), the Agency notified the administration of Governor of Kvemo Kartli about an interest in privatization of the lot 81.03.01.537. The Agency stated that absent an answer within 10 days from the administration, it would find that there was no objection about the privatization and it would use its discretionary power to decide whether to dispose of the property.
Still as part of the administrative procedure Well3 LLC had initiated, on 1 June 2016, the Agency asked Leval Samkharauli National Forensics Bureau to evaluate the value of the land. The land was evaluated at 45,581 GEL.
The administration of the Governor sent the Agency’s letter on the privatization of the lot 81.03.01.537, dated 14 June 2016, to Gardabani municipality.
After 1 month, on 15 July 2016, Gardabani municipality notified the Governor’s administration that the General Meeting of the village of Teleti, the Representative of Gamgebeli to Teleti and Gardabani municipality gave an approval of a privatization of the land (lot 81.03.01.537). On 19 July, the administration of the Governor of Kvemo Kartli sent this letter together with its own consent to the National Agency of State Property.
However, based on the documentation and an interview with the Agency, as of 2 February 2017, the Agency was still unaware of the consent given by the municipality about a privatization of the lot 81.03.01.537 (the noted letters). Therefore, it is unclear how and why the Agency has not received the letter sent by the office of the Governor of Kvemo Kartli. The Agency told Transparency International – Georgia that the July 2016 letter still cannot be found in their documentation-flow system. The letter has only become available as an annex to a letter that was resent to the Agency in 2017. The Agency cannot explain when, how or at which point the letter “must have been lost”. In an interview with us, we heard about a possibility that the administration of the Governor may have prepared the letter but may have never sent it.
As a result, on 1 September 2016, the Agency told Well3 LLC that it was not aware of the official decision/opinion of the administrations of the Governor and Gamgebeli. Due to this, the Agency rejected the privatization request of the company. The letter dated 2 February 2017 sent by the Agency to Gardabani municipality also shows that the Agency was not aware of the consent given by the municipality. In the response to the mentioned letter, the municipality specified that the consent had already been given in July.
Second Unsuccessful Attempt by Well3 LLC
On 8 September 2016, after Well3 LLC failed to receive any final answer about the lot 81.03.01.537, it submitted a privatization request to the Agency on the remaining two lots (lot 81.03.01.538 and lot 81.03.01.539). The National Agency of State Property notified the administration of the Governor about this expression of interest on 3 October 2016. The Governor sent this letter to the municipality. On 25 October 2016, the Gardabani municipality notified the administration of the Governer that the Representative of Gamgebeli to Teleti, the General Meeting of Teleti and the municipality were against privatizing the lot 81.03.01.538 and the lot 81.03.01.539. As a result, on 7 November 2016, the Agency rejected the request of Well3 LLC citing the refusal by the municipality.
On 21 November 2016, the company sent a letter to the Agency protesting the groundless refusal to auction the property that the company needed for expanding its business. In the letter the company notes that if the situation is not clarified, it will have to resort to “legal means”.
Next day, on 22 November 2016, the Agency received a letter from Gardabani municipality which noted that the municipality wanted to set up an animal shelter on the lot 81.03.01.538. After considering problems associated with stray animals in the municipality, the municipality requested that the lot 81.03.01.538 be transferred in its ownership. On 16 December 2016, the Agency asked Gardbani municipality to present detailed information on the animal shelter (source of financing, project timeframe etc.). In response, despite its plan to resolve the problem of stray animals two weeks prior, on 8 February 2017, the municipality asked the Agency to close the administrative procedure on transferring the lot 81.03.01.538 for organizing an animal shelter.
The fact that Gardabani municipality unexpectedly brought up the issue of stray animals in the end of 2016 and later again unexpectedly asked to close the administrative procedure raises questions about the true motives behind this. This is especially so considering that even according to the municipality the reason behind their request was “a rise of the number of stray animals in the municipality of Gardabani and public petitions about this issue”. Although Transparency International – Georgia requested every document about this issue held by the municipality, the documentation it received does not include the said public petitions or any information on the number of such petitions or their content. The municipality also failed to present any statistics on the number of stray animals in the municipality or a project of the shelter, budget, source of financing or other details of the project.
Again according to the information they provided, the lot 81.03.01.538 was selected because it is far from residential areas and the public would not face problems associated with a functioning of the animal shelter. In addition, the administrative procedure was closed because building an animal shelter according to adequate standards required large financial resources causing a suspension of the project. It is also notable that “in the period 2015-2017, the expenses of Gardabani municipality for combating the problem of stray animals was 0 (zero) GEL. Also, 2016 and 2017 budgets did not include any allocation of funds for organizing an animal shelter”. Such an answer from Gardabani municipality strengthens the suspicion that they raised the issue of the animal shelter to fit the privatization process to a specific interested party. As a result, Well3 LLC was again denied the sale of the desired lot of land.
Eventual Privatization of Lands
Another party interested in purchasing the land has never faced similar problems. On 2 February 2017, I.O., who is a friend of B.M. and a partner in purchasing the land, submitted a request to the Agency on privatization of all three lots. In contrast to the case of Well3 LLC, the privatization process proceeded suspiciously faster. The same day, the Kvemo Kartli center of the Agency sent a letter to the administration of the Governor informing that they were privatizing all three lots and they wanted to know their position on the issue. According to the letter, absent a response within 10 days, the Agency would use its discretionary power to decide whether to privatize the land. In the letter sent to the administration of Governor, dated 6 February 2017, Gardabani municipality did not express its position on the issue of privatization. It simply specified that these lots were owned by the village of Teleti but not by the village of Gamarjveba – in contrast to what the Agency’s letter had noted. On 8 February 2017, the administration of the Governor forwarded this letter of the municipality to the Agency.
Under Order dated 9 February 2017 of the National Agency of State Property, based on the request of I.O., within 6 days from the request, the lot 81.03.01.537 was put on auction. The Agency did not even wait for 10 days – a deadline for making its discretionary decision it had set in its own letter. It is notable that it was possible to call an auction based on the request of Well3 LLC that it had submitted already in July 2016. For unknown reasons, the company’s request did not result in an auction. Unlike I.O., Well3 LLC was not even given any notice of the auction. Considering the continued interest of the company in these lots, this decision is particularly notable. The starting price of the land at the auction was 46,000 GEL. The lot had only one bidder – I.O. – and it was sold with a single bid for 47,000 GEL. The Agency explained that its employee was disciplined for failing to give notice about the auction to Well3 LLC.
Under Order dated 10 February 2017, the Agency put on auction the lot 81.03.01.538 and the lot 81.03.01.539. A total starting price of both lots was 80,000 GEL. I.O. was again informed about the auction. The auction had only one bidder and I.O. bought the lots with a single bid for 81,000 GEL. However, in this case, it is notable to describe technical aspects of announcing and conducting the auction. On the electronic auction website eauction.ge, the auctions on these lots cannot be found by entering cadaster codes of the land. Additionally, in the description of the application, incorrect cadaster codes are included. According to the representatives of Well3 LLC, they were unable to find this auction on the website. Due to this, they were not informed about the announcement of the auction and as a result they were unable to participate in the auction. Further, the Agency again did not give notice to the company also about this auction, unlike I.O. The Agency explained that, as two lots were auctioned, the website technically did not allow including two cadaster codes. Contrary to the Agency’s argument, we were able to identify auctions with two cadaster codes on the website. The Agency has never corrected this problem. Therefore, their argument is unconvincing in this regard as well.
Events after Privatization of Lots
It is notable that in case of I.O.’s requests, the Agency called auctions in a matter of days whereas requests of Well3 LLC, despite lengthy formal procedures, never ended with an auction. Moreover, in cases of the lot 81.03.01.538 and the lot 81.03.01.539, Well3 LLC was denied the privatization because the local municipality refused to give consent. In case of the lot 81.03.01.537, the Agency did not announce an auction because it was expecting an approval letter from the municipality (despite the fact that the approval existed). The request of I.O. did not require going through these procedures. In this case, the Agency did not even have to wait for an approval by the municipality and also did not have to take into account the municipality’s former interest in the lots. In the end, these lots were auctioned without an approval by the General Meeting of the village or any assessment by the Economic Department of the municipality. This is even stranger in the cases of the lot 81.03.01.538 and the lot 81.03.01.539 because Well3 LLC was denied the privatization because of a refusal by the General Meeting of the village, the Representative of Gamgebeli in the village and the Economic Department of the municipality.
Transparency International – Georgia asked the Agency why it did not act within its discretionary powers from the very beginning (in response to the request of Well3 LLC dated 11 May 2016) when privatizing the lot 81.03.01.537 without any answer from the municipality. The Agency answered that in privatization processes it necessarily takes into account the position of the local municipality. As they were not aware of their position in this case, it refused to make a decision on a privatization of the land (which was communicated to the applicant in a letter dated 1 September).
This answer would have been convincing if the Agency had not failed to follow its own approach and had not used, what in fact is, double standard. Specifically, the same land was privatized much faster to another applicant – I.O. The Agency never waited for an answer from the local municipality, including with regard to the lots that the municipality had expressed its interest in the past. Instead the Agency auctioned the land immediately. When inquired about the reason behind this, the Agency noted that “the law does not require them” to wait for an answer from the municipality and to take it into account. Both the decision and the answer by the Agency raise more questions about a possibility of corruption in this case.
The events have become even more interesting after I.O. purchased the lots. According to eauction.ge, the time of the sale of the land is 17:00 o’clock 24 February (I.O. registered the ownership of the land on 24 and 28 March). According to representatives of Well3 LLC and a phone log, on 27 February, after three days from the auction, B.M. contacted the assistant of the director of Well3 LLC and noted that they had purchased the lots – also requesting a meeting. According to the representatives of the company, the winners of the auction told them in the meeting that all the three lots were in their ownership and offered to sell them to the company 2.5 times the price they had paid for the land.
“We had a number of questions from the start. How could another person do something we could not do? If the municipality refused [to sell the land], why was the auction called? In addition, our staff and Mr. Jeffrey [director of Well3 LLC] were moving near the territory on a daily basis. There was no banner on the land which would indicate that an auction was announced for the sale of the lots” – a representative of the company told Transparency International – Georgia.
Well3 LLC refused to enter into a deal with I.O. and B.M. and, on 6 March, informed Ketevan Bochorishvili, at the time – deputy Minister of Economy and Sustainable Development of Georgia, about the violations in the privatization process. The company also informed Giorgi Gakharia, the Minister of Economy. As a result of these, they had several meetings at the National Agency of State Property but the meetings had no results.
I.O. registered the ownership of the lot 81.03.01.537 on 24 March 2017 and the ownership of the lot 81.03.01.538 and the lot 81.03.01.539 on 28 March. Soon thereafter, at the request dated 6 April 2017, I.O. sold these lots to Grand Georgia Development LLC, a company registered on 22 March – a couple of days prior to the registrations of the ownership of the lots.
Transparency International – Georgia thinks that, in the village of Teleti of Gardabani municipality, in the process of privatizing lots 81.03.01.537, 81.03.01.538 and 81.03.01.539, the actions of the National Agency of State Property and Gardabani municipality contain possible signs of criminal acts of corruption. As a result of the actions of the National Agency of State Property and Gardabani municipality, parties interested in the purchase of the property were not given equal treatment as the legitimate interests of Well3 LLC were disadvantaged and I.O. received a preferential treatment. The suspicion of possible corruption is further supported by the fact that the representatives of I.O. tried to sell the same property to the disadvantaged Well3 LLC for 2.5 times higher price just a couple of days after purchasing the land. For this there is supporting evidence.
We believe that the law-enforcement agencies must take notice of this case and fully and objectively investigate facts of a possible crime.