Campaign Finances in Georgia’s 2020 Parliamentary Elections (Final Report) - საერთაშორისო გამჭვირვალობა - საქართველო
GEO

Campaign Finances in Georgia’s 2020 Parliamentary Elections (Final Report)

15 January, 2021

 

TI Georgia has studied the issues of parliamentary election campaign finances from September 1 to November 17, 2020. In addition, it analyzed the donations received by political parties in more depth and reviewed the trends highlighted in this regard since January 1, 2020. Out of nine election subjects that received at least 1% of the votes, one subject (Girchi) did not submit the completed financial statements to the SAO. Therefore, the findings of the report are mainly based on the analysis of the financial declarations submitted by 8 election subjects:

Revenues of election subjects

  • The studied election subjects received a total of GEL 38.6 million from September 1 to November 17. The ruling GD got almost half (45%) - GEL 17.3 million of this amount. Lelo - Mamuka Khazaradze took the second place with GEL 6 million, and the election bloc UNM-UOPU was third with GEL 5.7 million;
  • Only 10% (GEL 3.7 million) of the total revenues received by the election subjects came from public funding, and 90% (GEL 34.9 million) - from private funding. The small share of public funding is due to the fact that the reporting period was less than three months. Political parties receive an equal amount of public funding on a monthly basis, while funding from private sources is mainly concentrated during the election period;
  • The studied 8 election subjects received a total of GEL 33.4 million in donations, of which GEL 15.3 million (46% of all donations) went to the ruling GD party. Lelo – Mamuka Khazaradze took the second place with GEL 6 million and the election bloc UNM-UOPU was third with GEL 4.8 million. It should be noted that, compared to the 2016 parliamentary elections, the ruling party's share in total donations has decreased. In particular, in 2016, the GD got 68% of the total donations received by political parties;
  • 98% of the total donations received by the 8 electoral subjects were made by natural persons, and 2% – by legal persons. About 38% of the donors of the Georgian political parties have donated more than the average annual net salary in Georgia (GEL 11,900). Such donations account for about 85% of the donations received by all parties, which points to their dependence on large donors;
  • As it turned out, the companies connected with the donors of the ruling party had won tenders worth about GEL 68 million in 2020 (until November 17) and, in return, these donors had donated GEL 1.6 million for the benefit of the GD during the same period. Especially noteworthy is G & K Technology LLC, which won tenders worth GEL 17.2 million during the year, while its owner, Roman Abramishvili, donated GEL 60,000 to the GD, in February. Interestingly, Abramishvili made the donation after his company won several large tenders in a short period of time. It should be noted that this company was also included in TI Georgia’s report on political finance in 2019 for a similar action.[1] The dates of the won tenders and donations were also quite close to each other in the cases of Tsekuri LLC, Gravita LLC and G-T Group LLC. Another large state contractor is L. and K. LLC, which won tenders worth GEL 17.3 million in 2020, while its owners donated GEL 22,000 to the ruling party’s coffers. Yet another extremely interesting company is Arsakidze-2000 LLC, which won public tenders worth 2.2 million in 2020. The owners of this company are at the same time connected with Lilo-Mall LLC, a large business group whose partners have been among the largest political donors for years;
  • In addition to tenders, the companies of the natural persons donating to the ruling party are also recipients of simplified public procurements. In particular, Companies, which are directly or indirectly connected to persons who have contributed approximately GEL 2.2 million to the ruling party in 2020, received around GEL 4.2 million from simplified public procurement contracts until November 17, 2020. Kvareli Eden LLC is worth mentioning, which is owned by business partners of Alexandre Ivanishvili, a brother of Bidzina Ivanishvili, the Chairperson of the ruling party. This company also came under the spotlight of TI Georgia in the spring of 2020, when, at the time of the state of emergency and several days after the donation of money by its owners, it concluded a large contract of simplified public procurement;
  • Over the years, several major groups had been formed among the ruling party's donors that contributed large sums of money to the GD in almost every election. Three of these groups continued to make large donations in 2020. In particular, the individuals affiliated with Bidzina Ivanishvili donated GEL 544,300 in total to the GD. The individuals connected with Lilo-Mall LLC gave GEL 595,000 in total to the ruling party, and the individuals directly or indirectly connected with Bombora and Children LLC donated GEL 255,000 to the same party;
  • We have separately studied the donations of the majoritarian MP candidates of election subjects. 7 of the 30 majoritarian candidates nominated by the ruling GD party (including their family members and business partners) have donated GEL 1,035,000 to the party from January 1 to November 17, 2020, which was 5% of the total donations received by the party during this period. All the seven majoritarian candidates are big businessmen and are connected with 127 companies in total in this or that form. These candidates are: Zaal Dugladze, Anton Obolashvili, Gocha Enukidze, Zaza Lominadze, Irakli Khakhubia, Davit Songhulashvili, and Vasil Chigogidze. There were also cases when business partners of one majoritarian candidate donated the same amount of money to the party on the same day;
  • 15 of the 25 majoritarian candidates nominated by the election bloc UNM – UOPU (including their family members and business partners) have donated GEL 565,670 to the parties comprising the election bloc from January 1 to November 17, 2020, which amounted to 10% of the total donations received by the bloc during this period. Out of this amount, GEL 105,000 was donated by four business partners of the majoritarian candidate Murtaz Zodelava (Dimitri Dzagnidze, Giorgi Chiviashvili, Giorgi Gelkhauri and Beka Basilaia) on the same day – October 8;
  • 7 of the 29 majoritarian candidates nominated by the Alliance of Patriots of Georgia party have donated GEL 421,990 to the party during two months before the parliamentary elections, which amounted to 23% of the total donations received by the party during the year. From this amount, GEL 185,000 was donated by four majoritarian candidates (Ioseb Shatberashvili, Kakhaber Dzagania, Paata Jibladze and Archil Benidze) on the same day – September 10;
  • Only the ruling GD party had an opportunity to take a bank loan to fund its campaign. This party received a loan of GEL 1 million from Liberty Bank.

Expenditures of election subjects

  • 8 election subjects studied by TI Georgia spent a total of GEL 37.3 million in the reporting period, of which 46% - GEL 17.1 million– was spent by the ruling GD party. Lelo – Mamuka Khazaradze took the second place with GEL 6 million, and the UNM-UOPU was third with GEL 5.2 million;
  • 75% of election subjects' expenses (GEL 28.1 million) were advertising expenses, while the other largest categories - rental expenses (6%) and salaries (4%) were much smaller compared to advertising expenses;
  • The ruling GD party has traditionally had the largest advertising spending, and its costs were several times higher than those of the rest entities. The ruling party's advertising expenses accounted for 43% of the advertising expenses of all entities;
  • Among various types of advertising, TV Advertising (45% of the total advertising costs) and outdoor advertising (30%) were the largest ones. However, compared to the previous elections, the share of Internet advertising was also increased;
  • 8 election subjects spent a total of GEL 12.6 million on TV ads. The ruling GD political party spent the largest amount GEL 4.5 million on this type of advertising, who was followed by the UNM-UOPU with GEL 3.1 million;
  • Of the 8 election subjects, only one subject’s declared information on TV ads did not correspond to the actual expenses. In particular, the financial declarations submitted by the Shalva Natelashvili – the Labor Party of Georgia did not contain any information on TV advertising expenses in the relevant expense category, while our monitors recorded about 130 paid videos of this election subject, the total cost of which should have been around GEL 100,000;
  • 8 election subjects spent a total of GEL 8.3 million on outdoor advertising. The ruling GD political party spent the largest amount GEL 5.1 million on this type of advertising, who was followed by the Lelo – Mamuka Khazaradze with GEL 1.2 million;
  • Expenses on Internet advertising incurred by election subjects during the reporting period reached GEL 3 million. Bakradze, Ugulava, Bokeria - European Georgia - Movement for Freedom spent the largest amount GEL 849,592, followed by the election bloc Giorgi Vashadze - the Builder Strategy with GEL 681,044 and the GD with GEL 677,024;
  • According to the Facebook Ad Library, from September 1 to November 28, 9 election subjects had to spend a total of approximately $ 701,350 to place pre-election sponsored materials;
  • 8 election subjects spent a total of GEL 1.5 million on salaries. Approximately GEL 600,000 should be added to this amount since the ruling GD party indicated this amount in the Liabilities Registry for the compensation of over 2,000 campaign coordinators.

Transparency and oversight of campaign finances

  • The SAO has published its so far last report on its activities at the end of October, according to which, during the election period, as a result of studying the applications filed, the media monitoring, and the information submitted by electoral subjects, the agency launched administrative proceedings only in 7 cases. The SAO has already completed the proceedings in 3 cases and drawn up administrative offence reports on 2 offences. For example, in the run-up to the 2016 parliamentary elections, the SAO compiled 19 protocols of violations against election subjects and 10 protocols against donors;
  • In the pre-election period, the issue of financing Georgian political parties from a hostile state - Russia - was topical, which was not followed by an adequate response from the relevant state agencies. More specifically, Dossier – an investigative journalism platform, published in two parts on August 24 and August 31 and tells about the ties and financial relations of the Alliance of Patriots of Georgia with the Kremlin. This case has once again emphasized that the SAO does not have relevant powers and legal tools for investigating similar cases. As for other state agencies with investigative powers (Georgian Prosecutor's Office, State Security Service), they did not consider it necessary to launch an investigation, leaving unanswered serious questions about interference of the hostile country in Georgian politics.

Recommendations

  • Since the competences of the SAO are not sufficient to adequately respond to alleged cases of political corruption, including corrupt transactions between donors and parties, and illegal financing schemes, an independent anti-corruption agency should be established. This agency should be equipped with investigative powers and, among other things, should oversee the financing of political parties. Several members of parliament have already registered the draft law in the Parliament of Georgia to implement this idea, and it is desirable that Parliament consider it in the near future;
  • It is desirable that the SAO respond more effectively and promptly to the relevant violations, including the deficiencies identified in this report. It would also be good if this agency, like the CEC, establishes a publicly available special registry, which would bring together complaints / statements submitted to the SAO and information on their response;
  • It is desirable that the SAO also establish a specific rule for declaring campaign spending by election subjects on Facebook. In particular, it is necessary to establish uniform instructions on the financing of all pages used in the election campaign and declaration of information.

This report was made possible by the support of the American people through the United States Agency for International Development (USAID). The opinions expressed in the report belong to Transparency International Georgia and may not reflect the views of USAID or the United States Government.


[1] Georgia’s Political Finance in 2019: Revenues and Expenditures of Political Parties and Financial Oversight, TI Georgia, 09/07/2020: https://bit.ly/3mIrKYL

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