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Georgian Railway director charged with embezzlement of USD 40 mill

by | May 22, 2013

TBILISI, DFWatch–The unit to combat financial fraud in Georgia has charged Irakli Ezugbaia, the former head of Georgian Railway, of appropriation and embezzlement of state money. He is not in Georgia but has been sentenced in absentia to pretrial detention.

His lawyer says Ezugbaia is prepared to cooperate with the investigation.

The 2 344 km long railway through Georgia is one of the most important transport corridors in Eurasia, and represents the shortest connecting route between Europe and Central Asia.

Georgian Railway is a state company, which was transformed into a JSC on April 12, 2012. It is managed by a supervisory board and has a general director.

Following a decision by the government, the company has obligations in euro. In July 2012, Georgian Railway repurchased 88.99 percent of those euro obligations and replaced them with new euro obligations: nominal USD 500 million, coupon – 7.75 percent, payment – twice a year, term – 10 years.

These new obligations were successfully placed on London Stock Exchange. The emission was implemented through international investment banks Goldman Sachs International, J.P. Morgan Securities Ltd and Merrill Lynch International.

According to data from the first three quarters of 2012, the company had a positive result of 144.5 million Georgian lari, or nearly USD 87.5 million.

This is the second time a head of Georgian Railway has been served charges of embezzlement after there was a change of government. The first time was after the Rose Revolution in 2003, when the government detained Akaki Chkhaidze, former chair of Georgian Railway, and charged him with corruption, but released him after he paid a large fine, the amount of which was not made public.

Ezugbaia, who has been chair of Georgian Railway for the last few years, left Georgia soon after the Ivanishvili government took office. His lawyer says he left to study, but it is unknown where he is studying.

He is now charged with appropriation and embezzlement of state money. The investigative service of the Finance Ministry has found that five contracts were signed between the Georgian Railway and the company Vagonshenebeli since 2008. Georgian Railway wrote an artificially increased amount of money – USD 39 000 for rehabilitation of train cars, but the market price of rehabilitating one train car was GEL 31 000. This caused a loss of GEL 65 million — USD 40 million.

Seven persons from Georgian Railway and Vagonmshenebeli Company Ltd have been detained in the case.



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