Israelis arrested on bribery charges

On October 15 Georgian law enforcers detained Israeli businessmen offering Deputy Minister of Finance, Avtandil Kharadze USD 7 million as a bribe. Ron Fuchs and his partner in the company Tramex, Ioannis Kardassopoulos, together with Zeev Frenkiel offered the Deputy Finance Minister USD 7 million in exchange for him to convince the Georgian Government not to challenge a decision of the International Centre for Settlement of Investment Disputes (ICSID). The ICSID awarded Fuchs and Kardassopoulos about USD 98.1 million to be paid by the Georgian side.

According to the information released by the General Prosecutor’s Office the detention of the two Israelis is the final link in an extensive operation Georgian law enforcers have been conducting against the criminals. The case concerns corruption schemes during the previous Government of Georgia in 1990s. The authorities at that time granted an exclusive license to the company Tramex (of unknown origin) for oil-related projects in Georgia. Tramex, represented by its two shareholders Fuchs and Kardassopoulos, started looking for investment opportunities in Georgia’s energy sector. In 1992 the company established a joint venture with the Georgian State Oil Company and obtained a concession for the development of an oil pipeline network. The venture was later resumed by the Government of Georgia in 1996 when the Georgian International Oil Corporation was established on the initiative of former President Eduard Shevardnadze.

Tramex and the Georgian authorities tried to resolve the dispute over possible compensation for the company but in vain. In November 2004 the two business partners filed two separate but related suits against Georgia in the ICSID. On March 3, 2010 a London-based tribunal ruled that Georgia had violated the multilateral Energy Charter Treaty and unlawfully expropriated investments made by Kardassopoulos in Georgia. In respect of Fuchs, the tribunal ruled that Georgia violated the bilateral investment protection treaty between Israel and Georgia. This decision awarded each investor USD 15.1 million for losses, and USD 30 million in interest for the period when the dispute started in 1996 until the arbitration ruling in 2010. Georgia was also ordered to cover the investors’ arbitration costs of USD 7.9 million.

The Ministry of Interior Affairs of Georgia released additional video footage reflecting how the foreign businessmen have been trying to bribe the Deputy Finance Minister to convince the Georgian Government to refrain from applying against the decision to pay USD 100 million to Fuchs’s company. According to the investigators the business partners have been offering Kharadze different amounts of money at each new meeting from USD 10-20 million while their final offer was worth USD 7 million.

The Embassy of Israel in Tbilisi was not aware of the case. Receiving official notification about the detention of the two businessmen, the Embassy’s Press Service was unable to provide any comment to the media. Fuchs and his partner denied the charges. Irakli Kbilashvili, Fuch’s defense lawyer pointed out that his client only came to Georgia following an official invitation from the Prime Minister, Nika Gilauri. “We believe that his arrest is a persecution, the goal being to make him say no to the amount he has won for the international arbitration case against Georgia,” Kbilashvili told the media.

Fuchs and Frenkiel were sent to two-month pre-detention on October 16 after being refused bail by the court. The special operation being carried out in cooperation with the constitutional security department is now searching for the Greek businessman Ioannis Kardassopoulos who is now wanted. If found guilty the foreign businessmen could face imprisonment of up to 8 years.