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Injustice Leaked from a Scandalous Pipe(Part 1)

April 7, 2009

 Before the rehabilitation of the gas pipe-line started

Tea Topuria

On February 19 2009 Tbilisi City Court sentenced Professor Omar Kutsnashvili to four-years in prison The professor is 66-year-old and  has been detained for 9 months already. He is the father of Zakaria Kutsnashvili, a former member of the Parliament of Georgia. Omar Kutsnashvili was arrested based on an anonymous letter to the Ministry of Internal Affairs. According to the letter, an organization of which Omar Kutsnashvili was director, had appropriated state funds. The court could not determine if in fact there had been an appropriation but sent the professor to the prison pursuant to a charge of fabricating documents. The lawyers, human rights defenders and experts of economics think that Omar Kutsnashvili was not guilty of fabrication either and this judgment smells of politics.

This trial attracted attention from the very beginning. A lot of people came to attend the proceeding but the hearing was to be held in a small court-room. Although people requested the court administration to hold the trial in a larger room nobody satisfied their request and people had to go home. It was clear that the activities of the court could not be public. After an 8-month fight Omar Kutsnashvili was acquitted in one part of the case but was not found completely guiltless. At the end of the trial the Omar Kutsnashvili assessed the judgment as political. The public has same opinion about the trial and considers that the distinguished professor was judged by an unfair court.

Before the Trial

Everything started in 2006. On July 26 2006 the foundation “Millennium Challenge for Georgia” announced competition for rehabilitation work on the gas pipe-line in the Gldanula settlement in Tbilisi. “Geoinginering Ltd” won the competition and Omar Kutsnashvili is the head of it. On November 3 the foundation and “Geoinginering” signed an agreement. 1 006 306 USD was allocated for the rehabilitation work in Gldanula.

Foundation “Millennium Challenge for Georgia” was established based on an agreement between the governments of Georgia and the United States.It was part of the program Millennium Challenge. A grant of 395, 3 million USD was allocated by the US government to be distributed based on the priorities established by the government of Georgia. The foundation is leading the process of distributing and implementing projects. The money allocated from the US is assigned to the fund. It is reflected in the State Budget also. In fact, the money is transferred to the bank account of the fund and which is in charge of expenditures as well.

The problem was apparent from the very beginning. According to the conditions of the competition an 85-meter-long pipe-line was to be replaced by pipe that was to be installed in the river bed. Omar Kutsnashvili stated such activities were useless because the river could wash-away the pipe and it would soon spoil again unless they changed other rusty places too. In order not to perform poor work and not to waste money, Kutsnashvili requested the fund to make amendments to the project. He intended to decline the project if additional works were not added to the project. The Fund replied that he should work out a new project with his own funds but the price should not exceed the price of the initial project.

The offer was acceptable to “Geoinginering”. It worked out a new project which was called an alternative project. The alternative project aimed to double the work. First of all, the pipe to be replaced was twice as long as the pipe to be replaced in the initially planned 85-meter long pipe and it was to be installed under the river-bed and not in the river-bed.

The work was implemented in accordance with the alternative project. Later, a representative of the Millennium Challenge for Georgia, Colin Hew Backley confirmed this. The fund accepted the rehabilitation works on 146 meters of the pipe-line which was installed 4 meters deeper under the river-bed.

When the rehabilitation work on the pipe-line had been finished the fund did not have any complaints regarding the work. Nevertheless, the Prosecutor’s Office had some complaints about it and started an investigation based on the anonymous letter. The criminal case N 092080102 was launched. According to the bill of particulars submitted to the court Omar Kutsnashvili was accused of delivering fabricated invoices to the fund in which the organization artificially augmented the work and in doing so appropriated state funds. According to the conclusion of the prosecutor’s office Professor Kutsnashvili gained 295 893 USD, that is 503 018—over one have million--GEL, through artificial augmentation of the work.

Court Was Confused by Progress

Initially the prosecutor claimed the work was incomplete and that less was done than requested (for example 2 832 cubic meters of soil was dug out instead of the planned 3 300 cubic meters); and that nevertheless the company received the same payment for the work.

The accusation relied on the conclusion of the experts for the expert-criminalist department within the Ministry of Internal Affairs that could not be used as a legal document. The conclusion was drawn up by incompetent people, among whom was an intern who had no requisite qualifications. It must be pointed out, the prosecutor prepared the so-called document in a day even though the experts had to study several hundreds of pages of project documents and it could not have been done in a day. Nine members of the Georgian Association of Construction, three of whom are PhDs, confirm that the document is not competent.

Several completely different conclusions were in the case   some of the conclusions were provided by the prosecutor and some were prepared by the defense side.

Finally it was decided that experts needed to study everything at the site of the work and not from the papers. Consequently, experts had to arrive in Gldanula settlement and measure, count and find out the work that had been done (for example, the length of the pipe-line installed, and the amount of soil dug out).

In addition, the experts had to take into consideration the agreement between the fund and “Geoinginering” which envisaged increases and decreases in the amount. But the experts who had only technical education could not understand the agreement at all and even the court spent 8 months considering it.

The agreement indicated that the work of the Geoinginering should not be measured according to amounts but according to progress. This means that the rehabilitation of the 146-meter-long pipe-line that was twice as long as initially planned was to be assessed as an implementation of 100 percent of the work. So, when 10 % of the pipe had been replaced 10 % of the sum was to be paid; another 20 % of the sum was to be issued after another 20% of work had been done.

Expert economists explained that “measurement according to the progress is standard for such famous organizations like “BP”. The fund allocated a fixed sum for the work and the work to be performed for this sum could be increased or decreased. The objective is to make the entire work for the sum. And it really happened. Geoinginering did twice as much work for the allocated sum than was initially planned – the company replaced an146 meter-long pipe-line instead 85 meters and installed it four meters deep in the soil.

Colin Hew Backley, representative of the “Millennium Challenge for Georgia”, agreed with the above conclusion. He sent a letter to the company and expressed his opinion about the work activities. Later the letter was introduced in the court.

The letter of Mr. Backley informed the court: “The contract estimated the amount of the allocated sum and the contractor was entitled to perform the work in accordance with the project. The total amount of the sum was not related to the amount of the work. That means the contractor had the right to increase or decrease the work that is envisaged in the documents… invoicing and payment for the work was to be carried out in accordance with the progress… the corporation “Millennium Challenge” is sure that Geoinginering acted in compliance with the contract conditions; furthermore, it acted better than the requested standards of practice in Georgia.”
 
Gia Khukhashvili, expert economist, said in his conversation with us that he could not understand what the arguments are against Geoinginering. Measurement of the work by progress is a well-known method and is often used. In this particular case it is absurd to argue with a person for having done more than was planned. Since the employer is pleased nobody has right to interfere in the assessment of the work. >>>> Part II

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