Analysis of the State Audit Office Monitoring Service of Political Parties’ Finance

12 Oct, 2012


With the support of Open Society Georgia Foundation initiative group of independent experts and representatives of Coalition “For Freedom of Choice” conducted a study of the State Audit Office (Chamber of Control) Monitoring Service of Political Parties Finance activity starting from its establishment until August 2012.

The following circumstances were defined resultant to the analysis of Monitoring Service of Political Parties Finance activity:

1.      None of the highest audit offices of the 49 member countries of the EUROSAI (including the Swedish, Lithuanian and Latvian counterparts – partners of the Georgian State Audit Office) has competences identical to those of the Georgian State Audit Office in the area of political and election issues.

2.      Out of the State audit institutions of the EUROSAI member countries, only the Bulgarian, Polish, Spanish and Finnish audit institutions have different functions of over-monitoring of political parties activities. In any event, the competence of these audit institutions is limited with other administrative or judicial bodies’ involvement in their decision-making process.

3.      The recommendations contained in the 2011 Evaluation Report of the Council of Europe Group of States against Corruption (GRECO) and the 29 June 2012 Statement of the United States National Democratic Institute’s (NDI) Pre-election Delegation to Georgia indicate that the primary goal is to have objective, independent and politically neutral mechanisms of party funding elaborated and implemented.

4.      Noteworthy, the United States National Democratic Institute’s (NDI) Pre-election Delegation to Georgia deems political neutrality of the Georgian State Audit Office a matter of concern and states directly: “Remove the perception of a conflict of interest by ensuring that neither the chairman and deputies, nor staff run for political office or engage in partisan political activity.” Contrary to the above-cited recommendation, both the Chairperson and the Deputy Chairperson of the State Audit Office are nominated as candidates for membership of the Georgian Parliament and, notably, the nomination is coming not from different or opposition parties but from the ruling political party.

5.      On many occasions, decisions adopted by the Financial Monitoring Service of the Georgian Chamber of Control (later – the State Audit Office) against various legal entities went beyond the statutory constraints prescribed by the mandate of the Chamber of Control and simply became a tool for deliberate persecution against opposition-minded individual political subjects and imposing unsubstantiated financial sanctions upon them.

6.      Sanctions were applied against individual legal entities after the legal entities or their representatives made oral statements declaring solidarity and moral support to other non-political organizations. It should also be noted that the sanctions were applied in a way to legally and financially paralyze these legal entities at the outset of their activity (immediately after making a public announcement) without the need for proving first that the announcing organization had any election goals clearly stated and had been using financial or other resources for the achievement of these goals.

7.      Property of some of the legal entities was attached at a moment when not only they had not made any contributions yet but had never had effected any transactions using their bank accounts.

8.      It should be noted as well that the Chamber of Control enforced statutory restrictions against various subjects without first complying with its own obligation under law to issue respective administrative acts prior to actually enforcing the restrictions.

9.      The practice applied by the Chamber of Control in a number of individual cases of determining the amount of financial sanctions clearly lacks logic. An example is the Elita Burji case, in which the Chamber of Control fined the legal entity for printing services provided by the legal entity to a political party but determined the amount of fine not using the actual value of services provides but the value of the printer with which the legal entity provided the services.

10.   Furthermore, decisions adopted by the Chamber of Control against various legal entities served as a basis for other state bodies to implement restricting actions against the legal entities without any comprehensive review or receipt of explanations from the sanctioned legal entities.

11.  The protocol on administrative violation no. 000036 dated 7 June 2012 issued by the Chamber of Control became a basis for the Georgian prosecution office and the court of unlawfully limiting the freedom of expression. The mentioned protocol finds Bidzina Ivanishvili a perpetrator of an administrative offence under Article 252 of the Organic Law of Georgia on Citizens’ Political Associations. According to the reasoning provided by the Audit Office, Bidzina Ivanishvili made an unlawful contribution of 12,410,252.89 Georgian Lari to support the political party “Georgian Dream” to further own political and election goals and in avoidance of the requirements prescribed by the Organic Law on Citizens’ Political Associations. In particular, the Audit Office stated, Bidzina Ivanishvili used own resources to provide citizens of Georgia with the equipment necessary to receive the broadcasting signal through the Company “Global Contact Consulting” and the broadcasting services, free of charge. The stance of the Chamber of Control was finally affirmed by the court resolution dated 11 June 2012 fining Bidzina Ivanishvili with 120,220,190 Georgian Lari in favor of the State Budget.

12.  A “logical” continuation of the above-mentioned decision and the “finishing up” of the case were the court orders dated 21 June, 11 July and 14 July 2012 attaching the satellite antennas of the Maestro TV Company. A joint analysis of all of the three cases makes it clear that the Chamber of Control made unprecedently unlawful decisions, which had an adverse impact upon the general situation of freedom of expression in the country.

13.  The process of fining physical persons by the Chamber of Control (State Audit Office) featured a number of problems:

a)      unequal approaches towards the United National Movement and the Georgian Dream as regards investigation of the origin of financial sources of their contributors (financial sanctions imposed upon the Bank Cartu employees and the approach used towards the National Movement contributors are an example);

b)      insufficient evidence used to support decisions fining the party contributors (the case concerning Bidzina Giorgobiani);

c)      excessive use of powers by the Chamber of Control contrary to the applicable Georgian law (the case concerning Kakhi Kaladze);

d)      clear neglect of document-supported arguments provided by the contributors of opposition parties about the origin of their sources of income (see the case of fining the Cartu Bank employees);

e)      failure by the Chamber of Control to fulfill the requirements of law in examining the revenues of the ruling party contributors.

14.  Analysis of the practice the Chamber of Control (the State Audit Office) used in imposing financial sanctions upon political parties has revealed that the Chamber of Control was, in fact, not responding to and not examining the legality of the occurrences of the ruling party providing free-of-charge services to voters during its meetings with the population (meetings at restaurants “Kosmos”, “Elite”, “Monopol” and “Triumph”);

15.  The fact that, in the beginning of August, on account of having received unlawful contributions from the Management Service Ltd, the State Audit Office froze the bank accounts of all of the political subjects that were members of the Coalition “Georgian Dream” has substantially impeded the commencement of its official pre-election campaigning by the Coalition. The reasons provided to justify the mentioned decision are even more dubious against the background that three members of the Coalition who have been imposed financial fines have no legal relationship with the Management Service Ltd; in the time period the Chamber of Control was carrying out its monitoring (January – April 2012), one of the three sanctions subjects – the political coalition “Georgian Dream” was not even legally founded.

All the above quoted facts revealed resultant to the State Audit Office activity call in question both legitimacy of a number of decisions made by this agency and political neutrality of the one as moreover, two high officials of the State Audit Office – Ex-Chairman Levan Bejashvili and Ex-Deputy Tinatin Bokuchava balloted in Parliamentary Elections of 2012 under the ruling party “UNM”. Therefore, the present report will be presented to Georgian Parliament and the Prosecutor’s Office of Georgia for the subsequent reaction on violations unveiled in the activity of the Monitoring Service of Finance.