Mr Aristomene Varoudakis has not been able to find time to meet with me to discuss my claim, but it seems he has found time to speak with the media and to meet with Prime Minister Sargsyan to discuss the matter.
According to Varoudakis, the Municipal Development Project went ahead without a problem. He added that the Bank studied my reports of wrongdoings in 2004, and concluded they were unfounded.
So, now that Varoudakis has surfaced, I will respond to his claims and detail a well-documented multi-million dollar problem that the Commission exposed and reported to the Bank. Moreover, this particular event demonstrated that the Bank was a collaborator in the wrongdoings.
Firstly, it is important to understand that throughout the duration of the Municipal Development Project, Richard Walkling was both Authorized Representative of the International Operator (A. Utilities) and at the same time General Director of the Yerevan Water & Sewerage Company (YWSC).
This situation started in June 2000 and is a VERY serious violation of World Bank rules and of the Municipal development Project management contract, which A. Utilities signed with the Yerevan Water & Sewerage Company. Effectively Richard Walkling represented both sides of the contract, as ‘Principle’ and as ‘Contractor’. In his capacity as General Director of the Yerevan Water & Sewerage Company, he manipulated numerous financial documents with the clear intention of embezzling state assets.
One such document was the 2003 financial statement, which provided details of YWSC assets re-valuation, carried out by the local auditing company ‘Aucon’ in accordance with a Government decree. The ‘Aucon’ assets revaluation data and the YWSC 2003 financial statement assets revaluation data varied alarmingly.
In January 2003, the total value of the YWSC assets was about $10 million and the revaluation increased the value sixteen fold to a total of about $165 million. Then the assets were depreciated by about $115 million, to an end-of-year value of about $50 million. Aucon and the YWSC generally agreed on the final end-of-year valuation, but a significant difference in the two valuation reports was that Aucon showed the final total for the revalued ‘Machinery & Equipment’ to be 610 million Drams (approx), about $1.2 million, whereas the YWSC 2003 statement showed the ‘Machinery & Equipment’ to be revalued at a massively inflated figure of 13.49 BILIION Drams, about $26 million!!, with the fixed infrastructure assets at a miserly $11 million
It was no wonder the Bank withheld the 2003 statement until AFTER the original end date of the Parliamentary Commission - 10th September 2004. But in September the Speaker of Parliament (Artur Baghdasarian) extended the Commission term to the end of the year, after which the Bank could simply not withhold the document any longer. So on 7th October 2004, the Bank eventually approved release of the statement to the Commission.
On the 18th October I wrote to the Bank commenting on the grossly overstated revaluation figures for machinery and equipment, which gave Walkling’s Yerevan Water & Sewerage Company the opportunity to claim more than 6 BILLION Drams (about $12 million) depreciation, when if the assets had been recorded properly, should have been no more than $3 million.
This was yet another $9 million loss that Richard Walkling had arranged for the Armenian state budget – a part of nearly $60 million for the Yerevan Water & Sewerage Company in 2003 alone, a massive amount for a company with about $12 million dollars annual expenses. And the loss shown by Walkling in 2004 was not much less.
This event was of particular interest because the Bank wrote that it was not able to release the document earlier because it needed time (about 3 months) for its own “assessment”, which gave the Bank every opportunity to regulate the problem. That demonstrated quite clearly that the Bank was a collaborator in this highly corrupt activity.
So - when Aristomene Varoudakis says that in 2004 there was no significant project impropriety, he is VERY much mistaken.