Georgia: Israeli Entrepreneurs Sentenced To Prison For Alleged Bribery

By Molly Corso

A ruling against two Israeli businessmen in a controversial bribery case is again raising questions about the independence of courts in Georgia.

On April 1, the Tbilisi City Court found Ron Fuchs, an Israeli oil and gas trader, and his associate, Ze’ev Frenkiel, guilty of attempted bribery for having allegedly offered $7 million to Deputy Finance Minister Avtandil Kharaidze in an attempt to secure the Georgian government’s payment of a $98 million arbitration settlement to Fuchs and his business partner, Ioannis Kardassopoulos.

The 61-year-old Fuchs, who responded with a laugh when Judge Vazha Pukhashvili read his sentence to a dead-silent courtroom, was sentenced to seven years in prison and fined 500,000 lari (about $293, 238); Frenkiel, 64, received a six-year-and-six-month sentence and a fine of 100,000 lari (about 58,648).

No reason was given for the discrepancies in the sentences. The judge has two weeks to submit his justification for the sentencing.

The verdict, however, was widely anticipated. Over the past three days, Prime Minister Nika Gilauri, whom the defense alleges played a role in the two men’s arrest, as well as Petre Tsiskarishvili, the governing United National Movement Party parliamentary faction leader, both made televised statements calling for prison sentences for corrupt entrepreneurs.

Such statements are common practice in cases where the government has an interest. And such statements also appear to have a correlation to the outcome of trials. Despite ongoing efforts to encourage their independence, decisions and verdicts in Georgian criminal and administrative courts rarely go against the government’s preferences. Over 99 percent of criminal cases end with incarceration, according to official statistics.

It was not the first time that Gilauri’s name had surfaced in the case. The defense alleged earlier that the prime minister duped Fuchs by writing a letter that enticed the Israeli citizen to travel to Georgia, supposedly to discuss the government’s payment of a $98 million arbitration panel settlement. Upon arrival, Fuchs and Frenkiel were taken into custody on bribery charges. Under Georgian law, the defense letter argues, government officials cannot be involved in sting operations.

Judge Pukhashvili, though, repeatedly declined defense motions to call Gilauri and Finance Minister Kakha Baindurashvili to testify about the letter, or the alleged sting operation — even when Deputy Finance Minister Kharaidze testified about their alleged involvement in the sting operation. The two officials’ testimony, the judge claimed, was “irrelevant.” When queried by EurasiaNet.org whether or not he had written the letter cited by the defense, Gilauri did not respond directly. “Who is Ron Fuchs?” he asked, before stating that “[w]hoever will give any bribe [to] or try any bribery [of] any members of [the] Georgian, government will go to prison.”

The case against Fuchs and Frenkiel has played out against a larger fight between the Georgian government and the Fuchs-Kardassopoulos partnership over 19-year-old rights to use of Georgian oil and gas pipelines. In March 2010, the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) ruled against Georgia.

Over the past year, the Georgian government has sought to have the ICSID decision annulled and to revise the award, now worth over $100 million, thanks to accrued interest. Fuchs’ legal team has filed a counter-memorandum against the government petition for annulment, but a final verdict is not expected before autumn 2011, defense lawyer Archil Kbilashvili said. An ICSID representative was not immediately available for comment.

Georgian prosecutors have insisted that no connection exists between the ICSID case and the Fuchs-Frenkiel bribery charges.

Kardassopoulos, Fuchs’ business partner, has been implicated in the bribery case but authorities have not moved to arrest him. He is still “at large” according to the General Prosecutor’s Office, and an “investigation” into his role in the alleged bribery attempt continues.

The defense says that it appeal the Tbilisi City Court’s ruling, both inside Georgia and at the European Court of Human Rights in Strasbourg.

Over the course of the three-month trial, defense efforts to introduce evidence and question hostile witnesses were repeatedly declined. Kbilashvili, the defense attorney, took ten hours over two days to deliver closing arguments. The presiding judge ordered statistics citing Georgian courts’ criminal conviction rate struck from Fuchs’ statement, and angrily announced a sudden recess when the Israeli businessman described his court as “so-called.” Noise from the hallway and adjoining courtrooms often drowned out statements from the defense and defendants.

Prosecutors and other government officials have not commented on the verdict, but, in pre-verdict comments to EurasiaNet.org on March 30, Deputy Parliamentary Speaker Gigi Tsereteli stressed that justice must be served. “Of course, it is quite painful and not desirable to have such cases in business relations,” Tsereteli said. “But this particular case has corrupted roots.”“

Molly Corso is a freelance reporter based in Tbilisi and editor of the American Chamber of Commerce’s Investor.ge magazine.