18 Defendants in Criminal Case Related to 'North-South' Project

In light of the importance of public awareness regarding the current results of the investigation into violations recorded during the implementation of the "North-South Road Corridor" program (hereinafter referred to as the Program), we inform the following: This was reported by the Prosecutor General's Office of the Republic of Armenia.

As a result of the study conducted by the Prosecutor General's Office of Armenia, a criminal case was initiated on September 4, 2018, under part 2 of Article 308 of the RA Criminal Code, based on facts of corruption violations committed by public officials involved in the implementation of the Program during the period from 2009 to 2018. The estimated preliminary damage caused by this negligence amounts to approximately 23.7 billion Armenian Drams.

The data available in the criminal case evidently indicate that violations have occurred during the implementation of tenders, ineffective management of the Program, lack of oversight on the execution of work, changes in contract prices and contents, and unjustified alterations to projects. As a result, the construction works of the North-South Road have not been completed over nearly ten years, and the expected objectives and results of the Program—such as reducing travel times and connecting southern Armenia to the north with safe, quality, and fast roads—have not been achieved.

For example, due to gross violations of the established rules in both the selection of the main contractor and other tenders, organizations that bid higher prices under equal conditions have been declared winners, which, under ineffective oversight and amidst official crime committed by relevant public officials, have completely failed the North-South Road Program, violated all deadlines, and contractual obligations, misusing over 300 million USD in loans and state budget funds.

During the implementation of the Program, based on a previously conducted study concerning the technical assignment, it was unjustifiably determined to pave the Yerevan-Artashat segment with concrete despite the existence of conclusions stating the road was in adequate condition that required only marking and the renovation of drainage systems. Additionally, the previously decided asphalt cover was changed to concrete without any justification. In this context, it is notable that no special cement for road construction has been produced in Armenia, and the concrete cover used local manufactured cement. Consequently, the concrete pavement of Tranche-1 of the Program did not meet the specified technical conditions and standards. To rectify the arisen flaws and unevenness, unjustified additional work such as road milling was carried out. However, this additional work did not resolve the issues, and in all cases, the low-quality roads of Tranche-1 were accepted into operation.

Instead of applying accountability measures against the main contractors, subcontractors, and consulting companies for violations regarding the timing of construction works, poor quality of work, and other violations, the responsible public officials signed agreements that unjustly placed the responsibility on the state as the customer, resulting in the payment of millions of dollars in unjustified fines.

The investigative group established by the Investigative Committee of Armenia has conducted extensive multi-part investigative and procedural actions under proper prosecutorial supervision. As a result, numerous schemes related to unrecorded transactions, money laundering, tax evasion, and other illegal acts stemming from personal interests or group benefits have been discovered, leading to the initiation of 10 additional criminal cases, which have been combined with the main case.

Dozens of companies, both main contractors and subcontractors, as well as local and foreign trade organizations connected to them, their leaders, owners, employees, and family members of public officials are involved in the apparent criminal mechanisms.

During the pre-investigation, directors and employees of companies directly involved in construction work, including Chinese ones, as well as the head of a foreign consulting organization and former high-ranking officials have been engaged as defendants, amounting to a total of 18 individuals. For 9 of them, custody has been chosen as a preventive measure; for 3, a bail has been applied by court decision; and 6 have been subjected to a signature not to leave.

The investigation revealed that employees of several contracting and subcontracting companies, as well as the individuals effectively managing their activities, compiled and provided false accounting documents without actual work being performed or services rendered for the purpose of tax evasion and money laundering, causing a total damage of 2,848,946,479 AMD to the state, which with calculated penalties and fines amounts to 3,893,317,723 AMD.

In addition, through fraud, such as making additions to payment certificates regarding construction works and falsifying acceptance acts, the defendants in this case provided low-quality asphalt works, leading to the embezzlement of a total of 1,086,120,000 AMD of significant amounts.

As of now, 225,718,575 AMD has been recovered from the material, property damage recorded against the 18 defendants, and 1 billion AMD has been deposited into the deposit account of the Investigative Committee of Armenia. Additionally, a lien has been placed on approximately 50 units of immovable and 114 units of movable property, bank accounts, and 82,328,800 AMD in cash belonging to the defendants.

The pre-investigation continues with 6 main episodes proposed and planned.