Investigation Completed into Misappropriations Related to the "North-South" Project

The Investigative Committee reports that through joint operational-investigative measures carried out by employees from the Main Department for the Investigation of Particularly Important Cases, the Investigative Department of the NSS, the Prosecutor's Office of the Republic of Armenia, the Police of the Republic of Armenia, and the State Revenue Committee of the Republic of Armenia, the circumstances of the misappropriations committed during the development and implementation of the "North-South Road Corridor" project have been clarified.

According to the factual data obtained during the investigation, Sedrak Arustamyan, the director of the Multi Group concern, who effectively directed the activities of the “Stons” LLC company, from June 10 to August 8, 2016, while concurrently being the 100% owner of the shares of “Stons” LLC, together with Suren Avagyan and Gurgen Sargsyan, who coordinated the company's work with him, agreed with representatives of the Armenian branch of the contractor “Sinohydro Corporation” LLC to withdraw financial resources from the company through issuing tax invoices without providing services. This was done to facilitate particularly large tax evasion, for which an agreement was organized on June 8, 2016, regarding two contracts for consulting services between “Stons” LLC and “Sinohydro Corporation” LLC regarding the construction work of the Talin-Lanjik and Lanjik-Gyumri segments within the framework of the subproject titled "Reconstruction and Improvement of the M1 Road from Talin to Gyumri" of the North-South Road Corridor Project.

After signing the contracts, until December 25, 2017, the Armenian branch of “Sinohydro Corporation” LLC transferred a total of 1,139,665,469 AMD equivalent to 681,705 Euros and 1,652,277 USD to the account of “Stons” LLC as a prepayment. These funds were mixed with other funds present in the company’s account.

The agreements under the aforementioned contracts aimed to create an illusion and documentary grounds for executing supposedly assumed obligations, unlawfully reducing the tax obligations of “Stons” LLC, as well as distorting the source and real nature of the particularly large sum of 1,139,665,469 AMD obtained through fictitious agreements for services rendered and collaboration. According to an agreement between Sedrak Arustamyan, Suren Avagyan, and Gurgen Sargsyan, two employees of “Stons” LLC were involved under the pretext of receiving monetary remuneration, and without the goal of carrying out entrepreneurial activities, established “EM-ES Consulting” and “Gevorgian Consulting” LLCs on October 10 and November 11, 2016, respectively, with whom “Stons” LLC simultaneously signed contracts for purported consulting services.

Subsequent to these contracts, the chief accountant of “Stons” LLC unlawfully transferred 140,000,000 AMD to the account of “EM-ES Consulting” LLC and 124,800,000 AMD to the account of “Gevorgian Consulting” LLC as a prepayment ostensibly for services purportedly rendered.

The directors of “Gevorgian Consulting” and “EM-ES Consulting” LLCs, acting on the instructions of Gurgen Sargsyan and the chief accountant of the company, did not perform any work under the contracts, but instead effectively worked at “Stons” LLC, retaining 12 million and 8 million AMD respectively as their promised compensation from the funds transferred as prepayment.

In order to legitimize cash receipts from unlawful sources, the chief accountant fabricated documents, including 44 false acceptance-transfers and 44 false tax invoices, relating to works supposedly performed for 177,000,000 AMD from December 20, 2016, to November 3, 2018, as part of the services rendered to “Stons” LLC.

Additionally, an agreement was made with a female employee at a printing company to falsify “Stons” LLC's cash journal. On February 1, 2020, a new blank cash journal was inserted replacing previous signed records, facilitating the false modifications later submitted to the tax authorities.

Subsequently, the chief accountant participated in a tax audit of a flour-producing company, where he became aware of the potential for bribery to cover violations found during inspections. On March 2, 2020, he facilitated an agreement for a bribe concerning discovered violations.

With a sufficient combination of evidence, Sedrak Arustamyan and Gurgen Sargsyan were charged under Article 38-189, Part 3, Article 190, Part 3, Item 1, and Article 38-205, Part 2 of the RA Criminal Code; Suren Avagyan was charged under the same articles, while the chief accountant was charged under Article 189, Part 3, Article 190, Part 3, Item 1, Article 38-205, Part 2, Article 325, Part 2, Article 325, Part 1, and Article 313, Part 1. Their preventive measure was set as bail.

Charges have also been filed against employees of “Stons” LLC and the printing company for accepting bribes. A total of 1 billion AMD has been transferred to the deposit account of the Investigative Committee as compensation for damages arising from the criminal actions of the aforementioned leaders and employees of “Stons.” The preliminary investigation has been completed, and the criminal case has been forwarded to the prosecutor for approval of the indictment and submission to the court.

As for the two chief tax inspectors of the RA SRC and the director of the LLC, we previously reported that they have been charged, the preliminary investigation has been completed, and the case, along with the indictment, has been sent to court.