Tbilisi Mayor accuses former city leaders of “corrupt” bank deal

Architecture of Old Tbilisi; Photo by Nino Alavidze/agenda.ge
Agenda.ge, 12 Sep 2014 - 14:42, Tbilisi,Georgia

UPDATED 18:20: Tbilisi’s recently elected Mayor believes the loss of more than 10 million GEL from the capital city’s budget was the result of a corrupt deal between former municipal authorities and a local commercial bank.

At a special press conference today Mayor Davit Narmania said in 2013, former city officials allegedly engaged in a corrupt deal with Tbilisi-based Liberty Bank when they amended a contract Tbilisi City Hall signed with the bank in 2010.

According to the contract, Tbilisi City Hall reaped the benefit of a 16.5 percent interest rate on the money it had in its Liberty Bank account.

In 2013 this contract was amended and according to the new terms, the old percent rate would come into force only if the balance of the municipal funds did not exceed 40 million GEL. If the amount in the bank account exceeded 40 million GEL, the additional money would have a four percent interest rate.

Mayor Narmania said the city’s funds were normally always higher than 40 million GEL and as a result of the amended contract, the municipal budget suffered a loss of 10.5 million GEL.

Narmania said changes to the contract looked like a "corrupt deal” that stemmed from the "private interests” of former authorities. He noted documents he had obtained would soon be sent to investigators for further clarification.

Meanwhile Tbilisi City Hall’s former head of the Department of Finance and Budget, who signed the contract with Liberty Bank, said the Mayor’s accusation was "irresponsible” and "incompetent”.

Ex-official said the previous contact’s term was over and a new contract needed to be signed in 2013.

"Interest rates in the banking sector were significantly reduced in this period. Thus Liberty Bank did not want to continue its contract with Tbilisi City Hall with the same terms and conditions,” he said.

He claimed other commercial banks offered eight percent interest rates and after long-term negotiations, the contract was signed with Liberty Bank again as it still had the best conditions – 16 percent for funds up to 40 million GEL and four percent for funds higher than this amount.

He also said his dignity and business reputation, as well as the banking sector’s reputation, had been abused and the Mayor would "have to apologise” for this.

Meanwhile in a written statement issued this evening, Liberty Bank also denied Mayor’s Narmania’s accusations.

The bank claimed Tbilisi City Hall deposited more money than anticipated into its account and consequently the deal was no longer profitable for the commercial bank.

The bank said it decided to terminate the contract and notified Tbilisi City Hall about its decision in a written message sent to Tbilisi City Hall in 2013.

Liberty Bank said it would allow City Hall make this letter public in order to clear up all misunderstanding.

The bank said once the contract had been terminated, Tbilisi City Hall looked at investing with other banks but returned to Liberty Bank as "it still had the best conditions in comparison to other commercial banks”, the bank claimed.