The Armenian Customs Department Punishes Dissenters

In a closed-door session on March 3, the Military and Criminal Court of Appeal extended by two months the prison terms of Royal Armenia ltd. co-owner Gagik Hakobyan and vice-president Aram Ghazaryan. They have been in prison since October 11, 2005, and stand accused of customs duty evasion during the import of 1,579,720,519 drams of green coffee beans, rice, and pepper. Everything would have turned out differently if Royal Armenia had agreed to "cooperate" with certain senior members of the Customs Committee in 2003. "In 2003, Gagik Khachatryan, the deputy head of the State Customs Committee, and Suren Fahradyan, head of the Customs and Pricing Department, asked Royal Armenia co-owner Gagik Hakobyan for a huge sum of money in exchange for attractive rates on his imported products. Mr. Hakobyan rejected the offer, and this is where the persecution of Royal Armenia began," said Royal Armenia legal counsel Gevorg Minasyan and lawyer Ashot Sargsyan.

"This is a classic case of terror against Royal Armenia, organized by national security inspector Mnatsakan Marukyan," insisted lawyer Ashot Sargsyan. Sargsyan and Gevorg Minasyan had no doubt that the court would be unable to resist the pressure from the prosecution and would uphold the sentences against the Royal Armenia management.

The defense lawyers assured us that inspector Mnatsakan Marukyan, who headed the investigation, had ignored all the hard evidence brought in favor of the defendants.

A key figure in this story was plaintiff Vache Bedrosian, a representative of the American company Federal Invest Group, from whom Royal Armenia imported coffee to Armenia. According to the prosecution, Gagik Hakobyan embezzled US $368,000 from Vache Bedrosian between 1999 and 2004. The prosecution noted in the grounds for the charges that Gagik Hakobyan was a shareholder at Royal Armenia. In truth, he owned only 4% of the shares and there was no evidence to prove that he had been part of the deal by which the company had acquired green coffee, rice, and pepper through Vache Bedrosian, representing Federal Invest Group.

On February 20, 2000, a contract was signed by Federal Invest Group, Royal Armenia ltd., and foreign investor Leida Alujas Gonzalez, who is Gagik Hakobyan's wife and the main shareholder in Royal Armenia, according to which Gonzalez commissioned Vache Bedrosian to acquire green coffee beans, rice, and pepper from different countries as raw material to be processed by Royal Armenia. This contract covered the supply of all the goods; Gagik Hakobyan was not a party to the contract, and was not a part of any aspect of the deal. Payments were made by Leida Alujas Gonzalez; she also dealt with customs issues and organized the entire process from raw material to finished product. In early 2003, the parties to the contract agreed that Leida Alujas Gonzalez owed Vache Bedrosian approximately US $138,000 for goods provided. This amount was sent to Bedrosian's account within days, and he then expressed his thanks in an e-mail.

Who Owes What to Whom?

Royal Armenia and Federal Invest Group continued to collaborate from January 2003 to the first trimester of 2004. However that year, Royal Armenia repeatedly complained that Federal Invest Group failed to meet deadlines, causing problems for the company. At the end of the first trimester of 2004, Royal Armenia announced that it would cease working with Federal Invest Group (it had found other suppliers by then, including the Mitsubishi corporation).

Vache Bedrosian then announced that unpaid amounts for raw materials during 2003-2004 constituted US $164,000. Gagik Hakobyan proposed that Bedrosian come to Armenia in order to sign a memorandum settling accounts. He also said that they would "not only look into accounts, but also discuss issues relating to their partnership."

What partnership? Royal Armenia lawyer Gevorg Minasyan explained: "In 2001 and 2002, Gagik Hakobyan and Vache Bedrosian built a coffee factory in the U.S. called Bradford Coffee. US $600,000 was spent on the factory, of which Gagik Hakobyan had invested US $300,000. That factory was to be sold, and the profit split into two parts. Gagik Hakobyan was also to receive his US $300,000 investment back. In order for Hakobyan to avoid having to stay in the U.S. until the sale, Bedrosian convinced Hakobyan to sign over his US $300,000 share to him (Bedrosian). At the same time, Bedrosian asked that the share be valued at US $120,000 in order to pay lower taxes, but promised to repay the full US $300,000 as well as half of the profits from the sale. The factory was expected to fetch US $1 million, with the investors making a profit of US $400,000. However, Vache Bedrosian decided not to sell the factory and he transferred US $152,000 to Hakobyan in two installments - one in the amount of US $120,000 and the other US $32,000 - thus not even covering Hakobyan's initial investment.

"This is what Hakobyan had in mind when he invited Bedrosian to Armenia to settle accounts and discuss future relations. In truth, Bedrosian owes Hakobyan around US $348,000, of which US $148,000 is the remaining amount from the investment and US $200,000 constitutes the expected profit from the sale."

Unwilling to discuss their business relations, and probably also irritated at how Royal Armenia's collaboration with his Federal Invest Group had been terminated, Bedrosian turned to the Armenian Customs Committee and National Security Service, declaring that Gagik Hakobyan had embezzled US $368,000 from his firm.

Vache Bedrosian included this charge in his personal testimony against Gagik Hakobyan, stating that the debt had accumulated during the supply process for coffee, rice, and pepper. But Gagik Hakobyan's lawyer Ashot Sargsyan explained, "It is clear that these operations fall under civil law. If one party to a contract does not fulfill his obligations, then the other party should go to the Economic Court and not the National Security Service."

Addressing the accusations of customs evasion against Gagik Hakobyan, Royal Armenia lawyer Gevorg Minasyan stated that Armen Avetisyan, president of the State Customs Committee, had exempted Royal Armenia ltd. from customs duty through decrees 1753/2-2 and 1882/2 in 2001, as a company with foreign investment, in accordance with the Armenian law regarding foreign investment, and that only value-added tax on the goods had been required.

"All the inspections done during the year attest to the fact that Royal Armenia did not owe any taxes, and no claims of customs evasion can be made, and the accusations against Gagik Hakobyan as per Article 215 of the Criminal Code are groundless," Gevorg Minasyan said confidently. Gagik Hakobyan's legal representatives are sure that there are certain powerful people behind this case, which is why the prosecution is being led by Vache Bedrosian's groundless allegations. "Judge for yourselves - how can the inspector be unbiased if he has been taking trips to different countries with the help of Bedrosian? He was in Bedrosian's company over fifteen days on trips to the Far East - Thailand and Vietnam - and has tasted the wonders of the West as well," said lawyer Gevorg Minasyan.

Studying the goods transport invoices sent by Bedrosian, Hakobyan's lawyers discovered that he acted as the representative for two companies - Federal Invest Group registered in Nevada in the U.S.A and Federal Invest Group registered in Vietnam's Ho Chi Minh City. Gevorg Minasyan noted that the company registered in Vietnam was established as a trade representation and did not have the right to engage in commercial activity. "However, the goods transport invoices bear the name of Vietnam's Federal Invest Group as suppliers, and the prosecution now considers these invoices suspect. It is very obvious here that Bedrosian used the Vietnamese company's name to avoid paying the American taxes, and then claimed that the invoices presented at the Customs Committee in Armenia were not his and were forgeries."

Interestingly, Vache Bedrosian's name has also come up in connection with another coffee importer in Armenia - Golden Lens. The lawyers are certain that that company will soon have problems as well, and that 'benefactor' Vache Bedrosian will once again be on 'the receiving end' as the plaintiff. The prosecution continued to ignore suspicious activity by the plaintiff, as well as by two customs officials - Gagik Khachatryan, the deputy head of the State Customs Committee, and Suren Fahradyan, head of the Customs and Pricing Department.

Gagik Hakobyan's lawyer reminded us that Customs Committee head Armen Avetisyan had stated in 2005 that these were his best officials, and that the two continued to work in this capacity.

Gagik Hakobyan's representatives are prepared to go to the European Court of Human Rights. "If Armenia's legal system continues in this way, then our country will go bankrupt by constantly having to go to the European court," said the lawyers, noting that they plan to first apply to the Constitutional Court on July 1 and then to the European Court.

"If we don't come to an agreement, we also plan to go to the US Federal Bureau and the Nevada tax department, and inform them of Vache Bedrosian's tax evasion. He has a secret bank account in Cyprus, which is an offshore zone, where he conceals his money. He once claimed that it was US $400,000, but we are sure that it is more. The account is in Gagik Hakobyan's name. Vache Bedrosian had told Hakobyan that he was getting a divorce, and had asked to open an account in Hakobyan's name in order to avoid having to give his wife half of his money. If Gagik Hakobyan deserves the guillotine for this, then off with his head. But this is the truth. After all, there is a very simple fact - the debt that Leida Alujas Gonzalez owed Federal Invest Group. If this debt exists, then it should be mentioned in Bedrosian's documents and the accounts he presented to the tax departments. We have mentioned this to the inspector time and again, but there has been no reaction," said Gevorg Minasyan.

P.S. On March 17, Royal Armenia manager Tony El-Labaki and lawyer Gevorg Minasyan sent an open letter to President Robert Kocharyan "sounding the alarm regarding the injustice done to the company and its management and requesting the president's intercession to cease this injustice and release those who are innocent of criminal wrongdoing

"Royal Armenia is being subject to punishment by corrupt senior officials at the State Customs Committee for refusing to agree to their illegal proposal," the letter stated.