By Kristine Aghalaryan and Edik Baghdasaryan

Nairit Plant CJSC in Yerevan hasn’t been operating since 2010. The factory, producing chloroprene rubber, was built in 1934 and was considered a giant of its kind during the Soviet era. The market for its finished product was the Soviet Union and Soviet-bloc nations. In its heyday, Nairit was the 4^th largest rubber operation in the world.

 In the 1940s, Nairit was producing more than 7,000 tons of rubber per year. By the 1960s, output was 35,000-42,000 tons yearly. In the 1980s, this figure was more than 75,000 tons. After the fall of the Soviet Union, the fate of this behemoth fell into the hands of Russian and Indian owners. In 2002, RANSAT PLC became the 100% shareholder and the factory was renamed Nairit-Ransat. Later, the factory reverted to Haykap Bank (now Ararat Bank) when it could not meet a number of loan obligations it owed. In 2006 the government of Armenia passed a decision allocating 90% of Nairit’s shares to the HayGazArd state utility, with the remaining 10% going to Armenia’s Ministry of Energy and Natural Resources. This last transaction, which we will discuss below, was critical for Nairit. The factory was mired in debt, forcing it to halt production.

With the aim of reviving the factory, the Interstate Bank allocated US $170 million in loans between 2006 and 2010. There is no state agency in Armenia noting that Nairit received such a large amount of loans. Official statements only refer to $70 million. Today, this money has disappeared, the factory doesn’t operate, workers haven’t been paid for the past ten months, and Nairit is in debt to the tune of $500 million.

How much money did Armenian and Russian government officials walk away with?

In August 2006, Rhinoville Property Limited purchased 90% of the stock in the Nairit Rubber Plant from HayGazArd for US $40 million.

The remaining 10% is owned by the Republic of Armenia; specifically the Ministry of Energy and Natural Resources.

However, Rhinoville never paid any of its cash for the purchase. In a financial sleight of hand, Rhinoville used the factory as collateral to obtain a $70 million loan from Interstate Bank[1]. The company handed over controlling rights over Nairit to the bank stemming from the shares. After receiving the $70 million loan, Rhinoville purchased Nairit for only $39 million. The fate of the remaining $31 million is a mystery till today. We will cover this later.

According to the contract the Armenian government signed with Rhinoville, the latter was obliged to invest $120 million in the factory.

The initial $60 million was supposed to be invested by January 2009 and the plant’s overall production was to reach 2,500 tons. The other $60 million was to have been invested by January 2012. If production did not reach 2,500 tons by January 1, 2009 and the scheduled investment not made in full, then the government was authorized to take the difference of the investments in Rhinoville Property Limited shares.

The transaction was conducted with the consent of the Armenian government since the as yet paid for factory couldn’t have been put up for collateral with the agreement of the government since it owned shares as well.

Clearly, the Armenian government, in particular Energy Minister A. Movsisyan and Prime Minister Tigran Sargsyan, knew the details of the transaction since then RA Central Bank President Tigran Sargsyan served as the rotating president of Interstate Bank in 2006. Details of the transaction surely passed his desk.

We wrote to Energy Minister Armen Movsisyan, asking him to comment on whether Rhinoville had fulfilled its obligations under the contract, but have yet to receive any response. The minister also has refused to grant Hetq an interview regarding the matter.

Armenian government officials seem more concerned with concealing any traces about their failures to re-launch Nairit rather to get it working again. They have even removed traces of the government’s August 18 Decision N1131-A to sell the factory from the government’s official website archive.

Thus, we are left with no official information on the transaction despite scores of offshore companies, corporate lawyers and the large sums of money involved.

Hetq received nothing from the Ministry of Energy, while the Ministry of Finance sent bits and pieces of information, arguing that the bulk was a “trade secret”.

Hovhannes Hakhinyan, the current director of Nairit, also refused an interview. So did former director Vahan Melkonyan, arguing that a prior Hetq article contained less than 10% fact. Melkonyan said he didn’t trust us as a credible news outlet.

“When the RA authorities deem it proper that our international partners (i.e. Interstate Bank, of which he is now a representative in Armenia – author) officially refute all this, then we will refute it,” Vahan Melkonyan told Hetq.

The strange beginnings of Rhinoville Property Limited

In the summer of 2011, when reporters queried Minister Movsisyan whether Armenian government officials held shares in Rhinoville, the minister stated categorically that there were none. He also gave assurances that neither the RA Prime Minister nor his brother held shares in Rhinoville, the owner of Nairit.

“There are no officials from Armenia or even citizens of Armenia in Rhinoville’s list of shareholders, and there cannot be,” Minister Movsisyan declared. He added that three European companies founded Rhinoville, but that they had changed over time. “I can’t tell you their names right now,” Movsisyan said to avoid answering.

In reality, Armen Movsisyan knows full well who the founders and shareholders of Rhinoville are. He was privy to the entire transaction and knew the players involved. Yes, he was correct to say that no Armenian officials hold shares in Rhinoville. But he was wrong about his statements regarding the three European companies. We’ll now show you why. In any event, the minister said what he did to confuse the reporters.

Rhinoville Property Limited was registered on December 6, 2002. The last know registration address is 60 Cannon Street, London, EC4N 6NP. The company conducted no trade activity until August 2006; that’s to say until it purchased Nairit.

Isn’t it more than surprising that the government of Armenia entrusted the fate of Nairit to this company with no commercial experience in rubber production? The question arises – what possible profit could Minister Movsisyan expect to receive in return for selling Nairit to such an unknown and untested off-shore company?

Nairit becomes the shareholder of Rhinoville Property Ltd.

The founder and sole shareholder of Rhinoville Property Limited was one IMEX Executive Ltd., a company registered in the British Virgin Islands. However, in the summer of 2006 there was a change in top management and shareholders. By the end of the year, two other off-shore companies took over the shares of Rhinoville. They were Drayton Finance Ltd (810 shares) and Latheron Properties Ltd (190 shares).

Now, let’s look at who owns Rhinoville.

Drayton Finance Limited was founded by IMEX Executive; the same founder of Rhinoville. In Rhinoville’s 2006 annual report, which we obtained through British official sources, there is an interesting line stating that the parent company of Rhinoville is Drayton Finance Ltd., and the ultimate controlling party was one Sergey Kulikov by virtue of beneficial interest in the issued share capital of the company.  At the time of the sale of Nairit, Sergey Kulikov was serving as the Deputy Director of Interstate Bank. The Russian press, when referring to Kulikov, write that he used his numerous offshore companies to receive loans from interstate Bank for use for his companies operating in Russia. Later, those companies were declared bankrupt and were taken over by Interstate Bank. He no longer works for Interstate Bank.

In the financial report of financial year 2007, it states that as of November 30, 2008 the ultimate controlling party became Mr. Eric Narsisyan on the transfer of Mr. S. Kulikov's beneficial interest in the issued share capital of Drayton Finance Limited. French-Armenian Eric Narsisyan has served as one of the directors of Rhinoville for the past five years, assuming the position after the death of his father Andre Narsisyan.

Latheron Properties Limited was also founded by IMEX Executive, but in November 2008 Nairit LCC (ZAO Nairit) became the shareholder. According to Nairit Plant Public relations and Press Director Anoush Haroutyunyan, there never was nor is there now a Nairit LLC. However, Russian sources list a Nairit LLC (ЗАО Наирит), and the name of Varduhie Matevosyan is listed as coordinator. The company states it is mainly active in commodity trading including sales and supplies to Nairit CJSC in Armenia. Matevosyan told Hetq that Nairit LLC and Nairit Factory are one and the same, disclaiming any involvement with any other Nairit LLC.

According to documents in our possession, as of January 1, 2012, Drayton Finance and Latheron Properties are the shareholders of Rhinoville Property Ltd. In turn, Nairit Plant CJSC is the sole owner of both Drayton and Latheron.

In a weird about-face, it turns out that Nairit plant CJSC is the 90% shareholder of Rhinoville and the party responsible for its loan contractual obligations.

Nairit's $70 million loan: 3 major players remain tightlipped

Eric Narsisyan, Director of Rhinoville Property Limited, a shareholder of Nairit Plant CJSC, appears unwilling to grant Hetq an interview in response to our series of articles following the mysterious money trail of a $70 million loan. 

Hetq’s correspondent in France has been trying to get in touch with Narsisyan to no avail. The company director has failed to answer our voice mails as well.

In June 2006, when Rhinoville had already acquired shares in Nairit, Andre Narsisyan, a French-Armenian was appointed director and served until his death in April 2007. Maria Piotrovskaya, a Russian citizen served as director from February to April 28, 2007. Damien James Calderbank, a citizen of the UAE served as a director from March 2007 until December 2012. The company’s other director, Eric Leon Jacques Narsisyan (Andre’s son), became a director after the death of his father. He works at the Ararat Television Company in Marseille.

In essence, the three major players involved are refusing to go on the record regarding how they managed a $70 loan designed to get the Nairit plant up and running.

In the meanwhile, plant employees continue to their demands that the plant operate and that they get paid their wages.

Money laundering attempt fails: Two different verdicts in Nairit case

Through the efforts of the RA Ministry of Finance, yet a new case of money laundering was prevented.

Both the police and the prosecutor’s office knew about the attempt but did nothing. They knew who was behind the transaction. To expose it, law enforcement should have questioned Vahan Melkonyan, former Director of the Nairit Factory, and Judge Ara Kubanyan. But law enforcement never received instructions to do just that so they never followed up.

On November 2, one judicial dispute against Nairit was resolved. This time, an off-shore company of unknown origin lost. At the same time, two judges handed down two separate decisions regarding the dispute.

In 2009, Numard Trading took Nairit to court, seeking a freeze of its assets. At the heart of the matter was a supply contract agreed between Esmaeil Motavalli Soufiani Trading and Nairit Ransat CJSC.

In turns out that on October 3, 2002, Nairit Ransat, the legal predecessor of Nairit Factory, and Esmaeil Motavalli Soufiani Trading signed a supply contract for natural rubber, also called India rubber (caoutchouc). According to the contract, Nairit was obligated to supply the buyer with up to 2,700 tons of chloroprene rubber. The price was set at the equivalent in AMD of 1 ton for $1,500. Three months later, in January 2003, the same companies signed a contract stating that Esmaeil Motavalli Soufiani Trading had engaged in advertising of Nairit products at various exhibitions and that the value of the promotional, activities was 882 million AMD. The amount was regarded as a down payment on the supply of products and Nairit was obligated to supply the Iranian firm 1,000 tons of chloroprene rubber within 60 days of the contract signing.

According to Point 2.1 of the contract, the rubber would be delivered to the purchased in Yerevan at 70 Bagratunyats Street.

In other words, the Iranian firm had to send trucks to the factory to pick up the material. But the firm never sent the transport trucks and never presented any demand at the time.

Years later, in 2008, Esmaeil Motavalli Soufiani Trading ceded its demand rights to the unknown company Numard Trading. The latter did go to the courts, arguing that Nairit failed to meet its obligations and must return the 882 million AMD plus interest of 5 billion AMD.

Defense lawyer for Nairit responded by saying that the plaintiff should have presented its demand for supply of the product to the company in question within a reasonable time, but that it hadn’t. The lawyer continued by saying, “It would seem that the plaintiff lost all interest in the contract some seven years ago. Any contractual obligation must be executed in reasonable time; otherwise a limitation of action must be applied.”

Numard Trading presented a letter to the court according to which Esmaeil Motavalli Soufiani Trading supposedly did get in touch with the supplier in writing in 2006, requesting that it fulfill its obligations. Karen Israyelyan, director of the factory at the time, swears he never received any such letter. Israyelyan claims that all correspondence addressed to the factory would get stamped with a number and that this particular letter also includes a letter in the stamp, thus implying that it got to the factory by other than “routine procedure” and at a later date.

At the time Shengavit Court Judge Ara Kubanyan sustained the suit and ordered Nairit to pay the 5 billion AMD. This was the decision despite the fact that the plaintiff never showed up in court, thus depriving the defendant of the chance to cross examine. Judge Kubanyan never applied a limitation of actions based on the above mentioned letter. Vahan Melkonyan, on behalf of Nairit Plant, never appealed the decision and the 5 billion was drawn up as a creditor debt.

What followed were accusations and counter accusations in the press and criticism of the prime minister. It was only afterwards that Prime Minister Tigran Sargsyan instructed the Ministry of Finance in May 2011 to investigate the credibility of the Numard Trading creditor debt.

The investigative branch of the Ministry of Finance concluded that Esmaeil Motavalli Soufiani Trading never produced any substantiating documentation or contract regarding the promotional activities of behalf of Nairit.

Nairit grabbed hold of the ministry’s investigation and took its case to the Court of Appeals in March of 2012.

Shengavit Court Judge Ishkhan Barseghyan rejected the suit in total, applying the limitation of actions. The court ordered Numard Trading to pay 247 million AMD to the RA state coffers for various unpaid court fees. It’s not clear how the money will be seized from the shadowy company.

Numard Trading is registered offshore, in the Seychelles Islands. There is no information about it on the internet. This means that it was formed to resolve its issues with Nairit.

Numard’s director is one Stephen John Kelly, a citizen of Great Britain. His name can be found as a director and shareholder of many other companies; most of them offshore as well.

Three individuals are listed in the case as authorized representatives of the company and they gave Yerevan’s Ani Plaza Hotel as an address for official court correspondence. Some mail is also delivered to a post office box #76 at Republic Square. The company has no representation at Ani Plaza and mail sent there has been returned.

Nairit Loan Scam: Is the government implicated in millions of dollars going “missing”

Over the years millions of dollars have been lent to the Nairit Rubber Plant. No one knows the exact amount. The Armenian government remains tight-lipped on the subject. State officials refuse to talk to Hetq. It’s a sensitive topic and a potentially embarrassing one. It is another traditional example of money laundering at the highest level.

In addition to the $70 million loan taken by Rhinoville Property Limited in 2006, according to Nairit Plant CJSC financial statements, the factory took out another loan from Interstate Bank in 2009 for 35.5 billion AMD ($86 million). There was another 5.5 billion AMD ($13.5 million) loan in 2010. In other words, $170 million in loans were given to Rhinoville Ltd and Nairit before 2011.

$170,000 million later, we still have a factory that lies idle. How was all that money managed? Is there any government official in Armenia that can provide an answer? The Police and Prosecutor General’s Office remain silent. There are two likely explanations. Either the government was involved in these transactions or privy to what was taking place – which would explain their stonewalling tactics. Or else they just can’t wrap their heads around what has happened under their very nose and aren’t capable of getting to the bottom of it all. Perhaps the current crop of presidential candidates should add another point to their platforms – Exposure of the Nairit fiasco.

CIS Interstate Bank took Rhinoville Property Limited, the 90% shareholder of Nairit Plant, to court. The bank is demanding $25 million from the company – around $17 million is in interest and $8 million in penalties and fines. Alexander Mikhkov, who is coordinating the Nairit matter at CIS Interstate Bank, confirmed to Hetq that it had gone to the courts. Moscow’s arbitration court will hear the case on March 18.

The fact that Interstate Bank has taken Rhinoville to court is that same as suing Nairit Plant, given that Rhinoville has become a shareholder in Nairit, even though authorities in Armenia and the factory’s management had successfully concealed this fact for a long time. Thus, if the court sustains the suit, those sums will have to be paid by Nairit Plant. Given that 10% of Nairit is owned by the RA government, Armenian taxpayer money will have to be paid as well.

Let’s remember that Rhinoville had taken a $70 million loan from IB in order to buy 90% of the shares in Nairit Plant and to make investments in the factory. As collateral, Rhinoville put up shares of Nairit with IB. The loan was issued in August 2006 at an annual interest rate of 12.5% for five years and three months. In one of the financial documents of the IB board it states that of the $70 million, Rhinoville paid $39 million to purchase 90% of the shares in Nairit Plant.  With $12.8 million it increased its working capital and paid $18.2 million for reconstruction and refurbishing services. The reader should pay attention not to the working capital but to the latter. What was purchased with the $18.2 million?

There is no reference anywhere to the remaining $1 million. Whereas according to RA government’s Decision 1121-A of August 18, 2006, 90% of the plant’s shares were sold for $40 million under the purview of the transaction agreement signed in 2006.

We wrote to HayGazArd (a former large shareholder in Nairit, from which Rhinoville purchased the plant, shareholder of HayGazArd is Ministry of Energy of RA), in order to ascertain if it had received the last $1 million or not. HayGazArd Director Gagik Hakobyan wrote back: “The purchaser, according to the contract, paid $39 million in the year of the transaction, and the remaining amount after a review of the plants assets and liabilities.”  So far from Mr. Hakobyan’s response it still isn’t clear if the money was actually paid or not after the review. Perhaps there was a deficit problem and that’s why the $1 million wasn’t paid. However, according to Gagik Hakobyan, there wasn’t a surplus or deficit problem. “With a signed agreement between the parties of June 7, 2007, the buyer and seller regarded the handover and receipt of the work as envisaged in the contract, to be finalized.”

We sent a second letter to Hakobyan, noting that in the Rhinoville document in our possession there was reference stating that Rhinoville had transferred the $1 million to HayGazArd.

Gagik Hakobyan, perhaps not reading his previously sent statement with due diligence, gave another answer this time: “...After a review of the assets and liabilities, the remaining mutual obligations were carried out in 2010.” However, there is no mention of the transfer of the $1 million to HayGazArd in the 2010 accounting statements of Rhinoville Property Limited.

Rhinoville Property Limited, Nairit Plant and sister companies

The secret of the $1 million is to be found elsewhere. In 2006, Rhinoville registered a sister company in Russia called Rhinoville LLC. Its director was A. Kulikov, wife of former Interstate Bank deputy president Sergei Kulikov. The $1 million was transferred to the new company as founding capital. This company was supposed to sell the caoutchouc (rubber) produced by Nairit Plant.

On August 18, 2010, Rhinoville LLC merged with Nairit LCC, a company registered in Russia in 2007. Thus all the rights and obligations of Rhinoville LLC passed to Nairit LLC. Rhinoville Property Ltd owns 25% of the shares in Nairit LLC; the other 75% are owned by Nairit Plant CJSC. In January 2012, the management of Nairit Plant decided to dissolve Nairit LLC.

It turns out that Nairit LLC has yet another sister company – Nairit Trading Company Limited, registered in Belize. In 2008/2009, Nairit LLC invested around $45,000 in it.

In 2009, Nairit Plant registered another sister company in Armenia – Nairit Trading and Service Group. The amount invested in it wasn’t large. In March 2012, it too was dissolved.

Rhinoville Property Limited also founded Rhinoville Chemical Industry in Armenia. This too was supposed to provide advisory services. $2,500 was transferred to the latter as founding capital.

As to how the $1 million, from the $70 million loan, transferred to Rhinoville LLC and the other working capital transferred to the other sister companies was managed, is something that only former plant director Vahan Melkonyan knows. It was under his watch that these companies operated.

Regarding HayGazArd, it is a state enterprise wholly owned by the RA Ministry of Energy and Natural Resources. Surprisingly, Minister Armen Movsisyan doesn’t seem at all concerned that Rhinoville Property Limited hasn’t paid the remaining $1 million. The Armenian government as well, in the person of Prime Minister Tigran Sarsgyan, hasn’t followed up on the implementation of the government’s decision.

There is an interesting fact contained in the document of the Interstate Bank’s Economic Council. It turns out that the Russian company “ПСМ” LLC was also involved in the selling of Nairit Plant products. Interstate Bank provided it a $10 million loan, ostensibly to buy Nairit rubber.

In 2005, another company appeared involved in the sale of plant product – InterCaoutchouc. This is a much more interesting topic that we will soon cover separately.

Perhaps law enforcement should look into why Nairit Plant saw the need for so many sister companies involved in the sale of its product. The history of Nairit shows that it never had any trouble selling its products directly to end consumers.

Nairit Plant is neck deep in loans

As already noted, in addition to the $70 million loan taken by Rhinoville Property Ltd in 2006, according to the factory’s accounts, in 2009 Nairit took out another loan from Interstate Bank of 35.5 billion AMD ($86 million) and a 5.5 billion loan ($13.5 million) in 2010.

Add up the numbers. That’s around $170,000 million in loans provided by Interstate Bank to Rhinoville Property Limited and Nairit Plant as of 2011. We contacted the factory to find out if the debt obligations had gone up or down since then. Nairit Plant didn’t respond to our written inquiry, but referred us to the company’s official website. However, the company’s 2012 financial statements still haven’t been posted and thus we can’t get the complete debt picture. The extent to which Nairit Plant has paid off its debt, or taken on new debt, isn’t clear.

Neither has the Ministry of Finance clarified anything about the plant’s debts. It merely responded that the debt was provided directly to the factory and that the government provided no guarantees. Readers will remember that the RA government, in the person of the Ministry of Energy and Natural Resources, owns 10% of Nairit Plant shares. It has a stake in the plant and must surely be involved somehow in the lending/borrowing history between Interstate Bank and Nairit Plant.

Here’s another valuable piece of information in the financial puzzle. To attract these credit resources, Nairit Plant engaged the services of the offshore company Tarbet Management Limited. The mediation services rendered by Tarbet, allowing the plant to get the loans, amounted to a bill of 261 million AMD ($650,000). There are tens of offshore companies involved in the history surrounding Nairit Plant, but the addresses of many are the same. For example, the addresses of Tarbet Management Limited and Latherton Properties, the company that founded and was a shareholder in Rhinoville Properties Limited. In other words, this money was also pocketed by those running these companies behind the scene.

Will Minister of Energy and Natural Resources Armen Movsisyan come out and explain why these companies gave so much money and who they actually paid?

After receiving no official response from Armenian state agencies regarding the debt obligations of Nairit, we contacted Interstate Bank President Igor Suvorov. The bank refused to answer any of our questions.

“There are conditions in our agreement that the information contained therein is secret and not revealed to third parties,” responded Alexander Mikhkov, who handles the bank’s dealings regarding Nairit. He refused to broach any issue dealing with Nairit.

“I don’t want to make any comment in order not to annoy anyone.”

Nairit Loan Scam: Yet another scandalous revelation

As we wrote previously, in 2009 Nairit Plant received its second large loan of 35.5 billion AMD ($86 million) from Interstate Bank. At the time, Vahan Melkonyan was the director. He also served as the Interstate Bank representative in Armenia.

Melkonyan decided to purchase 97% of the shares of Megateks Group that had been given as collateral to Interstate Bank. Nairit paid $9.4 million for the shares.

In 2009, Nairit wasn’t running at full capacity. It remained idle for 225 days due to capital repairs of production units and limited energy supplies. Readers will remember this was the year of the chloroprene explosion in units 1-12. This fact is registered in the plant’s unified financial reports. Usually, limited energy supplies happen when the plan has debts. ArmRusGasprom halts the supply of gas. This was the condition of the plant when it purchased the Megateks Group shares at a cost of $9.4 million.

Megateks Group was the former cloth factory. Why did the necessity arise for a factory producing chemicals to purchase a cloth factory that hadn’t operated since 2005? The official reason was to sell the unit. So, Nairit Plant veered away from its prime production function and started to get involved in other transactions.

According to RA State Registry data, the legal successors of Megateks Group were Mahoud CJSC and Nor Ltd. The former was established in 1995 by the RA Ministry of Light Industry and others.

The RA Ministry of industry and Commerce (now known as the Ministry of the Economy) was also previously known as the Ministry of Light Industry. In 1995 it became the Ministry of Commerce, Services and Tourism. From 1995-1996, Vahan Melkonyan served as its minister.

Two companies founded Nor Ltd – Asian Group and NN KO Ltd. There is no information about Asian Group other than it is the founder of “Arir Hay-Iranakan H/Dz Ltd, along with “NNN KO Ltd. Members of Vahan Melkonyan’s family (sister Magdelena Melkonyan, sister’s husband Yuri Nshanyan and their son Vahagn Nshanyan) founded the latter in 1994. Yuri and Vahagn Nshanyan worked in the factory.  

Vahan Melkonyan was also listed as a shareholder.

Now it is clear why Vahan Melkonyan purchased Megateks Group shares via Nairit. He essentially, took out a loan for a factory he managed with his own “assistance”.

Who are those mysterious Iranians?

We have come across a list of Iranian organizations and individuals in our investigation of the Nairit Plant loan history. Who are they and who are those who constantly directed Vahan Melkonyan?

In the state registry dates, we see the names of Iranians and Iranian-based organizations in the list of participants. Thus we can infer that Vahan Melkonyan and his family have had dealings with Iranians.

We should note that most of the information regarding these Iranians and Iranian organizations is distorted. Most of the listed addresses either do not exist or are simply wrong. 

The December 2011 Act, with the inspection results compiled by the RA Ministry of Finance’s Financial Control Inspectorate, was sent to the RA Prosecutor General’s Office (PGO). The PGO replied to written inquiry regarding this issue, stating that additional studies were being conducted by the RA PGO’s Department in the Defense of State Interest based on the above findings.

Sona Truzyan, the PGO’s Press Secretary, wrote: “A request was sent to the Prosecutor’s Office of the Islamic Republic of Iran for legal assistance in March 2012. We have yet to receive a reply even though several reminders were sent.”

For the past year the PGO has been sitting and waiting without conducting an investigation. They can do nothing and say they are waiting. The Office sees no need for urgency in the matter. The main players in this case are in Armenia, they are top government officials. The PGO is frightened to question them because the entire matter can blow up in its face.

We requested that the RA Ministry of Finance provide us with the inspection results dealing with Megateks Group. However, the ministry only provided excerpts of the study Act, noting that the Act contained trade secrets regarding Megateks. The excerpts contained no information regarding transactions by the Megateks shareholders. The public has no access to this information. In the meantime, the Nairit Plant, once a leader in the chemicals production sector with 3,000 jobs, is going bankrupt and incurring more debt before the eyes of RA officials and legal agencies.

What was the fate of Megateks Group shareholders?

After the purchase of Megateks Group shares, as of December 31, 2009, there was a reappraisal of the shares. They had depreciated in vale. The Megateks shares, purchased at 3.5 million AMD, had already depreciated to 2.9 billion. By 2011, they had fallen in valued to 2.5 billion ($6 million).

On August 19, 2010, Nairit Plant sold the Megateks shares to the British company International Capital Group Limited for a mere $972,000, with a repurchase right of more than $3 million. Readers should remember that the shares were originally purchased at $9.4 million. It now becomes clear what devious devices Armenian officials use to launder such large sums of cash.

We contacted Nairit Plant to find out what eventually happened to the shares - had the shares been repurchased?  Anoush Harutyunyan, who heads Nairit’s Public Affairs and Press Service, responded, “Answers to questions regarding Megateks Group should come from that company.”

Nairit Plant became the owner of 97% of Megateks Group shares and at issue is the transaction conducted by Nairit. Thus, it has all the corresponding information at its disposal. To this observation of ours, Harutyunyan issued a follow-up response: “No comment on any matters regarding Megateks Group”

The management of Megateks Group also refused to answer these questions. Instead, Megateks Deputy Director Gagik Nazaryan suggested that we refer to the RA State Registry, “where everything is listed”. But the Registry does not provide information on the CJSC shareholders.

Certain data was included in the plant’s accounts. Nairit Plant operated for 4.5 months in 2009, 3 months in 2010. In 2011, it practically didn’t operate at all. But its financial accounts show that in 2009 some 28 million AMD in purchases were made (inventory and leasing services) from Megateks Group. In 2011, some 24 million AMD in purchases were recorded. During 2011, rent payments for the leased space amounted to more than 29 million AMD. As of December 31, 2011, the balance of rental payments was more than 38 million AMD (15 million AMD as of December 2010). This figure was incorporated in the commercial credit debt.

Isn’t it odd that the non-operating Nairit Plant would pay such large amounts of rent to Megateks Group, given that it had no need to warehouse either raw materials or product?

Money Laundering, offshore transactions: Nairit’s rubber money flows into the pockets of Russian and Armenian officials

 Nairit isn’t able to pay wages to its workers because the plant’s former director, Vahan Melkonyan, along with Minister of Energy and Natural Resources Armen Movsisyan, entered into an arrangement whereby they would obtain the rubber produced at cheap prices and then resell at double or triple the price. Over the years, InterCaoutchouc (UK), the offshore company set-up by Vahan Melkonyan, obtained 10,000 tons of rubber in this manner. Melkonyan obtained the product at $2,400 a ton and then resold at $4,100-$7,800. He’s thus racked up a tidy profit of at least $25 million. Only Melkonyan knows how much went to line the pockets of various Russian and Armenian officials. As to how   the payments were made, in cash or to their offshore accounts, remains unanswered as well.

Officials not only pocketed the loans received to get Nairit back up and running, but they went out of their way to prevent it from operating. The rubber produced by Nairit was in great demand in Russia, the former Soviet-bloc countries and the United States. Now, a well-known German company has captured the market. Perhaps this was the ultimate goal of Armenian officials? There is no government that hands over the market for the sale of one of its products to some other company. 

How was the rubber sold?

Vahan Melkonyan, the former director of Nairit Plant and the current representative Interstate Bank in Armenia, refused to answer Hetq’s questions. During a telephone interview we said that the questions not only concerned Nairit but those offshore corporations registered in his name. Mr. Melkonyan said it was impossible for us to have any such information concerning him and confidently stated, “I have no offshore registered companies.” Before examining those companies, here’s an excerpt regarding how Nairit went bankrupt.

From 2005 until February 2007, InterCaoutchouc (UK) had been granted exclusive rights for the sale of Nairit Plant  rubber. In other words, InterCaoutchouc served as a middleman. Nairit was prohibited from selling its product directly to another company. Karen Israyelyan, who served as Nairit Plant director at the time, sold 10,000 tons of rubber to InterCaoutchouc at $2,400 a ton ($24 million). What’s interesting is that these transactions do not appear in the financial books of InterCaoutchouc. This means that the sale of rubber was transacted through other companies.

After the sale of the plant, from 2007 onwards, Nairit rubber was sold by Rhinoville Property Ltd. (90% shareholder) via two companies operating in Russia – Rhinoville Ltd and Nairit Ltd.

Documents in our possession show that InterCaoutchouc, and later on Rhinoville Property Limited, resold Nairit rubber at very high prices. Russia’s “Vimpel” company, the “Chapaev Production Facility” in the Russian town of Cheboksary, and Russia’s Orenburg “ORT” CJSC, purchased rubber at the following prices.

(U.S. $ amounts according to foreign exchange rates at the time of transaction)

“I told the minister that I could sell at better rates. I entered into an agreement and received the money. I wanted to organize the delivery but the minister telephoned and told me not to deliver. I said we would assume heavy losses, but he told me that wasn’t my concern. A week later they sold the plant to Rhinoville,” recounts former Nairit director Karen Israyelyan. He was subsequently dismissed from his job.

Vahan Melkonyan’s offshore company

There are numerous offshore companies involved in the sale of Nairit Plant and its history of loans. These companies, in turn, are owned by other offshore companies, and so on in a never ending chain. Naturally, such a scheme was meant to cover up all traces of criminal activity.

 InterCaoutchouc, registered in Wales, was one such company. Our colleagues abroad assisted us in obtaining information about the company. InterCaoutchouc was established in February 2005 and was dissolved in February 2011. The company’s shareholders were: 

Charrydale Limited - 40%

Lankwood Finance Limited - 10%

Egler Corporation - 50 %

Charrydale Limited is registered in the British Virgin Islands. The sole shareholder is Vahan Melkonyan, former Nairit Plant director and currently Interstate Bank’s representative in Armenia

Lankwood Finance Limited is also registered in the Virgin Islands and Vahan Melkonyan is the sole shareholder.

Egler Corporation is registered in Belize. We haven’t yet found out who the shareholders are. Mr.S. Kulikov, former president of Interstate Bank, is a likely candidate. 

According to company registry data, Vahan Melkonyan’s Charrydale Limited owns 120 shares. Melkonyan’s Lankwood Finance Limited owns 30 shares. Egler Corporation owns 150 shares. 

Later, Vahan Melkonyan seems not to have shared something with Egler Corporation. Melkonyan’s two companies became entangled in a court case with Egler over disagreements regarding the distribution and management of shares they owned in InterCaoutchouc. We deduce this from the verdict handed down by Jules Sher QC hat we obtained from the High Court of Justice, Chancery Division: 

 InterCaoutchouc has had a number of directors, including former Interstate Bank employee Tatanya Serbkova. She served as director from February 18, 2005 until September 21, 2007. She was replaced by Aleksandr Yegelski. Sergey Sklyarov was appointed director on June 18, 2008. Ashot Pashinyan was director in 2009.

We were able to get in touch with a former employee of InterCaoutchouc. He informed Hetq that Vahan Melkonyan managed the company’s accounts. The employee confirmed that S. Kulikov owned shares in InterCaoutchouc. He didn’t rule out the possibility that former Interstate Bank president Anatoly Turkadze also benefited from these transactions. According to the same source, not only Armenian but top Russian officials as well benefitted from the Nairit transactions.

The participation of former Interstate Bank deputy director Sergey Kulikov in the matter is clear since his wife, Anna Barisovna Kulikova, was also a director of InterCaoutchouc. This fact is noted in a document. In 2006, InterCaoutchouc made a payment to Russia’s pension fund. The payment was made in the name of Anna Kulikova, listed as the company’s director.

 “Accidental” Coincidence

It turns out that Vahan Melkonyan is an expert in offshore companies. Furthermore, he and his two sons formed “M-V-M Consulting Company”, a firm providing legal advisory services. The chief director is Samson Melkonyan, Vahan Melkonyan’s eldest son. The company is well versed in providing clients with professional advice in setting up offshore companies. Their website even offers a special section on the matter.

When obtaining information regarding the offshore companies that have played a role in the Nairit loan story, several coincidences are strikingly apparent. There is no doubt that all the companies are closely linked and that, given such a scenario, Nairit’s going bankrupt was no accident. For example, a company called Cls Secretaries Ltd. was carrying out the secretarial duties for InterCaoutchouc and was doing the same for Drayton Finance Limited and Latheron Properties Limited; two companies which own shares in Rhinoville Property Limited.  

The addresses where InterCaoutchouc  and Latheron Properties Limited are registered are the same.

And here’s another interesting coincidence.   The registration address    of G.S.L. Law & Consulting (UK) Limited, the company who handled the registry of these companies and all the transaction paperwork, is the same as that of Rhinoville Property Limited.   G.S.L. Law & Consulting (UK) Limited-has branches in Russia, Cyprus, the Netherlands and the Virgin Islands. Documents we possess reveal that the registration, their subsequent sale, and other issues, were handled by the Russian branch. Vahan Melkonyan has very close ties with Moscow and he makes frequent visits to Russia.  

 Finally, there is an important fact appearing in the 2010 financial statement of Rhinoville Property Limited. It clearly exposes the connection of Rhinoville Property Limited (who own 90% of Nairit Plant shares), the other offshore companies, and Vahan Melkonyan in all of this.

According to the 2010 financial statement of Rhinoville Property Limited, $8.8 million was “written off”. The written off amounts belonged to two companies of Vahan Melkonyan, and another to Ashot Pashinyan. ($19,000 was written off to a third company).

Charrydale Limited – more than $8 million

Lankwood Finance Limited - $600,000

Ashot Pashinyan – more than $30,000

The statement shows that that Rhinoville Property Limited gave the above amount as a loan to these companies and Ashot Pashinyan. Since the payback deadline had already expired, Rhinoville Property Limited had given up hope of ever getting paid back. Thus, it decided to “donate” the amounts to the above-mentioned companies and individual, thus writing off the amounts in its books.

As we’ve already mentioned, Ashot Pashinyan served as InterCaoutchouc’s director as of November 2009, the period when InterCaoutchouc wasn’t acting as the seller of Nairit rubber but continued to legally exists and make transactions.

During this period, the government of Armenia pursued the idea of launching a new factory, called Shanxi Nairit, with China. Shanxi Nairit is one of the biggest Armenian-Chinese collaborative economic projects. The project, which started operating in 2010, was the product of a 2003 agreement signed between China’s Shanxi Synthetic Rubber Group Co., Ltd. and Armenia’s Nairit. Armenians own 40% of Shanxi Nairit. Most interesting is the fact that $220 million was spent to construct the factory, from scratch, in China. In contrast, $170 million in loans to restart an already existing factory in Armenia were pilfered and pocketed, leaving 3,000 workers without jobs.

What we end up is a troubling reality. $170 million is squandered and stolen in Armenia, a country in the midst of a deep economic crisis and where 35% of the population officially lives in poverty. The regime brandishes a sword in its declared fight against corruption in one hand, while the other hand is busy stealing and squandering from the people. It goes without saying that the RA government, particularly the Ministry of Energy and Natural Resources which owns 10% of Nairit, is responsible. The government knew about the tens of offshore and Russian companies that Nairit set up and the transactions carried out. Vahan Melkonyan, Interstate Bank’s representative in Armenia, and Nairit director at the time of the loans, can present a detailed picture of how this tangled financial puzzle siphoned off all those millions.  RA Prime Minister Tigran Sargsyan is also full aware of what happened since the sale and loan transactions occurred under his watch. Adding insult to injury, Ashot Sargsyan, one of the Nairit Plant deputy directors, is the PM’s brother,

 It’s hard to predict if any of these officials will ever be called to account. But neither can these same officials pretend not to notice the facts staring them in the face.

Photo: Armen Movsisyan, Vahan Melkonyan, Prime Minister Tigran Sargsyan