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Edik Baghdasaryan

Further episodes in the story of how a bank was ruined

(continued from On the trail of Aravot's retraction)

As you already know, Artashes Davtyan, the former head of the supervision department of the Central Bank has been taken into custody. Before that, from 1995 to 2001, he worked in three different banks, and all three - HaySnund Bank, United Bank and Credit Service Bank -- went bust. It looks like Davtyan was acting on somebody’s orders.

Credit Service Bank, Ltd was founded by four shareholders. Boris Arakelyan was part of the bank management from the very first day of its creation. He is a relative of one of the founders of the bank. Before 1997, Arakelyan was the executive director of the bank, and its shareholders trusted him completely. Until 1997, practically nothing that could be pointed to that the bank had done wrong. In 1997 Artashes Davtyan was appointed executive director of the bank at Boris Arakelyan’s suggestion. Arakelyan presented Davtyan as a competent professional and a close friend. Arakelyan himself was appointed chairman of the board. In January 2001, bank clients began to complain about various wrongdoings on the part of bank management. One of the shareholders began to personally supervise the activity of the bank. The bank’s legal counsel, Tigran Zalinyan, ordered an investigation into goings-on at the bank. Looking into bank activity from 1997-1999, Zalinyan discovered that the executive director, Artashes Davtyan had made loans that involved illegal dealings. At the time of the investigation, Davtyan was already working as a chief of department at the Central Bank.

Here are some loans the bank provided:

1998 - $30,000
1998 - $8,400
1999 - $50,000 
1999 - $100,000

All of these loans were made to relatives and friends of Artashes Davtyan. The law doesn’t permit the publication of information on the people who received the loans, so we will refrain from printing that and a lot of other information. The total amount of loans and interest accrued through similar machinations by Davtyan is about $442,500. The were instances when the interest rate on loans provided to Davtyan’s relatives did not even amount to 1 %, at the same time that the bank was paying rates of 3 and 4% on individual deposits. Thus, with such low-rate loans, the bank was intentionally deprived of profit. “In the loan dealings in question, not only are the signatures forged, but also there are decisions signed by Davtyan which to all appearances represent decisions of the bank board. But Davtyan was never a member of the board, and had no legal authority to sign anything on its behalf,” Tigran Zalinyan told us.

And how were those loans intended to be recovered? In all likelihood, the scenario was something like this: Do everything possible so that the bank be declared bankrupt, and pay off the loans by some other machinations in the future.

In September 1997, Davtyan signed an agreement with a certain CJSC, providing it with the equivalent of $40,000 in loans. Although the head of the loan department of Credit Service Bank, P. Poghosyan, was opposed, Davtyan insisted on making the loan. In exchange, according to our information, the CJSC deputy director signed his vacation house in Jrvezh over to Davtyan.

Since June 19, 2001, the Commercial Bank ofGreecehas kept short-term treasury bills worth 127,475,000 Dram in a deposit account at Credit Service Bank. The registration of all treasury bills is done by the Central Bank; it oversees how many treasury bills are kept in which banks, and who they belong to. On October 10, 2001 and November 2, 2001 Credit Service Bank took out a loan worth $202,000 from Artsakh Bank for three days, and deposited the Greek bank’s treasury bills as collateral. Credit Service Bank knew that it had no right to do so, and that it would not be able to repay this money to Artsakh Bank. All activity involved in depositing treasury bills is performed and registered by the Central Bank. During this period of time, the Central Bank gave Artsakh Bank a document stating that the treasury bills were the property of Credit Service Bank. At the same time, the Central Bank gave the Greek bank a document stating that the treasury bills in the same amount and in the same series also belonged to the Greek bank, and were deposited in its account at Credit Service Bank. Why the Central Bank gave them these documents is not yet clear.

To be continued...