Former President Serge Sarkisian Charged with Embezzlement

Former Armenian President Serge Sarkisian (Photo: Kremlin/November 15, 2017)

YEREVAN—The Armenian Special Investigation Service (SIS) announced on Wednesday that it had charged former President Serge Sarkisian with embezzlement of state funds. According to the terms of the indictment, in 2013 Sarkisian used his position as President to orchestrate a scheme to subsidize petrol imported by the conglomerate Flash LTD at a deliberately inflated rate, under the guise of a State Assistance Program for agricultural projects. The difference was then allegedly pocketed by those involved. The former President is being charged under Article 38-179 (3)(1) of the Armenian criminal code for “publicly dangerous acts” which carries a penalty of up to eight years in jail. Sarkisian denies the charges as “fabricated and ludicrous.”

The SIS claims that the former President was well aware that other importers had made tenders offering significantly lower rates but instructed his cabinet to go through with the Flash LTD deal regardless. State records reveal that the government had approved fuel subsidies for the Ministry of Agriculture, transferring funds on three occasions—February 7, March 19 and April 2—to the corporate account of Flash LTD. The total cost of the deal with Flash LTD, which saw the purchase of 12,088,334 liters (3,193,400 US gallons) of diesel at the cost of 1,269,275,070 AMD (2.658 million USD) to the taxpayer, exceeded the amount proposed by rival importer Maxhur LLC by over $886,000. 

This initial arrangement with Flash LTD provided the blueprint for Sarkisian to greenlight yet another round of fuel subsidies destined for the Ministry of Agriculture’s agro-business development program, which exceeded the Maxhur LLC’s quote by 66,068,620 AMD (138,350 USD). In total, the SIS estimates that Sarkisian and other government officials involved in the scheme pocketed 489,160,310 AMD (1.02 million USD) in state funds as a result of the deal with Flash LTD in 2013 alone.

Sarkisian has mostly kept a low profile since he was ousted from office in last year’s Velvet Revolution following an attempt to extend his hold on power. However, several prominent members of his family have been investigated and arrested by authorities. One of his brothers, Levon Sarkisian, who has since fled the country, has two warrants out for his arrest on charges of embezzlement and money laundering over his intervention in a $250 million deal to rebuild Armenia’s main North-South highway. His other brother, the notorious oligarch Alexandr “Sashik” Sarkisian was arrested in a National Security Service (NSS) raid but released on bail after he agreed to “donate” the contents of his $30 million bank account back into state coffers.

Sarkisian‘s nephew Narek Sarkisian, who escaped Armenia shortly before the NSS raid, was arrested in Prague by Czech police in possession of a fake Guatemalan passport identifying him as Franklin Gonzalez last December and extradited to Armenia where he faces charges of illegal arms possession and narcotics trafficking. Sarkisian‘s son-in-law Mikael Minasyan, a former media magnate and one-time Ambassador to the Vatican, has seemingly entrenched himself in Italy after a series of vocal criticisms of the new authorities drew some unwanted attention. 

During a recent trip to visit the Armenian community of Italy, Prime Minister Pashinyan spoke of investigating the activities of oligarchs who had fled the country. “I don’t know if they are hiding in Vatican basements,” said Pashinyan. “We will grab them by the neck, drag them out and take them to courts,” in what many interpreted as a thinly veiled warning to Minasyan. 

The fact that the former president has managed to avoid the same fate as so many of his close relatives and allies has led to much speculation over why no criminal charges had yet been filed. Some have questioned whether he was promised immunity from prosecution in exchange for a peaceful transition of power and retirement from politics. Others, like analyst Richard Giragosian, have suggested that Sarkisian may have been careful to disassociate himself from any personal ties to corruption. Pashinyan himself addressed the issue during a press conference last December where he responded to reporters that he does not have the authority to order investigations. “Investigative agencies need to build a case before requesting an arrest warrant,” he explained.

Still, the timing of this latest charge coincides with a recent re-emergence into public life by Sarkisian. The former president hosted US Ambassador Lynne Tracy in November and publicly accused the new government of eroding Armenia’s democratic traditions. 

The Sarkisian government’s fuel subsidies have been the subject of numerous investigations and media interest over the years, however. A 2014 report by the investigative reporting site Hetq found that CPS Oil and Flash LTD were selling gasoline branded as “super” grade fuel at petrol stations across Armenia despite neither of the two having imported that sort of fuel since 2008. Hetq also reported on similar deals for Flash LTD to supply diesel to various government bodies, including the Ministry of Defense and Revenue Service, as well as other companies belonging to Republican members of parliament who had also won government contracts. 

The government’s relationship with Flash LTD has continued all the way to 2018. Barsegh Beglaryan, a longtime personal friend of the former president, is the primary shareholder at Flash LTD. The fact that it has continued to receive the lion’s share of government contracts into 2016 and 2017 spurred the ARF parliamentary faction—then a junior coalition partner—to question the transparency of the government’s procurement policy at the time.

A government policy impact assessment released in May 2019 revealed that two oil importers— CPS Oil Corporation LLC and Flash LTD—had effectively solidified their duopoly over the market by 2017, directly contradicting reports by the previous administration claiming that it had in fact diversified. 

At the moment, the SIS has slapped the former President with a travel ban as it continues its investigation into the matter.

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Raffi Elliott

Columnist & Armenia Correspondent
Raffi Elliott is a Canadian-Armenian political risk analyst and journalist based in Yerevan, Armenia. As correspondent and columnist for the Armenian Weekly, he covers socioeconomic, political, business and diplomatic issues in Armenia, with occasional thoughts on culture and urbanism.

10 Comments

  1. Anyone who has lived in Armenia for even a short time suspects that SS (like the other presidents) has probably been involved with dozens (if not hundreds) of such schemes during his presidency and in the last 30 years in general. Whether it was to help family members or friends get rich, to have ‘compromat’ on key business/political figures, to exchange favours in the form of money vs. political/financial/material/intelligence support deals, etc … and these would only be his financial sins, god knows what may have happened during the war: assassinations, huge scale corruption of soviet military for weapons, large scale embezzlement to fund the war, black market shady deals, etc.

    This is how Armenia was managed since soviet times, it’s a new republic with scarce resources, little tradition of self-governance, and the example of soviet public administration as its only real-life reference. LTP, RK, SS were not educated in statesmanship at the Harvard Kennedy School, ENA, or other top ranked western institutions. They did what they knew and could … if you ask me with, more success than failure.

    In other words and at the risk of sounding cynical: it’s not really big news that Armenia is not Denmark.

    In my view, the current administration’s approach is a textbook example of Machiavellian moves: punish former leaders/opponents so that the rest will fear you, show who’s boss by making examples and thus gaining allies, start strong so that you can be nice later on, etc. It’s petty politics, at best, disguised as justice!

    They could have established a truth commission where everything could have been discussed openly, in depth, and much more substantially than the cheap reality show we’re witnessing; sins admitted, explained, put in context, and repented publicly for everyone to see; money and assets returned, at least partially, to the government; moral standards set for the future and core message transmitted to the new generation, etc … but no: they’re going the way of the confrontation and revenge. They’re Armenians (not Danish) after all!

    We’ll see where it leads.

    • With the exception of his sarcastic comparisons between Armenians and Danes, I’m in agreement with nearly everything that Jackson said here. The historical storylines of the two countries and people is so different that it’s ludicrous to try to assert that something innate shaped the two Peoples. Come now, and smell the coffee: Denmark didn’t suffer a century old genocide, which caused tumors that shook the very foundation of the People. .

  2. The corruption in Armenia continues. The new regime is paid from the allocated funds. Pashinian is shutting down anyone who disagrees. He is a tyrant.

    • Well Pashinyans daughter was gifted with a new car, and NO ONE knows where the money came from.
      Some kind of mysterious funds……Pashinyan himself could Not answer about the funding of his daughters car.
      One plus year on, and he has done NOTHING but jail his former adversaries.

    • I could’ve listed other things, but that seemed foremost, because it’s not only about a population perishing, it’s also about cultural genocide, and its aftershock “tremors” (not how it was misspelled). How you can even ask how, makes me wonder whether such people even know about our historical geography.

      But, I wasn’t saying there that the century old genocide was the cause of present day corruption, I was saying that the genocide has established different historical circumstances between Danes and Armenians. If people here want to buy the baloney about Armenians being innately inferior to Danes, then be my guest.

      Ask yourself whether Denmark suffered from the things I’ll proceed to list here, because this is what the genocide did do to the cultural fabric of the Armenia People: (1) It greatly diminished the area of the Armenian Highlands currently inhabited by Christian Armenians. (2) It resulted in more than a century of destructive activities against Armenian Cultural Landmarks. (3) It systematically eliminated leadership personalities with Armenian Communities throughout the Armenian Highlands, whether they be the clergy, political leaders, educators, intellectuals, or other such people. (4) It replaced millennia old Armenian Communities with a tiny Republic of the USSR, dominated by Socialists and Communists. (5) The newly independent landlocked Armenia (1991) is surrounded by hostility Turkey and Azerbaijan, indifferent Georgia, and a worldwide ostracized Iran. Yet, they’re expected to do as well as Baltic Coastline Denmark. (6) I can go on with more things, but this is probably enough.

  3. One of the goals of the American University of Armenia (AUA) was to change the culture and governmental practices of the Republic of Armenia. I worked for AUA (US office) for 20 years and think that the overall thrust was and is positive, However,as the old saying goes ” old habits die hard “.

  4. The bottom line, no one in the governmental position should be using their position for personal gains at the expense of the Armenian people. what SS and his family have done, is set Armenia back many many years. Granted, this is a normal occurrence in almost every country in the world, but this is no excuse for this to occur in Armenia by Armenians. If the evidence shows that SS stole money at the expense of the national security of Armenia and Artsakh then there should only be one form of punishment. SS and his family should receive the same punishment that Katch Antranig provided to the traitors who betrayed Saroup Pasha.

  5. Laurence Kueffer, I agree with everything you wrote in your last message, my comparison with Denmark was an exaggerated example to hammer in the point that Armenia (like most countries of the region) does not have the political culture/tradition of stable and prosperous western democracies (to put it mildly and politely) and hence judging Armenia’s leadership with metrics/standards we use to evaluate western governments is not fair. The question as to why would require a long and multifaceted analysis of historical and social factors, which you accurately and partially referred to. So bottom line, we may agree more than disagree.

  6. Yes, the Armenian Genocide wiped out a lot of Armenian leadership structure that had been around for centuries and could be traced back to the last Armenian monarchies. This was replaced by a completely new foreign soviet structure. With that gone for the most part we are starting from scratch with only that limited system with its cynical traits as our only reference.

    We only have that and what we are learning from the west as a means to go forward. I hope the good qualities from the west, individual civil rights, fair justice, and the idea of country first, win out.

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