Suspicious Procurements in Kobuleti Municipality by a Company Related to the Former and Current High Officials of the Kobuleti City Hall - საერთაშორისო გამჭვირვალობა - საქართველო

Suspicious Procurements in Kobuleti Municipality by a Company Related to the Former and Current High Officials of the Kobuleti City Hall

26 October, 2022

“Zoma” LDT wins public procurements in Kobuleti Municipality without a competitive process.  The director of the company Otar Zoidze is the former Head of Municipal LTD Kobuleti Water and Fati Jintcharadze, the wife of his Deputy Gia Goliadze is the Head of Financial Service at the Kobuleti City Hall.

Since 2010, "Zoma" has been providing outdoor lighting services for Kobuleti Municipality. During this period, out of 1,317,839 GEL received, 1,104,280 GEL (84% of the income) was obtained through non-competitive and simplified public procurements. According to the reports of the State Audit Office, “Zoma” is a subcontractor of the public procurement winner companies, however, Kobuleti Municipality does not provide public information to us about such cases.

Connections and Incomes from Kobuleti Municipality

Otar Zoidze is a founder of “Zoma” and he has been the director and 50% shareholder of the company since 2005. In 2011, Zoidze was given the remaining 50% share from his partner Avtandil Mikelaishvili free of charge.

Otar Zoidze was appointed as the director of Municipal LTD Kobuleti Water by the Gamgebeli (Head of Municipal Administration) of Kobuleti on September 1, 2014. By this time, “Zoma” had already received 750,000 GEL from the non-competitive and simplified public procurements of Kobuleti municipality. Moreover, “Zoma” received almost the same amount of income as Zoidze being a director of Kobuleti Water. Otar Zoidze was fired from Municipal LTD Kobuleti Water on April 12, 2018.

According to the asset declarations submitted by Otar Zoidze in 2015-2019, he received more than 103,000 GEL as the director of “Zoma” and per the same declarations, Zoidze received 65,300 GEL as the director of Municipal LTD Kobuleti Water in 2014-2018.

The connections of “Zoma” with Kobuleti Municipality do not end here. The wife of the Deputy Director of “Zoma” LTD Gia Goliadze, Fati Jintcharadze has been working in various positions at public service for more than 30 years.  Since 2009, first she has been the Head of Financial Service at the Municipal Administration  of Kobuleti and later at the Kobuleti City Hall.

In the first asset declaration submitted by Fati Jintcharadze in 2014, she indicated that her husband Gia Goliadze was the Deputy Director of “Zoma” LTD, and in that capacity, he received more than 21,000 GEL in 2013. Despite the fact that Jintcharadze only indicated the name of the company related to her husband in the asset declaration, using the information available in the National Agency of Public Registry, we concluded that “Zoma” LTD where Goliadze works and the company named “Zoma” linked to the public procurements in Kobuleti are the same.

In 2010-2011, Fati Jintcharadze while working in the Tender Commission of the Municipality stated the participation of “Zoma” LTD in public procurements of the Municipality did not arise a conflict of interest. According to the State Procurement Agency, she did not work in the Tender Commission in the following years.

It is noteworthy that the Kobuleti Municipality is the procurer in all (18) tenders won by “Zoma” LTD. The company received 847,974 GEL, including 634,415 GEL (75%) in non-competitive conditions. The Kobuleti Municipality and the legal entities of the Municipality are signatories of 25 simplified procurement contracts with “Zoma” LTD. Through these contracts, the company generated 469,865 GEL.

Questions Regarding the Subcontractors

According to the 2021 Report of the State Audit Office, “Zoma” LTD is a subcontractor of the winner of the municipal procurement for outdoor lighting services “Meokhi” LTD; moreover, both companies participated in the tender announced in December 2019, which made the Audit Office suspect that the aforementioned companies colluded to receive more benefits from the municipal budget.

We found that the above-mentioned companies competed with each other in other procurement of the Kobuleti municipality (SPA120015502). In parallel with the formal rivalry, the companies formed close ties - in order to confirm the qualification requirements and the possession of appropriate equipment in the state procurement NAT190024927, "Meokhi" LTD presented a lease agreement on a specialized crane belonging to "Zoma" LTD. Accordingly, it can be assumed that the income received by "Zoma" LTD in the Kobuleti public procurements, subcontracting, and equipment rental is significantly more than the amount we have calculated on the website of the State Procurement Agency (especially when the income of the "Meokhi" company from Kobuleti municipal procurements exceeds 6,5 million GEL).

It should be noted that the Kobuleti Municipality did not provide Transparency International Georgia the contract copies between the public procurements winning companies and their subcontractors, therefore, we cannot determine the exact income received through the subcontracting by the company linked to the spouse of the Head of Financial Service at Kobuleti City Hall, received from the procurements of the same municipality

Conclusions and Recommendations

The income received by "Zoma" LTD under the non-competitive conditions from the public procurement of Kobuleti Municipality poses significant corruption risks – apart from lack of competition, the participation of "Zoma" LTD as a subcontractor in Kobuleti municipal tenders is striking.

We call on the Anti-corruption Agency of the State Security Service to examine the simplified procurement contracts between the Kobuleti municipality and "Zoma" LTD, as well as the municipal contracts that the company received in the absence of competition. In addition, we call for the City Hall of Kobuleti Municipality to change the flawed practice of the monitoring of hiring subcontractors of the public procurement winning companies, to demand contracts signed with each subcontractor, and to disclose them publicly in case of an appeal by interested parties.