Victims of pyramid scheme protest outside Parliament - საერთაშორისო გამჭვირვალობა - საქართველო

Victims of pyramid scheme protest outside Parliament

11 May, 2011

Around 300 people who suffered serious financial losses after investing money to have a flat built by construction company Center Point Group, held a manifestation in front of the Parliament building on April 28th, 2011. The protesters demanded the launch of an investigation into the affairs of the Center Point Group by the Prosecutor’s office, so that the Group would either fulfill all conditions foreseen in contracts between the company and its clients or return their money altogether. According to a Studio Monitor television documentary (available with English subtitles), around 6,200 people have been duped by the Center Point Group, a company founded in 1999 that controlled up to a third of the construction market in Tbilisi within three years. The company is owned by Rusudan Kervalishvili, nowadays the deputy speaker of the Parliament, representing the ruling United National Movement party, her sister and her brother-in-law, who served as a deputy speaker during President Eduard Shevardnadze’s rule. Legally speaking, Center Point Group apparently encouraged buyers of apartments to join specially established Partnerships, which then hired Center Point Group to administer the construction of new residential buildings in which the apartments would be located. After their first down-payment for an apartment, individuals automatically became a member of the Partnership and shared all the responsibilities of this entity. According to the Georgian Law, all members of Partnerships are personally liable. This legal framework minimized the liability of Center Point Group and left citizens who bought into the Partnership without protection. Center Point Representatives apparently did not inform investors about the risk they were taking on in case of a collapse of the construction project. Most investors thus did not realize that they would not be able to file a claim against Center Point Group, as they themselves were initiating the construction of buildings in which, once finished, they would own a flat. Studio Monitor's research suggests that Center Point Group used a pyramid system to finance the construction of different housing projects. Allegedly, money from new investors was used to finish older projects, until the scheme collapsed and the company could no longer fulfill its obligations towards its clients. The victims are still waiting for the apartments they expected to be finished a long time ago. In September 2010, the Center Point Group handed over all its affairs to Dexus, a company that was created only two weeks before, promising that this company will fulfill all initial obligations given to the clients of Center Point. Dexus is currently selling a number of assets it took over. So far, Rusudan Kervalishvili, the deputy speaker of Parliament has not taken any legal or moral responsibility for the alleged pyramid scheme created by her company, which has filed for bankruptcy. Georgia’s main TV channels so far have paid little attention to this affair. To our knowledge, no investigation into potentially fraudulent activities of Center Point has been launched. For more details on the case, watch Studio Monitor’s documentary about Center Point. We will continue to follow developments in this case.

Author: Sara De Sloover and Gia Gvilava