TSU Management Engaged in Insider Trading

by Revaz Bakhtadze
Jaba Devdariani, editor-in-chief of Civil Georgia contributed to this report

An inspection by the State Chamber of Control showed numerous cases of mismanagement and accounting violations at the Tbilisi State University. Civil Georgia research showed that at least some cases of violations are connected with personal financial interests of the top University management.

Tbilisi State University the shrine of national education is widely believed to be one of the most corrupt institutions, but it has been so far difficult to prove specific cases of mismanagement and corruption. But the situation may be changing.

Tbilisi State University (TSU) was the first Georgian highest education institution to be established in 1918. After the demise of the Soviet Union, the Georgian government has granted TSU wide autonomy, particularly in academic freedoms and independent financial management. But in the legal status of TSU remained unclear for long.

Gigi Tevzadze, who works for the Anticorruption Bureau established by President Shevardnadze with USAID assistance in 1999, believes the tertiary education institutions do not have a real autonomy, since the Ministry of Finances defines their budget, the Ministry of Education approves the study programs and rectors are recommended by the same ministry and appointed by the President.

The legal status of Tbilisi State University was changed only after a recommendation from Anticorruption bureau and from 2001 Tbilisi State University is registered as a subject under the Public Law. “The only thing that these institutions have a real autonomy in is corruption,” says Tevzadze.

His conclusion is confirmed by the finding of the State Chamber of Control, the main governmental watchdog agency, which inspected at the beginning of year 2002 TSU’s activities for in the year 2000 and 2001. According to State Chamber of Control Annual Inspection Act the university management is involved in serious violations of financial management of university property.

The documents of the Chamber of Control confirm that in 2001 the university income amounted to 10.2 million Lari (approximately USD 4,7 million), while the expenditures were 3,5 million Lari higher. Loans from a private bank Republic and debts to the municipality for water services account for the difference in income and expenditures.

The Chamber of Control reports most serious violations in university’s property management. The university is renting out non-residential space to various companies. Some of the rental contracts were concluded before a decree of the State Property Management Ministry was issued in November 1997. According to this decree all contracts concluded before November 1997 should be renewed – but this has never happened.

The university has selected the Property Management Department of Tbilisi City to announce tenders for rental space that belongs to the university. Civil Georgia has asked the department to provide information about several such tenders, including criteria for the assessment of price for a square meter of property.

The reply of Mr. Urushadze, the deputy head of the Tbilisi City Property Management Department, to Civil Georgia, does not say anything regarding the assessment of rental price for property. It refers only to the decree of November 14, 1997.

But in fact, this decree only stipulates that the State Property Management Ministry or its territorial body shall compose a special commission, which will be in charge of organizing a tender, making relevant announcements and selecting a winner. As further research by Civil Georgia has shown, this Committee was never employed.

Civil Georgia was interested in the announcements of the Property Management Department of Tbilisi City. Eight announcements appeared in “Tbilisi” newspaper (issued on March 27, 1999; April 9, 1999; April 24, 1999). Interestingly, not a single one included information on the deadline for acceptance of applications or the date of decision about the winner of the particular tender. This represents a serious violation of the decree on public procurement of February 14, 1997, which obliges an announcer to include such information in the announcement.

But even more interestingly, only one company, University-Service, has participated in these 8 tenders. Finally, as Civil Georgia discovered, Tengiz Shoshitaishvili, head of accounting department of the university, is listed as a co-founder of this company in its official foundation documentation.

It seems that there are even more personal links between the university and companies renting university space for business purposes. For example the Rector of the university, Roin Metreveli, is a board member of the private bank Republic, in which he as the Vake District Court confirms owns 1% of the shares.

Certainly, the companies that are renting business space from the university can be very happy about their profitable deals with the university. For example, the bank Republic is renting 131,87 square meters in Building 8 of TSU on Chavchavadze avenue No 13. Its contract is valid for 10 years and they pay annual rent of USD 1400. That gives a sum of 88 cents for a square meter per month.

The company University-Service can be even happier. It is renting 1186 square meters in the main building of TSU, Chavchavadze ave. No 1, for 10 years with annual fee of USD 3000, i.e. one square meter goes for ridiculous 21 cents.

As Civil Georgia checking with a real estate agency has shown, a current market price for 100 square meters in comparable location on prestigious Chavchavadze avenue is USD 700-800 a month, which leaves us with a market price of USD 8 per square meter and per month. Hence, the University has rented out the space for the benevolent 2,6 to 11 percent of the real market price.

Student Association for Self Governance, a student body seeking higher transparency in university management, inquired the Anticorruption Bureau regarding the findings of the Chamber of Control. Tea Tutberidze, student representative, told Civil Georgia that they wanted to know what would be reaction of the General Prosecutor on these facts.

The Anticorruption Bureau inquired the General Prosecutor’s office, which stated in its letter to the head of the Anticorruption bureau Vladimer Ugulava, that the office of the General Prosecutor has interviewed inspectors of the Chamber of Control, who have been inspecting TSU.

“As the inspectors explained, none of them found the violations to give sufficient ground for prosecution under the Criminal Law and, therefore, they were not submitted to the General Prosecutor,” reads the letter from the General Prosecutor Nugzar Gabrichidze.

Gigi Tevzadze from the Anticorruption Bureau believes that the biggest problem of the university is its completely inefficient management system. Tevzadze says, it is totally unclear who is in charge of the university. There is a mammoth council, elected by the rector. It is unclear whether the rector is a lawmaker of an executive authority. “This system should be very unambiguous,” Tevzadze said.

Current management of the university shows very little will to implement any reforms. After all, as the cases with renting out space show the current leadership is either getting some real profit from mismanagement or is simply insufficiently professional to handle the routine managerial duties.

Thus, unless a real change occurs the newly defined aim of the university, to “grow professional, deeply educated and qualified specialists with high moral standards” will remain just thin air.