State audit agency, the body with broad powers to monitor political finances, accused billionaire opposition politician Bidzina Ivanishvili’s public movement, Georgian Dream, of illegally obtaining GEL 1.1 million through striking a sham deal with its affiliated company with a purpose to evade restrictions set by law.

Monitoring service of political party funding at the Chamber of Control, the state audit agency, said on January 26, that Ivanishvili’s movement, Georgian Dream, falls under the regulations of the law on political parties, emended in late December. Although the Georgian Dream is not a political party, the law says that funding restrictions set for political unions should also apply to organizations and groups affiliated with political parties or which have “declared political goals and tasks”. The highly controversial new regulations ban political parties and their affiliated groups to receive funding from legal entities, including from business organizations. The state audit agency said it considers the Georgian Dream as an organization having “declared political goals and tasks”, thus falling under the new regulations.

The agency said that on December 26 the Georgian Dream signed a contract with a private company Elita Burji on purchase of services and on December 29 the Georgian Dreamed transferred GEL 2 million to Elita Burji based on that contract.

Elita Burji is wholly owned by an offshore company Ringold Finance Limited, which is registered in the British Virgin Islands. Elita Burji is a construction firm affiliated with Cartu Group, a holding incorporating firms and organizations owned by Bidzina Ivanishvili.

The state audit agency said, that on January 17 of GEL 2 million it had received from the Georgian Dream, Elita Burji transferred back to the public movement’s account GEL 100,000. Three days later, on January 20, according to the state audit agency, Elita Burji transferred back to the Georgian Dream GEL 1 million.

In a letter sent to the Georgian Dream on January 25, Natia Mogeladze, head of the party funding monitoring service at the Chamber of Control, writes that these transactions contain “signs” of sham deal which aimed at “by-passing rules and restrictions set by the law”; she also writes, that the purpose of the deal was to obtain funding from a legal entity, something that is banned by the law.

Mogeladze also writes, that illegally obtained funding can be confiscated and transferred to the state budget. She, however, also writes, that the Georgian Dream can transfer GEL 1.1 million, which the state audit agency deems to be illegal funding, back to Elita Burji in order not to apply sanctions set by the law.

The Georgian Dream is expected to respond to the state audit agency’s allegation in a written statement later on January 26; meanwhile, Zakaria Kutsnashvili, Ivanishvili’s one of the aides on legal affairs, said that the Control of Chamber was illegally interfering into the private company’s finances.

Controversial new regulations tightened rules for party funding continues to be a source of criticism from the watchdog groups and opposition parties, who say that provisions of the new legislation are vague, potentially giving the authorities possibility to misuse the legislation against opponents. Opponents say that the legislation was specifically designed to target billionaire political Bidzina Ivanishvili.

Addressing these allegations, Secretary of Georgian National Security Council, Giga Bokeria, said in an interview with the Georgian weekly magazine Tabula, that the new legislations aimed at filling loopholes in order to prevent a situation wherein “large finances will have disproportionately huge influence on democratic processes.”

“There are talks that this [legislative amendments on party funding] coincided with emergence of a particular person [on Georgia’s political landscape], yes that’s the case. Concrete political developments can put on surface some obvious loopholes in the legislation,” Bokeria said.

“Our goal is to make the system protected against being misused by huge finances and one more step has been undertaken in this direction [to protect the system by new legislation] and one of the factors [behind] taking this step was what we have all seen: a man has appeared, who said ‘there are loopholes and I will use them to by-pass the regulations’; that’s it. But [these new regulations] in no way mean that competition will be restricted,” he said.