Saturday, December 25, 2010

Norwegian and US Credit Scandals Larger than Expected in Azerbaijan

"Everyone looks bad, so everyone looks the other way.'

RE: Based on documents received December 25, 2010

Corruption in ACDI/VOCA programs,  Azerbaijan and Georgia

Dear Norwegian Embassy, USAID:

RE:  Normicro's vision is to be a sustainable and leading organization in alleviating poverty through providing broad access to credit in Azerbaijan. Normicro promotes viable enterprises for internally displaced and low-income Azerbaijanis by providing sustainable lending services.


I think we need to compare some notes as there is "organized looting" of credit associations in Azerbaijan. It also seems that several Norwegian banks have also been involved, and some suspect that this corruption was a joint venture with locals (and there was some kind of inside collaboration with foreign representatives).

As shared with investigators, US, Norwegian government and the US State Department.  A package of document was shared with Jeffrey K. Silverman, December 25, 2010.

Nb. Jeffrey is the former editor in chief of Azerbaijan Today and Georgian Times, and who now resides in Georgia.

The letter is part of the package of documents which outlines allegations of corruption, as addressed to USAID, United States Agency for International Development, Office of Inspector General.  However, no date was on this letter but it appears to be very recent.

Key elements – and allegations are as follows:

You are being approached by a group of former employees of CreditAgro, a NGO based Credit Organization set up under a US government funded grant … and notwithstanding the [apparent] indifference of the organization that set up this association, ACDI/VOCA, which we have applied to several times in written form, no measures have been taken in response. Now you can take the facts listed below into consideration and provide assistance to CredAgro and its former employees (a total of 6 were listed at the end of the correspondence, and their many years of service to the association).

Screaming Foul or NOT?

These contentions and allegations go beyond what appears to be a group of disgruntled former employees screaming foul:

"Everybody is fully aware that Credit Agro was set up with funding provided by the US taxpayer, [in USAID doublespeak, the American People]. Hence we request that the various organizations that we have applied to assist in bringing about justice with fairness, both for CredAgro and its employees."

Claims made:
1)    Falsification of reports (ones addressed to the incorporator, investors, AMFA and the Central Bank of Azerbaijan).
2)    International exposure of credit risks on a massive scale, and their removal (writing off) from the balance and the [subsequent] misappropriation of such credits, a list of provided of the amounts involved and the years involved. Moreover, the main culprit-perpetrator is listed as J. Jafavrov, the head of the network of credit unions.
3)    Description of how big rigging and amounts for land purchases were exaggerated, jacked up for the "cash purchase of land plots for the construction of branch offices, and even how one construction company may have had unfair advantage in the process
4)    "Transferring of 6 to 7 branch buildings to a single construction company as an entity, which participated in rigged tenders for the construction of branch offices." NB. Special notice in the correspondence is made of how this person, who was the president of the construction company, hanged himself, or at least that is what it may be officially claimed in the police report.
5)    More mundane, "agreements/contacts for various things were concluded outside the tender process. Moreover, other mechanisms were used to misappropriate funding and many organizations were involved "tenders" in the sphere of Information Technologies;
6)    Furthermore, it is alleged that that the actual costs of repairs and construction was at least doubled, and examples given:
7)    Two hundred and eighty thousand USD allocated for the construction of an administrative building in Guba, a branch office for that city, and how this amount was fully prepaid. Another example is the cost for the purchase of the administrative building for the Khachmaz branch, and exact amounts provided. In total, 242,000 AZN, 320, 000 AZN for the building and 100,000 for the land plot.  The former employees claim that this is an unheard of amount in the history of Khachmaz.
8)    Eldar Jafar, director, established several micro credit organizations [keeping it in the family] directly on his mother's name with the mother that he had misappropriated (for example, "Invest Credit" and BOKT).
9)    Not in keeping with acting legislation, transport facilities were [confiscated, foreclosed] … taken back from clients and then sold illegally at bargain prices "too cheaply" to others for what is referred to as "front money."
10)    Moreover, and perhaps some of the most serious of charges made by this group of former employees: " E. Jafarov, used a "pyramid" scheme in order to artificially decrease credit risks and used a variety of tricky schemes to cover such activities.  Also, human resources, at least those on the books were used as a way to siphon off money, and payments were diverted to cover debts and these were not done in accordance with normal operating procedures.  Specifics are given and these are not provided here as so not to hinder any possible investigation, so not to give the opportunity to cook the books in light a criminal investigation.
11)    It is also charged that there is a great disparity between the salaries, as for those on administrative boards and regular employees, which indicates a possible kickback scheme with salaries.
12)    The diversity of employees is also worth mentioning:  each and every month. 8,000 (eight-thousand) was paid to one Vusal Eynullayev, acting in the capacity of the supervisory board, vice director and current employed as consultant to CredAgro.  Nobody, at least those who shared this information, understand what this person actually does and why he is being paid for doing nothing.  As the commentary provides. "it is a riddle for all of us, paying a person who does not assist the organization … and we note another case in regard to this person, [more about how Eldar Jafarov uses people in realizing his 'dirty purposes' and how loans are made with 12 percent APR, and how can you provide loans to a person working as a consultant, and this is [but the tip of the iceberg] – and the same person is working on the books as an assistant accountant to the Abseheron Brach, and the highest salary is paid, even higher than what is paid to others.  Moreover, it is claim that these benefits are attributed to having "rightly" supported the director when he was a member of the supervisory board.
13)    Perhaps the most central theme to various chain of correspondence, including this most recent one, is that of how employees are fired from their jobs under various excuses and with penalties and keep from being able to freely get on with their lives. They are blacklisted and prevented from finding other suitable employment.
14)    Much is written between the lines of the listed recriminations and criminal charges, and the central theme is how the director acts unprofessionally and not in accordance with local or higher permitted authority, especially in terms of dealing with the head office, and these things are discussed among those working in the organization as common knowledge – and one question is how best to make the responsible management aware of what is going on?
15)    It is in the opinion of those that shared this letter, that those working for E. Jafarov, and based on this "cadre policy" are in their positions illegally, and they are those closest to him. Even the qualification of employees is highly suspect, and for instance, AzruAsqerov who acts as the director of the Absheron branch was given a position and his diploma was a fake.  Employees state that one only needs to look at his pay stubs to fully understand.  Moreover, you briefly determine how this person without any experience is paid such a high salary. Another example is given how a person with only a high school diploma is appointed as a top employee in one branch.
16)    Other more local and administrative rules are listed among the complaints.  That the labor books of some of the terminated employees are not being returned to their rightful owners and outstanding legal payment of their wages not being paid out, as in the case of (ex-directors of Lankaran and Zagatala branches).
17)    All and all, and the bottom line: using such a combination of schemes and circumventing the law, the network of the director of the credit association has increased his personal wealth by millions of dollars, which was looted from not only those that provided grants and seed money for the association. How the money is spent is rather specific with details.
•    All these properties are registered under the mother's name (for instance) … 4 to 5 Mercedes with license number 10 AA 315, two flats in a new building with more than 300 square meters each, and located in the Yasamal district,  also under the mother's name – and these examples is just  a partial listing of what the employees are aware of.
•    Much more can be listed and discussed but for the sake of brevity, not in the form of this letter, as to the falsification/fraud committed by E. Jafarov, and we have the facts to support such claims. All that is needed is the opportunity to meet with the persons that this letter and early statements and documentation has been provided, and we believe that we will be in the position to present such facts.
•    As the letter concludes, "Dear Persons, which we apply to, we beg you to consider the above-mentioned circumstances and help the organization carryout a full-fledged "strong" audit … and if this unbridled "out-of-control" person is not soon brought under control, he will continue to pervert the lives of many individuals."


A list of six employees with many years of professional experience,

Listed and years of experience actually provided:

Commentary and History:

In the meantime, I am providing some information that may be useful for your investigators, as I suspect the same mechanism and players are involved as with Normico, especially on higher levels, as to what has gone before with US Government money. It is highly suspected that all efforts to reform the rural and micro credit sector on the policy level have been stonewalled at the higher levels of government.

This may be our smoking gun. I  have been investigating this for some years, dating back to 1991, when ACDI/VOCA, a US funded development organization appears to have covertly used funneled financial support to support Chechen and foreign fighters holed up in the Pankisi Valley of Georgia. Similar mechanisms have been used for years in Azerbaijan, as with MEGA oil and Taliban fighters. It is interesting how the same players (aid workers) and funding mechanisms have been used in other parts of the world, including Georgia and Afghanistan.

Most recently, aside from the squandering of about six million from one USG program, I have heard from several confidential sources that at least 10 million of Norwegian funds have been siphoned off in another credit scheme. Moreover, the corruption may reach to official levels of the Azeri government, and out of expediency, perhaps because of Statoil, a "blind eye" is being turned by the Norwegian government.

Please find some related information as how such mechanisms work, as reported to USAID OIG, Office of the Inspector General, and Criminal Investigative Wing of United States Agency for International Development.

Credit Agri, the same organization, on the American side has been implicated in providing material support to Chechen terrorists, and has been involved in high level corruption in Azerbaijan, and this too was never investigated by USAID and other USG organizations.

To make a long story short, there also appears to be a massive cover up in process, and not only involving the USG but other providers of funding for what would have been otherwise worthwhile credit activities - and EU  countries are also involved, and even money provided by IFC, the financial arm of the World Bank.

I am willing to set up meetings with those involved, who can provide insight and actionable intelligence as to these schemes. I think this can lead to criminal convictions and the cleaning up of the rural credit sector in Azerbaijan.

I will be looking forward to hearing from you as soon as possible. Incidentally, Roddy Scott, a British Journalist and I were investigating funding mechanisms via Azerbaijan some years back, he ended up dead, and coincidence or not, a few days later I was beaten and ended up with a brain concussion in Baku.

I was chasing the money via Azerbaijan that was being used to support Chechen fighters in Georgia, and learning the routes that Chechens were using to carry out operations against the RF, and how the Georgian government was a state-sponsor of terrorism, providing them weapons and transport - and the bulk of the funding came from the US government during the period of former president Eduard Shevardnadze. This process was in close connection with a group of Afghan War Veterans, Javi - a NGO set up by the Georgian National Security Council in order to help justify the 64 million dollars US train and equip program and to carry out a war of destabilization in various regions of the Russian Federation.

History of ACDI/VOCA in Azerbaijan

ACDI started a rural credit SME program funded by USAID about 2001 in Azerbaijan. It was the largest of the USAID funded credit projects. About $4 million was in loans. They made loans to rural enterprises, farmers, etc. They had offices in most areas of the country (Lenkoran, Imishli, Ganja, etc.) ACDI/VOCA, an international development organization dedicated to empowering people worldwide, and it has had its problems in a number of countries.

The ACDI system in Azerbaijan was established to provide local control and a local company was set up to run all the local offices. The company was called CreditAgro This system was unlike that in Georgia, where credit associations were formed. This was more centralized, with offices reporting to a central office in Baku. However, the same propensity to hand the operation over to corrupt locals was observed. In this case, ACDI/VOCA hired a man called Eldar Jafarov, initially as credit officer, but he eventually became head of CreditAgro. Soon problems developed between Eldar and the ACDI/VOCA Chief of Party and other expatriates, who considered that Eldar was taking too much power and hiring cronies for every position in CreditAgro. Despite numerous attempts by ACDI/VOCA expatriate staff to remove Eldar Jafarov these attempts were consistently blocked by ACDIVOCA Washington. An internal audit proved many allegations against Eldar.
Still, ACDI/VOCA refused to fire Eldar or change human resource personnel practices. In 2005, however, enough was enough and ACDI decided to fire Eldar. Then Eldar told all managers of Creditagro to go on strike in his support. As a result, ACDI/VOCA Washington completely caved in (ACDI's VP Dennis DeSantis), and gave the position back to Eldar. The fallout was immediate and the ACDI/VOCA Country Director resigned in disgust, [check out this source] and Eldar, now much more powerful, personally fired the other principal expatriate himself, cleaning up loose ends. The impression was that Creditagro was now a private enterprise of Eldar.

The United States Agency for International Development, USAID was well aware of this scandal but decided to turn a blind eye, and often sided with Eldar in subsequent criticism of ACDI/VOCA. However, they still made a grant of the USAID funds (about $4 million) to ACDI/VOCA/Credit Agro. ACDI continues to be the owner of CreditAgro, yet it forced into a curious position where they are telling all potential investors and lenders to stay clear of CreditAgro because of the above-mentioned shenanigans, and not to taint their reputation more than it is already.

It was obvious that ACDI/VOCA had really mishandled the project, setting up a private company serving one individual. Still, even though USAID was for a very long time aware of the problems, never penalized ACDI/VOCA, but instead, in 2005, rewarded ACDI/VOCA with a major rural enterprise development project in Azerbaijan, which is now employing the old second in command fired by Eldar.

Sordid track Record, Georgia

This is not the first incidence of ACDI/VOCA incompetence in running credit projects. The Georgia ACDI rural credit project was a well-known complete disaster, as local credit associations created by ADCI and funded fully by USAID and USDA were taken over by the local managers selected by ACDI/VOCA and turned into a private money making racket with accountability to none. A later USAID project to assist these entities found out later that the managers had illegally fleeced the associations of most of their funds. Most of the funds disappeared as "dividends" to the local project managers, who normally had been selected due to their power within the local community (for example, some of them were heads of the local tax inspectorate and well known bandits, including members of state security, and not because of any credit or relevant knowledge.

Professional skills are not the decisive factor. The result is that senior local bureaucrats, politicians, and businessmen gain positions. This was part of the problem with the credit unions set up by ACDI/VOCA in 1993 and funded by the US government.

ACDI/VOCA hired these people ostensibly because their muscle could be used to guarantee repayment from poorer farmers. Even as far back as 1998 the then Georgian Agriculture Deputy Minister Nugzar Duchidze had remarked that ACDI/VOCA's setup was a "rich farmer's club designed to help these well connected individuals. The Georgia operation was obviously even worse than the Azerbaijan setup. Still, USAID encouraged the Azerbaijan operation was to be patterned after Georgia by the USAID program officers who controlled aid programs in both countries. However, now it appears that Azerbaijan has exceeded all levels of fraud and corruption that was demonstrated by the Georgian project.

One International TV network producer wrote an email dealing with accountability in international organizations 'Ahh – there is the problem. Nobody is interested in corruption. Western agencies would be very embarrassed to be seen dealing with a bunch of second-rate crooks. After all, you must remember that it looks bad if your program which is funded by the US or Europe has no correct oversight. "
"Everyone looks bad, so everyone looks the other way.'

The "total" lack of accountability NGOs (including a host of international organizations) continues when receiving grants and cooperative agreements from international organizations. These NGOs can do what they want, and are "assumed" to be doing well, because they are "fellow travelers" with USAID.

They all claim to be helping in improving the livelihood of local farmers, small business, etc.

Best regards,

Joni Simonshvili, Jeffrey K. Silverman, Tbilisi Georgia 


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