Update of Corruption Scandal
Name:" E. G. wrote by email several weeks ago: "I read your article from 7th September 2010. I agree with you in all you wrote and want to give you some facts about corruption among Eldar Jafarov, ACDI/VOCA and USAID in Azerbaijan. Also materials about wheeler-dealer finance of Eldar Jafarov. Do you speak Russian? […]" 23.10.10."
As provide a few days ago:
Dear Joni:"Here is something you might want to look into, and how can I get in contact with you to give you more. I was provided documents yesterday from Azerbaijan of a major fraud case involving USAID and credit unions, (perhaps some World Bank money too), involving approximately 3.5 million dollars.
I also have a copy of the letter sent to the US Embassy in Baku about this corruption - and it is alleged that the Credit Agro, which was established with US and World Bank money operated a pyramid system and gave fake rural credits to various organizations. This will not be the first major cover up of USAID in Azerbaijan and Georgia - and they have also been active in Iraq and Afghanistan, and even some of the same human resources. You know all about these things, even better than I do.
Currently Creditagro operates in 27 districts of Azerbaijan. Can you suggest how best to distribute this information - also - do you have anyone in DC that can go to ACDI/VOCA and get all the reports and complaints made under a FOIA request about alleged corruption in ACDI/VOCA for both Georgia and Azerbaijan. The point of contact would be Seth McDonald, Project Coordinator/Financial Services 202 469-6172 or Bill Polidoro, Chief Operating Officer, President Office.
A complain has been made to the US Embassy in Baku but there has been no reaction on their part, only closing ranks – and this is a pity, and more than 60 honest employees of the organization have been replaced as part of the cover of a massive corruption scandal.
Again, as with earlier complaints to ADCI/VOCA and the Office of Inspector General – the home office is telling that it is 'a non-meritorious claim, and there needs something to be investigated – not just generalities.' The person at the center is Eldar Jafarov, and he has organized some kind of pyramid scheme and payments for credits are made by money from the organization and not the creditors themselves. The so-called world financial crisis was also used as a cover to write off some loans as bad when they were not. In many cases the loans were not even in arrears, and the purpose was to devalue the worth of the credit unions in order to privatize it at not to nothing.
I will let you connect the dots, as it is possible that there are other dark forces of such schemes and various scenarios. Employees of the credit union, "Credago" suggest to you that a commission should be set up that knows credit and finance, and this body consist of independent people (those not working for CredAgro) to carry out an audit. Most of the corrupt loans were given out in the period 2007-2008, and the vast majority in the second half of 2007. It is clear that some other motivation was involved – as the change was sudden, credit policy, and this set up the conditions for the above-mentioned pyramid scheme, as an effort to reduce the risk and cook the books. However, in spite that the risk exposure was brought down on paper, outstanding old debts continued unabated.
In order to try to shut up the staff of the credit unions, so to turn blind eye to illegal practices, promises were made to give some share of ownership when the credit unions were privatized. Those that did not play along were forced to resign and in some instances, set up in cooperation with local enforcers in the government, and sent to jail on bogus charges. Naturally it would appear that there is direct government involvement in the fraud – as few would take such a risk of sending innocent people to jail unless they were well paid. The motivation is clear, not only for the director Eldar Jafarov, to bankrupt the organization, make as much money in the process by writing off loans, pocketing the money, along with corrupted officials and then to turn around and set fresh by privatizing the credit union and then to seek fresh international funding from various organizations such as the Word Bank, German Bank for Reconstruction and Development (KFW), European Bank for Reconstruction and Development (EBRD) and others, especially the greatest milk cow of all – USAID."
NB: Background as earlier posted on this site:
Corruption in USAID Azerbaijan and ACDI/VOCA
On-going investigation of corruption in Azerbaijan and USAID
Name:" E. G. wrote by email today: Content: "I read your article from 7th September 2010. I agree with you in all you wrote and want to give you some facts about corruption among Eldar Jaffarov, ACDI/VOCA and USAID in Azerbaijan. Also materials about wheeler-dealer finance of Eldar Jafarov. Do you speak Russian? […]" 23.10.10."
Here is the case file on this investigation and it has many side plots and connection with funding mechanisms in Georgia, Azerbaijan and Afghanistan.
Earlier Article from September 7, with all the sorted history.
Rats Everywhere, can you fill in the gaps?
Intercepted correspondence from USAID, OIG
RE: Everyone looks bad, so everyone looks the other way.'
"Can you please advise a telephone number and let me know of a few convenient times, which I may try to contact you in reference to the information about USAID programs and activities?"
Thank you,
KC Smith
Special Agent
USAID Europe & Eurasia
RIG Frankfurt, Germany
OFFICE: 49-69-7535-7845
FAX: 49-69-7535-7841
SmithKC2@state.gov
1) A source under contract to USAID, as employed business development expert, Mr. X, who may be the source on ADCI corruption with good access states the following: 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.4
2) However, regardless if this source will be forthcoming, he can give more information about the basis of Azerbaijan Business Assistance and Development Program (ABAD), and how things were flawed (how there was bid rigging, and how it was the contract was awarded to a group with weak organizational credentials in business development at best. You just need to look into how the project was solicited, and it may not have been a RFP, and the winner did not win in full and open competition, and thus USAID participated in corruption and did not acquire the services of the most capable technical assistance provider.
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.
Successful Track Record
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 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.
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 programme which is funded by the US or Europe has no correct oversight. Everyone looks bad, so everyone looks the other way.'
Nonetheless, it does appear that the US government and the Bush Administration were a bit concerned about the "total" lack of accountability NGOs (including a host of international organizations) have when receiving grants and cooperative agreements from USAID. 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.
No noise was made of this incredible debacle of ACDI/VOCA in Georgia because none other than Rusty Schultz a very close friend of Gerry Anderson, high-ranking USAID official in Tbilisi, ran the ACDI/VOCA project in Georgia. Many sources (including a those close to a Chemonics run project of assistance to credit organizations) confirm that Anderson did everything in his power to protect Rusty and his corrupted minions. And finally because of their disastrous management, Jim Holderbaum, ACDI Country manager was lost as what to do. Many claim that those working in NGOs only to come to Georgia in order to get laid regularly, something Rusty was good at arranging. Then visiting experts had access to the Rusty castle where they could be entertained, and the rest is history.
Gerry Anderson, USAID Georgia, directly instructed even those visiting experts that were involved in proposal writing when he was in Georgia in mid-2001 that they needed to hook up with ACDI. Now that is interesting and what authority would Gerry have in making such recommendations? He was proposing to work with a specific group and the instructions were outlined in such a way in terms of value chains, and that the only clear choice was that ACDI as the company that they he needed to work with. A month or so later on other business, same instructions were provided to visiting experts to make sure that there was a connection with ACDI.
It should also be noted that ACDI/VOCA has a policy of putting on its payrolls mainly old USAID hands. That is why ACDI/VOCA is a favorite in all parts of USAID's world. Others need not apply. Financially ACDI/VOCA is a disaster, but it is doubtful that any of the board members have the brass to go against the entrenched senior employees, for whatever reason, and AgVantage is doing well as can be expected. SAVE, the original project in Georgia, which was renamed AgAdvantage and this project was doomed from the start because of the problems with ACDI. First their money problems: Then there was a lack of any clear direction or focus, other than to pander to Gerry Anderson and USAID.
It is clear that what happened is Azerbaijan and Georgia is par for the course; Gerry Anderson had gone to great pains to cover up USAID scandals and to protect his friends. What is less clear is the motivation. He has made sure that many project evaluations are stacked with the people that will come back with results that conform that all went well and program objectives were achieved. In one instance, he had bumped off a person from an evaluation that may not have brought back the desired results. Allegations of his morals are well documented, and there is a large age difference between him and his Asian mail order bride, and there are still allegations of sexual harassment of staff of USAID floating around Tbilisi (he demanding that some USAID staff works share in housekeeping responsibilities, such washing his plates).
Eventually it is known, as part of damage control Rusty Schultz, the program coordinator in Georgia, was sent to head up a high profile ACDI/VOCA operation in Iraq. It was clear that criminal activity had proliferated unchecked in the Georgia project and the cover up was complete. And still, with similar noise filtering out of the Azerbaijan project, and still USAID does nothing other than praise a bankrupt project and continue to dole the pork to an incompetent but rich organization.
Moreover, there are serious allegations of money being used to support the trafficking of weapons. One source shares the following: "If there was money going to arms I rather suspect it would have been more likely to have been connected to Rusty's sidekick, the New Zealander mercenary who had been all over Africa and Asia soldiering in places they would pay. I heard lots of stories about how he and Rusty got hooked up, but I suspect all of them were at least partial fabrications just to make both of them look good."
There are many stories in Tbilisi about how he and Rusty got hooked up, but in all likelihood most of them were at least partial fabrications just to make both of them look good. The bottom line, Rusty needed the soldier of fortune (he may have officially been his deputy but it is difficult to say if he had that title) because he made the parties and the stories so much more fun for Rusty to use to encourage people like Gerry that he wanted to co-opt the parties. Gerry is all about spin and control and the soldier wanted everyone to know that though he was in the background it was he who was still the one carrying the entire buzz.
The most notorious corruption in Georgia involved Micro and SME Credit activities in the South Caucasus countries of Georgia and Azerbaijan. It is hardly accidental that such programs have been so unsuccessful that there is even doubt if they were even intended to be effective from the very start.
How long can USAID continue to support an organization with such a record of negligence and criminal malfeasance as ACDI/VOCA and others? ACDI/VOCA continues to win all the contracts it wants and nobody brings their record to the public light. ACDI/VOCA works in approximately 40 countries and claims to foster vibrant communities, organizations and enterprises that can manage and finance themselves.
See acdivoca.org for more information. All this is a matter of record with USAID, OIG, Office of Inspector General.
This connects many dot, and what is going on today, and what has gone on - where did the money come from and where did it go - and while the wool was being pulled over the eyes of the American People as they try to help Georgia and Azerbaijan develop.
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