Anti-Corruption Agency of Georgian State Security Service prosecuted eight, including former Georgian Railway chief, ​​in major corruption case

Eight individuals have been charged in connection with an organised crime scheme involving the legalisation of illicit income, following operational and investigative measures conducted by the Anti-Corruption Agency of Georgia’s State Security Service, said on Tuesday Emzar Gagnidze, the Director of the Agency.

According to Gagnidze, the case concerns corruption schemes orchestrated by former senior officials of JSC Georgian Railway during their tenure at the company. Investigators say the suspects unlawfully appropriated large sums of state-owned assets through various criminal methods and subsequently sought to disguise the illegal origin of the proceeds.

The investigation revealed that in the autumn of 2019, then-General Director of Georgian Railway, Davit Peradze, established a structured organised criminal group with the aim of fraudulently obtaining valuable company assets. Under a pre-arranged scheme, members of the group were tasked with collecting, transporting, cutting, sorting, and preparing scrap metal owned by Georgian Railway in a manner that would make it impossible to determine its original quantity.

At the same time, selected companies were used to create tax and accounting documents that gave the misappropriated scrap metal a fictitious legal origin, enabling its subsequent sale. Investigators claim that Peradze gradually involved several individuals in the scheme, including the then-Director of Infrastructure at Georgian Railway and another individual who exercised effective control over multiple companies, including LLC Kakheti, LLC Nova Trans, LLC Jadexa, LLC Construction and Repair Company Khuro, and LLC Grand Kakheti.

According to investigators, Georgian Railway announced two tenders in February and September 2020 for services related to the transportation, sorting, cutting, and collection of scrap metal. The winning bidder in both cases was LLC Kakheti, a company allegedly controlled by members of the criminal group.

The investigation found that, in coordination with Peradze, scrap metal was removed from Georgian Railway facilities without proper counting or weighing procedures. In some cases, the quantities recorded in official documentation were reduced artificially, making it difficult to identify shortages and facilitating the eventual write-off of the missing assets from the company’s balance sheet.

Instead of being stored as required, portions of the collected scrap metal were transported to the Rustavi-based steel producer GeoSteel and sold there. Investigators state that members of the criminal group supervised and coordinated the process, while forged tax documents were created to conceal the criminal origin of the metal and facilitate its transportation and sale.

Authorities estimate that between 2020 and 2021, the group unlawfully obtained a total of 22,120 tons of scrap metal belonging to the Georgian Railway. After its origin had been concealed, the metal was purchased by GeoSteel for GEL 17.39 million. The proceeds were transferred to the bank accounts of Nova Trans and Jadexa, after which the funds were periodically withdrawn in cash and distributed among members of the group.

Investigators also uncovered a separate fraud scheme involving a contract signed on April 29, 2022, between Georgian Railway and LLC Raveldi for rail defect repair services worth USD 999,768. Under the agreement, the company was to weld up to 1,600 rails, with payments based on officially approved completion certificates.

The investigation alleges that Raveldi’s director, in agreement with the then-Director of Infrastructure at Georgian Railway, falsified acceptance documents by overstating the volume of completed work. While only 987 rails were actually welded, documents indicated that 1,200 rails had been repaired. Investigators say authorized Georgian Railway employees signed the false documents at the direction of senior management, resulting in an overpayment of GEL 403,844 to the contractor.

The criminal proceedings involve charges of large-scale fraud committed by an organized group, aiding and abetting fraud, forgery and use of false accounting and official documents, and money laundering involving especially large amounts of income. Two of the eight suspects will be charged in absentia and declared wanted by authorities.

If convicted, the accused face prison sentences ranging from nine to twelve years.

Gagnidze stated that investigative activities are ongoing and that the Anti-Corruption Agency continues efforts to identify additional members of the organized group and take further legal action.