The owner of Armenia’s largest food exporting company accused of tax evasion warned through his lawyer of “severe consequences” for the domestic economy after the Court of Appeals refused to release him from custody on Tuesday.
The businessman, Davit Ghazarian, was arrested three weeks ago after the State Revenue Committee (SRC) charged that his Spayka company evaded over 7 billion drams ($14.4 million) in taxes in 2015 and early 2016.
The accusations stem from large quantities of foodstuffs which were imported to Armenia by another company, Greenproduct. The SRC says that Greenproduct is controlled by Spayka and that the latter rigged its customs documents to pay fewer taxes from those imports.
Ghazarian has strongly denied any ownership links to Greenproduct. He said on April 5 that the SRC moved to arrest him after he refused to pay the alleged back taxes.
The Court of Appeals upheld a lower court’s April 8 decision to allow investigators to hold Ghazarian in pre-trial detention. It also rejected a separate petition to free him on bail.
The tycoon’s lawyer, Arsen Sardarian, denounced the ruling as baseless. He claimed by that keeping his client in custody the authorities want to “extort” large amounts of money from Spayka.
“His detention could lead to severe consequences,” said Sardarian. “That is, the company could fail to continue its operations.”
Spayka is Armenia’s leading producer and exporter of agricultural products grown at its own greenhouses or purchased from farmers in about 80 communities across the country. The company employing about 2,000 people also owns hundreds of heavy trucks transporting those fruits and vegetables abroad and Russia in particular.
In a series of statements issued earlier this month, Spayka claimed that because of Ghazarian’s arrest its mainly foreign creditors are withholding further funding for the company. It said it may therefore not be able to buy large quantities of agricultural produce from Armenian farmers this year.
Prime Minister Nikol Pashinian dismissed those warnings on April 9. He said he is confident that the food giant will carry on with the wholesale purchases.
The SRC chief, Davit Ananian, said afterwards that the tax collection agency is now scrutinizing Spayka’s operations in 2016-2018 and will likely impose even heavier tax penalties on the company.
Echoing Spayka’s statements, Sardarian insisted that the charges are based on an arbitrary “expert evaluation” cited by the SRC. The lawyer said Ghazarian will be ready to pay up if the alleged tax evasion is proved by a more thorough audit involving “specialists trusted by him.”
Spayka was already fined about 2.5 billion drams ($5 million) for profit tax evasion in July last year. Ghazarian said before his arrest that he agreed to pay the “unfounded” fine in order to have the company’s bank accounts unfrozen.
The arrest came just two weeks after the tycoon inaugurated a new cheese factory in Yerevan built by Spayka. Pashinian was present at the opening ceremony.
Spayka also planned to expand its greenhouses under a $100 million project that was due to be mostly financed by the Kazakhstan-based Eurasian Development Bank (EDB). Andrey Belyaninov, the EDB chairman, said on April 25 that the disbursement of its $67 million loan to Spayka has been put on hold because of Ghazarian’s arrest.
“We can’t take such a risk if we are talking about [Spayka’s] potential bankruptcy,” Belyaninov was reported to say.