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By Ruzanna Stepanian

Businessmen Arrested Amid Court Battle With Armenian Customs

The two top executives of a coffee importing company who have alleged high-level corruption within Armenian customs have been arrested on charges of fraud and smuggling, their lawyer said on Thursday.

The arrest of Gagik Hakobian and his deputy Aram Ghazarian is the latest twist in a long-running bitter dispute between their Royal Armenia firm and the State Customs Committee (SCC). It began nearly two years ago when they the company claimed to be penalized for its refusal to cut illegal deals with corrupt customs officials.

Criminal proceedings against the Royal Armenia executives were launched by the National Security Service (NSS), the Armenian successor to the KGB secret police, last spring. The case is reportedly based on a complaint filed by a U.S. citizen of Armenian descent who claims that Royal Armenia owes him $164,000 for coffee supplies and has failed to pay up. The man, identified as Vache Petrosian, has also alleged that Hakobian and his associates forged financial statements to understate the volume of their imports.

Hakobian's lawyer, Ashot Sargsian, described the case as `weird.' `I wonder why he went to the National Security Service,' Sargsian told RFE/RL. `If one of the parties fails to honor its contractual obligations, it must be taken to court.'

`I don't know what National Security wants today. They themselves probably don't know,' he said.

The NSS refused to comment on the case on the grounds that the investigation is still going on.

Speaking at a news conference last June, Hakobian charged that he is being prosecuted in retaliation for its high-profile battle with the customs chiefs. `We are dealing with a group of officials who set unofficial rules, and if you don't comply with those rules then you must not operate,' he said.

The two-year dispute centers on the Customs Committee's controversial discretionary power to determine the market value of imported commodities before levying a fixed 10 percent duty from them. Royal Armenia, which imports, processes and sells coffee, said last year that customs officials offered to grossly undervalue price of its imported coffee beans in return for sharing in the resulting extra profits.

The Armenian customs has evaluated one kilogram of Indonesian raw coffee imported by Royal Armenia at $1.8. The company insists that its real purchasing price was only $1.24 per kilogram. The value of the same sort of coffee brought in by other importers is set at $1.1 per kilogram or even less.

Customs officials say they trust invoices submitted by Royal Armenia's competitors but they have yet to clearly explain why they distrust customs declarations issued by Hakobian's company.

Royal Armenia says it has repeatedly demanded a written explanation of the price evaluation policy from the customs but to no avail. It asked Armenia's Economic Court last month to force the SCC to provide such a document and reconsider its controversial import duties. The court is still considering the lawsuit

Customs administration is one of the most frequent sources of complaints made by Armenian entrepreneurs. However, few of them go public with their grievances for fear of government retribution. Royal Armenia is the only private firm which is known to have publicly clashed with the SCC in recent years.

Corruption among Armenian officials in charge of collecting taxes and import duties is widespread. President Robert Kocharian personally warned senior customs officials on two occasions this year to stop harassing honest taxpayers and helping importers avoid taxes in return for kickbacks.

Armenia's controversial customs chief, Armen Avetisian, is believed to be close to Defense Minister Serzh Sarkisian. Incidentally, Avetisian has held senior posts in the NSS in the past.

RFE/RL Armenia Report - 10/13/2005