Shadow Celebrations: How Two Companies Received More Than AMD 7 Billion for Decorating Yerevan Without Tenders

Yerevan City Council member Pedro Zarokyan has revealed a scheme under which public funds were allegedly transferred on a large scale to two interconnected companies while bypassing competitive procedures. According to his estimates, the actual value of the services provided amounts to only 10–15 percent of the sums received. Journalists from the Anti-Corruption National Initiative (ANI) examined the details of this controversy.

The Core of the Controversy: USD 15 Million for “Decorations”

In February 2025, Yerevan City Council member Pedro Zarokyan publicly raised concerns about systemic issues in public procurement. In a Facebook post, he stated that two interconnected companies Factory Production and Background Production had received state contracts worth more than AMD 7.2 billion (approximately USD 18.6 million) without competitive tenders.

According to Zarokyan, this became possible due to a 2018 law, which allows companies organizing events to receive public contracts without going through a tender process. The opposition politician claimed that the real cost of the services provided amounted to only 10–15 percent of the funds received and that approximately USD 15 million had effectively been shared with Yerevan City Hall for city decoration projects.

“For New Year decorations, USD 1.5 million is allocated to Factory Production and Cinemart. But the same work could be carried out by our own municipal institution. Instead, you prefer to distribute money to your friends without a tender,” Zarokyan stated during a City Council session.

The “Monopoly” Companies and Former Public TV Employees

According to data from the State Register of Legal Entities, Factory Production LLC was established on June 29, 2017. Its founders were Rudik Ter-Galstyan and Vazgen Poghosyan, former employees of Armenia’s Public Television (H1). Ter-Galstyan served as chief producer from 2012 to 2017, while Poghosyan was executive producer.

Notably, in November 2021, Poghosyan sold his 50 percent stake in the company to Ter-Galstyan for only USD 50, after which Ter-Galstyan became the sole owner. Poghosyan was later appointed an assistant to President Armen Sarkissian, though he left that position in March 2022 following the change of presidency.

In 2022, Factory Production received another major contract worth AMD 750 million (USD 1.5 million) for organizing the European Boxing Championships in Yerevan. The government justified the lack of a tender by citing time constraints, despite the event having been announced approximately six months earlier.

How the Mechanism Works: “Non-Procurement Expenditures”

The essence of the issue lies in the Armenian government’s active use, since 2018, of the so-called Non-Procurement Expenditure (NPE) mechanism.

This mechanism is not provided for under the Law on Procurement and was introduced by Government Decision No. 706-N of June 15, 2018.

The growth has been significant: while between 2013 and 2016 the volume of such expenditures did not exceed AMD 150 million, by 2023 it had reached AMD 11.7 billion.

Moreover, unlike single-source procurement procedures, the Armeps public procurement system does not require justification for these expenditures.

Major Contracts and Connections Within City Hall

An investigation by Zhoghovurd newspaper found that in 2025 alone, Factory Production signed contracts with Yerevan City Hall worth nearly AMD 780 million, all through single-source procurement procedures. According to the newspaper, this has already become a “tradition” within the municipality.

Particular attention has been drawn to Artur Julhakyan, Deputy Head of Yerevan’s Kentron Administrative District. According to the investigation, he allegedly coordinated and supported the company’s activities from within City Hall.

Julhakyan’s official biography does not mention employment at Factory Production, but in a conversation with a journalist posing as an event organizer, he did not deny his involvement in events organized by the company. Moreover, he acknowledged that the company had outsourced part of its work to him.

Timeline of Factory Production’s Major Contracts (Partial List)

Reactions and Conclusions

Pedro Zarokyan also noted that Yerevan City Hall already has its own municipal non-commercial organization, “Decoration and Maintenance,” which could have carried out this work. Instead, he argued, the municipality preferred to “distribute money to its friends.”

Experts in anti-corruption and public procurement have repeatedly expressed concern about the growing number of contracts awarded without competition. Varuzhan Hoktanyan of Transparency International has stated that contracts awarded without tenders create corruption risks and are among the factors affecting Armenia’s standing in international corruption perception rankings.

Although Prime Minister Nikol Pashinyan has repeatedly declared victory over “systemic corruption,” new facts have raised concerns about the emergence of new monopolies in public procurement. As early as 2019, Member of Parliament Ani Samsonyan warned in an open letter to the Prime Minister about the risks of creating new monopolies when a single company is repeatedly favored without competition.

Whether the situation constitutes corruption or is merely the result of shortcomings in legislation remains an open question. What remains clear, however, is that two companies founded by former employees of state television have received contracts worth billions of drams while bypassing competitive procedures, while Yerevan City Hall has spent tens of millions of dollars on city decorations despite having its own specialized municipal institution capable of carrying out such work.