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Corruption

Azerbaijani oil company accused of bribing American congressmen

The Azeri Times

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Ten American congressmen have been accused of going on a trip to Azerbaijan in 2013 that was paid for by the state oil company of Azerbaijan, SOCAR, and, while there, received expensive gifts.

The congressmen were invited to the Vision for the Future Convention which took place in May 2013. The Washington Post writes that before this, SOCAR and several other energy companies had looked at ways for bringing the Trans-Anatolian Pipeline out from under American sanctions.

The pipeline’s purpose was to transport Azerbaijani gas to Europe, but it had sanctions placed against it because of Iran’s involvement in its construction.

The Washington Post claims that SOCAR used the conference to try and convince the congressmen to help lift the sanctions. About $112,000 was spent on airfare for just the 10 congressmen and their 32 aides.

Moreover, they all received expensive gifts, ranging from silk items to carpets and crystals. The cost of these presents exceeded the allowed $350 value which American congressmen are allowed to accept without violating the ethical standards of the US Congress and other US federal laws.

This legislation serves to forbid foreign governments from influencing American politics.

Two years later, the congressmen are being asked for explanations. One of them, Danny Davis, said that he did not know that the conference was funded by SOCAR. He promised to donate the carpet he received in Azerbaijan as a gift to a museum or charity organisation.

SOCAR states that it never hid its involvement in organising the conference, but that this was not properly reflected in the accounts of the non-profit foundations that officially sponsored the event.

One other figure, Kemal Oksuz, who served as a sort of mediator between SOCAR and the congressmen through these non-profit foundations, was also involved. Oksuz recently went on the run and was apprehended by Interpol in Armenia.

His arrest was the last missing link in the investigation of the congress’ ethics committee and also the reason for the media to revisit the incident.

In total, the conference cost more than two million dollars of which Oksuz received $750,000 directly from SOCAR and the rest through front companies. In other words, he pretended to be the organiser of the event, thus covering for SOCAR.

Oksuz’ comment on the matter was rather succinct: “[This is] probably corruption. I don’t know.”

Corruption

UK aims at shady Azerbaijani money – but is it missing the target?

The Azeri Times

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Some have expressed concern that the UK’s first use of the “unexplained wealth order” targeted someone already out of favor with the Azerbaijani government.

The announcement that the wife of an Azerbaijani banker is the first target of British efforts to crack down on foreigners’ illicit wealth was welcomed by good government advocates, but raised concerns that London may only be aiming at figures who are out of favor with their home governments.

On October 10, British media reported that the target of Britain’s first “unexplained wealth order” is Zamira Hajiyeva, the wife of Jahangir Hajiyev, the former head of the International Bank of Azerbaijan. The order is a recently introduced instrument allowing British law enforcement officers to demand explanations when a person’s wealth does not correspond to their declared income. It is aimed at cracking down on the vast amounts of ill-gotten wealth – much of it from the former Soviet Union – parked in London.

There is no shortage of dodgy Azerbaijani money in the UK. The investigation into the “Azerbaijani Laundromat,” for example, found that shell companies based in the UK played a key role in the Azerbaijani political elites’ money-laundering and influence-buying operations.

The Hajiyevs, meanwhile, had already been cast out of the Baku political elite: In 2015, Hajiyev was sentenced by an Azerbaijani court to 15 years in prison for misuse of funds.

The government-friendly Azerbaijani press – not typically a fan of stories about Azerbaijanis falling afoul of investigators in the West – widely reported the news about Hajiyeva. “All of England is talking about Zamira Hajiyeva,” crowed a headline on Haqqin.az, a news site connected to Azerbaijan’s security forces.

Two days before the news broke in the UK, in fact, Haqqin had already reported that Hajiyeva was the target of the order. The story cited the Telegram channel Banksta – a Russian-language channel covering banking affairs – but a sister website of Haqqin, Azeri Daily, had named Hajiyev as early as July.

That Hajiyeva was targeted, out of the many potential subjects of the order, raised some consternation among observers.

“There is an interesting issue with the case of Zamira Hajiyeva,” tweeted Anar Mammadli, an Azerbaijani human rights activist. “After all, she and her husband, Jahangir Hajiyev, are not the first Azerbaijani civil servants to buy property in London. Will the other official-families’ ‘contributions’ to the British economy be investigated? After all, they are not alone!”

“What a can of worms,” tweeted John Heathershaw, a professor at the University of Exeter who studies post-Soviet financial ties with the West. “Many thousands more potential cases. Or are we just going to look at those who have fallen out of favour with their home governments?”
“What a can of worms,” tweeted John Heathershaw, a professor at the University of Exeter who studies post-Soviet financial ties with the West. “Many thousands more potential cases. Or are we just going to look at those who have fallen out of favour with their home governments?”

“Hajiyev and his wife have already fallen foul of the system in Azerbaijan. I don’t imagine the Azerbaijani regime will be overly concerned to see this investigation. Who knows, maybe they even had a hand in triggering the investigation,” tweeted analyst Alex Nice.

“My take on the UWO is that it looks like a missed chance to send a big message,” tweeted Oliver Bullough, a journalist who has extensively covered post-Soviet wealth in the UK. “Jahangir Hajiyev had already been jailed in Azerbaijan so why not use the standard asset recovery route, as with Gulnara Karimova? UWOs are supposed to be for assets that can’t be seized otherwise.”

Nevertheless, the move was welcomed by good government advocates. “UWOs should now be used more widely to pursue more of the £4.4 billion worth of suspicious wealth we have identified across the UK,” Duncan Hames, director of policy at Transparency International UK, told the BBC.

And some in the region wondered if their oligarchs would be next. “It seems that investigators from the National Crime Agency started from the letter ‘A,’” joked Uzbekistani writer Hamid Ismailov on twitter. “Uzbek ‘nouveau riches’ might think that they are last in the running order:) in between Uganda and Zambia.”

Joshua Kucera is the Turkey/Caucasus editor at Eurasianet, and author of The Bug Pit.

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Corruption

How one Azeri owns 50 companies and wins tenders worth millions

The Azeri Times

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A 47-year-old Azeri businessman is the registered owner of more than 50 companies. Those companies won more than 180 government tenders worth six million manats ($3.5 million at current exchange rates) from 2012 to 2016. Most of these companies, it turns out, have no office address or phone number, but instead are listed at two primary addresses, both family residences where there is no sign of the businessman himself.

The entrepreneur, Fakhraddin Mammadov, could not be reached by phone and did not respond to several attempts to contact him personally through friends or relatives who live at the registered addresses given for his companies.

There is no evidence that Mammadov or his companies have done anything illegal. But why would anyone create multiple individual companies, without any obvious offices or staff, to apply for government tenders?

Experts believe that the motive for establishing multiple companies often has to do with tax legislation. If a company’s annual turnover exceeds 200,000 manats ($118,000), it must pay an 18 percent tax. But if the turnover is less than 200,000, it pays 4 percent in tax. In addition, if a purchase is officially registered, the 4 percent in tax is refunded. At the same time, because it is unusual for one company to win many tenders, entrepreneurs prefer to establish several companies to spread them out.

 

FOLLOWING THE ADDRESS TRAIL

At least 49 companies owned by Fakhraddin Mammadov were registered in 2012-2016 at 187A Jorat, a settlement three kilometers from Baku on the shore of the Caspian Sea in the Sumgayit administrative region, where he is registered himself as a voter.

This is a narrow street in Jorat. There are two houses in the courtyard, which is surrounded by a three-meter-high stone fence. We knocked on the door, which was open, and a dog barked in response. An upstairs window opened and an elderly woman peeked out.

Meydan: We need Mr. Fakhraddin. As far as we know, he lives here.
Woman: No, he does not live here.
Meydan: How can we find him?
Woman: I do not know.
Meydan: Ms. Fatma, is that you? Mr. Fakhraddin is your son, isn’t he? Do you happen to know where we can find him?
Woman: He’s not my son. He’s a relative…

Four visits to this Jorat address where Mammadov and several of his companies are registered failed to turn up the business owner. A man aged 35 to 40, grey-haired, about 1.70-1.75 tall, opened the door on the final visit and introduced himself as Javanshir Mammadov, Fakhraddin Mammadov’s brother, and confirmed that Fatma Mammadova is their mother.

Meydan: Hello. We need to talk to Mr. Fakhraddin.
JM: Why?
Meydan: He is the legal representative of about 49 companies. We have questions about that.
JM: I have nothing to do with that.
Meydan: How can we find him?
JM: Leave your phone number, he will be in touch.

The expected call never came.

The house where Fakhraddin Mammadov is registered
The house where Fakhraddin Mammadov is registered.

Three other companies owned by Fakhraddin Mammadov are registered at another address, which turns out to be the house of a friend, at 39/16 2nd micro district, unit number 59, in Sumgayit.

Rena Mahmudova, the owner of the apartment shown as the legal address of three of the companies owned by Fakhraddin Mammadov, says that her ex-husband, Zaur, was friends with Mammadov and therefore allowed the businessman to use their address. Ms. Rana herself learned that the address was being used for business purposes when letters from the Tax Ministry started arriving at her place in April-May 2016, seeking debt payment. When we asked for those letters, she said that she had thrown them away.

Another company listing Mammadov as owner is Tac LTD, which is registered in 6th micro district in Sumgayit. This is the address of a shopping site that belongs to the company Iter Star International. Tac LTD, which was registered on 25 October 2002, won a tender announced by the Gubadli District Culture and Tourism Department of the Ministry of Culture and Tourism in 2012. According to the terms of the tender, the company was to supply the department with 30,000 manats ($17,700) worth of stationery.

No public information could be found on offices or phone numbers while we searched online for any of the companies, of which Mammadov is the legal representative.

 

TENDERS COVER WIDE AREA

KEY FACTS: The State Procurement Agency’s database contains information about more than 180 tender orders won by Fakhraddin Mammadov’s 49 companies. The orders that he received in 2012-2016 had a total value of 6,056,520 manats ($3.57 million).

Of that amount, he received 1,543,984 manats ($910,000) from the Gadabay, Guba, and Ismayilli regions and 4,512,536 manats ($2.66 million) worth of tender orders were from Sumgayit-based state agencies.

Mammadov is one of the main winners of tender orders from various agencies in Zangilan. (Zangilan is a region in southwestern Azerbaijan occupied by Armenian forces in 1993. After the occupation of Nagorno-Karabakh and seven neighboring regions, the state agencies of those regions, including executive authorities, schools, and clinics, continued to function in other regions of the country, where the IDPs were settled.) For instance, Mammadov won about a quarter of the tender orders in the Zangilan region in the past four years, for a total of 3,030,000 manats ($1.8 million), including for food, equipment, furniture, office supplies, renovation work, etc. Of that amount, 157,953 manats ($93,000) were received from the Zangilan Hospital, which serves IDPs from Zangilan at three different locations.

The Zangilan District Central Hospital is located in the building that houses the Masazir Clinic
The Zangilan District Central Hospital is located in the building that houses the Masazir Clinic.

Zangilan Central Hospital’s main branch occupies three rooms in a polyclinic in the Masazir settlement on the Absheron peninsula. The chief doctor, Tariyel Salmanov, uses one of the rooms as an office with his desk, a stretcher, a TV, and several small cabinets. In the second room, containing a bed, several tables, and a refrigerator, patients are received. In the third room five or six young women were in the third room, each with a desk and a computer.

Confirming our first impression, Dr. Salmanov told Meydan TV that there is no medical equipment here at the main site of the Zangilan Central Hospital. According to him, the hospital simply does not have the budget for equipment although, between 2012 and 2016, the Health Ministry handed out approximately 229 million manats ($135 million) in tenders for furniture, machinery, and equipment for the hospital, including those won by Mammadov’s companies.

First-aid facility in the IDP settlement in Masazir
First-aid facility in the IDP settlement in Masazir.

The second branch is 10 minutes away – a four-room building in the yard of a dormitory for Zangilan IDPs. It is equipped only with furniture.

The third branch is in the New Zangilan settlement built for IDPs in the Sabirabad region. The small town was built in 2010 and currently 150 families reside there. The hospital serves the IDP families as well as residents of the nearby village of Rustamli. A one-story building with four rooms, the hospital is furnished with three beds, one refrigerator, one TV, and one desktop computer.

View of the first-aid facility in New Zangilan in Sabirabad
View of the first-aid facility in New Zangilan in Sabirabad.
View of the first-aid facility in New Zangilan
View of the first-aid facility in New Zangilan.

Fiday Abbasov, the physician at the facility, says he has held his position for about five years now. According to Dr. Abbasov, the The equipment that we see at the first-aid facility are items that were purchased and placed here when the facility was built and put into operation, except the television and the computer, which the hospital received two years ago.

But the State Procurement Committee’s database does not provide detailed information about specific items acquired through tenders, so it is impossible to say which supplies or equipment Mammadov’s companies were supposed to provide to the Zangilan hospital.

Fiday Abbasov, physician at the first-aid room in the village of New Zangilan
Fiday Abbasov, physician at the first-aid room in the village of New Zangilan.

 

TRANSPARENCY MISSING IN GOVERNMENT TENDERS IN AZERBAIJAN

In Azerbaijan, little is known or can be discovered about government tenders, the businesses that win them, or even what specifically the contracts cover.

The main problem is that the law “On State Procurement” does not set strict requirements for a company participating in a tender, according to Toghrul Valiyev, who is an economic analyst of the non-oil sector in Azerbaijan.

“For example, in many countries, in order to participate in state tenders, a company must meet certain operational requirements,“ he said. “But by law this is the responsibility of the entity organizing the tender.” No outside agency evaluates the companies which are granted tenders.

There is also a lack of transparency in the vague wording of tenders in Azerbaijan. “Tender announcements and reports indicate only ‘renovation work’ or ‘office supplies,’ Valiyev said. “In neighboring Russia, for example, [items in tenders] must be clearly specified – how many vehicles, how much construction material, etc.”

Another problem, according to Valiyev, is that laws on competition and monopolies are not enforced in Azerbaijan. According to the law “On Anti-Monopoly Activity”, if a company controls more than 35 percent of the market in a certain sector, it is considered a monopoly. However, the law does not specify how to calculate that share or what indicators should be used as a basis (although it does specify indicators such as entry into the market, volume of assets and sales, etc). Legislators have been discussing a proposed competition code for 10 years now, but even if it is eventually adopted, drafts suffer from the same problems as existing legislation, and experts believe that it will not remedy the situation.

This news was originally published at Meydan TV

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Corruption

UK LAW FIRM FALSIFIED DOCUMENTS TO OPEN OFFSHORE ACCOUNTS FOR ARZU AND LEYLA ALIYEVA

The Azeri Times

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Originally published by the Guardian

A firm of London solicitors that set up an offshore company for the daughters of Azerbaijan’s president has been referred to a disciplinary tribunal after being accused of multiple failings. They include not detecting “a significant risk of money-laundering”.

Leyla and Arzu Aliyeva – the daughters of President Ilham Aliyev – set up a secret offshore company to help manage their multimillion-pound property portfolio in Britain. The firm, Exaltation Limited, was based in the tax haven of the British Virgin Islands.

Details of the offshore company emerged in April 2016 as part of a leak of records from the Panamanian law firm Mossack Fonseca, known as the Panama Papers.

The London law firm that set up Exaltation, Child & Child, claimed – wrongly – that the two women had no political connections. The business interests and property portfolios of the Aliyev family have been the subject of extensive reporting, amid allegations of massive corruption.

In a notice published on Monday, the Solicitors Regulation Authority (SRA) said it had referred Child & Child’s senior partner, Khalid Sharif, to the solicitors disciplinary tribunal.

The allegations are subject to a hearing due later this year at which Sharif is entitled to present his own evidence. They are as yet unproven. If found guilty, he could be struck off.

The SRA said that there was a case to answer by Sharif in respect of allegations that he failed to ascertain whether the two sisters were “reportedly linked with the proceeds of crime” or were “politically exposed persons”.

This classification automatically triggers enhanced banking and due diligence checks.

The case against Sharif also includes allegations that he failed to take into consideration “a higher risk of money laundering” when he set up the offshore company using Mossack Fonseca’s Jersey branch. It further says he did not check that the Panamanian firm was properly authorised to give instructions on behalf of the president’s daughters.

This is the first time the SRA has taken action against a firm implicated in the Panama Papers, a leak of 11.5m documents obtained by Germany’s Süddeutsche Zeitung and shared with the International Consortium of Investigative Journalists, the Guardian and other media.

The SRA said it was still investigating Child & Child and was working closely with other agencies “to tackle concerns raised by the papers”. It added: “Although in many instances, we found that the law firms and lawyers mentioned are not based in this country or regulated by us, we still have a number of ongoing investigations.”

“The credibility of law firms makes them an obvious target for criminals wishing to launder money. Tackling money laundering is crucial not only to maintain trust in the profession, but also for the good of society.”

Sharif did not reply to an email requesting comment. According to his profile on the firm’s website, he has “acted on the purchase and sale of some of London’s most prestigious properties for both domestic and international clients”. His skills include advising on how to set up and administer “offshore entities”.

Exaltation Limited was set up in 2015. The notice also refers to an earlier gift made between November 2013 and March 2014 which Sharif allegedly failed to monitor. The transaction had “a significant risk that money laundering was taking place”. There were no further details.

President Aliyev has ruled Azerbaijan since 2003. During this time, his daughters have reportedly amassed vast personal business empires. They own luxury apartments in the UAE, as well as interests in telecommunications and gold mining.

Leyla Aliyeva’s assets include a £17m mansion on Hampstead Lane in north London, next door to Kenwood House and overlooking Hampstead Heath. She is an artist and socialite, with friends said to include Prince Andrew, Lord Mandelson and Elisabeth Murdoch.

The Panama papers showed that she set up a new offshore firm at the time of her 2015 divorce from Emin Agalarov, an ethnic Azerbaijani businessman and pop star. The couple lived in Moscow and also reportedly owned a luxury penthouse overlooking Hyde Park. Neither daughter has commented.

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