Wednesday, August 31, 2016


Interview: Lawyer 'Cannot Rule Out Crime' In TeliaSonera Deals With Uzbekistan

Biorn Riese of the Mannheimer Swartling law firm, which is leading an independent investigation into allegations that the telecom company TeliaSonera paid millions of dollars in bribes to the Uzbek elite.
Biorn Riese of the Mannheimer Swartling law firm, which is leading an independent investigation into allegations that the telecom company TeliaSonera paid millions of dollars in bribes to the Uzbek elite.
A Swedish lawyer investigating how Scandinavian telecommunications giant TeliaSonera secured deals in Uzbekistan says that "we cannot rule out that crime has taken place." Biorn Riese of the business law firm Mannheimer Swartling was speaking to Farruh Yusupov of RFE/RL's Uzbek Service.

RFE/RL: On February 1, Mannheimer Swartling released the findings of its investigation -- commissioned by TeliaSonera -- into whether TeliaSonera's representatives engaged in bribery or money laundering in connection with its activities in Uzbekistan.

This has come at a time when there is also an ongoing Swedish criminal investigation into TeliaSonera's relationship with its local partner, Takilant, and more broadly whether TeliaSonera paid bribes to secure its mobile-phone license in Uzbekistan in 2007.

What were you looking for in your investigation?

Biorn Riese: The basic question is whether you had a crime committed or not, and there we come to the conclusion that, from the information we have in the investigation, we cannot confirm that bribery or money laundering has occurred. So that is one conclusion.

But we also found out that there was not enough information inside the company, inside TeliaSonera, to take the decision to enter into this joint venture; and the criticism is, really, that if one doesn't know who a counterpart is or how a counterparty has obtained the assets that you acquire, then it is difficult to assure that corruption has not occurred at some step along the way. And I think that is the core of it -- it is a lack of information, and that's what the investigation criticizes.

RFE/RL: The Swedish anticorruption prosecutor Guntar Stetler said on February 1 that "there are substantial suspicions, enough in this case, to believe a crime has been committed." Do you agree with that?

Riese: I think that what we have concluded is that from the information we have we cannot establish that there is a crime, but I have also been very careful in saying that we can't rule it out from the information we have. And I think that also is an important part of it, because, although we cannot establish at this stage that bribery or money laundering has occurred, we cannot dismiss the suspicion of crime expressed in either the media or by the Swedish prosecution authority; and I think that is serious enough.

RFE/RL: What were the sources for your investigation?

Riese: We have interviewed about 35 different sources -- it has been people that work and have worked with TeliaSonera -- and we also have had contact with other people around the company. And we have gone through quite substantial written information -- about 40,000 e-mails and a lot of documentation from [TeliaSonera] board meetings, and agreements, and documents like that.

RFE/RL: In your work, did you take account of the investigative report by Sweden's SVT television that aired in December? The report included interviews with two TeliaSonera executives who said that, in exchange for licenses, the company had to give part of its shares in TeliaSonera's Uzbek subsidiary (today called Ucell) to Takilant, a firm controlled by Gulnara Karimova, the eldest daughter of Uzbek President Islam Karimov. They also said that some licenses were bought from a firm that was established just two weeks prior to getting those licenses itself.

Riese: Yes, we obviously took those into consideration, and I think you refer to a company called Teleson, a subsidiary of Takilant and though which most -- if not all -- the licenses and frequency transferring were made. So we have gone through the material with the agreements and how these things were carried out, and we have also looked into the different information from different sources with regard to this. And, in summary, it's a difference between doing a transaction in a corrupt country and doing a corrupt transaction.
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Comment Sorting
by: Frank from: London
February 07, 2013 11:03
"In regard to investigating whether a corruption offence or a violation of the [Swedish] anti-money laundering act has occurred – Riese has not been able to establish that bribery or money laundering has occurred, based on the information available to the investigation."

Such an assessment is like saying “I can’t be sure there isn’t an exception to the rule that nature does nothing in vain, but I haven’t found one yet. More to the point, why would the Uzbek leadership not have been corrupt on this occasion? Mr Riese’s assessment is a joke.

The Swedish prosecuting authorities have a decision to take on whether to prosecute under the anti-money laundering act: if they do nothing, Ucell (TeliaSonera’s Uzbek subsidiary) may be able to continue its operations in Uzbekistan, and Dr. Kazi and Gulnara, herself, will be quick to use this to claim Gulnara is whiter than white in her business dealings: she most certainly is not. If they prosecute, Teliasonera will have to unwind the deal and will probably only end up getting back a small fraction of its original investment (it would be lucky to get back 10% initially and will then face a seven year legal battle to get back, say, another 50%).

Prosecuting also flies in the face of Western policy towards Uzbekistan: which is to draw Uzbekistan away from Russia; encourage it to provide a logistical base to support the establishment of law and order in Afghanistan; and to support anyone committed to preventing an Islamist regime from emerging that might sell uranium to the Iranians.

Uzbekistan is not in the top 30 list of countries most likely to have a coup (list published in the Guardian recently); the efficiency of the security state apparatus and the abominable human rights record make it less likely apparently, although the execrably bad behaviour of the leadership makes it one of the most deserving candidates for one).

In addition to the above reasons not to prosecute, the Swedish authorities now have two face savers: Mannheim Swartling’s assessement that they can’t be sure a corrupt transaction has taken place – it is hard not to laugh – what did they expect to find, given they were paid by Teliasonera?; and a letter of denial from the Uzbek authorities that any corrupt practices have taken place – itself completely worthless, but most Teliasonera shareholders won’t know that).

And what sort of profits will Teliasonera’s Ucell make in Uzbekistan? In a few days, you can be sure Takilant will exercise its option to require Teliasonera to buy out its 6% stake in Ucell at the exorbitant price of 500 million kroner (The regime has a voracious appetite for hard currency). What Swedish and Finnish investors in Teliasonera have to appreciate is everything is stacked against them making any money at all in Uzbekistan. Gulnara efficiently milks any business that acquires an increase in the value of its economic rent (the present value of the surplus profit over that required for a rational investor to bring an asset into production, an amount Governments are always interested in because they can tax it without forcing the business to downsize). Economic rents arise out of scarcity of capacity in relation to demand, a scarcity, in the case of Ucell, that Gulnara can manipulate in the same way she has done on Uzdonrobita (after it did too well bogus fines were imposed on it to bankrupt it and transfer 9 million phone customers, along with the economic rent, to a rival operator. My guess is the Swedish authorities will not prosecute, but the Uzbek leadership will take that as a green light to plunder Ucell of everything it has just like they did on Oxus Gold, Uzdonrobita, Newmont Minining’s Uzbek subsidiary and Metal-Tech’s Uzbek subsidiary. Teliasonera shareholders need to ask their new CEO searching questions about the Uzbek subsidiary and not be lulled by Mr Riese’s findings or to believe Gulnara has kicked her addiction to business theft. Just my view.

by: Muhammet Altun from: Istanbul
February 08, 2013 18:27
I saw the report and very strange for me. Why didnt they interview first CEO Ucell who was Bora Baysal in 2007 and Oguz Memiguven who was CEO Ucell between 2008-2012? It means that audit was not fair. These two guys know all about operations. They were CEO. Am I right?
In Response

by: Frank from: London
February 09, 2013 10:29
I don't know how much they would know about the original licensing arrangements. If my understanding is correct of how Gulnara Karimova operates, they would certainly have been the target of threats and demands to pay Karimova money if the business was doing better than expected. My impression is Mr Riese didn't intend to find any evidence of corruption. The question he should have been asking is why the Uzbek regime would not have been corrupt on this one occasion. That is a much harder question to answer.

For an example of how Karimova apparently behaves when she sees a business she fancies, read this about the seizure of an Uzbek owned restaurant:

Yesterday's failure by the Swedes to announce a prosecution case against Takilant now probably means its seized assets will be unfrozen. The Uzbek regime will now be free to take revenge on Ucell for all the adverse corruption publicity Karimova has received from Swedish TV.

First the Takilant option will be exercised to extract an additional 500m Kroner out of Teliasonera, then new operating licenses will be issued to a rival Gulnara-owned company (helps to reduce the scarcity value of the other licenses in issue), then bogus fines (usually for non payment of taxes or for "illegal" FX transactions) will be imposed on Ucell if it doesn't hand over more hard currency, and then the company will be bankrupted (just like Uzdonrobita), and then the customers will be transferred (along with any associated remaining value in the company) to a rival license holder owned by Gulnara. Meanwhile Ucell will have a 3 year arbitration battle to get an "award", and then 4 years of trying to enforce any order to pay the "award". Gulnara is a skilled fraudster. It is a shame the EC doesn't put a stop to it, and of course it is silly to expect small countries like Switzerland and Sweden to be the deliverers of justice for the Uzbek people. Everyone is stolen from but it is deemed a price worth paying to enforce law and order in Afghanistan, an objective which I think is a fair one (nobody wants another 9/11?), but I think it is time to stop supporting the Karimov kleptocracy: there must be an alternative between having Karimov in power and a having an extreme Islamist Govt. in Uzbekistan that supports the Iranian regime e.g. by selling it uranium. Just my view.

P.S. The cost of the initial complete loss of the Ucell investment shouldn't affect Teliasonera shareholders too much: it might render it a no-growth company for a few years?

P.P.S. Please consider signing the demand to release Said Ashurov:

He is a Tajik metallurgist who worked for the British mining company, Oxus Gold, in Uzbekistan. When Oxus declared Force Majeure (Karimova wanted the mine for herself - well it has 27 million ounces of gold in it - who wouldn't want it when the gold price has soared, and the economic rent on it has thus multiplied many times due to extraction costs remaining relatively constant compared with the gold price) so I think they imprisoned Said on bogus spying charges as a bargaining chip to blunt Oxus's legal claim for the $1bn theft of its mine. It is a State secret what a State secret is in Uzbekistan so it is impossible to defend Said properly: all he did was carry a USB stick with publicly available gold mining data on it through a border crossing on a regular visit to his family in Tajikistan: just taking his work home with him? It is a particularly shocking case of just how callous the regime is. I think Mr Riese has done an effective job easing the way for the Swedish prosecutors to drop the case against Takilant: not what I wanted but I understand why, particularly when Britain is doing nothing either, at least publicly, to clamp down on the excesses of the Karimov regime.

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