{"id":2479,"date":"2016-04-04T14:55:21","date_gmt":"2016-04-04T14:55:21","guid":{"rendered":"https:\/\/covcasbulletin.info\/?p=2479"},"modified":"2017-08-11T15:15:31","modified_gmt":"2017-08-11T15:15:31","slug":"how-family-that-runs-azerbaijan-built-an-empire-of-hidden-wealth","status":"publish","type":"post","link":"https:\/\/covcasbulletin.info\/?p=2479","title":{"rendered":"How Family that Runs Azerbaijan Built an Empire of Hidden Wealth"},"content":{"rendered":"<p style=\"text-align: justify;\">By WILL FITZGIBBON, MIRANDA PATRUCIC and MARCOS GARCIA REY<br \/>\n<em>The Panama Papers, The International Consortium of Investigative Journalists (ICIJ)<\/em><\/p>\n<p style=\"text-align: justify;\"><strong>Documents peel away three layers of secret ownership in a conglomerate and lead to gold mines and overseas real estate<\/strong><\/p>\n<p style=\"text-align: justify;\">In this story<\/p>\n<ul>\n<li>President Aliyev\u2019s family named in a proposal to reap benefits from a complex offshore structure to hold interests in a major conglomerate<\/li>\n<li>Children and sister of Azerbaijan\u2019s President revealed in connection with previously unknown offshore companies<\/li>\n<li>New revelations that President Aliyev\u2019s children controlled a majority interest in a controversial gold mine project<\/li>\n<\/ul>\n<p style=\"text-align: justify;\">On October 31, 2003, Ilham Aliyev, the newly elected president of Azerbaijan, stood behind a podium and a profusion of white flowers to address presidents, prime ministers and 2,000 other guests assembled at the Respublika Palace. First touching the constitution and then the Koran, Aliyev swore to serve his people. That night, fireworks lit up the sky of the Azeri capital, Baku.<\/p>\n<p style=\"text-align: justify;\">Aliyev\u2019s election to lead this energy-rich former Soviet republic bordering both Russia and Iran had been all but guaranteed. His ailing father, Heydar, an ex-KGB officer, had served in the same role for the previous 10 years. Election monitors <a href=\"https:\/\/www.hrw.org\/legacy\/backgrounder\/eca\/azerbaijan\/azerbaijan-elections2003.pdf\">reported<\/a> that police had beaten and detained political opponents, in line with the country\u2019s reputation for repression.<\/p>\n<p style=\"text-align: justify;\">Becoming president wasn\u2019t Aliyev\u2019s only ascension during 2003. Using a <a href=\"https:\/\/www.documentcloud.org\/documents\/2782793-20160404-azerbaijan-01.html\">network of secretive companies<\/a> in offshore tax havens, his family, advisers and allies set about acquiring expensive overseas homes and positions in the country\u2019s valuable industries and natural resources, including the family\u2019s majority control of a major gold mine that has been unknown until now.<\/p>\n<p style=\"text-align: justify;\">The new details of the Aliyev offshore empire emerge from secret records obtained by the International Consortium of Investigative Journalists, the German newspaper S\u00fcddeutsche Zeitung and other media partners from Mossack Fonseca, a Panama- headquartered law firm that helps to set up hard-to-trace corporate structures for clients. The more than 11 million documents reviewed by ICIJ and its partners \u2013 emails, bank accounts and client records \u2013 represent the inner workings of Mossack Fonseca for nearly 40 years, from 1977 to December 2015.<\/p>\n<p style=\"text-align: justify;\"><strong>Family alliances<\/strong><\/p>\n<p style=\"text-align: justify;\">The records show that, in mid-2003, months before the October presidential election, Fazil Mammadov, Azerbaijan\u2019s tax minister, began to create AtaHolding, which has since become one of the country\u2019s biggest conglomerates. Mammadov, influential in his own right, subsequently invited President Aliyev\u2019s family to join him, cementing a potentially potent and advantageous business and political partnership.<\/p>\n<figure id=\"attachment_2480\" aria-describedby=\"caption-attachment-2480\" style=\"width: 454px\" class=\"wp-caption alignleft\"><a href=\"https:\/\/covcasbulletin-info.hhd.am\/wp-content\/uploads\/2017\/08\/Aliyev-family.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-2480\" src=\"https:\/\/covcasbulletin-info.hhd.am\/wp-content\/uploads\/2017\/08\/Aliyev-family-1024x591.jpg\" alt=\"\" width=\"454\" height=\"262\" srcset=\"https:\/\/covcasbulletin.info\/wp-content\/uploads\/2017\/08\/Aliyev-family-1024x591.jpg 1024w, https:\/\/covcasbulletin.info\/wp-content\/uploads\/2017\/08\/Aliyev-family-300x173.jpg 300w, https:\/\/covcasbulletin.info\/wp-content\/uploads\/2017\/08\/Aliyev-family-768x443.jpg 768w, https:\/\/covcasbulletin.info\/wp-content\/uploads\/2017\/08\/Aliyev-family.jpg 1400w\" sizes=\"auto, (max-width: 454px) 100vw, 454px\" \/><\/a><figcaption id=\"caption-attachment-2480\" class=\"wp-caption-text\">The Aliyevs<\/figcaption><\/figure>\n<p style=\"text-align: justify;\">AtaHolding is a corporation that has significant interests in Azerbaijan\u2019s banking, telecommunications, construction, mining, oil and gas sectors. Its most recent corporate filing in 2014 shows it held over $490 million in assets.<\/p>\n<p style=\"text-align: justify;\">The leaked files show that the tax minister created a company in Panama through Mossack Fonseca named FM Management Holding Group S.A. Stand-in directors \u2014 straw men supplied by Mossack Fonseca \u2014 concealed the fact that Mammadov was involved.<\/p>\n<p style=\"text-align: justify;\">Mammadov then created a second offshore entity \u2013 this time a foundation \u2013 called UF Universe Foundation. Panama foundations are subject to strict confidentiality laws. Anyone who discloses information about them can be fined or imprisoned.<\/p>\n<p style=\"text-align: justify;\">The files show that two years later, in 2005, <a href=\"http:\/\/www.theguardian.com\/world\/2010\/dec\/12\/wikileaks-cables-azerbaijan-first-lady\">Aliyev\u2019s wife<\/a>, the fashion-conscious, collagen-infused first lady and member of Parliament, Mehriban Aliyeva, became one of two managers of the UF Universe Foundation, alongside the tax minister, Mammadov.<\/p>\n<p style=\"text-align: justify;\">In attachments to a \u201cHigh Importance\u201d email sent to Mossack Fonseca in February 2005 by a lawyer representing the Azeris, documents proposed that then six-year-old Heydar Aliyev, the president\u2019s son who is known in the files as \u201cA1,\u201d be made the beneficiary of 20 percent of the foundation\u2019s proceeds. The plan also proposed that the president\u2019s two daughters, Leyla, then 19 and Arzu, then 17, would hold 15 percent each. Mammadov\u2019s son held 30 percent while Ashraf Kamilov, a former tax ministry official, and other former tax officials held smaller stakes. So, too, did AtaHolding\u2019s chairman, Ahmet Erentok.<\/p>\n<p style=\"text-align: justify;\">So the secrecy had three layers: 1) The UF Universe Foundation, which controlled 2) FM Management, the Panama company set up by Mammadov, which owned shares in 3) a United Kingdom-based company named Financial Management Holding Limited. According to a flowchart shared with Mossack Fonseca in 2005, the UK company held 51 percent of shares in AtaHolding Azerbaijan.<\/p>\n<p style=\"text-align: justify;\">While there is no doubt that these secret companies existed and paid hundreds of dollars to Mossack Fonseca in administrative fees, it is unclear whether or not the proposed structure to benefit President Aliyev\u2019s teenage daughters and six-year-old son and other prominent Azeris was ever adopted.<\/p>\n<p style=\"text-align: justify;\">UF Universe Foundation was closed in January 2007. Then, in February 2014, months after President Aliyev was sworn in for his third term, a London-based lawyer sought to reactivate the Foundation and FM Management Holding Group. Mossack Fonseca was happy to oblige and issued a $9,000 invoice in exchange for reactivating the company.<\/p>\n<p style=\"text-align: justify;\">Most recently, majority ownership \u2014 51 percent \u2014 of AtaHoldings was held by Hughson Management Inc., according to AtaHolding\u2019s online annual report. A 2010 letter signed by Mossack Fonseca listed Aliyev\u2019s daughters, Arzu and Leyla, and Swiss lawyer Olivier Mestelan as directors.<\/p>\n<p style=\"text-align: justify;\">ICIJ sought comments from all individuals named in this article and received no responses. In response to previous reports about the family\u2019s holdings, the President\u2019s spokesman said the daughters \u201care grown up and have the right to do business.\u201d<\/p>\n<p style=\"text-align: justify;\"><strong>Friendship with U.S.<\/strong><\/p>\n<p style=\"text-align: justify;\">Despite global criticism of Azerbaijan\u2019s mounting authoritarianism, the Aliyev regime has been a friend of successive U.S. administrations. The United States has spent hundreds of millions of dollars on the Aliyevs\u2019 Azerbaijan, including millions for military and security training. Azerbaijan\u2019s government is one of the <a href=\"http:\/\/foreignpolicy.com\/2015\/06\/11\/how-azerbaijan-and-its-lobbyists-spin-congress\/\">largest buyers of influence in Washington D.C.<\/a> and, together with its lobbyists, spent at least $4 million in 2014 alone burnishing the country\u2019s image. The country has taken members of Congress on all-expenses-paid visits to Azerbaijan, lavishing the lawmakers with silk scarves, crystal tea sets and rugs.<\/p>\n<p style=\"text-align: justify;\">Azerbaijan\u2019s importance in energy, as a supply route to American troops in Afghanistan and its potential role in the fight against ISIS makes the United States a reluctant critic, said former U.S. ambassador to Azerbaijan Richard D. Kauzlarich, now an adjunct professor at George Mason University.<\/p>\n<p style=\"text-align: justify;\">\u201cBeing where it is \u2013 bordered by Russia and Iran in a very unstable geopolitical environment \u2013 is a factor that makes it among the more unique countries in the region,\u201d said Kauzlarich, who was U.S. ambassador to Azerbaijan from 1994-1997.<\/p>\n<p style=\"text-align: justify;\">Its levels of corruption and elite control of the economy make it stand out in a part of the world where these things aren\u2019t unusual, he added.<\/p>\n<p style=\"text-align: justify;\">\u201cThe franchising out of economic activity to families and clans that are important for maintaining the current regime in power is not an unusual pattern,\u201d said Kauzlarich. \u201cHowever, it certainly has been perfected in Azerbaijan.\u201d<\/p>\n<p style=\"text-align: justify;\"><strong>Bigger offshore network revealed<\/strong><\/p>\n<p style=\"text-align: justify;\">The fact that Aliyev\u2019s family can be linked to offshore companies is not new. A <a href=\"http:\/\/www.icij.org\/offshore\/offshore-companies-provide-link-between-corporate-mogul-and-azerbaijans-president#_ga=2.100897412.487706809.1502462472-1655654310.1502462472\">2013 investigation by ICIJ<\/a> showed that Aliyev, his wife and his daughters owned or were otherwise connected to offshore companies. Now Mossack Fonseca\u2019s files greatly expand on what is known and disclose new companies belonging to the President\u2019s two daughters, Leyla and Arzu.<\/p>\n<p style=\"text-align: justify;\">The documents show Leyla and Arzu Aliyeva controlled two previously hidden British Virgin Islands-incorporated firms \u2014 Kingsview Developments Limited and Exaltation Limited. It is unclear from the files the purpose of the first company, but the second was incorporated in January 2015 to own a British property worth more than $1 million.<\/p>\n<p style=\"text-align: justify;\">President Aliyev\u2019s eldest sister, Sevil, is also shown in the files as the owner of another British Virgin Islands company, Setanon Properties Inc. Again, it is unclear from the files what the company was used for. In the Mossack Fonseca documents Sevil Aliyeva, a composer, listed her address in West London in a neighborhood where average home prices touch nearly $9 million.<\/p>\n<p style=\"text-align: justify;\"><strong>Sitting on a gold mine<\/strong><\/p>\n<p style=\"text-align: justify;\">Mossack Fonseca\u2019s records reveal that the first family secured secret control of a gold mine, dwarfing a smaller stake they\u2019d been known to hold.<\/p>\n<p style=\"text-align: justify;\">In 2006, Azerbaijan\u2019s government granted mining leases in the country\u2019s west to a consortium of companies that established the Azerbaijan International Mineral Resources Operating Company Ltd. Under the agreement, the consortium would keep 70 percent of the mine\u2019s profit, and the Azeri government received the remaining 30 percent, according to a 30-year production agreement.<\/p>\n<p style=\"text-align: justify;\">At the time, opposition politicians criticized the deal\u2019s lack of transparency.<\/p>\n<p style=\"text-align: justify;\">In 2012, Azeri journalists working with the Organized Crime and Corruption Reporting Project, a non-profit investigative journalism group focused on Eastern Europe and Central Asia, <a href=\"https:\/\/www.occrp.org\/index.php\/en\/ccwatch\/cc-watch-indepth\/1495-azerbaijans-president-awarded-family-stake-in-gold-fields\">reported<\/a> that one of the four consortium members, Globex International LLP, was owned, in turn, by three Panamanian companies controlled by President Aliyev\u2019s daughters and Mestelan, a Swiss businessman and family friend.<\/p>\n<p style=\"text-align: justify;\">One of the <a href=\"https:\/\/www.occrp.org\/en\">OCCRP<\/a> reporters was Azeri investigative journalist <a href=\"https:\/\/www.icij.org\/blog\/2015\/09\/icij-condemns-conviction-member-khadija-ismayilova#_ga=2.141711799.487706809.1502462472-1655654310.1502462472\">Khadija Ismayilova<\/a>, also a member of ICIJ. In 2015, Azeri authorities imprisoned Ismayilova in what is widely believed to have been retaliation for her expos\u00e9 of government corruption. Authorities charged Ismayilova with counts of embezzlement, illegal business, tax evasion, and abuse of power and inciting a man to commit suicide. Her sentence: 7\u00bd years.<\/p>\n<p style=\"text-align: justify;\">\u201cSorting out AIMROC\u2019s structure is a daunting task,\u201d Ismayilova wrote in 2012, connecting the consortium\u2019s operating company with an opaque \u201cPanamanian trail\u201d that linked the Aliyev family with the mining consortium.<\/p>\n<p style=\"text-align: justify;\">Mossack Fonseca\u2019s files reveal the leading member of the consortium, Londex Resources S.A., which was incorporated in Panama in 2005 and held 45 percent of the consortium\u2019s stake. The files show that, in April 2008, the same <a href=\"https:\/\/www.documentcloud.org\/documents\/2782794-20160404-azerbaijan-02.html\">three Panamanian companies<\/a> owned by President Aliyev\u2019s daughters and Mestelan, who shared control of Globex International, became Londex\u2019s shareholders. Globex International held 11 percent of the consortium\u2019s share of the goldmine.<\/p>\n<p style=\"text-align: justify;\">The trio\u2019s control of Londex Resources meant that President Aliyev\u2019s family and inner circle controlled a majority stake \u2013 56 percent \u2013 in the consortium.<\/p>\n<p style=\"text-align: justify;\">There are nearly 400 documents about Londex in the Mossack Fonseca files, including invoices, corporate registry records, instructions to open a bank account, and emails marked \u201cURGENT REQUEST!!!\u201d Londex was a valuable client for Mossack Fonseca. The law firm invoiced Londex for thousands of dollars between 2005 and 2014.<\/p>\n<p style=\"text-align: justify;\">In January 2016, mine workers protested before Azerbaijan\u2019s parliament, alleging that Londex had not paid wages since 2014, when the mine was abruptly closed.<\/p>\n<p style=\"text-align: justify;\">One of the protestors, Cumshud Alasgerli, a 46-year-old married father of three who worked as a geologist on the mine, was interviewed by OCCRP.<\/p>\n<p style=\"text-align: justify;\">\u201cMore than 200 workers can\u2019t get their salary,\u201d Alasgerli said. He said he hadn\u2019t received wages owed to him for nearly two years. \u201cAnd the government doesn\u2019t do anything for us.\u201d<\/p>\n<p style=\"text-align: justify;\">Alasgerli said he has taken his employment case against Londex to court. But he is not optimistic. The company and the government alike have so far failed to help.<\/p>\n<p style=\"text-align: justify;\">\u201cThey just don\u2019t want to help us,\u201d Alasgerli said. \u201cThey pretend like they don\u2019t know anything.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"<div class=\"mh-excerpt\"><p>By WILL FITZGIBBON, MIRANDA PATRUCIC and MARCOS GARCIA REY The Panama Papers, The International Consortium of Investigative Journalists (ICIJ) Documents peel away three layers of <a class=\"mh-excerpt-more\" href=\"https:\/\/covcasbulletin.info\/?p=2479\" title=\"How Family that Runs Azerbaijan Built an Empire of Hidden Wealth\">[more &gt;&gt;&gt;]<\/a><\/p>\n<\/div>","protected":false},"author":1,"featured_media":2480,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9,7,3],"tags":[],"class_list":["post-2479","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-region","category-azerbaijan","category-azerbaijan-human-rights"],"_links":{"self":[{"href":"https:\/\/covcasbulletin.info\/index.php?rest_route=\/wp\/v2\/posts\/2479","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/covcasbulletin.info\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/covcasbulletin.info\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/covcasbulletin.info\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/covcasbulletin.info\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2479"}],"version-history":[{"count":1,"href":"https:\/\/covcasbulletin.info\/index.php?rest_route=\/wp\/v2\/posts\/2479\/revisions"}],"predecessor-version":[{"id":2481,"href":"https:\/\/covcasbulletin.info\/index.php?rest_route=\/wp\/v2\/posts\/2479\/revisions\/2481"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/covcasbulletin.info\/index.php?rest_route=\/wp\/v2\/media\/2480"}],"wp:attachment":[{"href":"https:\/\/covcasbulletin.info\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2479"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/covcasbulletin.info\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2479"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/covcasbulletin.info\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2479"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}