Kurdistan’s powerful #Barzani family accused of using London real estate to corrupt Iraq regulators
While 2019 marked the ten-year anniversary of the withdrawal of most British troops from Iraq, court filings in the United States have shed new light on how the UK, specifically London’s notoriously opaque real estate market, continues to play a role in the governance issues roiling Iraq to this day, writes Louis Auge.
A request for discovery filed last month in the US District Court in the state of Pennsylvania, targeting the law firm Dechert LLP, has laid out in detail an alleged scheme to use pricey London homes to bribe Iraqi telecommunications regulators and effectively rob some of the country’s most prominent foreign investors of hundreds of millions of dollars.
Allegedly engineered by Raymond Rahmeh, one of Lebanon’s most influential businessmen, for the benefit of Sirwan Barzani, a scion of Iraqi Kurdistan’s most powerful family, the case demonstrates how £2.3 million in real estate was reportedly enough to help expropriate over $800 million invested in Iraq by France’s largest telecom firm and a major Kuwaiti logistics company.
While the case is playing out in jurisdictions from Dubai to Pennsylvania, its most serious implications are in Iraq itself, where popular frustration with entrenched corruption has thrown the future of the political order the UK helped create into doubt.
Joint misadventure
The proceedings in question revolve around the ownership of Iraqi telecoms carrier Korek, launched in 2000 as a regional carrier with operations limited to Iraqi Kurdistan. In 2007, Korek obtained a nationwide mobile telecoms license from Iraq’s Communications and Media Commission (CMC). That license, however, carried with it a $1.25 billion price tag, as well as a provision requiring CMC approval for any ownership changes involving 10% or more of the company’s shares.
To pay this licensing fee, Korek turned to outside investors, namely Kuwaiti logistics firm Agility Public Warehousing and its partner, French telecoms giant Orange. Together, and with the CMC’s approval, Agility and Orange invested over $800 million in Korek via a joint venture, Iraq Telecom, in 2011.
In turn, Iraq Telecom received a 44% stake in Korek, with a “call option” that would allow the venture to obtain a majority stake of 51% in the company in 2014. Just as the joint venture sought to exercise that call option, however, the court filings detail how the CMC’s attitude towards the foreign investors ‘suddenly and inexplicably’ turned sour.
In June 2014, the regulator informed Korek it no longer considered the company Iraqi, ordering it to pay over $43 million in extra regulatory fees on account of its ‘foreign ownership.’ Less than one month later, the CMC declared that Iraq Telecom’s investment in the Kurdish operator was ‘void, null and invalid’ and ordered that all shares be returned to the company’s original shareholders, chief among them Kurdish businessman and Peshmerga commander Sirwan Barzani.
Critically, while the shares were returned to Barzani and fellow shareholders Jawshin Hassan Jawshin Barazany and Jiqsy Hamo Mustafa, the $800 million-plus invested by Agility and Orange were not. The foreign investors have taken the dispute to international arbitration, with cases before the Dubai International Financial Centre (DIFC) and the International Chamber of Commerce (ICC).
From Barn Hill to Banstead
Subsequent investigations have allegedly revealed the explanation for this inexplicable turn of events. According to the ex parte application for discovery filed in Pennsylvania, two business associates of Raymond Rahmeh, the supposedly independent member of Korek’s supervisory committee who in fact has a close business relationship with Sirwan Barzani, purchased two homes in London that were then used by the very CMC members helping to decide Korek’s fate.
The first of those two homes, located at Barn Hill in Wembley, was reportedly purchased wholly in cash by Raymond Rahmeh associate Pierre Youssef for £830,000 in September 2014. The second home, on Higher Drive in Banstead, was also purchased wholly in cash by Mansour Succar, another associate of Raymond Rahmeh, for £1.5m in December 2016.
Neither Mr. Youssef nor Mr. Succar lived in these homes. Instead, the property in Wembley seems to have been occupied for nearly three years by Dr. Ali Nasser al-Khwildi, the current director general of the CMC, and his family. The Banstead property was occupied by former CMC director general Dr. Safa Aldin Rabee and his family until this past September, when a complaint filed by Iraq Telecom revealed their connection to the address.
These property acquisitions also explain Dechert and Pennsylvania’s connection to the alleged bribery. The filings indicate Dechert, which is headquartered in Philadelphia and has previously worked with both Sirwan Barzani and Raymond Rahmeh on matters related to Korek, represented both Mr. Youssef and Mr. Succar in these transactions and used the same client reference number for both sales, demonstrating that the same individual or organization was behind them.
According to the court documents, the use of these properties by CMC leaders constitutes a corrupt ‘quid pro quo’ in which the regulators were rewarded for expropriating Orange and Agility with London real estate. The request for discovery seeks to produce additional evidence to that end.
Policy implications in Britain and Baghdad
The alleged bribery scheme, partially uncovered by the Financial Times last year, casts a harsh spotlight on the British government’s efforts to stop the use of the UK as an avenue for corruption. In addition to the 2010 Bribery Act, the 2017 Criminal Finances Act provides for unexplained wealth orders (UWOs) designed to combat corrupt real estate transactions. These tools, however, remain new and largely tested, with the National Crime Agency’s UWOs targeting a foreign official’s homes this past May representing only thesecond time that they have been used.
In Iraq itself, meanwhile, the idea of regulators being corrupted by powerful business figures will hardly come as a surprise to the demonstrators who have turned out in force since October to demand the destitution of the country’s post-invasion political order. Corruption is a key driving factor behind the protest movement, which forced Iraqi premier Adel Abdel-Mehdi to tender his resignation at the start of December. Given the Iraqi state’s failure to address corruption at home, legal actions such as those targeting Korek’s shareholders could help bring at least some measure of transparency to one of the world’s most corrupt countries.
Iraq-businessnews.com
Baghdad – Mawazine News, Saleh Muhammad al-Iraqi, minister of the Sadrist movement leader Muqtada al-Sadr, who is close to him, confirmed that the demonstrations that started today, Tuesday, in front of the American embassy in the Green Zone, are intended to end the people’s reform demonstrations.
Economy News – Baghdad: Gold prices rose to the highest level in more than two months, Monday, amid weak dealings at the end of the year while the US dollar went down while American military strikes in the Middle East pushed investors towards the metal, which is a safe haven.
Baghdad / … Parliament Speaker Muhammad Al-Halbousi condemned, today, Monday, the attack on pieces of the popular crowd, which left a number of martyrs and wounded, considering this targeting a violation of the sovereignty of Iraq.
The Central Bank of Iraq announced, on Sunday, a large increase in its sales in the currency auction to reach $ 257 million.