BOOK REVIEW: Sweden’s dark secret exposed in book on TeliaSonera

BOOK REVIEW: Sweden’s dark secret exposed in book on TeliaSonera
By Nick Kochan November 12, 2015

The Swedish government turned a blind eye to endemic corruption at the heart of the country’s premier telecommunications company, allowing its management to engage in flagrant corruption in Central Asia. That is the core claim of “Telia: Alliansregeringen och korruptionen” (Telia: The government and corruption), a book on the recent history of TeliaSonera, whose bribes to Gulnara Karimova, daughter of Uzbekistan’s authoritarian president, have become the subject of lurid headlines and numerous investigations, including those in Sweden, the US and Switzerland.

Knowledge of the corrupt practices at the heart of management was widespread, but such was the government’s conviction the company would only break into the market if it played by local rules, that the facts were suppressed. It is also no accident that TeliaSonera is 37% government owned, and a stalwart of the Swedish commercial-political establishment. Despite a number of press exposes of a $300mn bribe paid to Takilant, a company fronting for Gulnara’s own business, Sweden’s politicians and law enforcement agencies remained silent and did nothing.

Sweden’s attitude to corruption in its midst, in this sense, was little different to that in Uzbekistan, where Gulnara lived the high life on the proceeds of bribes reputedly totalling as much as $1bn, paid by international telecom companies including Russia’s VimpelCom and TeliaSonera. VimpelCom is also being pursued by international law enforcement agencies and recently set aside $900mn against a settlement with the US Department of Justice. TeliaSonera has yet to come clean on its financial obligations to the authorities.

See no evil...

The expose of the corrupt Swedish management culture as well as of Uzbekistan’s compromised ruling class has been conducted by Patricia Hedelius, a Swedish financial journalist. She has interviewed some 50 managers of the company and Swedish politicians, as well as bankers and consultants from Uzbekistan, Belarus and Kazakhstan. She concludes that, “The Swedish government was willing and able to close their eyes to what they knew was corrupt business.”

The book concludes that it took widespread international pressure from the US to push the Swedish authorities into taking action against the company. This coincided with a deepening flow of information from Uzbekistan as the relationship between Gulnara and her father, Islam Karimov, soured. Her rampant excesses, not only in terms of the size of bribes but also in terms of a decadent lifestyle – she was a pop star, fashion model, socialite with a dubious and increasingly salacious private life – prompted the president’s wife to persuade her husband to break off relations with the errant daughter. Gulnara was put under house arrest (where still languishes to this day), stripped of much of her wealth and humiliated. Banks handling her money further turned the screws on Karimova, so when a friend sought to retrieve some of her money from a Swiss private bank they were turned away. The authorities had apparently instructed the bank to freeze her assets. Longer-term efforts to recoup her wealth will require international co-operation.

A powerful television documentary piled the pressure on Sweden’s government to act on the corruption at the heart of TeliaSonera, when it reported what had been widely known among the Swedish establishment for a long time. TeliaSonera’s failure to do the most basic due diligence on its business partners, namely the owners of Takilant, was highlighted. Had this been done, they would have found the dark forces of Uzbek corruption pulling the strings.

Once the heat under the management became too uncomfortable to bear, the government removed the CEO at the time, and is belatedly investigating his claims that he knew nothing about his company’s shameful lapses in a particularly profitable region. TeliaSonera has also since announced it is selling its interests in Central Asia, no doubt in the hope of drawing a line under the episode. Hedelius sees a new sense of ethical responsibility in its current management, and is prepared to allow that the culture pertaining in 2005, when the company pushed into Central Asia, was very different to today’s.

Looking away

Almost as shameful as the government’s tardiness in acting against corruption in its midst is the lack of action by its law enforcement in tackling the case. This has greatly exercised US authorities, who have threatened to start their own criminal investigation if Sweden continues to drag its feet.

One possible hindrance is the inadequate anti-corruption law in force in 2005, when the dubious activity began. Hedelius explains that Swedish companies were not prohibited from making such payments to private individuals who held no official position for business purposes. Such an outmoded law is likely to protect many who should now be facing prosecution. The law in Sweden has since of course been brought up to date with modern standards of governance, which demonstrates the sea-change in attitude and practice toward corruption that has occurred over the last decade.

What is clear about this hard-hitting book, which has yet to be translated from Swedish, is that it has hit some of the right targets. Hedelius knows this because TeliaSonera has withdrawn its advertising from Svenska Dagbladet, the newspaper where she works. “TeliaSonera stopped marketing through my paper. If I was an Uzbek journalist, I would have expected that. But I work in Sweden and this is a partly state-owned Swedish company. It is outrageous. Transparency should be really important for our democracy and for a state-owned company,” Hedelius says.

The paper has said it is standing by her, and indeed is serialising the book as an important commentary on Swedish corporate culture. Stieg Larsson’s fictional character of Mikael Blomkvist, the investigative journalist and publisher of Millennium magazine, would be proud.

“Telia: Alliansregeringen och korruptionen” (Telia: The government and corruption), Patricia Hedelius, published by Massolit Förlag (2015)