US Justice Department applies to seize Gulnara Karimova's assets

By bne IntelliNews July 3, 2015

Jacopo Dettoni in Almaty -


The US government is seeking to seize assets worth almost $300mn from “an international conspiracy to launder corrupt payments” allegedly carried out by Russian telecoms MTS and Vimpelcom and linked to an unnamed member of Uzbek President Islam Karimov’s family that other ongoing legal proceedings identify as Gulnara Karimova, the president’s disgraced eldest daughter.

MTS and Vimpelcom paid as much as $500mn to shell companies “beneficially owned” by a president’s relative holding government roles (“Government Official A”) between 2004 and 2011 “in exchange for, among other things, inducing Government Official A to use his/her influence in the government of Uzbekistan […] to affect or influence acts and decisions of Uzbek government officials […] in order to assist the telecom companies in entering and operating in the Uzbek telecom market, including by influencing government officials at the Uzbek Agency for Communications and Information (UzACI)”, alleges the forfeiture complaint filed by the Asset Forfeiture and Money Laundering section of the Justice Department before a federal court in New York on June 26.

A portion of that money was later invested in financial assets held in custody by the Bank of New York Mellon in accounts registered in Ireland, Belgium and Luxemburg. The US government is now seeking to seize assets worth $285mn held in these accounts – an official request to the court to approve an arrest warrant for the seizure of the assets was filed on July 2.

Big foreign telecom companies operating in Uzbekistan including Vimpelcom and Teliasonera of Sweden are currently under investigation in the US and Europe (Switzerland, the Netherlands and Sweden) on charges of systematically bribing Uzbek government officials to enter and operate in the local market. Specifically, they allegedly transferred illicit funds to shell companies owned by close associates of Gulnara Karimova, who has been repeatedly indicated to be the final beneficiary of the payments. MTS is under investigation in the US.

“As the investigation is ongoing, we can’t really comment on it,” a spokesperson from MTS tells bne IntelliNews.

“As we have disclosed in our filings with the [US Securities and Exchange Commission], VimpelCom had prior dealings with Takilant related to our business in Uzbekistan,” quoted Vimpelcom’s spokesperson Rozzyn Boy as saying. “We continue to cooperate with the authorities in their investigation and given that these are still ongoing, we cannot comment further.”

The Organised Crime and Corruption Reporting Project (OCCRP), a Maryland-based umbrella programme of regional investigative centres and independent media in Eastern Europe and Central Asia, puts a conservative estimate of the sums Karimova allegedly extracted from telecom companies willing to enter the market at a staggering $1bn.

"Even the $1bn figure likely underestimates the true magnitude of the alleged extortion and bribery she received because most records of her business records have not been released," the March 2015 report reads.

Vimpelcom and MTS paid millions of dollars in corrupt payments using three main methods, the complaint filed by the US Justice Department’s investigation claims.  First, Karimova’s shell companies would retain equity interests in the local subsidiaries of the two telecom companies and they would later sell them to MTS and Vimpelcom at a profit; second, a shell company would enter into a series of opaque contracts with the two telecom companies aimed at funnelling additional millions of dollars into the pockets of “Government Official A”; third, Vimpelcom would close multi-million consultancy contracts with a shell company only to “pay large sums of money to Government Official A”.  

Overall, the Justice Department traced $380mn of allegedly corrupt payments made by MTS, and another $133.5mn carried out by Vimpelcom. As the money hit the bank accounts of Karimova’s shell companies, it was allegedly laundered through portfolio investments in Belgium, Ireland and Luxemburg.

Financial transactions between Takilant, allegedly one of Karimova’s shell companies, and Vimpelcom and Teliasonera have already emerged in the two companies’ official financial filings, but both companies denied any bribery or wrongdoing. MTS disclosed in its 2014 annual report that US authorities are investigating the activities of its former Uzbek subsidiary.

MTS is the largest telecom operator in Russia and is majority-owned by Sistema, a Russian holding controlled by tycoon Vladimir Evtushenkov. Vimpelcom is controlled by another Russian oligarch, Mikhail Fridman, who owns 47.9% of total voting rights, and Telenor, a telecom group majority owned by the Norwegian government, which owns 43% of the voting rights. Teliasonera is majority owned by the Swedish and Finnish governments.

Vimpelcom and TeliaSonera currently have the lion’s share of the Uzbek market, after MTS’s local operations were suspended for months because of an ongoing dispute with the government over the use of its licences – the dispute was eventually settled in 2014 and MTS relaunched its services in December 2014. 

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