The ongoing case of asset recovery and Uzbekistan
Gulnara Karimova, the daughter of the former President of Uzbekistan and once the international face of her father’s regime, was put under house arrest in 2014 and is now the subject of court cases from the US to the Netherlands and Switzerland over the alleged US $1 billion taken by her in bribes and facilitation payments.
How did the former president’s daughter end up in this situation and what was the role played by businesses in the scheme?
According to the OCCRP, Karimova used two schemes to get money from businesses: directly asking for a percentage of the company as a gift or as a fake “local partner” investment or demanding money to secure licences. The licencing scam was often done on a repeated basis every time a licence needed to be renewed and was accompanied by threats of being shut down or arrested if executives didn’t pay the facilitation payment.
In addition to running franchises, such as the Coca Cola franchise in Uzbekistan, and corruption involving licencing and protection, Karimova’s alleged main target in these schemes was, however, ownership in the telecommunications sector.
According to reports, this began in 2001 when the first mobile phone operator was set up in Uzbekistan – Uzdunrobita. Karimova allegedly demanded that she be given a 20% stake in the company or face removal from the Uzbekistan market. The company agreed and transferred a 20% stake to Revi Holdings, according to reports, a company set up in the UAE by an employee of her former husband. It is then alleged that two months later, Karimova directed the Uzbek State Property Committee to transfer the state’s 31% share of the company to her, giving her a controlling 51% stake in Uzdunrobita. According to the former employee that set up the UAE company, in 2004 she sold part of this to the Russian telecommunication company MTS for $100 million, retaining a 26% stake through a Gibraltarian company, Swisdorn, officially owned by her then boyfriend. In 2007, she allegedly sold this stake for US $250 million.
In 2005 the Norwegian-Russian telecommunications partnership VimpelCom decided to enter the Uzbekistan market. Buying a small provider through one of its partner companies, this company benefited from a suspension in the licence of the part-state owned Uzmacom in 2005, allowing it to acquire valuable technological access. Two days later, one of its partner companies transferred US $19 million to Talikent, a Gibraltar registed company, officially managed by an aide to Karimova. It is alleged that Karimova then obtained up to US $100 million more from VimpelCom during its operations through transfers to companies controlled by her.
The last major telecommunication deal involved the Swedish-Finish company TeliaSonera. TeliaSonera entered the Uzbek market in 2007 by buying the company Coscom, which had been owned by the American company MCT but had faced investigations and tax evasions charges by Uzbek officials. As part of the deal to enter the market, reports state that TeliaSonera agreed to transfer US $30 million and a 26% stake in the company to a local partner – which ended up being Talikent, which would provide licences to operate 3G. 20% of that stake was later sold for US $220 million.
Where are we today?
Asset freezes are in place and court cases underway to confiscate these assets from both Karimova and the telecommunications companies. This includes:
- VimpelCom has agreed to pay US$ 795 million to US and Dutch authorities after admitting bribing Karimova
- US and Dutch authorities are looking for US $1.4 billion from Telia Company (formerly TeliaSonera) as a fine for their involvement in the scheme
- Swiss prosecutors have questioned Karimova over the money frozen in companies alleged to be controlled by her, including around 800 million Swiss Frances (US $ 793 million) in Switzerland.
Aside from confiscating the money, the big question also remains on how it should be returned, bearing in mind that the regime has not changed, political opposition is almost non-existent and that civil society faces repression in Uzbekistan.
Civil society groups outside the country are working in coordination to support a return to Uzbekistan that is transparent, accountable and contributes to supporting the victims of grand corruption. This includes measures to give voice to the people of Uzbekistan in the return and providing oversight to the processes happening in several countries at once. As part of this work, we aim to ensure that the return to Uzbekistan builds on past lessons and provides them for future returns.