Michael Weiss
Few developments speak so well of how far Caucasian dictatorships
have come since the grey days of the Soviet Union as the fabulously
wealthy and
incredibly investment-savvy 15-year-old male heir of Azerbaijan's
ruling family.
When he was a mere 11 years old, Heydar Aliyev, the son of
Azerbaijan's President Ilham Aliyev, purchased $44 million in luxury
mansions on Palm Jumeirah,
the elite artificial archipelago built by Dubai and known for housing
both holidaying British soccer players and thieving Russian tax officials. $44 million is, in the words of the
Washington Post's Andrew Higgins, who broke the story in 2010,
"roughly 10,000
years worth of salary for the average citizen of Azerbaijan." But
young Heydar wasn't the only member of his family engaged in Gulf
property speculation.
His two older sisters, Leyla and Arzu, were also listed as owners in
Dubai's Land Department registry. Together, the three Aliyev children
invested in $75
million in Dubai real estate, which certainly is impressive
considering that their father's official annual income as a public
servant is just $228,000.
When asked for comment by Higgins, who showed how the date of birth
and name for the listed Dubai owner was the same as Ilham's dauphin,
Aliyev's spokesman
Azer Gasimov replied: "I have no comment on anything. I am stopping
this talk. Goodbye."
The reader will therefore understand why I didn't bother to try to
reach Gasimov to explain Heydar's other high-profile but low-recognition
investment. Now
15, the Aliyev son and likely heir to Azerbaijan's political dynasty
has also got himself a sideline in commercial banking, judging from
corporate filings
I've obtained. These documents show that he controls a parent
company that owns, through an offshore subsidiary, almost half of
Russian mega-bank VTB's
Azerbaijani subsidiary.
Nothing wrong with that, you say. It's a fine idea to give a
pubescent a solid education in the credit industry, what with all global
shenanigans that have
taken place in the last five years.
There are only two problems.
The first is that VTB, which is the second-largest bank in Russia
and is 75 percent-owned by the Russian government, is also one of the
fastest-growing
financial institutions on the planet, with retail, commercial and
investment arms in 19 countries, including the United States. It has
been, and continues
to be, dogged by civil lawsuits filed in multiple jurisdictions
because of its issuance of loans that have led High Court justices to
wonder "what, if any, due diligence"
was carried out beforehand. VTB has been accused to being little more
than a vehicle for the enrichment of its executives and for the
Kremlin's "economic
diplomacy" in luring foreign direct investment to Russia--a Putinist
Lehman Brothers. In 2011, it took in about $712 million in German and
French pensioner
deposits, and earlier this year, it featured prominently
and unflatteringly in the
Cyprus credit implosion,given the $13.8 billion in assets it had
tied up in the Mediterranean country long rumored to be a
money-laundering haven.
Embattled Russian opposition leader Alexey Navalny is particularly
fond of exposing VTB's dodgy history; in September 2012, his Foundation
for Fighting
Corruption published a
comprehensive report examining some of the highlights (full disclosure: I edited it).
The second problem is that in May of this year, Azerbaijan's
sovereign wealth fund invested $500 million in VTB's secondary public
offering (SPO). It was
joined by Qatar's and Norway's sovereign wealth funds and, collectively,
all three gobbled up 55 percent of the SPO. According
to Herbert Moos, VTB's chief financial officer, "We have been working
with the [Azerbaijani
sovereign wealth fund] on a real estate investment in Moscow, their
first investment, and they have a 20 percent allocation to Russia so
they made a
strategic decision to invest in us and become a business partner."
Good thing Heydar has ample real estate experience, otherwise his
father's regime might have balked at the prospect of throwing a cool
half a billion into
a bank heavily owned by the baby of the Aliyev family.
Here's what we can prove from open-source financial filings and
Panama's surprisingly helpful corporate registry. On November 9, 2009,
Ataholding, an open
joint-stock company that manages AtaBank, one of the biggest commercial banks in Azerbaijan,
purchased
48.99 percent of VTB's Azerbaijani subsidiary. The remaining 51
percent is owned by VTB and thus mostly owned by the Russian government.
As of December 31,
2009, AtaBank's investment was valued at 10,887,310 Azerbaijani
manats, which at today's exchange rate is around $13.8 million.
Ataholding is 51 percent-owned by a Panama-registered shell company
called Hughson Management, Inc., of which, as the Ataholding financial
statement for
2009 informs us, Heydar Aliyev has the controlling interest. At least
that's in the iteration of the statement I received. (Here's a PDF copy and mark that the metadata dates its drafting in 2010.)
Curiously, and perhaps owing to the diligent spadework of Andrew Higgins, the Ataholding statement currently hosted on the company's website does not include the notes
section of the earlier copy, which features this disclosure:
The Group's immediate parent is Hughson Management Inc, tax resident of Republic of Panama (2008: Hughson Management Inc, tax resident of Republic of Panama). The Group is ultimately controlled by Mr. Heidar Aliyev (2008: Mr. Heidar Aliyev).
Hughson Management is still currently listed as the majority owner of AtaBank.
Now, there have been exactly two prominent Heydar Aliyevs in
Azerbaijan's recent history. The first was a KGB chief turned Communist
ruler of the Soviet
autonomous region (1969-1982) and was the kind of Stalinoid
satrap-cum-mafia kingpin who found it necessary to bribe Leonid Brezhnev
in order to remain in
power. Gorbachev's rise in Moscow coincided with this Heydar's
eclipse in Baku. He subsequently became first the de facto head of the
republic (*), as the USSR
was falling apart, and then the first president of post-Soviet
Azerbaijan in 1993.(**) Heydar ruled until 2003, which is the year he died.
That would have made
it difficult -- though probably not impossible given that Azerbaijan is one of the world's most corrupt countries
-- for him to be found
owning banks five years later. The elder Heydar was immediately
succeeded by his son Ilham, the State Department's Michael/Sonny
metaphor whose own
"election" in 2003 Human Rights Watch characterized
as the rotten fruit of
"bureaucratic interference and political intimidation against the
opposition [which made] a free and fair pre-election campaign
environment impossible."
Terms limits for presidents were abolished in 2009, the same year the
regime clamped down on domestic press freedoms and took the BBC, Radio Free Europe/Radio Liberty, and Voice of America off the
air.
Here's how the U.S. embassy in Baku described Ilham Aliyev in
2009:
"Azerbaijan's President Ilham Aliyev utilizes distinctly different approaches to foreign and domestic policies. He typically devises the former with pragmatism, restraint and a helpful bias toward integration with the West, yet at home his policies have become increasingly authoritarian and hostile to diversity of political views. This divergence of approaches, combined with his father's continuing omnipresence, has led some observers to compare the Aliyevs with the fictional 'Corleones' of Godfather fame, with the current president described alternately as a mix of 'Michael' and 'Sonny.' Either way, this Michael/Sonny dichotomy complicates our approach to Baku and has the unfortunate effect of framing what should be a strategically valuable relationship as a choice between U.S. interests and U.S. values."
***
What else do we know about Hughson Management, the parent company of
Ataholding? Well, the president and treasurer of it are, respectively,
little Heydar's
older sisters, Arzu (now aged 24) and Leyla (who just turned 28 last week). Here's
a nice shot of the entire Aliyev brood looking very happy and glamorous.
Arzu and Leyla were
linked to a highly lucrative Azerbaijani telecom company called Azerfon
in a much-discussed piece of investigative journalism conducted by
Khadija Ismayilova of RFE/RL in June 2011. Ismayilova found that Azerfon
was owned by
three Panama-registered entities, another company registered in a
Caribbean tax haven jurisdiction, and Azerbaijan's state-owned Aztelekom
company. The
three Panama-registered companies each owned a 24 percent stake: one
of these was Hughson Management. And although Ismayilova cited the
governance
structure of Hughson in her article, she did not disclose that the
owner was Heydar Aliyev, which adds telecom mogul to his real estate and
banking
portfolio. (Just wait till he gets to college.)
She did, however, connect Hughson to a mysterious third party, a
Swiss financier and art collector named Olivier Mestelan, who owns the
Kicik QalArt
gallery in Baku and founded the Art ex East Foundation. He was
profiled prominently in the Moscow-published "style magazine" Baku, the
editor-in-chief of
which is none other than Leyla Aliyeva, who is very style-conscious indeed.
The Mestelan profile
stated that the Swiss national owns property in Azerbaijan and
visits the country several times a year. But he evidently does a bit
more than that. In
August 2011, this State Department cable named Mestelan as one of
the "top Azerbaijani officials...of particular interest" to the U.S.
government owing to
these officials' cozy relationships with Baku's first family,
chiefly President Ilham and his wife Mehirban Aliyeva.
These are not relationships that Aliyevs wish to see explored by
muckraking journalists. Following her exclusive, Ismayilova was
targeted
by a particularly nasty campaign of state harassment, which included
her being sent an envelope filled with "pictures of a personal nature"
and a message
reading: "Whore, behave, or you will be defamed." These images were
later published in Azerbaijani newspapers associated with the ruling New Azerbaijan Party,
of which President Aliyev is also the chairman. Ismayilova
later discovered and documented surveillance wires that had been
installed in the walls and ceilings of her home kitchen, bathroom and
bedroom, apparently
while she was out of the country just days after RFE/RL published
her piece. The government's "investigation" of the tapping of
Ismayilova's residence was
a whitewash.
Of further interest is the fact that, according to Hughson's more recent governance filings, Olivier Mestelan left the company as secretary
in April 2012, about a month before second RFE/RL
report -- this one co-written by Ismayilova -- demonstrated how the
Aliyev regime had assigned the Azerbaijani International Mineral
Resources Operating
Company, Ltd (AIMROC) the right to develop a gold mine valued at
$2.5 billion in Chovdar, a mountainous village in the Nagorno-Karabakh
region of
Azerbaijan, which was ravaged by years of war with Armenia. AIMROC,
widely thought by angry Chovdar residents to be a British company, is in
fact owned by
four separate shells, only one of which (Globex International) is
British. RFE/RL found that Globex International was itself owned by
three
Panama-registered companies, each of which listed Leyla and Arzu
Aliyeva and Olivier Mestelan as senior managers. As of this writing,
Mestelan is also
listed as a member of the "supervisory board" of
Ataholding, the company that owns AtaBank and half of VTB's Azerbaijani subsidiary.
I'll do the State Department a favor and cast Mestelan as the "Tom Hayden" of the Aliyev family.
"The Atlantic," July 11, 2013
(*) Heydar Aliyev actually returned to Azerbaijan in 1990 and settled in his native Nakhichevan, where he was first elected deputy to the Soviet Supreme of the Azerbaijan SSR, and from 1991-1993, chairman of the Soviet Supreme of the Nakhichevan Autonomous Republic (Armeniaca).
(**) Aliyev was actually the third president of Azerbaijan (1993-2003). The first one was Ayaz Mutalibov (1991-1992) and the second, Abulfaz Elcibey (1992-1993) (Armeniaca).
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