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Last week, a Swedish court of appeals upheld the acquittals of three former senior officials at Telia, formerly known as TeliaSonera, who were accused of bribing Gulnara Karimova, the daughter of Uzbekistan’s late President Islam Karimov, for lucrative telecom contracts in the Central Asia country.
The Stockholm District Court that initially acquitted former Telia CEO Lars Nyberg and his two co-defendants in February 2019 ruled that they could not be convicted because the prosecutors were unable to prove that Karimova held an official position in the Uzbek telecom sector. The ruling, and the recent concurrence from the court of appeals, reveal a fundamental failure to appreciate how corruption in kleptocratic states works and the role that international financial systems play in empowering them.
In kleptocracies – where officials systematically abuse their power to loot state resources for personal gain – the formal and informal sectors are blurred and officials use opaque networks of offshore entities to secure their illicit gains abroad, primarily in real estate and accounts based in established democracies.
In the TeliaSonera case, payments were made to Takilant, a shell company registered in Gibraltar, whose sole registered director, Gayane Avakyan, was a close associate of Karimova. The financial secrecy afforded to the Uzbek kleptocrat by the international financial system makes it nearly impossible for prosecutors in Sweden, or any country that upholds the rule of law, to prove without a reasonable doubt that Karimova was the ultimate beneficiary of the payments.
However, the public record makes it exceedingly obvious that TeliaSonera paid hundreds of millions to secure access to the Uzbek telecom market. Karimova, besides being the daughter and once heir apparent of the country’s longtime dictator, held numerous diplomatic posts and leveraged her political power to capture vast tracts of the Uzbek economy. Beyond telecoms, she controlled the Uzbek gold, cotton, oil and gas industries through a Swiss-based conglomerate called Zeromax that appeared out of thin air in 2001.
Moreover, in September 2017, Telia settled the foreign bribery case against it with the U.S. Department of Justice and Dutch authorities, agreeing to pay a penalty of $965 million. Acting U.S. Attorney Joon H. Kim of the Southern District of New York said at the time that “Swedish telecom company Telia and its Uzbek subsidiary Coscom have admitted to paying, over many years, more than $331 million in bribes to an Uzbek government official.” The wealth of public reporting on the case indicates that the government official was Karimova.
The many scandals surrounding Karimova set off a power struggle in Uzbekistan, resulting in her initial confinement to house arrest in 2014 and the subsequent freezing of her assets in the United States, Switzerland, the United Kingdom, France, and elsewhere. She is now in Uzbek prison, serving a 13-year sentence handed down in March 2020 for extortion, money laundering, and other crimes in addition to previous sentences. The Uzbek courts are hardly the paragon of justice and Karimova’s sentences are likely more about the consolidation of power for the regime of Karimov’s successor, President Shavkat Mirziyoyev, but there is little reason to doubt Karimova’s guilt.
Neither is there doubt that Nyberg and his fellow TeliaSonera executives understood that the complex transactions their company was facilitating to Takilant were vehicles to pay off Karimova, the chief gatekeeper to Uzbek telecom licenses whom U.S. diplomatic cables describe as a “robber baron.” Their acquittals are a worrying sign given that many international corruption scandals involve much more complex financial mechanisms than the relatively straightforward bribery surrounding Karimova.
Deference to the accused is a hallmark of fair trials, but combined with ubiquitous financial secrecy in both tax havens like Gibraltar and key nodes of the international financial system like Switzerland it makes it difficult to hold kleptocrats and their international interlocutors accountable. If individuals at companies like Telia can escape punishment for their involvement in fueling kleptocracies, even when their companies admit to wrongdoing and pay substantial penalties, there may remain sufficient incentives for executives to continue participating in foreign corrupt practices.
Recognizing the difficulty of seizing and returning corrupt proceeds after the fact, the United States passed a new suite of anti-corruption measures in the National Defense Authorization Act for 2021, including the establishment of a beneficial ownership registry that will effectively ban the anonymous shell companies that allow kleptocrats like Karimova to conceal their connection to illicit assets. The United Kingdom and several smaller countries also have beneficial ownership registries, but international harmonization of national policies to deny kleptocrats access to shell companies is far from complete.
The Telia executives were let off the hook because Karimova did not hold an official position in the Uzbek telecom sector, despite the fact that she possessed complete control over the sector in practice. As more beneficial ownership registries are implemented it will be easier to demonstrate such control, but the acquittals further point to the need for specialized anti-corruption training for judges.
Donor countries like the United States encourage countries struggling with corruption like Afghanistan to form courts like the Afghan Anti-Corruption Justice Center to tackle such cases. Given the central role that financial institutions in establish democracies play in enabling corruption in kleptocracies, they should also develop anti-corruption expertise in their own judicial systems too.
Ian J. Lynch is an independent foreign policy analyst with a Masters in Middle East, Caucasus, and Central Asian Security Studies from the University of St Andrews in Scotland. He previously developed girls’ education programs in Afghanistan from 2013-2018. He tweets at @Ian_J_Lynch.
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