How The President’s Daughter Controlled The Telecom Industry
Gulnara Karimova, the elder daughter of Uzbek President Islam Karimov,
is being investigated for taking bribes for allowing Scandinavian and
Russian telecom companies TeliaSonera and VimpelCom to operate in
Uzbekistan. The Organized Crime and Corruption Reporting Project (OCCRP)
has found new records that show she was far greedier and the scale of
her alleged corruption was far wider than has been reported.
Financial documents OCCRP has obtained detail that Karimova received
more than US$1 billion worth of payments and ownership
shares out of international telecom-related companies. Meanwhile,
telecom users in her impoverished country pay among the highest rates in
the world for mobile phone service.
OCCRP found that Karimova used similar schemes on at least six
telecom-related groups of companies, including those that ran fiber
optic lines and provided WiFi and WiMAX services – a high-speed,
long-range version of WiFi. She helped companies obtain operating
licenses that agreed to meet her payment demands and she squashed those
that did not, including three US companies.
Her audacious schemes may have cost the people of Uzbekistan money that
could have paid for pensions or healthcare but instead went into banks,
an offshore hedge fund and luxurious real estate around the world including a
castle in France and a penthouse in Hong Kong. Even the US$ 1 billion
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.
While the international companies involved claim to have been innocent
or unwilling dupes of her maneuvers, the blatant means by which Karimova
allegedly operated made it virtually impossible for those involved not
to realize they were giving in to extortion and bribery.
The Bad Seed
Karimova has appeared regularly in the news over the years. Once
anointed as the heir apparent to her ailing father, she has fallen from
favor and is now under house arrest. Uzbek prosecutors have said she
operated an organized crime group that stole US$ 53
million from the state and state businesses
through forgery, blackmail and extortion in running her businesses,
including Uzbekistan Airways, Coca Cola, a refinery and others. Since
then, her businesses have been closed and several of her proxies
arrested and given short sentences.
Karimova, educated in the US, fashioned herself at times as a pop star,
fashion designer, international celebrity, diplomat and a successful
entrepreneur, although her true skill seems to be a ruthless brand of
political corruption. Former aides said she used extortion and selling
her influence as the President’s daughter to get what she wanted and
what she got in return was huge payments and her own share of companies.
But payment records show that much like a blackmailer, she wouldn’t go
away – coming back over and over again to bleed companies every time a
new license was required. One US Embassy cable disclosed by Wikileaks
described her as the most hated person in
Karimova preferred not to run businesses but instead to take her cut and
run before attracting too much attention, a former aide said. In fact,
Karimova, despite her public relations image, never really started a
She has yet to be charged for her activities in the telecom industry,
which in terms of money, dwarf all of her current alleged crimes.
Karimova’s telecom dealings first came to light in a 2012 story by
Swedish Public Broadcaster Sveriges Television (SVT), followed by
stories from The TT News Agency, and the Norwegian weekly Klassekampen
– all working with OCCRP. They showed how Swedish-Finnish operator
TeliaSonera and Russian-Norwegian operator VimpelCom paid millions to
Karimova which allowed them to secure mobile phone licenses in
Uzbekistan. TeliaSonera and VimpelCom are being
investigated in Sweden, the Netherlands and
Financial documents OCCRP has obtained detail that Karimova squeezed
more than US$ 1 billion worth of payments and ownership shares out of
international telecom-related companies. TeliaSonera paid US$ 381
million and promised an additional US$ 75 million;
VimpelCom and its Russian mother company Alfa Telecom paid US$ 176
million; the Russian giant MTS paid US$ 350
million. She also received nearly US$ 90 million from
two other companies that ran fiber optic lines and provided WiMAX and
WIFI services in Uzbekistan.
Gunnar Stetler, a prosecutor at the Swedish Prosecutor Authority, told
OCCRP a criminal indictment will be brought against one or more of the
parties in the TeliaSonera case before the end of the year.
How She Worked
Karimova used three main techniques to enrich herself, according to
financial records and to people who worked with her. Sometimes she’d
demand a percentage of a target company as a gift or dressed up as a
fake investment in a local partner. Sometimes she demanded premium money
for her personal services and lobbying efforts in getting required
licenses. She also allegedly bullied executives to either go along with
her plans or to risk arrest or being shut down by Uzbek regulators. She
demonstrated a ruthless ability to acquire a share of ownership (her
preferred rate was 26 percent) of lucrative telecom-related companies –
without actually putting up any money for doing so. Language was
inserted into contracts forcing companies to buy back her shares at a
future date at an exorbitant profit.
In late 2001 she met with Shahid Feroz, president of International
Communications Group (ICG) of Atlanta. A decade earlier, ICG had set up
the Uzbek mobile phone carrier Uzdunrobita through a joint venture with
the Uzbek government. It became the first mobile operator in Central
Gulnara Karimova, surrounded by top
management from Uzdunrobita in 2005. (Photo from "Kariera" magazine)
Her proposal to him was straightforward: give her a 20 percent stake in
the mobile operation or be destroyed.
2001 was a good time for Karimova to insert herself into the telecom
market in Uzbekistan. With a population of 29 million and only 128,000
mobile subscribers, the market was one of
the few areas left in all of Europe and Eurasia with fast-growth
potential. Russian and European companies that had grown rapidly for
years were slowing down. Everyone wanted a piece of the Uzbek market,
which eventually grew to 25 million subscribers by 2012.
“She made it clear that, without her support, Uzdunrobita would be
destroyed,” ,” Farhod Inogambaev, once one of Karimova’s closest
advisors, said in an affidavit filed with a US
court. She pressured the American investors
to accede to her demands by getting Uzbek authorities to withhold its
Between 1994 and 2001, Inogambaev had worked in Dubai for Karimova’s
former husband, Mansur Maqsudi, a
naturalized American businessman of Afghan origin. Karimova had lived
with Maqsudi in the US, but when the marriage foundered, she returned to
her homeland in 2001. Upon her return to Uzbekistan, she had
Inogambaev’s brother detained to allegedly coerce his return from Dubai
to Tashkent and to ensure his allegiance to her. Until he escaped to the
US in 2003, he was intimately involved in her business and personal
activities. Together they set up bank accounts, established proxies and
took over controlling interest in a host of companies.
ICG, taking the threat to heart, agreed to transfer 20 percent of
ownership in Uzdunrobita to Revi Holdings. That was a Dubai company
Inogambaev set up in November 2001 in the Sharjah Free Trade Zone of the
United Arab Emirates as an offshore holding company over all Karimova’s
other firms. It was one of many companies the two set up as she got
“Through these explicit threats, Karimova had acquired a large stake in a multimillion dollar company without spending a penny.”
Two months after that coup, Karimova was back directing the Uzbek State
Property Committee to also transfer 31 percent of state ownership in
Uzdunrobita to her – giving her a majority share of ownership. Again,
she put up no money for this.
Once Karimova was in full control, “large amounts of funds in US
dollars started arriving into the (Karimova) companies’ accounts from
Uzbekistan,” often in the form of marketing and consultancy contracts
to herself, the aide said. Through these sham contracts, where no
services were actually provided, she paid herself millions and deposited
them into her personal account, Inogambaev told a federal court in
Washington DC. For example, in July 2002 Uzdunrobita sent a bank
transfer to Revi Holdings for US$ 330,000 for undocumented
“consultation services”, according to some of Inogambaev’s documents
reviewed by the Financial Times.
Revi Holdings also received money from Huawei Technologies, a Chinese
telecommunication company that helped Uzdunrobita create a mobile
network outside Tashkent as well as other telecom companies.
Fearful of being caught up in what he called her racketeering,
Inogambaev left Uzbekistan in 2003 with a stack of internal documents
exposing her operations and that were shared with Global Witness, a
British-based corruption watchdog, and the Moscow Times.
Karimova’s appetite steadily grew and she refined her approach over the
years. A trove of financial and banking records OCCRP has obtained show
that as time passed, she started asking for more and more: first a
couple million dollars, then tens of millions and finally hundreds of
Eventually, she managed to acquire an even larger controlling, but at
the time hidden stake in Uzdunrobita, though exactly how large is
The Uzbek Partner
In July 2004, Inogambaev told reporters, she decided to cash out and
sold a controlling share of Uzdunrobita to a company outside of
Uzbekistan for more than US$ 100 million.
“At best, MTS is paying double what Uzdunrobita is worth.”
Karimova retained a 26 percent share in the MTS-owned Uzdunrobita
through a company later revealed to be Swisdorn, a Gibraltar
company on paper owned by her then- boyfriend, Rustam Madumarov, an
Uzbek pop singer. Neither MTS nor its financial consultant on the deal,
Renaissance Capital, would comment to the Moscow Times on the ownership
structure of Uzdunrobita. They would only say that they struck the deal
with two private companies that “were ready to exit this project.”
MTS negotiated with Swisdorn a three-year “put and call agreement”
allowing it to acquire the stake for a minimum price of US$ 37.7
million. A put option allows a buyer to sell shares at a specified price
within a fixed period. Those shares are thus protected against a loss in
value. This deal made little business sense for MTS unless its minority
partner was the powerful Karimova. This ploy became a hallmark of
Karimova’s deals and was repeated again and again. By maintaining a
minority share and selling it back at vastly inflated prices through a
put and call agreement, Karimova harvested her biggest profits at a
steep cost to the mobile carrier. Three years later, in June 2007,
Karimova cashed in at six and a half times more than the agreed price or
US$ 250 million.
Next in Line: VimpelCom
A similar scheme appears to have played out when Norwegian-Russian
telecom company VimpelCom and its principals entered the market in 2005.
VimpelCom was a joint venture of two giants: Norway’s Telenor and
Russia’s Alfa Group.
Alfa entered the Uzbek mobile market first in December 2004 when it
bought a small, primitive 2700-subscriber local company named Bakrie
Uzbekistan Telecom (known as Buztel) for US$ 4 million according to the
2005 financial statements of its former
shareholder, the Indonesian firm Bakrie.
In February 2005, Alfa obtained a GSM license by buying 74 percent of
Uzmacom for US$ 13 million according to media reports, with the state
telecom owning the rest. A small operator with just 9,000 subscribers,
Uzmacom still had a valuable GSM license that covered the whole country
and more valuable 900 MHz frequencies in Tashkent than all other
However, as soon as it was bought, Uzmacom either didn’t pay its license
fee or the state refused to accept it and the license was suspended by
state authorities in August of 2005. Although Alfa publicly blamed
management for the failure, it benefited from the suspension when it
applied for Uzmacom’s license through its own company Buztel. Buztel was
awarded the license sometime later in 2005. In the process, the state
lost its share in the lucrative license.
Takilant would loom large in future deals, especially the TeliaSonera
deal. Scandinavian prosecutors now say Karimova owns this company,
although on paper it is owned and run by her aide, Gayane Avakyan.
Takilant has served as a holding company for other Karimova deals
including those involving duty-free shops, clothing businesses, and
Why Alfa’s subsidiary made this payment to Karimova is never explained
but Alfa’s Buztel significantly benefited from favorable decisions by
Uzbek regulators throughout 2005.
In February 2006, VimpelCom bought Unitel for US$ 200
million, one of the big remaining players in
the Uzbek market. A couple of months later, it merged Buztel into
Unitel. A VimpelCom spokesman at the time said Takilant consulted on
the merger although how and on what terms
were never made clear.
In April 2007, Karimova entered into an agreement with VimpelCom to buy
a 7 percent stake of Unitel for US$ 20
million through a subsidiary. A put option allowed
either party to force the sale of the 7 percent stake back to VimpelCom
two years later for between US$ 57.5 million to US$ 60 million.
Karimova exercised that option in September 2009 earning a windfall of
US$ 37.5 million. Again, the terms of the
deal made little financial sense for VimpelCom and it’s not clear why
the firm would sign a deal so beneficial to Karimova.
Recently a whistleblower told Norwegian
officials that VimpelCom paid at least US$ 100 million more to
Karimova. OCCRP confirmed at least one of the additional payments –
VimpelCom said at least US$ 43 million was paid for a license in
Uzbekistan in their 2007 filings with the
US Securities and Exchange Commission. This makes little sense since the
actual cost of a license in Uzbekistan is quite small.
TeliaSonera and Karmova’s Investment Group
Enter TeliaSonera, the Swedish-Finnish telecom giant that also sought to
capitalize on the fast-growing Uzbek market. It would follow a path
remarkably similar to MTS and VimpelCom.
However, because Swedish officials and TeliaSonera itself investigated
the bribery allegations more effectively than Russian and Norwegian
officials, more information is
available. That includes a 2013
report by the Swedish law firm Mannheimer
Swartling which detailed TeliaSonera’s 2007 entry into the Uzbek telecom
market. It spells out in detail what Karimova allegedly did.
Bekzhod Akhmedov, who managers at a TeliaSonera subsidiary described as
the head of “Karimova’s investment group,” was the CEO of Uzdunrobita
when MTS bought it under questionable circumstances. Akhmedov became
central to many of Karimova’s deals for over five years, even
negotiating deals on behalf of his rival telecom companies with
Karimova. He remained as CEO of Uzdunrobita until he left Uzbekistan in
a hurry in 2012.
In 2007, TeliaSonera wanted to acquire Coscom, then the third-largest
telecom in Uzbekistan and owned by MCT Corp., an American firm. The
government had been after MCT for months, suspending its licenses and
sending tax inspectors in to visit. The firm was hit with a US$ 23
million tax evasion charge. Realizing it was
not going to be allowed to operate in the country, MCT opened buy-out
negotiations with a number of firms. Odd barriers seemed to crop up for
every potential buyer – until TeliaSonera.
According to diplomatic cables leaked by Wikileaks, a Coscom director
not identified by name informed the US embassy that he believed the
government’s legal moves might be orchestrated by the president’s
daughter seeking personal gain. Pressure and the threats of new
lawsuits died away when TeliaSonera began
negotiating with the government, he said.
As the negotiation continued, though, another secret deal was taking
place. Akhmedov’s assignment was to ensure that Karimova would have a
stake in TeliaSonera’s Uzbek investment.
Days before TeliaSonera was to buy MCT and get Coscom, Ahkmedov and
TeliaSonera signed an agreement. Coscom needed 3G licenses to succeed in
Uzbekistan. The agreement stipulated that a local partner would transfer
its licenses to Coscom for US$ 30 million in cash and a 26 percent
share in a new joint entity.
Though the agreement was signed, there were several legal problems with
it. According to Uzbek law, frequencies can’t be transferred. And no
local partner existed, much less owned licenses.
According to the agreement, an Uzbek partner would set up a firm in the
British Virgin Islands, which in turn, would set up an Uzbekistan
subsidiary. Instead, in late 2007, Akhmedov informed TeliaSonera that
its local partner would be Takilant, which Karimova owned and her aide
Guyane Avakyan ran.
Avakyan signed all contracts at a distance and never negotiated deals
directly with TeliaSonera.
Takilant then established Teleson Mobile, a fully owned subsidiary which
by the end of September had obtained all needed licenses, despite, like
its parent Takilant, having no experience in the telecom business as
required by Uzbek regulations. TeliaSonera and Takilant signed
shareholders and 3G agreements allowing Takilant to become a shareholder
in their joint venture. There was one condition – that Teleson Mobile
would surrender its license.
As soon as Teleson did this and Coscom obtained it from the Licensing
Authority, TeliaSonera paid. Instead of just giving Takilant 26 percent,
TeliaSonera paid US$ 80 million, and Takilant wired back
US$ 50 million the same day. The exchange, leaving Takilant with US$
30 million, made it look like Karimova had paid for the 26 percent
although she essentially had received both the ownership and the money
for free in exchange for arranging the license transfer.
She later sold 20 percent of the company for US$ 220 million. She still
holds a 6 percent share in Coscom that she could sell for at least
another US$ 75 million according to Takilant’s contract.
Payments for Licenses, Support, Services, Fiber Optic Lines
While Karimova made a fortune off the sale of her ownership shares in
various companies that she obtained for little or no money, she
regularly took large sums of money directly for obtaining and renewing
various telecom licenses. Telecom companies paid to Takilant and her
other companies more than US$ 200 million between 2006 and 2011. OCCRP
is aware of details from only two of her companies which may mean there
were more payments.
For example, TeliaSonera paid Takilant US$ 30 million initially to
enter the market with a 3G license, paid another US$ 9.2 for more
telephone numbers in 2008, paid off a US$ 15 million debt of another
company in 2010 at the same time they got a 4G license, and paid US$ 55
million for additional frequencies and access to fiber optic networks in
late 2010. In the last two payments, the license and frequencies were
voluntarily surrendered by Uzdunrobita for TeliaSonera’s benefit.
VimpelCom paid more than US$ 75 million in the same way.
But these were not the only companies.
The records also show that Eastwell SA and Eastwell Invest Holding, two
holding companies based in the US and Luxembourg, made payments to
Takilant and Finex, another Karimova-owned company,
in 2006 and 2007. Together the two Eastwells form the Eastwell Group, a
murky company that refused to talk to OCCRP reporters. A check of
Eastwell’s original corporate owners from 1994 reveals that at least two
of them never existed, according to official emails from the business
registries in Ireland and Malta. Some shareholders and directors have
appeared over the years involved in everything from arms smuggling to
Eastwell paid at least US$ 3.8 million for technical support and
consulting to Karimova’s companies. It was one of the original founders
of Uzdunrobita along with East Telecom, the largest digital
communications operator in the country, and Super iMAX, a wireless
broadband provider. Eastwell sold its shares in East Telecom and Super
iMAX in 2007 to Sumitomo Corporation from
Japan and KT Corporation from South Korea.
Eastwell Group says on its website that it is a holding company that
provides investment capital and new technologies to businesses in CIS
and Central Asia states. It has businesses in telecommunications, gas,
energy, and industrial projects in the Russian Federation, Ukraine,
Croatia, Turkey, Uzbekistan, Tajikistan, and Georgia.
And these are not likely the only cases where Karimova received payments
from telecom companies. Other payments to offshore companies have not
been adequately explained and businesses working with Karimova’s
companies often made very bad business decisions for themselves that
For example, Karimova got more than US$ 350 million in payments from
the Russian telecom company MTS when it took over Uzdunrobita based on
records and court testimony. But she may have gotten more. In a May 2009
filing with regulators, MTS disclosed that it had paid a US$ 21.2
million deposit to Tammaron, a
BVI-registered company whose owner is not known.
MTS told Russian media it had made an investment in Tammaron because the
privately held Tammaron had a license for 4G mobile phone technology,
the newest standard. However, shortly after, regulatory filings show
that MTS wrote off its investment as “bad debt” explaining that
“significant uncertainty exists with regard to the completion of such a
MTS managed to secure a license from Uzbek regulators shortly after it
wrote off its debt but not before making an additional US$ 40 million
payment to a Karimova-associated business. In September 2009, MTS paid
the money to buy Kolorit Dizayn, a company
allegedly providing “outdoor advertising services” in Uzbekistan which
was owned by Karimova’s boyfriend. MTS in its own filings shows that it
valued the company at just US$ 13 million or one-third of the price it
paid for Kolorit.
Then there is the mysterious case of Merkony.
Karimove controlled Takilant and Finex through proxies. Takilant is
formally owned by her employee Gayane Avakyan and Finex by Ekaterina
Klyueva. Klyueve was a secretary in UK holding company which was owned
by Takilant. Gayane and Klyueva worked together in Karimova’s House of
Style. Both have since been detained by Uzbek authorities.
Between 2006 and 2008, a BVI company called Merkony Investment Group
made US$ 85.7 million in payments to Takilant and
another Karimova company called Finex, which is registered in Hong Kong.
The payments, according to paperwork, were made for WiMAX and fiber
optic services. However, neither Takilant nor Finex were allowed to
provide such services in Uzbekistan.
It is not clear who owned Merkony, which was founded in 2004 and
dissolved five years later. Merkony’s director is listed as Oleg
Sviridov, a lawyer working for MTS and the
right-hand man of Uzdunrobita CEO Akhmedov, Karimova’s representative in
the TeliaSonera deal. Svirdov’s name, meanwhile, shows up in leaked
documents as being on the payroll of Karimova’s Takilant. Attempts to
reach Sviridov and Akhmedov were unsuccessful.
Tip of the Iceberg
Karimova did not just make money initiating these deals. She appears to
have continuously bled her victims through extortion.
In May 2013, Swedish reporters revealed leaked documents that show
TeliaSonera being asked to pay hefty sums for protection from government
agencies and for an infusion of new clients. Karimova directly asked for
US$ 15 million to protect TeliaSonera against five regulatory bodies:
the state tax inspectorate, customs officials, the anti-monopoly
committee, the state communications inspectorate, and the Interior
Ministry. Payments on a per-agency basis were possible, the documents
show, but at higher rate. Ultimately, telecoms were just a part of
Karimova’s activities. She was involved in airlines, shipping, cement,
export-import, fashion, pharmaceuticals and other industries. If she was
as rapacious in those industries as she was in the mobile phone
business, the amount she allegedly stole may be far above the US$ 1
billion figure OCCRP found and the losses to the Uzbek people may never
Editor’s note: Reporters and researchers who contributed to this
story include: Lejla Camdzic (OCCRP), Dragana Peco (OCCRP), Olesya
Shmagun (OCCRP), Inga Springe (Re:Baltica), Fredrik Laurin (Sveriges
Radio), Joachim Dyfvermark (SVT), Alisher Siddiq (RFERL), Farruh Yusufiy
(RFERL), and Hamoud Al Mahmoud (ARIJ). OCCRP wishes to thank SVT’s
Uppdrag Granskning for their assistance.
Trans-Signal-Rabita, an Azerbaijani company, came out of nowhere to score a huge deal: A US$ 56.8 million share of a larger project with Swedish engineering giant Bombardier Transportation to install signaling equipment for Azerbaijan’s state-owned railway company. But when OCCRP reporters tracked down its owner, they found only a rural electrician living in a remote village near the Iranian border.
Three years after the “Laundromat” was exposed as a criminal financial vehicle to move vast sums of money out of Russia, journalists now know how the complex scheme worked -- including who ended up with the $20.8 billion and how, despite warnings, banks failed for years to shut it down.