Friday , 30 October 2020

Khamenei’s Office finds a way to circumvent US sanctions

Radiozamahe – Barkat Pharmaceutical Group wants to look legitimate in order to expand its international business and financial network. But Barkat is owned by Setad, an organization under the direct rule of Iran’s Supreme Leader and sanctioned by the US government. Barkat, therefore, found a way to mask its ownership. In 2019, a secretly quiet company, named Karandish Doran Moaser and seemingly not related to Setad, took over major shares of Barkat. However, according to the investigation carried out by Zamaneh and the Danish media Danwatch, the new shareholder is a shell company and, in fact, itself belongs to Khamenei’s Office. Karandish is not included in the list of US sanctions, an apparent advantage for Barkat.

Barkat Pharmaceutical Group Company is one of Iran’s four major Pharma holdings, representing the economic interests of Iran’s Supreme Leader in the growing pharmaceutical market of the country. Since its creation in 2010, Barkat has initiated several collaborations with foreign companies, and been active in investing and attracting foreign investment in diversified sections of the pharma business.

However, one major problem could always disrupt the ambitions of Barkat to expand its connections beyond the business opportunities available in the domestic pharma market; It was owned by Setad, an organization under the direct rule of Ayatollah Ali Khamenei and sanctioned by the US since 2013.

Although pharmaceuticals are exempted from US sanctions, having connections to a sanctioned foundation can create problems for Barkat if it wishes to carry out international financial transactions, says Mahdi Ghodsi, an economist at Vienna Institute for International Economic Studies.

Facing the difficulties that sanctions might cause, Barkat’s solution was to mask its ownership.

Therefore, in 2019, Barkat’s ownership changed on paper. However, as an investigation by Zamaneh and Danish Media shows, nothing has changed in the real structure of Barkat’s ownership.

Our investigation has obtained three pieces of evidence which show Karandish Doran Moaser, a company that owns majority of Barkat’s shares since 2019, is a shell company belonging to the economic conglomerate of Ayatollah Khamenei.

Pieces of evidence suggest that Karandish is not only a shell company but a mask name for the sanctioned Tadbir Economic Group that was the major shareholder of Barkat before 2019

What is Setad?
Setâd-e Ejrây-ye Farmân-e Emâm (Setad), a foundation under the direct supervision of Ayatollah Khamenei, the supreme leader of Iran has tightened its grip on Iran’s economy especially in the pharmaceutical market in the last decade by creating a complicated inter-linked network of companies.
Since its creation in 1989, Setad has developed a complicated network of inter-linked companies and diversified its activities by entering profitable markets from petrochemicals to pharmaceuticals.
The US has sanctioned Setâd-e Ejrây-ye Farmân-e Emâm (Setad) in 2013. In a press report published by the Treasury Department of the United States in 2013, the organization of Setad is described as a “a labyrinth of 37 ostensibly private businesses, many of which are front companies. The purpose of this network is to generate and control massive, off-the-books investments, shielded from the view of the Iranian people and international regulators.”
The Treasury department claims that the mission of this labyrinth of front companies is “generating revenue” for Iran’s Supreme Leader and assisting the “Iranian Government’s circumvention of U.S. and international sanctions.”
Khamenei’s office and the foundations under his control are also known to the Iranian public as a shadow government, because his office has not been exposed to legal and juridical inquiries and is known for lack of accountability to governmental agencies.
Setad as well as several other foundations under Khamenei’s supervision are exempted from paying taxes to the government of Iran.
This independence highlights the opportunity for Setad to run shady economic activities, lacking transparency and accountability to the people.
Zamaneh and Danwatch have investigated how Setad’s companies such as Tadbir Economic Development Group and Barkat Pharmaceutical Group succeeded to circumvent US sanctions.

People’s company or Khamenei’s

Most of Iran’s big holdings are either government-owned or affiliated with foundations under the control of the Supreme Leader. Barkat belongs to the latter.

But riding on the massive wave of supposed privatizations in Iran, Barkat announced in October 2016 that it has changed its status from privately held to publicly listed company, meaning that the company was listed in Iran’s stock exchange.

With regards to the current status of Barkat as a publicly listed company, the deputy manager of Barkat Pharmed Group claimed that more than 50 percent of the company now belongs to “natural persons” (in contrast with “legal entities”).

However, the combination of shareholders shows the opposite. Barkat was never owned by individual citizens.

Reviewing the annual financial reports of Barkat from 2016 to 2019, Zamaneh and Danwatch found that throughout these years, the sanctioned company Tadbir Economic Development Group was its main shareholder, owning in March 2017, March 2018, March 2019 respectively around 84.14%, 68.23% and 72.48% of shares.

The rest of the ownership of Barkat belonged to other Setad companies, including Pouya Investment, Tadbir Investment, Alborz Investment, Sobhan Pharmaceutical Group, amongst others, while some of those companies such as Alborz and Sobhan were at the same time subsidiaries of Barkat.

Setad and its non-sanctioned territories
Barkat Pharmaceutical Company was created in 2010 in order to focus on and invest in the healthcare sector. It functioned as an umbrella company for diverse Setad affiliated companies that are active in the pharmaceutical market.
According to the company’s report to its shareholders, the group integrated more than 20 subsidiaries active in “the development and transfer of technical knowledge, commercializing technology and production of medicine” besides others.
However according to Orbis Business Directory, the number of Barkat’s direct subsidies exceeds 30, in addition to tens of other indirect subsidiaries.
The group has become one of the four major holding companies in the Iranian pharma market in the last decade, according to an analytical report of Iran’s Pharma Market published by Tamin Ejtemaei Research Institute. It provides around 14 percent of the pharmaceutical products in the market, according to the group’s website.
The company has taken major steps in the last decade to make profitable deals with well-known European companies such as Novo Nordisk, the Danish pharmaceutical company.
Barkat has established Barkat Pharmeceutical Town, a special economic zone, and claims that several foreign companies from Denmark, France, Germany, Britain and Austria have decided to invest in the town.

Shreds of Sanctions

A major shareholder of Barkat until 2019, Tadbir was simultaneously under US sanctions since 2013 for being a Subsidiary of Setad.

The US Treasury describes Tadbir Group as “one of the main holdings companies” belonging to Setad that uses its subsidiaries to make significant investments in Iran’s economy.

Barkat Pharmaceutical Group itself, despite its sanctioned ownership, was not listed under the sanctions, most probably because medical and pharma companies are exempted from US sanctions.

In the last decade, US sanctions have intimidated and blocked major foreign investments and transactions in Iran even in the pharmaceutical market despite the exemption from the sanctions.

In the case of Barkat, the situation might be more complicated as long as it has an apparent financial link to Setad.

Mahdi Ghodsi, an economist at Vienna Institute for International Economic Studies explains: “The US sanctioned the Supreme Leader of the Islamic Republic who is legally appointing the heads of semi-public companies such as Barkat. Therefore, US sanctions may be extended to these companies even operating in the humanitarian sectors.

Without Tadbir on the board of Barkat, the risk could be compromised and collaborations with foreign partners might be less exposed to the US sanctions.

An in-house baby

Then in 2019, something strange happened on the managing board of Barkat. The major shareholder of Barkat was not anymore the sanctioned Tadbir Group.

A company named Karandish Doran Moaser took the place.

The first traces of Karandish on the board of Barkat go back to the spring of 2019, according to the documents and sheets reviewed by Zamaneh and Danwatch.

In a few months and until August 2019, Karandish had taken 78.5 percent of the shares belonging to Barkat Group, around the same amount that Tadbir used to own.

Karandish Doran Moaser, to-date, is the main shareholder of Barkat, owning 59.7 percent of the shares as of August 2020, while Tadbir Economic Development Group regained some stakes, elevating to 8.2 percent.

There are hardly any documents available online about the activities of Karandish Doran Moaser except for its presence as a shareholder of Barkat, and a registry announcement in the official newspaper of the ّIslamic Republic of Iran.

According to the registry, Karandish appeared first in May 2013, with 10 million Rial (which at that time was around 50 Dollar) capital. Its main shareholders are unknown.

No website, no public activities, no comments by people on board about this specific company, and finally, no story is available online or offline about Karandish.

According to an auditing expert in Iran who spoke to Zamaneh, Karandish might be a shell company disguising some of Khamenei-owned companies. This expert, who preferred to stay anonymous, meant that we have to look for the auditor of Karandish, if it is Mofid Rahbar Audit Firm, then Karandish belongs to Khamenei’s office.

Mofid Rahbar is an auditing firm that offers exclusive accountancy services to organizations overseen by Ayatollah Khamenei’s office.

It was not difficult to discover that both, Karandish and Barkat, have contracted Mofid Rahbar as their auditor.

Zamaneh and Danwatch could access a list of companies, most of them created in the 2000s, the sanction era, whose all auditor is Mofid Rahbar. Most of them are specialized in investment.

Tadbir in other clothes

Two other pieces of evidence indicate that Karandish Dornan Moaser is not only  Khamenei’s company but merely a mask name for part of Tadbir Economic Development Group’s stakes.

The first documentation concerns a physical and concrete fact: Karandish and Tadbir both occupy the same office space at the same time.

In the registry announcement of Karandish Doran Moaser, the address of the company changed in January 2018 to a building in Khaled Islambuli street. The same address corresponds to Tadbir Economic Development Group. Both companies are situated on the same floor, and have the same postal codes.

In our last documentation we looked into possible changes in Barkat’s structure of management, and concluded that the change of ownership did not lead to a meaningful change in Barkat’s Board of Directors.

Looking into Barkat’s Board of Directors, Zamaneh and Danwatch discovered that in the last few years almost the same faces have been on the board. The members, however, change titles and represent different entities at different times.

As the most salient case, Akbar Barandegi, a member of the board and the current Chief Executive Officer (CEO) of Barkat, was also representing Tadbir Economic Development Group on the board at the beginning of 2019. However, one year later and at the beginning of 2020, he was suddenly representing Karandish Doran Moaser.

It seems that the Chief Executive Officer (CEO) of Barkat formally represents the shareholder that has the most stake in the company. Hamid Reza Jamshidi, the head of the management board, and the one who, for now, represents Alborz Investment Group on the board, used to represent Tadbir Economic Development Group when he was the CEO of Barkat.

The fact that the same members of the board are representing different entities based on their position indicates that the structure of management (and therefore ownership) in Barkat is quite fixed, although some changes are happening on paper.

In addition to the aforementioned, Hamid Reza Jamshidi, in one of the board meetings in June 2019, the time that marks the transitional period in the ownership of Barkat, signed the form of attendance as a representative of Karandish. We could not find out if he forgot who he represents on the board, or if he was only undecided.

Shell entities all over the place

The auditing expert who preferred to stay anonymous says that a strategy to circumvent sanctions is to create shell companies and disguise one’s connections.

Opening of a housing suburb project by Barkat in Maragheh, Eastern Azarbaijan Province – Photo: IRNA

 “They make these companies in order to go around sanctions,” he says.

A source with knowledge of Setad’s economic activities said to Danwatch that a number of companies belonging to Setad are doing the same to obscure their ownership. He believed that the change in the ownership of Barkat was done not only to circumvent American sanctions but also to avoid any bad reputation. 

“In reality the ownership of Barkat has not changed. They are just playing with names and the legal structures. Moaser is a shell company for Tadbir. They do this mainly due to the US sanctions but also to avoid any bad reputation Setad or they themselves might have”, says the source.

Mahdi Ghodsi, an expert on Iran’s economy, believes that the strategy to mask ownership enhances the financial interactions of foreign companies with the foundations supervised by the Supreme Leader. 

“When Bonyads (Foundations ruled by Iran’s Supreme Leader) want to run their businesses and get their revenues from exporting, etc., they may do it through this new company instead”, he says.

Who is Karandish?

The board of directors of Karandish have three members: Ahmad Mirsane’, Ahmad Azizi, Alireza Ghelmansoraei.

These three men are on the board of other companies at the same time, all of which are audited by Mofid Rahbar.

Ahmad Azizi, the head of Karandish Doran Moaser until March 2020, is the former general manager of Meli Bank in London, and former high consultant for the Central Bank of Iran. His CV says that he now works as an investment and international banking consultant.

Companies like Karandish are run by people who have prestigious resumes and educated backgrounds. The accounting expert says: “Setad companies are partly led by those well educated and enabled individuals who are partly corrupt. They get busted and make a deal. So they go to the safe side to run the business for Khamenei. ”

“Setad wants to have relations with the world, and put those educated people at its service,” he says.

  • The other articles in this investigation will be published gradually in the coming days
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