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Sharda Naidoo, Craig McKune, Stefaans Brümmer30 Mar 2012 00:00
Cellphone giant MTN was so desperate to win a mobile operating licence in the “virgin” territory of Iran that it allegedly put together a package of bribes, trading opportunities in sophisticated weaponry, capital investment and diplomatic influence that the Islamic Republic could not resist.
That is the claim of rival firm Turkcell, which was pushed out of the deal when MTN arrived on the scene. It backs up the allegation with a raft of what appears to be internal MTN documents, leaked from the heart of the company’s Iran operation.
The allegations are set out in a $4-billion (R32-billion) lawsuit launched in the US District Court of Columbia in Washington DC this week.
The scheme, allegedly known in MTN as “Project Snooker”, was allegedly driven from the top by then-chief executive Phuthuma Nhleko, with the assistance of Irene Charnley (then commercial director), and Sifiso Dabengwa (then chief operating officer).
It included alleged bribes to South Africa’s ambassador to Iran, Yusuf “Jo-Jo” Saloojee, and Iran’s deputy foreign minister, Javid Ghorbanoghli; the involvement of former defence minister Mosiuoa Lekota in the procurement of highly sensitive weapons systems from parastatal Denel; and access for Iranian officials to South Africa’s top nuclear envoy, Abdul Minty.
The memos attached to the court papers apparently set out how Ghorbanoghli, dubbed “Long John”, was allegedly paid $400 000 to politically undermine Turkcell’s position while Saloojee, codenamed “Short John’‘, was allegedly paid $200 000 to help MTN deliver pro-Iran votes from South Africa at the International Atomic Energy Agency (IAEA) amid controversy over Iran’s nuclear plans.
The Irancell cellphone network was projected to be worth $31.6-billion in revenues over 15 years for a licence fee of $380-million.
The licence holder and the Iranian state-owned telecommunications company were to enjoy exclusive use of the market for two years before a third competing licence would be awarded.
Turkcell won the bid on February 18 2004 and MTN came second.
To secure the 49% stake in Irancell, MTN effectively also allegedly carried all the costs for its 51% partner through “sham loans”, Turkcell says.
It is alleged in the papers that MTN paid the €300-million licence fee, capitalisation costs and share transfer tax of Iran’s state-owned defence company, Sairan (also known as Iran Electronic Industries or IEI) and Bonyad (one of the five Iranian quasi-independent charitable foundations that is integral to Iran’s defence establishment) in exchange for their assistance within the ministry of defence and the “Supreme Leader”.
What follows is a summary of Turkcell’s claims in its court application and the supporting documentation that allegedly emanates from within MTN. It has not yet been tested in court, nor has MTN commented on the authenticity of the documents.
The cash bribes: the “Long John” and “Short John” story
A few weeks after Turkcell was made the preferred bidder, Charnley met with Ghorbanoghli (Long John) in Tehran where the minister told her that MTN’s only chance to oust Turkcell was to win political influence in Iran and use South Africa’s influence to favour the Iranian government at the UN Security Council.
And so began “Project Snooker”—the plan on how best to use Iranian and South African government officials to allegedly gain political influence. MTN reached out to a former deputy minister for the Iranian ministry of information and communications technology and to Mohammed Mokhber, the deputy president of a major charitable foundation known as Bonyad Mostazafan, controlled by the supreme leader of Iran.
The Bonyad foundation is controlled by the Iran Revolutionary Guard Corps, the military complex formed by Iran’s supreme leader, Ayatollah Ali Khamenei, and is believed to control about one-third of the Iranian economy. It is known for engaging in Iran’s shadow foreign policy.
MTN was then introduced to Ebrahim Mahmoudzadeh, a former Iranian deputy minister of defence and then-president of Iran Electronic Industries, who reported directly to the Iranian minister of defence.
As one of Turkcell’s local minority partners in the Irancell consortium, Mokhber and Mahmoudzadeh told MTN executives they would be willing to work with the South African company and dump Turkcell if MTN could obtain certain defence equipment, support its nuclear programme and pay for the licence and other benefits.
For example, MTN was urged to facilitate the purchase of certain military equipment from South Africa for Iran’s state-owned defence company, Sairan, which was previously blocked by South Africa’s national conventional arms control committee. For more than a year, MTN executives regularly visited Mahmoudzadeh and the ministry of foreign affairs to reinforce its political influence.
In about April 2004, the Iranians tested MTN’s ability to deliver on defence products and nuclear votes. Sairan requested that MTN arrange a meeting with Denel, South Africa’s largest manufacturer of defence equipment, as well as then-defence minister Mosiuoa Lekota.
MTN was told Iran was building its defence force and it wanted to purchase military radios, encryption technologies and pilot display computer chips manufactured in the Western Cape, which South Africa refused to sell them previously. MTN made a commitment that it could procure this equipment as well as facilitate installation of eavesdropping technologies on MTN devices were they to be awarded the 49% stake in Irancell.
The MTN board of directors, including Cyril Ramaphosa, Nhleko, Dabengwa and Charnley, received regular reports on the status of Turkcell’s licence and MTN’s strategies.
Enter Saloojee, “aka Small John”, who was appointed South Africa’s ambassador to Iran on May 23 2004. Before he left for Tehran, MTN briefed him about the licence situation and about its desire to win the licence from Turkcell. “Small John” started working closely with “Long John” and convinced the Iranian government that MTN had enough political clout to help Iran on its nuclear and defence equipment needs. Charnley was key to that mix because of her political connections in South Africa, particularly with Lekota—she worked closely with him in the United Democratic Front during the 1980s. Ramaphosa also enjoyed a close relationship with Lekota because of their ties in the ANC.
It is well known in political circles that Charnley and Nhleko were closely aligned with former president Thabo Mbeki. Charnley is friends with Mbeki’s wife, Zanele, who assisted the former MTN executive with funds to help start Smile Communications, a telecoms company.
“Small John” was also allegedly close to Mbeki, with whom he had shared a house at some point during the struggle.
In about June 2004, Saloojee invited Charnley and Nhleko to his house for dinner and that’s where the discussion of the bribes for both “Small John” and “Long John” took place. Saloojee explained that he was hoping to purchase a house in South Africa for $200 000. On April 26 2007, MTN made a direct payment into a trust account for Saloojee, which was received by his property attorneys, Gildenhuys Lessing Malatji Inc. The property transaction was closed on September 26 2007.
MTN had also made a promise to Ghorbanoghli to reimburse him for his assistance and Saloojee had helped the Iranian with personal favours, such as arranging for his children to be educated in South Africa.
It was at a dinner in May 2005 that Charnley offered Ghorbanoghli a $400 000 bribe through a “sham” consultancy agency agreement to reward his efforts to politically undermine and destroy Turkcell’s position as the licence holder and to deliver the licence to MTN instead. The “sham” consultancy payment was authorised by Nhleko on behalf of MTN in a memo dated December 11 2006.
Charnley was sent a confidential memo in which Ghorbanoghli says he has arranged for a friend in Dubai to receive the funds on his behalf through a company called Aristo Oil International Services.
In an invoice from Aristo it described the scope of the responsibilities as “introduce MTN-Iran to key role-players, arrange meetings and generally provide support and assistance during the negotiations and conclusion of the necessary agreements that will provide for MTN’s entry into the Iranian mobile market”.
Ghorbanoghli delivered on that. On September 17 2005 MTN’s executive team flew to Iran and finalised agreements with the IEDC and payment structures. A day later MTN issued a notice to its board members regarding “Project Snooker” and its decision to officially take up the GSM licence in Iran.
On September 21 2005, two months before being awarded the licence, Nhleko delivered a confidential memorandum to Dabengwa, Charnley and MTN’s former chief financial officer, Robert Nisbet, which was copied to the Chris Kilowan and Paul Norman setting out in detail the ground rules for “Project Snooker” and how MTN would deliver on the defence and nuclear support promises.
Weapons: The promised Denel collaboration, which clearly came off
In August 2004, MTN accompanied Lekota on a trip to Iran, which the cellphone company organised and paid for, where they struck an “arms- for-licence” deal with the Iranian ministry of defence to deliver “The Fish”. Nhleko and Charnley were present at the meeting where they signed a confidential memorandum of understanding, promising that South Africa would deliver “heaven, earth, and fish”, meaning the elicit arms and technology in exchange for the licence.
“The Fish” was a code for the name for a combination of military co-operation and big-ticket defence equipment, including Rooivalk helicopters, frequency-hopping encrypted military radios, sniper rifles, G5 howitzers, cannons, armoured landmine-proof personnel carriers, radar technology, pilot “heads-up” display technology and other defence articles that included US systems and components. Iran didn’t have access to this equipment legitimately because of US and international sanctions against it at the time.
To reassure the Iranian authorities, MTN paid for Iran’s nuclear negotiator to meet with then-president Mbeki at his Cape Town residence, a meeting which was apparently facilitated by Charnley, Ramaphosa and Saloojee through their political connections.
On November 16 2004, Charnley sent a letter via fax on behalf of MTN, copied to Saloojee, facilitating a meeting between Denel and the Iran Helicopter Support and Renewal Co. The letter indicated that Charnley had met with then-Denel chief executive Victor Moche to provide helicopter technology from Denel to produce helicopters with US Apache technology in Iran.
Denel’s former head for North Africa and the Middle East, Donald Romfolo, confirmed they had been in talks with Iran’s defence ministry and state arms company, Sairan, in 2004.
But he said the national conventional arms control committee barred the company from trading in Iran “because of the US sanctions”. He denied any knowledge of Charnley and said he knew of no talks with MTN or pressure applied by the company.
Lekota, now president of Cope, flatly denied on Thursday that MTN had paid for any visit by him to Iran. “This is absolutely fallacious. Defence was never bankrupt when I was there.”
However, he confirmed one or more visits “in my official capacity” to Iran, and he confirmed that “in one of those visits it coincided with the MTN people also travelling there—they did form part of the South African delegation going there”.
“I had meetings with the relevant minister and I think even the head of state — but at no stage did I have any meetings with the cellphone company MTN, I was never in any meeting. I had no obligation or, in fact, no power to negotiate anything on behalf of MTN. I think MTN negotiated their business with their counterparts quite independent of their mission. I could not have made any promises to the Iranian government on defence co-operation without going through Cabinet.”
Later, confronted with a specific allegation that he had met his Iranian counterpart in the presence of MTN officials, he conceded that “when official business had been done — we might have been entertained, and that the businesspeople that may have been part of this visit may have been part of that”.
“I deny that there was any negotiations around MTN’s business interests by the ministry of defence led by myself.”
Lekota denied that he would have promised any weapons outside of the arms control committee’s approvals that would have to follow. “I never made any commitments of the nature you are suggesting.”
In the end, and once Iran had handed the licence to MTN, it seems whatever promises about defence materiel may have been made, came to naught.
In March 2007, a year and half after MTN was awarded the licence, MTN began facing even greater pressure from its Iranian partners to deliver on some of its defence and nuclear-related promises. MTN’s representative in Iran, Chris Kilowan, sent a memo to Nhleko from the Iranians calling on the company to deliver on its defence promises. “[MTN’s chief executive Nhleko] should attempt as a matter of urgency to contact the president of South Africa and impress upon him that the failure to resolve the defence matters to the satisfaction of Iran will have severe negative repercussions for MTN,” read the memo attached as an exhibit.
The “highly confidential” memo recounts Saloojee’s description of visits to South Africa by top Iranian officials on behalf of supreme leader Ayatollah Ali Khamenei and President Mahmoud Ahmadinejad.
Khamenei dispatched Ali Larijani, then the secretary of Iran’s Supreme National Security Council, to remind Mbeki “that certain defence-related promises were made by the South African minister of defence in 2004 in exchange for which MTN was allowed to replace Turkcell in the Irancell consortium”.
The same memo reports that Manouchehr Mottaki, then Iran’s foreign minister, was sent by Ahmadinejad to “get a direct answer” from Mbeki about South Africa’s alleged promises to sell arms to Iran. Kilowan wrote in the memo: “Mottaki reiterated their understanding that MTN was allowed to replace Turkcell in exchange for defense co-operation.”
On the UN Security Council vote, the memo said: “It is now a matter of public record what happened to the vote on Saturday — that South Africa also voted in favour of the sanctions.”
The memo also relates Saloojee’s concerns. “The Iranians did not expect the voting to go otherwise, although they were hopeful that South Africa would at least abstain. As it is, South Africa is now seen as having made a U-turn on the matter and we will have to closely monitor the reaction of the Iranians to the fact.”
MTN also found itself being threatened in late 2007 by “Long John” for not delivering on its promises.
Mbeki’s spokesperson, Mukoni Ratshitanga, told the M&G: “Former president Thabo Mbeki does not believe that he should oblige attempts to drag his name into this matter and will therefore not comment.”
The Votes: International Atomic Energy Agency and the United Nations
Throughout 2004 and 2005, at the same time that MTN was lobbying hard to displace Turkcell, Iran came under intense pressure over its nuclear enrichment programme.
The international community had repeatedly voted against the state before the International Atomic Energy Authority and the UN Security Council, calling on it to meet its obligations under the Nuclear Non-Proliferation Treaty.
In fact, as Turkcell detailed, from 2004 to 2008, South Africa largely joined the votes against Iran except for a brief hiatus at the end of 2005 and the beginning of 2006, which coincided with the November 2005 license award.
“MTN learned that the Iranians understood South Africa to play a critical role in being able to lead the ‘non-aligned’ nations on nuclear votes in international bodies,” Turkcell stated.
And so, Turkcell claims, the cellphone giant orchestrated an “informal” meeting between Mbeki and Iran’s nuclear chief, Hassan Rowhani, at a dinner at Mbeki’s Cape Town residence.
“MTN paid for adviser Rowhani to stay at a hotel in Cape Town, sponsored the large dinner party, and covered all travel logistics,” Turkcell claims. “Consistent with MTN’s promises, the president assured adviser Rowhani that the South African government would support Iran at the [International Atomic Energy Authority].”
But Mbeki, through his spokesperson, refused to comment on this account.
That September, when the International Atomic Energy Authority board found Iran not to be complying with its non-proliferation treaty obligations, South Africa abstained.
Come November 20, Turkcell detailed, MTN expected it was to be awarded the licence. Instead, the Iranians are said to have delivered the message that should South Africa vote against Iran at a crucial November 24 vote before the IAEA, it would “cause trouble”.
The decision the IAEA has to make was on whether to refer Iran to the UN Security Council for breaching the NPT.
This appears to have sent the company’s mavericks into a bit of a spin.
It is alleged they approached Saloojee, who approached South African ambassador to the IAEA Abdul Minty. Other frantic calls were made, and as it happened, South Africa abstained from the vote.
Three days later the Iranians issued the GSM license to MTN.
The M&G was unable to reach Minty on Thursday, but when he was approached on the matter in February, he strenuously denied having been influenced: “At no point did [MTN] approach me to influence me in any direction.”
According to him, South Africa’s policy on Iran at the IAEA had been “very consistent”.
The “loan” to the 51% partner
After being awarded the 49% stake, MTN made good on its promises to its 51% shareholder, carrying all its costs. MTN agreed to pay the IEDC’s $88-million capital share of MTN Irancell as well as their share of the $300-million licence fee.
The Iranian partners were clear that they were not willing to pay any “interest” on, or put up security for, a “loan”. Charnley presented the proposed arrangement to MTN. Rob Nisbett, the chief financial officer, was apparently shocked at the proposal and refused to permit the deal on “improper and unsecured terms”.
He insisted that a formal loan agreement be negotiated and entered into with the parties. He also threatened to resign if this was not done.
On November 15 2005 MTN Group directed its subsidiary, MTN International (Mauritius) Ltd, to enter into sham “loan” agreements with the IEDC. Nisbett still voiced concern about this arrangement and informed the executive team that the “loans” put MTN at huge risk. Nhleko issued Nisbett with a formal written warning for opposing the financial terms and was instructed to authorise the transaction.
Documents show MTN made the “loans” through a series of complex “round trip” agreements by shifting the funds around between the IEDC, MTN-Irancell, and MTN Group, which it then recorded on its books as loans.
By the time the loans were due, MTN-Irancell was highly profitable—$118-million profit in 2007, $234-million in 2008, $516-million in 2009, $583-million in 2010 and at least $503-million projected for 2011.
Charnley did not respond to numerous messages left on her cellphone and with an assistant in her office. An automatic message at Saloojee’s office—the South African embassy in Oman where he is ambassador—said staff did not work on Thursdays, and emails were not answered.
Spokespeople for Nhleko and Ramaphosa said they would pass on the M&G‘s respective messages, but neither responded in time for print deadline.
Department of International Affairs and Cooperation spokesperson Clayson Monyela could not be reached, but last month he denied that any company had influence over South Africa’s foreign policy.
Calls to Iran’s embassy in South Africa were placed on hold, after which no calls were answered.
Claim ‘has no legal merit and will be opposed’
MTN and its legal advisers were locked in all-day meetings yesterday, filing its JSE news service (Sens) announcement only at 5.30pm in response to the explosive claims made by Turkcell in a lawsuit filed in the Washington Federal Court at 2am South African time.
Africa’s largest cellphone operator said the claim had still not been served, but that it would oppose it. The company reiterated that there was “no legal merit” to Turkcell’s claim and no basis for such a claim to be brought before a United States court. It also noted the South African government’s denial of the allegations that MTN exercised influence over it.
In advance of Turkcell filing its claim, MTN announced the formation of an independent committee, under the chairmanship of internationally renowned jurist Lord Hoffmann, to investigate Turkcell’s allegations. The Hoffmann committee has already begun its investigations and will report its findings to the MTN board, with any recommendations on actions to be taken as a result of its findings, including their publication.
“The Hoffmann committee has invited Turkcell to participate in its investigation, but Turkcell has to date not done so,” MTN said in the statement. “The invitation remains open to Turkcell to participate in the Hoffmann committee’s investigation.”
Turkcell has been threatening to take MTN to the US courts for corruption since February 2, but held out for a settlement from MTN first before it filed. MTN has been calling its bluff by refusing to settle out of court, claiming extortion.
Turkcell has argued that MTN has many business interests in the US and that the cellphone company has violated the Alien Tort Statute, a 1789 law that gives US courts jurisdiction in some instances to consider claims by foreigners for illegal conduct that occurred in another country. The law is usually cited in human rights and torture cases.
Meanwhile, Turkcell was yesterday dealing with its own set of issues relating to infighting among its board and shareholders.
Reuters reported that the board met to discuss its structure and independent board members. Having founded Turkcell in 1994, Mehmet Emin Karamehmet is locked in a boardroom struggle with the other main shareholders in Turkcell: Altimo and Nordic telecommunications group TeliaSonera.
Turkcell’s board has seven members. The three main shareholders—Cukurova, Altimo and TeliaSonera—each has two seats. Chairperson Colin Williams is the designated independent board member. Altimo and TeliaSonera want him replaced because they say he sides with Cukurova, Reuters reports. TeliaSonera has a 37% stake in Turkcell, whereas Altimo has a 13.2% stake it bought from Karamehmet in 2005. However, Cukurova’s 13.8% stake carries controlling rights because of Turkcell’s structure.—Sharda Naidoo
Sharda Naidoo is assistant business editor; Craig McKune and Stefaans Brümmer are investigators with the M&G Centre for Investigative Journalism (amaBhungane).
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