The verdict in a massive corruption case involving the Iran Petrochemical Commercial Company (PCC) was announced on September 5, 2021. But nearly three years after proceedings first got under way, the details remained shrouded in mystery.
We were told at the time that 15 named defendants had been sentenced to a total of 180 years in prison, linked to the embezzlement of around €6.6bn. But curiously for Iran, none of them were in custody at the time the sentences were issued. Most were out on bail, and a handful had even managed to leave the country.
IranWire has now gained access to the 2,000-page judgment, issued by Judge Asadollah Masoudi-Magham in Branch 3 of the Special Corruption Court. The contents shed light on the sheer extent of mafiosi behavior, graft, cronyism and money laundering in Iran’s still-lucrative petrochemical industry – and on how far the 15 convicted men were aided and abetted by dozens of others, many in positions of power.
The PCC case is a labyrinthine affair. In this article, the new hidden passageway we’ll explore is the role played by the telecommunications company Irancell and its partner, the South African MTN Group, in bringing even more vast, illicit profits to PCC bosses – and, according to documents newly unearthed by IranWire, some of their own people, too.
The PCC, as the semi-public commercial arm of the National Petroleum Company, was tasked with selling Iranian petrochemical products to foreign markets. The scam was that operatives did not bring back all the proceeds to Iran as foreign currency. Instead, they reimbursed Iranian firms by paying them an equivalent amount in rials at the officially-set rate, rather than the open-market one, thereby pocketing more than €6.6bn of proceeds rightly owed to Iran. The surplus cash was stored in various shell companies it had created, mostly with the state’s blessing, in order to bypass sanctions.
During the process, PCC managers were aided and abetted by members of the Intelligence Ministry, who helped to cover up the embezzlement, and affiliates of the Islamic Revolutionary Guard Corps.
At the time the scam was unfolding, from 2009 to 2013, Iran’s biggest mobile network provider, Irancell, was facing problems of its own. Its official partner, the South African MTN group, owned 49 percent of Irancell shares and had been providing Irancell with equipment since it was founded in 2005. The company not only owed MTN half its profits, but all the money for this equipment, which was due to be paid in instalments.
Finding millions of euros within the Iranian banking system and transferring them abroad had become practically impossible by that time due to sanctions. Procuring this much foreign currency from the open market and transferring it on exchanges was prohibitively expensive. This was where the euros accumulated by PCC operatives in their foreign accounts came into play.
It was agreed that Irancell would pay the directors of the PCC not the official rial-equivalent of the euros it needed, but at the much higher open market rate. The PCC was then to pay MTN the money owed via its foreign accounts, using some of the profits it had made abroad from Iranian oil and gas. Apart from making vast amounts off the difference, documents received by IranWire show that PCC bosses profited from this regrettable arrangement in other, more intricate ways.
Carousel Fraud in the Time of Sanctions
At that time, most Iranian currency exchanges charged a 10 to 12 percent commission for money transfers. Bank Mellat’s flat rate for transferring money from Irancell stood at the more modest eight percent.
But documents received by IranWire indicate that this charge, too, was exploited by PCC directors and accomplices. Because the money was now being transferred in rials, inside Iran, from one domestic company (Irancell) to another (the PCC) – and, via the PCC’s shell accounts in Dubai, the money was then paid to MTN in euros and dirhams – PCC directors colluded with both Irancell and MTN staffers to take an additional six percent as commission for the transfers. This money was allegedly shared between a handful of senior employees at all three companies, even though during the trial, Mohsen Shir-Ali, one of the defendants, claimed that Irancell’s share had “only” been one percent.
Six percent might seem trivial a trivial amount. But one of the transfers alone was worth more than €500m, allowing those involved to generate an extra €30m for themselves. The PCC, the internal documents state used these “commissions” to buy out other companies, such as Dalahu Petrochemical Company, without touching the other euros it had stashed in accounts abroad.
A supplementary investigative report in the PCC case, prepared in 2014 by the legal division of the IRGC’s Intelligence Unit, states: “Mr. Alireza Ghalambor Dezfuli, Irancell’s CEO at the time, participated in obtaining and transferring ‘commissions’ along with the [PCC] defendants Messrs. Mohsen Ahmadian and Mohammad Hossein Shir-Ali.”
The report says that the PCC agreed to transfer some 200 million dirhams, as well as €498,638,122 gained from the PCC’s oil and gas sales, into the account of MTN South Africa on behalf of Irancell in 2011. The PCC’s Dezfuli is said to have colluded with Nazir Patel, chief financial officer of the MTN Group, and two other MTN officials to gain an extra $30m in “percentages” from foreign transactions.
In another case, according to Page 145 of the judge’s verdict, “When the transfer of €402m of currency was interdicted, Mr. Mohsen Ahmadian, in collusion with Ms. Masoumeh Dari [head of the PCC’s Dubai office] and Alireza Dezfuli, CEO of MTN Irancell, obtained the amount from the secondary currency market inside the country and gave this sum to the PCC.”
The so-called “secondary market” is where the Iranian government sells foreign currency at a price higher than the officially-set one, but lower than the open market rates: a form of subsidy for necessary goods. In other words, the participants were giving currency back to the government that it already had at its disposal. Any such transaction, the verdict surmised, was “useless” to the state.
On yet another occasion, Page 25 reports, a transfer to a PCC cover account worth €96m was interdicted due to sanctions. Mohsen Ahmadian, the PCC’s director for foreign trade, then colluded with the head of the PCC’s Dubai office and Alireza Dezfuli, CEO of Irancell, to instead deposit more than €30.4m in the PCC’s accounts inside Iran.
Page 1,625 of the verdict states that the Irancell chairman, Ebrahim Mahmoudzadeh, also “participated and getting and transferring percentages” from several transactions.
These frequent and extremely large currency transfers between Irancell and the PCC, in the name of the MTN debt, were taking place at a time when, according to court documents, Irancell had no formal contract with the PCC in place. The transfers were conducted solely on the basis of a written request from MTN Group for the repayment of Irancell’s debts.
A Drop in the Ocean
Many of the charges against individuals and entities involved in the PCC fraud were dropped before the case got to court. In most cases the specific reason for their removal was not spelled out, though Judge Masoudi-Magham makes repeated, stern reference in his judgment to interference in the case by Iranian security agencies. Even some of those who were sentenced to prison terms were allowed to leave Iran before the case concluded, and family members who colluded with them were generally let off the hook. The side venture that PCC bosses engaged in with Irancell and MTN is only one small part of an embezzlement that cost Iranian companies – many of them owned by the state, so in effect, the Iranian people as well – a grand total of more than €6.6bn.