Iranian corruption: The revolving door between gov't and business

Several officials from Khamenei's business empire have been appointed to top government posts in recent years.

Iran's Supreme Leader Ayatollah Ali Khamenei 390 (R) (photo credit: REUTERS/Caren Firouz)
Iran's Supreme Leader Ayatollah Ali Khamenei 390 (R)
(photo credit: REUTERS/Caren Firouz)
In the fall of 2009, two of Iran's most powerful entities teamed up to participate in the largest deal in the history of the country's stock exchange.
The partners were the Islamic Revolutionary Guard Corps, Iran's elite military unit, and a multi-billion dollar business empire known as Setad that is controlled by Supreme Leader Ayatollah Ali Khamenei. The Guards and Setad formed a consortium to bid on a controlling stake in Telecommunication Co of Iran, or TCI, which had a near monopoly on landline telephone services. The partners won the stake for $7.8 billion, Iran's largest privatization ever.
The deal stirred up controversy when Iranian media reported that another bidder for TCI had been eliminated the day before the sale by the regulator, the Iranian Privatization Organization, or IPO. The man then heading up the IPO was Gholamreza Heydari Kord Zanganeh. One local news organization dubbed him "Mr. Privatization."
Kord Zanganeh, Reuters has learned, soon got another job: In 2010, shortly after leaving office as privatization czar, he was appointed managing director of a giant holding company. That holding company belongs to one of the winners of the TCI stake - the Khamenei-controlled business empire, whose full name in Persian is Setad Ejraiye Farmane Hazrate Emam.
Kord Zanganeh also later became chairman of a large pharmaceutical holding company. The drug company, too, is part of the Khamenei-controlled conglomerate.
Reuters last month detailed how Setad has become one of Iran's richest and most powerful institutions, largely through the systematic seizure and sale of thousands of properties belonging to ordinary Iranians. Iran's state news agency denounced the Reuters series as "disinformation" intended to undermine public trust in the Islamic Republic's institutions.
Several Setad officials have been appointed to top government posts in recent years. In August, Iranian President Hassan Rouhani named Mohammad Shariatmadari, who had served on Setad's board of directors, as his vice president for executive affairs.
The case of Kord Zanganeh shows there is a revolving door between Setad and Iran's government, with government officials also landing jobs at Setad-linked companies. Kord Zanganeh isn't the only example.
A former Iranian minister of housing and urban development, Mohammad Saeedikia, was named chairman of Tadbir Construction Development Group, another Setad holding company, after leaving office in 2009, according to a resume posted on his personal website.
Kord Zanganeh and Saeedikia didn't respond to requests for comment. A Setad spokesman didn't respond to questions about the hiring of the two men. He said the approval process of the telecom privatization deal was completely proper.
The revolving door between the private sector and politics isn't unique to Iran, of course. In Washington, politicians routinely parlay their experience into lucrative consulting jobs in fields such as military contracting.
Khamenei, who has the final say on all governmental matters, was a big proponent of privatizing Iranian state assets in the years before the TCI deal. In 2004, he ordered a review of Article 44 of Iran's constitution, which mandates state ownership of critical industries. A state advisory body appointed by the supreme leader issued a new interpretation of Article 44 allowing the privatization of major industries.
Kord Zanganeh was selected as head of the Iranian Privatization Organization in 2005, putting him at the center of the new divestment drive. Over the next five years, he oversaw the sale of about $67 billion worth of shares, he said in an interview with the Hamshahri newspaper in 2011.
The sale of the controlling stake in TCI was the biggest and most highly anticipated deal on Kord Zanganeh's watch.
One of the bidders was a telecom company called Pishgaman Kavir Yazd Cooperative Co. On Sept. 26, 2009, the day before the TCI sale, Pishgaman received a letter from the IPO stating that it wasn't qualified to participate. That account is laid out in an interview with Pishgaman's managing director, Mohammad Reza Rezainejad, published by the semi-official Fars News agency.
"On this issue, the Pishgaman Kavir Cooperative Company looks at the Iranian Privatisation Organisation as the wrongdoer," Rezainejad told Fars News on the day of the sale.
Kord Zanganeh told Fars News that the IPO hadn't acted inappropriately. He said Pishgaman had withdrawn from the bidding a day or two before the sale. Another IPO official later said Pishgaman couldn't bid because the company lacked a security clearance.
A consortium called Tose'e Etemad Mobin Co was declared the winner. Through a subsidiary, Setad held a 38 percent stake in the consortium, according to internal Setad documents reviewed by Reuters. A company reportedly affiliated with the Revolutionary Guards held 52 percent, while a local bank held 10 percent, the documents show.
Asked about Kord Zanganeh's role in the consortium's victory, Hamid Vaezi, director general of Setad's public relations department, wrote in an email: "The acquisition of shares in TCI was effected through bids (on the) Tehran Stock Exchange, and nobody could play any role in the application of its regulatory regime and any transaction carried out through this Exchange."
On Sept. 29, 2010, a little over a month after leaving office, Kord Zanganeh was appointed managing director and a member of the board of a Setad-controlled holding company called Tose'e Eqtesad Ayandehsazan Co, or TEACO, according to Iranian corporate filings.
This June, the US Treasury Department sanctioned TEACO, stating it "was created as part of the Iranian strategy to circumvent US and international sanctions." The Treasury also sanctioned a major TEACO subsidiary, Rey Investment Co.
Kord Zanganeh also now serves as chairman of the board for the Sobhan Pharma Group, according to that company's website. One of Setad's largest pharmaceutical holdings, Sobhan is worth about $181 million, according to data from the Tehran Stock Exchange.