Shortly after Supreme Leader Ayatollah Ali Khamenei’s call on officials to uproot corruption, the Iranian judiciary announced perhaps the largest embezzlement case in the country’s history involving some 6.6 billion euros ($7.4 billion).
Similar to other major embezzlement scandals in recent years — such as the one centered on businessman Babak Zanjani, who is now awaiting execution — the current case relates to murky schemes to bypass sanctions imposed by then US President Barack Obama. Over a dozen executives and board members of petrochemical companies are accused of financial crimes dating back to 2010-13, the final years of previous President Mahmoud Ahmadinejad. Eleven of the main suspects are in custody, while three others are reportedly abroad and will be tried in absentia.
To evade sanctions, the suspects allegedly set up outside of Iran companies that sold petrochemical goods to foreign customers. The suspects are accused of "disrupting Iran's economic system" by profiteering from the country’s multitiered exchange rate regime. A senior judiciary official stated at a March 7 hearing, "Despite the numerous letters [from] the Minister of Oil … to the defendants that the foreign currency [proceeds] must be paid in full … the defendants did not pay any attention … and seized a portion of the foreign currency."
Rather than handing over all hard currency proceeds, the suspects are said to have only transferred some of it but converted to Iranian rials at the official exchange rate. Meanwhile, the withheld foreign exchange was allegedly sold for up to three times that rate on the black market.
Nemat Ahmadi, a prominent Iranian lawyer, told Al-Monitor, "The case is highly complex. … Based on Iranian law, exporters must repatriate their foreign currency revenues to the Central Bank and then receive the rial equivalent.” He added, “The Central Bank currently has the same problem with a number of petrochemical exporters."
Indeed, as the rial has tanked with the return of US sanctions, the Rouhani administration has struggled to compel petrochemical exporters to return their hard currency proceeds. Back in September 2018, Central Bank Gov. Abdolnasser Hemmati warned that such practices will be “confronted” by the government. He also lamented that non-oil exporters had in the preceding six months only sold $3.8 billion out of $27 billion in hard currency revenues via NIMA (the state-run secondary foreign exchange market). Petrochemical companies — many of which belong to the so-called semi-state sector — generated 80% of these revenues. The latter is greatly constituted by privatized enterprises whose shares are commonly owned by state investment companies — all while their management is appointed through lobbying by the government, the parliament and third-party individuals.
As recently as Feb. 25, Iranian President Hassan Rouhani lashed out at the semi-state sector, saying that an economy dominated by it “is the worst kind” and that “no one dares to supervise” it.
While apparently five years in the making, the embezzlement case could be the result of pushback from the Rouhani administration against a consistent thorn in its side that has long been rumored to wreak havoc on the foreign exchange market while lobbying to sabotage the approval of anti-money laundering and other conventions that would permanently exit Iran from the blacklist of the Paris-based Financial Action Task Force (FATF). In this vein, conservative Javan daily has referred to coverage of the case as a “plot to deceive” by those in favor of adhering to the FATF’s hotly contested action plan.
An unexpected twist
Much of the outrage on Iranian social media and news sites is focused on one of the chief suspects: Marjan Sheikholeslami Aleagha. As CEO of two Turkey-based trading companies, Sheikholeslami has been described as the "partner" of prime suspect Reza Hamzelou, the former managing director of the Iranian Petrochemical Commercial Company (PCC). Most of the suspects were reportedly PCC managers at the time of the alleged offenses. Of further note, PCC was privatized in 2009.
Court records allege that Sheikholeslami transferred proceeds from sales of Iranian petrochemical products to the accounts of her trading companies, earning almost $9 million in the process. As early as 2017, the conservative Bultan News claimed that Sheikholeslami had won a contract to evade sanctions from Sepanir Oil and Gas Company, which is affiliated with the Islamic Revolutionary Guard Corps (IRGC) Khatam al-Anbia Construction Headquarters. The report also alleged that she had later “fled” for Canada “with a lot of money."
The uproar has also engulfed Sheikholeslami's spouse, Mehdi Khalaji — the Libitzky Family Fellow at the Washington Institute for Near East Policy. Given Sheikholeslami’s alleged profiteering from sanctions evasion on behalf of the IRGC, Khalaji has also become the target of a public backlash since he has long been a prominent sanctions advocate.
Sheikholeslami was previously a political writer for Reformist daily Hambastegi. She also set up the Cultural Heritage News Agency in the early 2000s. Sheikholeslami reportedly ran as a Reformist in the 2000 parliamentary elections and as a conservative in the 2008 legislative polls. Amid the backlash, property records have been circulating on social media and news sites indicating that Sheikholeslami in 2013 and 2017 bought two homes in Canada and in 2016 purchased a $2.35 million house in Washington, DC.
In addition to her Turkish trading companies, Sheikholeslami has also established several enterprises in Canada and the United States. One of them — the US-based Idea Center for Arts and Culture LLC — was set up in 2014. The company also funded a website and Persian-language magazine named "Ghalamro." One of the editors, Mohammad Izadi, confirmed the funding on March 9, writing that "this scandal has been shocking and regrettable." The Idea Center for Arts and Culture LLC was dissolved in 2017.
Sheikholeslami has so far declined requests for comment by BBC Persian. However, in reaction to the wave of criticism, Khalaji released a statement March 9 condemning "character assassination" of him and his spouse and stating that the trial in Iran is "illegal."
The case could end up having further dimensions. As some have speculated, the alleged sanctions evasion on the part of Sheikholeslami could spur legal action by Canadian and US authorities.
Another chief suspect in the case, Amin Ghorashi Sarvestani — who is being tried in absentia — was arrested in the United States in 2012 and charged with helping export embargoed communications equipment to Iran. Sarvestani pled guilty and was sentenced to 30 months in prison and a $100,000 fine in August 2013. His lawyer later argued that the sentence ought to be revised since the exports were in line with US foreign policy goals of promoting internet freedom for Iranians. Sarvestani insisted in an email to the Associated Press in 2014 that he was “neither an activist nor politically motivated,” adding, “I think it should be considered one of the strangest fraud cases if what we did was exactly in line with the US government policies — and also it would be against the Iranian government policies!”
Six years earlier in 2008 — a year before the Iranian government’s sale of PCC — Sarvestani, along with Hamzelou, had approached a Maltese businessman. They wanted to discuss “ongoing privatization efforts” in Iran that had given the two men and their partners the chance to buy state-owned PetroPars. Their idea was to look for European partners and financing for the venture. A leaked US Embassy cable relays how the Maltese businessman described Hamzelou and Sarvestani: “reform-minded ‘moderates’ who believed the current ‘situation’ in Iran could be improved through the expansion of business ties to the West.”