Iran Pulse

Will leaked payslips scandal bring down Rouhani?

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Article Summary
Iranians are more outraged by the day over revelations of exorbitant pay for executives at state-controlled banks and insurance firms as the fallout from their leaked payslips continues.

TEHRAN, Iran — The trickle of leaked payslips of executives at state-controlled banks and insurance companies in Iran has become an avalanche, claiming careers and threatening the prospects of President Hassan Rouhani only 11 months before the country’s next presidential vote.

The scandal began on May 7, when leaked wage slips from Central Insurance of Iran showed that top officials at the state-owned insurer had received monthly compensation of up to 875 million rials ($28,600). The subsequent media frenzy forced the company’s president to quit.

Soon afterward, on June 2, the payslip of Ali Sedghi, chairman of Bank Refah Kargaran (Workers Welfare Bank), suddenly surfaced on social media, showing that he had earned some 2.34 billion rials ($76,500) in the Iranian month ending March 20. Meanwhile, conservative media outlets began reporting on alleged ties between Sedghi and Rouhani’s brother, Hossein Fereydoun.

With anti-government media outlets extensively covering the leaks, public outrage grew over a bank executive receiving some 300 times more than the minimum wage of a common worker.

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In an attempt at damage control, Rouhani ordered Vice President Eshaq Jahangiri to take decisive measures by identifying the violations, obtaining refunds and dismissing irresponsible managers. Rouhani said June 12, “Unusual payments, … bonuses and loans … [are] not compatible with standards of justice or commitment to the public money … [and are] considered a misuse of the government’s trust.” 

Government spokesman Mohammad Bagher Nobakht also offered an apology to the public, but asserted that nothing illegal had happened, as some state bodies had used legal loopholes to exorbitantly compensate senior managers. Of note, paragraph 6 of Article 76 of Iran’s Civil Service Management Law — ratified in 2013 — states that the maximum wage of a civil servant can only be seven times the minimum wage.

Only four days after Rouhani’s order to address excessive pay, another document emerged claiming that Seyed Safdar Hosseini, the head of the National Development Fund — a key state body — had been receiving monthly pay of 570 million rials ($18,600), with additional bonuses and grants for his children’s vacation expenses, books and sports activities. Of note, Hosseini’s daughter was elected to parliament on Feb. 26 as part of the pro-Rouhani List of Hope.

Amid the storm of criticism, Prosecutor-General Jafar Montazeri accused Rouhani’s opponents of using the payslip scandal to settle political scores. Separately, the head of the General Inspection Office, Naser Seraj, warned against attempts to magnify the scandal and paint things in black and white. 

On June 28, in what seemed to be an act of retaliation, government-run Iran newspaper ran a report that claimed that former hard-line parliamentarian and editor-in-chief of the anti-Rouhani newspaper Vatan-e Emroz, Mehrdad Bazrpash, had received 6 billion rials ($196,000) in “executive awards” while serving as CEO of SAIPA Automotive Group. Bazrpash denied the accusation and filed a lawsuit against the newspaper. Things took another turn when Seraj dropped the bombshell that Fereydoun had lobbied for the appointment of Sedghi, even though the latter apparently faced corruption charges dating back to his time as chairman of Bank Melli.

Al-Monitor asked longtime conservative political strategist Amir Mohebbian about the reasons for the sudden emergence of the leaks. He told Al-Monitor he believes that the leaks “definitely have a political purpose,” but added, “At the same time, they are aimed at creating more economic transparency.” Mohebbian added, “Various political factions jumped on the bandwagon and began the blame game when they saw the public backlash.”

A great portion of the Rouhani administration’s response to the public outcry has been to heap blame on previous administrations. But will this be enough? Mohebbian told Al-Monitor, “The wrong culture of high salaries undoubtedly stems from the past, but because the current government showed no opposition to that trend, its excuses are unacceptable.”

Mohammad Kajbaf, a telecommunications engineer, told Al-Monitor that he doesn’t see the leaks as a scandal because “If it were, the government would have felt ashamed of it.” Kajbaf expressed anger, noting that he's saddened to see excessive executive pay “while there is rampant injustice, discrimination and poverty in society.” He also blamed former President Mahmoud Ahmadinejad for not spilling the beans on such officials sooner.

Masoud Sadeqi, an entrepreneur in Tehran, expressed sorrow to Al-Monitor but said neither the incumbent government nor the previous one is responsible for the situation. Sadeqi said he thinks the problem lies with the lack of transparency and oversight, and believes the recent embarrassment is not the first nor will it be the last unless legislators take the issue of supervision and inspection seriously.

In the latest turn of events, the CEOs of four major banks — Refah Kargaran, Mellat, Saderat and Mehr — have been dismissed from their positions. The entire management team of the National Development Fund — including Hosseini — has been forced to resign. In addition, Minister of Economic Affairs and Finance Ali Tayebnia has set a salary cap of $5,500 monthly for bank executives, with wider regulations for public firms to be announced. 

It is not yet clear whether these measures will be enough to calm the popular outrage. The president’s cultural adviser, Hesam al-Din Ashna, has acknowledged that the leaks have stirred public opinion against the Rouhani administration, striking a heavy blow to its social prestige. Mohebbian, the conservative political strategist, told Al-Monitor, “The leaks have put the government in hot water. In addition, the lack of an appropriate media strategy to address the revelations and deal with their reverberations has further weakened the Rouhani administration’s position.”

Mohebbian also said there may be profound adverse effects from the revelations of excess pay, which he described as causing “unjustifiable rifts between high-ranking officials and members of society.” He emphasized, “The [revelation of the] exorbitant salaries exposed an important social harm: a new social class that was formed after the 1979 Islamic Revolution. Members of this new class enjoy prosperity and certain social and economic benefits while marching under the banner of revolutionary slogans. The presence of this group could have serious political ramifications, because it would divide the society into two categories: the minority high-ranking managers, or ‘haves,’ and the majority masses, or ‘have-nots.’ The creation of another social gap would disappoint the oppressed people who have been supportive of the revolution.”

Mohebbian concluded, “Although the people don’t necessarily see the government as the guilty party, the scandalous financial leaks will have their social effects and in the long run could tarnish the image of the entire political establishment in Iran.”

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Found in: leaks, iranian politics, iranian elections, iranian economy, hassan rouhani, corruption, banks

Fereshteh Sadeghi is an Iranian journalist and social media activist based in Tehran, where she has written for Panjereh and other Iranian publications. She holds a master's degree in women's studies from the University of Tehran. On Twitter: @fresh_sadegh

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