oDR

Phantom foreign investors for an open new Uzbekistan

A high-profile urban development project in Tashkent is designed to showcase the country for western capital. Our investigation suggests principal investors are from much closer to home.

openDemocracy investigations
21 December 2018

lead

Project design for Tashkent City's Lot 3, a shopping centre with two 30-storey buildings. Source: Tashkent City.

Two years after the death of Islam Karimov, Uzbekistan’s first president, the once impenetrable country has shown interest in opening up to international investors. Enthusiasts regard this as the “Uzbek spring”, a new beginning for the country under its new leader, Shavkat Mirziyoyev. Others have pointed to the sluggish and inconsistent pace of liberal reforms in the Central Asian state, which could just be used as façade to attract foreign capital.

Take Tashkent City, a government-sponsored project that aims to develop a high-tech business hub in Uzbekistan’s capital at a total cost of around $1.3 billion. British, Korean and German companies were awarded the main lots for construction. This flagship project seeks, in the words of analyst Dilmira Matyakubova, to “rebrand Uzbekistan as a country interested in political reform, economic investment, and friendly relations with the rest of the world”. As Mirziyoyev, who is overseeing the project, stated in October 2017: “Tashkent City is a project which we will use to announce ourselves to the international community.”

But closer scrutiny into one of the foreign investors into Tashkent City reveals a complex network of companies and individuals closely linked to Central Asia, casting doubt on the positive news that Uzbekistan’s official media initially trumpeted. Hyper Partners GmbH, though heralded as a German investor for Tashkent City’s Lot 3, seems to belong to a network of Uighur businessmen, partnering with a Kazakh entrepreneur currently facing fraud charges. Neither this company, nor others associated with its public directors, has any record of experience of large-scale construction projects.

The Uzbek government’s desire to showcase its friendliness to foreign investors led journalists to investigate the ownership of the companies that won the tenders to develop Tashkent City, unveiling a complex network of companies and individuals which operate without a clear financial rationale. With the help of legal experts in Germany, we were able to disentangle the threads and highlight the network behind Hyper Partners GmbH, one of Tashkent City’s main investors and foreign contractors.

The German front

Hyper Partners, a company registered in Germany and contracted to develop Tashkent City’s Lot 3 – a shopping centre with two 30-storey towers – is everything but German.

Financial data shows that since 3 August 2018 the company’s sole owner has been Mustafa Palvan, who was 18 when he assumed the company’s directorship and 100% of the shares. The company’s capital amounts to €25,000, the minimum amount required to register a company in Germany. Research suggests that relatives and their business partners, not young Mustafa, could be the ones really in charge of Hyper Partners. There seems to be little justification or rationale for the Tashkent City project management in awarding a tender on a large project to a 19-year-old.

Picture 12.png

Shareholder list for Hyper Partners GmbH shows Mustafa Palvan, now 19, as the main shareholder.

The founders of Hyper Partners are Waleri Wolf, 54, and Evgueni Rosenberg, 61. It’s not clear what nationality Wolf and Rosenberg hold, but the spelling of their names suggests a Russophone origin. Wolf and Rosenberg registered the company on 26 February 2018.

The two had previously founded two other companies, W&R Handelsgesellschaft GmbH in November 2008 and Statuswest GmbH in August 2016. Since October 2018, all three companies have been registered at the same address: Assar-Gabrielsson-Straße 10-14, in Dietzenbach, Germany.

Judging by the financial statements of W&R, the decade-long partnership between Wolf and Rosenberg has been a rocky road. The company mainly sold bathroom supplies. Data from the German State Trade Registry of Companies shows that W&R piled up debts.

A German legal expert, who agreed to analyse the data on condition of anonymity, said that W&R appeared to be on the brink of bankruptcy until a Kazakhstani shareholder appeared three years ago.

Picture 1.png

Data from German Trade Registry shows that Baurzhan Baimukhanov took a third of the shares in W&R Handelsgesellschaft GmbH in 2015.

In 2015, Baurzhan N. Baimukhanov, a Kazakhstani national, became a shareholder in W&R, acquiring one-third of the shares. Following Baimukhanov’s investment, the company’s troubled finances were saved by a loan.

According to the records of the German State Registry, the company declared a €78,419 debt, marked “740 VB gg. Gesellschaftern”. The company’s previous debts towards Wolf and Rosenberg were always marked “730 VB gg. Gesellschaftern”. A shareholder (Gesellschaftern in German) provided the new loan.

While W&R kept logging growing debt in its balance sheets in 2015, the following year the debt was slashed by around €70,000, without clarification in the income tables of the company’s balance sheet. According to the legal expert, this warrants further analysis:

“There are two possible scenarios here: either a shareholder gave the company a ‘credit’ of at least €78,419, or a contract was signed, without a cash transaction, but a promise of repayment. If a credit was given, it's strange that the money never showed up on the balance sheet. If this scenario is correct, the credited amount must have been spent immediately.”

In 2016, W&R’s debt was reduced to €156,336 from €245,462 the previous year.

“The company did not have the capital to reduce the debt in 2016, so the question remains: who paid in €89,126 to settle the debt? In other words, almost €90,000 circulated through the company without a public trace,” the expert concluded.

Wolf and Rosenberg’s associate Baimukhanov is a Kazakhstani businessman with close relations to Chinese business interests. In 2015-2016, Baimukhanov’s small construction company Bazis Alatau, registered in Kazakhstan, worked with a Chinese company, Zhongfu, to bid for a regional government project in Kazakhstan. We can confirm Baimukhanov’s identity from the Kazakh state registry of taxpayers, where his date of birth is consistent with the documentation from the German Trade Registry.

Earlier this year, Baimukhanov was arrested. On 20 February he was detained together with his business partner G. Nabiyeva and charged with fraud of one billion tenge (€2.4 million) in relation to building contracts and leasing land, and with attempting to issue illegal gambling permits in the Khorgos International Centre for Border Cooperation, a joint business project that stretches over both sides of the Chinese-Kazakh border. On 26 February 2018, Baimukhanov’s business partners Wolf and Rosenberg founded Hyper Partners GmbH.

The Uighur connection

Here, this story turns towards the border between Xinjiang and Kazakhstan, the geographic crux where ethnic identities merge and business connections intertwine.

In July 2016, a Dubai resident, Kazakhstani national and ethnic Uighur with the name Abdukadyr Khabibula became a major shareholder in W&R. Khabibula and Baimukhanov each took control of 40% of the company, leaving Wolf and Rosenberg with a 10% stake each. Two weeks after this transaction, Wolf and Rosenberg registered a new company, Statuswest GmbH, together with a resident of the German town of Dietzenbach by the name of Palvan Habibullah. The company was registered at the same address as W&R. Palvan Habibullah owned €20,000 of the shares, or 80%, and Rosenberg and Wolf controlled €2,500 worth of shares each.

Screen_Shot_2018-12-17_at_12.28.10 (1).png

The new Tashkent City project from above. Source: Tashkent City.

Palvan Habibullah not only has a strikingly similar surname to Abdukadyr Khabibula, who took over W&R – he was also born on the exact same day, 16 February 1964. Cross-referencing through different jurisdictions and the matching date of birth suggest that Palvan Habibullah and Adukadyr Khabibula could be the same person, though differences and mistakes in spelling in the German business registry make it difficult to establish this with any certainty. Several iterations of this person’s name appear in business registries around the world. Here we chose to use the official spelling of the Kazakhstani citizen Abdukadyr Khabibulla, as registered in the UK Companies House database.

In 2014, Khabibulla founded a new company, Palwan Limited, in London. Palwan is the German spelling of the name Palvan, the name Khabibulla may be using as a German resident. But in the UK registry, Khabibulla figures as a UK resident. Palwan Limited has remained dormant, and counts possible relatives of Khabibulla among its shareholders: Aibibula Paliwanmuhaimaiti (born August 1991), a UK resident and Chinese national; Rezi Maliya (born April 1967), UK resident, Chinese national; Aibibula Yamimaiti; and Aibibula Nuerbiya.

Two of the shareholders in Palwan Limited, Abibulla Paliwanmuhaimaiti and Rezi Maliya, are also shareholders and directors of another company, AKA London Trading Limited (later renamed AKA London Limited). This company was registered on 29 October 2015 in the British town of Kingston upon Thames. Abibula Nuermaimaiti (born June 1989), a UK resident and Chinese citizen, is also listed among the company’s shareholders.

With companies registered in Dubai, Kyrgyzstan, London, Germany and Turkey, holding Chinese and Kazakh passports, and with a variety of residencies, these directors and major shareholders are part of an international Uighur community that makes use of different jurisdictions and investment options across Europe and Asia. According to public accounts, some time between in 2015 and 2016, AKA London Trading borrowed around £2 million from a man named Abdurkadyr Khabibula, in all probability a spelling mistake of Khabibulla’s full name, since it was disclosed in the accounts that he was a “related party to the directors” of AKA London Trading Limited.

This UK company also borrowed around £7.1 million from Palvan Insaat Turizm Lojistik San. TIC. Ltd, a Turkey-registered company related to the Uighur group, between 2015 and 2016. Aibibula Paliwanmuhaimaiti, a director of the UK company Palwan Limited, is registered as the head of this Turkish company, according to information from Turkey’s Yellow Pages business directory. The Palvan Insaat company is located in a residential area of Istanbul. A cursory look through Google Street View and a thorough search failed to return any details of business activity at the address.

Picture 9.png

The business address of Palvan Insaat Turizm Lojistik San. TIC. Ltd. Source: Google Streetview.

Dubai subsidiary, AKA International DMCC, owned by Khabibulla and two other Palwan Limited shareholders, appears to be the only company among this network with an actual real estate portfolio. Indeed, this company invested in a high-tech project in Kyrgyzstan, Bishkek Smart City. This government-led project aimed to install cameras for road safety and surveillance, utilising facial recognition technology to identify people of interest to the authorities. According to the Kyrgyz government, a Chinese state investment fund, Beijing China Veterans Lingxin Capital Management, is acting as the main investor, with Huawei Technologies providing implementation. According to the January 2018 deal, the Beijing China fund will provide $51 million of the investment. The Kyrgyz government was due to provide the remaining funds ($9 million), but backed out at the last minute. According to the director of the Investment Promotion and Protection Agency of Kyrgyz Republic, Huawei identified a new partner ready to invest these funds: a Kyrgyz-registered company, AKA Invest.

At this time, AKA’s investment and ownership came under scrutiny by Kyrgyz investigative websites Kloop.kg and Respublika KG. When contacted by Kloop, AKA Invest admitted to being a subsidiary of the Dubai company AKA International DMCC, and stated that it is owned by three ethnic Uighurs: Abdukadyr Khabibulla from Kazakhstan and Aibula Nuermaimaiti and Aibula Palivanmukamiati, both from China. At the time, AKA Invest’s office was located at the address of a cafe in Bishkek, Kyrgyzstan’s capital. The company’s clerk told Kloop journalists: “You can ask your questions there [in the cafe] and they will pass them on to us.” It seems an unlikely base from which to make a $9 million investment in a high-tech urban development project, still more so given that these Uighur businessmen are also investing in another – Tashkent City.

While Wolf and Rosenberg served as the public directors for the German companies, Palvan Habibullah obtained 60% of the shares in Statuswest in 2016. According to data from the German State Registry of Companies, Statuswest took a loan of €500,000 in 2016 from an unknown source. Given the paucity of their assets, it is unlikely that the loan came from Wolf and Rosenberg. After the loan, Khabibulla/Habibullah appeared in the company’s documents as a 60% shareholder.

Picture 5.png

Shareholders in W&R Handelsgesellschaft GmbH, according to German Trade Registry.

Between 2017 and 2018, control of these companies was ceded to family members of Khabibulla, Wolf and Rosenberg. W&R is now owned by two men in their thirties named Wolf and Rosenberg. After the August 2018 buyout, Hyper Partners’ main shareholder is now 19-year-old Mustafa Palvan.

Thomas Mayne, an anti-corruption campaigner and author of a recent report on asset recovery and return, said:

“This shows how easily it is to obscure the true owners of a project – the beneficial owners – using companies registered abroad. The project certainly raises many red flags: the source of the funds is unclear, and a 19-year-old is unlikely to be the true beneficial owner of the company responsible for the Tashkent City shopping centre project.”

With complex rounds of loans and cash, this network of German companies could be used as a shell for opaque investments. The difficulty of identifying the investors and shareholders of Hyper Partners GmbH, Abdukadyr Khabibulla and the other businessmen may be no accident.

Concealing their identity and affiliations in relation to this project would have been a plausible response to the scrutiny that arose following the investigations from Kloop.kg and other watchdogs. Similarly, Baimukhanov’s initial role in W&R and the fact that Hyper Partners was founded less than one week after he was arrested on fraud charges in February this year could suggest that his role as the middleman between the project and the unknown beneficial owners of these companies was spoiled.

An expert with over a decade of experience in major financial crime cases in Europe and Central Asia, who agreed to comment on the case on the condition of anonymity, said the German front companies raised suspicion:

“The commercial rationale for funding a Germany-based company through unsecured personal loans originating from a high-risk jurisdiction raises eyebrows. Looking at the data, the money from such unsecured loans would then go from Germany to Uzbekistan. What would be the benefit of [this circle of transactions] other than guaranteeing a degree of anonymity for the ultimate beneficiaries of the investment?”

Funds are transiting from Central Asia through German companies back into Central Asia. These funds are now poised to be funnelled back into Uzbekistan through Hyper Partners’ investment in Tashkent City. Two key questions remain: why did the Uighur businessmen set their companies up in this way? And are these men the end of the chain or are they another front for other figures behind the money flows?

Destruction of an apartment block for Tashkent City project

Destruction of an apartment block for Tashkent City project.

Tim Stanley, senior partner for Russia and Commonwealth of Independent States at Control Risks, a global risk consultancy, said: “This investigation into a potentially fraudulent investment scheme involving a flagship investment project is a timely reminder to investors and the donor community of the risks they run if they fail to conduct adequate due diligence or take the required steps to identify and mitigate their third-party risks.”

Thomas Mayne further stated: “[This information] also poses many questions for the German authorities, who should investigate the funds flowing through the German companies in question. If the Uzbek authorities are serious about attracting foreign investment, they should not only collect and verify full beneficial ownership information of companies bidding for such projects, but also make that information available to the public.”

In sum, it appears that not only did Tashkent City accept a teenage investor, the project also chose to work with a company closely associated with a Kazakh businessman currently facing significant fraud charges for 1 billion Kazakh tenge (€2.4 million) – and with Uighur investors representing a group of active and dormant companies, which issue personal loans of several million pounds. It might be high time to request a public audit of Rosenberg and Wolf’s companies.

Open Democracy contacted Hyper Partners GmbH, Statuswest GmbH, W&R Handelsgesellschaft GmbH and International Business Center Tashkent City for comment, but did not receive a response.

Tashkent City is having human impacts on the ground. Read a personal account of dispossession here.



Get oDR emails A weekly roundup of political and social developments in the post-Soviet space. Join the conversation: get our weekly email

Comments

We encourage anyone to comment, please consult the oD commenting guidelines if you have any questions.
Audio available Bookmark Check Language Close Comments Download Facebook Link Email Newsletter Newsletter Play Print Share Twitter Youtube Search Instagram