Orascom sanctions bombshells

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One of the drearier aspects of working on North Korea is that the lack of hard data means that observers are free to spin out unfalsifiable speculation. It is not without reason that someone once likened writing about North Korea to writing fiction. So it is always a pleasant relief to encounter someone who is actually doing their homework and uncovering new information and not just spinning their wheels.

A couple of years ago I was visited by British financial journalist George Turner (twitter handle @finuncovered) who came to my office armed with some SEC filings and annual reports. He wanted to compare notes and get any feedback on an investigation into Orascom Telecom and Vimplecom (the Russian company that bought most of Orascom’s assets, though not its North Korean Koryolink subsidiary). We kept in contact.

Turner has now put out a report on Orascom Telecom, its owner, Naguib Sawiris, and possible violations of US and UN sanctions, based on official filings and UK court proceedings. It is an extraordinary document. In it Turner states that:

  • Sawiris is a US citizen,
  • As part of the Orascom Telecom deal with the North Korean government to establish the Koryolink subsidiary--a joint venture with the Ministry of Posts and Telecommunications--the company established Orabank, a joint venture with the North Korean National Foreign Trade Bank which is a sanctioned entity.
  • Orascom Telecom is ultimately owned by Marchmont Trust, based in the UK Crown Dependency tax haven of Jersey. The trustee who administers the Trust’s assets is the February Trust Company; among the February Trust Company’s five directors is an American, Kevin Struve, who is also a director of Contrack Watts, which Turner describes as “a major US defense contractor and another Sawiris family owned business.”

That would be Orascom Construction, owned by Naguib Sawaris’ brother Nassef Sawaris. (Orasom was in essence an Egyptian chaebol which the founder split among his three sons into construction, telecom, and hospitality companies.) In a 2013 AP story, Struve is identified as the Orascom Construction’s strategic planning director. Contrack Watts, then Contrack International, made the press when it was sued for fraud in connection with USAID-financed construction contracts in Egypt.

In short, Turner lays out a case of possible sanctions violations by US citizens with ties to the US defense industry. A weakness in this case (which Turner admits) is one of dates: he bases his forensic investigation on SEC filings and annual reports. In particular, it is possible that while Sawiris and associated parties had business relationships with the National Trade Bank in the past, that the links were terminated after the NTB was placed on the sanctions lists. But according to Turner’s report, neither Sawiris nor Struve are talking.

(And as my partner Steph Haggard observes, the issue is not solely connections to the NTB. If Orascom is controlled by Americans, then the issue of use of their phone network by sanctioned entities presumably becomes a live issue. That consideration puts new spin on the statement in papers filed with Egyptian financial authorities in November that "the group had lost control over its Koryolink subsidiary." The issue then is standards of proof and the ability of US authorities to subpoena Koryolink financial records. Good luck.)

To be clear, Turner’s investigation does not establish that sanctions violations have occurred. But George Turner struck me as a serious investigative journalist, and the documents that he shared with me appear to be genuine SEC filings and annual reports. At a minimum these allegations ought to spur the Treasury and other parts of the US government to examine the possibility that as Turner puts it, “For several years Sawiris has been free to operate a bank in North Korea, a joint venture with a financial institution which later was considered by the US Treasury to be financing the country’s WMD programme. He has shared the profits of his burgeoning mobile phone business with the regime, and appears to have given tens of millions of dollars to their projects. All this was done as other Sawiris family companies received hundreds of millions of dollars from the US Department of Defense.”

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