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South African headquartered group MTN has been brazening out allegations that it bribed its way into the consortium which holds the Iranian mobile phone market. MTN is relying on results of its paid for investigation by SA-born and educated Leonard Hoffmann, a retired UK Judge. Hoffmann’s conclusions are based primarily on a view that MTN’s former manager in Iran, Chris Kilowan, is an “unreliable” witness. As we discovered in today’s interview, Hoffmann never met nor interviewed Kilowan. The former MTN manager alleges quite a few things, but primarily that $400 000 was paid by an MTN company to an Iranian official Javid Ghorbanoghli, who greased the right palms to get MTN in. Nobody disputes the money was paid just before MTN was brought in to replace Turkcell. Or that it went through a company called Aristo Oil owned by a friend of Ghorbanoghli. Kilowan maintains the invoice was approved and signed by MTN’s then CEO and now chairman Phuthuma Nhleko. Hoffmann pointed to a handwriting expert who concluded it was not Nhleko’s signature on the document. I guess that’s now up to the SA court to decide. Turkcell, the group which was replaced in the winning Iranian consortium, isn’t lying down. After withdrawing its US court action last year, this week it issued summons against MTN in the Gauteng High Court. Turkcell’s attorney Eric van den Berg came through to the CNBC Africa studio today to explain on our Power Lunch show why his client disagrees with Judge Hoffmann’s findings; why the US case never got to court; and what Turkcell now expects to gain. After agreeing to participate, MTN’s legal counsel was suddenly called to an “internal meeting” just before we aired. I wonder when the cell phone company will realise the brazening time is over? First the former Financial Director gets fired and leaves immediately without explanation. Now this. Eisch. – AH
ALEC HOGG: Well, as we’ve been discussing throughout the week, Turkcell has filed a court case in South Africa against the number two cellphone provider, MTN. Joining us to discuss the case is Eric van den Berg who is a partner at Fasken Martineau. The firm will be representing Turkcell during the proceedings. Eric thanks for coming through. Just by way of completeness, we have been asking MTN to participate. In fact, up until about 45 minutes ago, they were coming. Then the legal counsel of MTN was called to an internal meeting, which one presumes is extremely urgent because they are here defenceless. That’s their problem. However, as far as you’re concerned we need to go through the facts of the matter and the reason why Turkcell is suing MTN in the South African courts – so quite a lot of ground to cover. Just to go back though, the basis of your claim is that a gentleman who worked for MTN called Chris Kilowan has made certain allegations. He worked for MTN in Iran from 2004 to 2007. How did he come to Turkcell in the first place?
ERIC VAN DEN BERG: It’s quite a long story. As I understand, a representative of Turkcell made contact with him in about December 2010, and over a series of meetings in December, the beginnings of the story came out. It was quite a bit later – February/March, almost into October of the following year – where he was properly recognised and debriefed by various other legal representatives of Turkcell. I think they were also represented by DLA Piper in Paris, and Patton Boggs in Washington, so in a series of meetings they managed to get to see some of the documentation that he had: the sham contract with Aristo Oil. Those kinds of things started to emerge. What the period was between 2007 and 2010 – I’m not sure why there was that lengthy period of silence, but he may well at that stage, not have wanted to talk. I understand that up until 2010, he was a fairly reluctant and recalcitrant person in coming forward.
ALEC HOGG: What changed his mind?
ERIC VAN DEN BERG: As I understand, it relates primarily to the money that was paid to the South African Ambassador to Iran (Yusuf Saloojee). Money which he (Kilowan) paid out of his own pocket and which he was seeking to recover from MTN.
ALEC HOGG: The basis of this, though – and let’s just unpack this quickly – there was a person called Mousa (Hosseinzadeh). I’m not going to use the surnames because they are terribly long. Mousa was introduced to Chris Kilowan, your star witness, by an Iranian official called Javed (Ghorbanoghli). Nobody disputes that. Chris Kilowan then used an MTN company to pay $400 000 to Mousa, presumably to go through to Javed via Aristo Oil.
ERIC VAN DEN BERG: Arista Oil – yes.
ALEC HOGG: So everybody agrees $400 000 has been paid via Aristo Oil to the Iranian officials, through the Iranian official’s friend. The dispute or MTN’s side of it is that when Judge Hoffmann looked into this he called Kilowan and Mousa unreliable witnesses. What makes you think they are reliable?
ERIC VAN DEN BERG: There’s quite a lot of background documentation, which ought to be available. Hoffmann never interviewed Kilowan. What he relied on was his deposition in the United States and as I understand it, – I haven’t read Hoffmann in any great detail – but as I understand it, there was also reference made to evidence he gave in one of the other arbitrations. He didn’t give it to the ICC, but at the BIT, he certainly would have testified, and so that was available. Then Patton Boggs made available to Hoffmann, various other documentation, so really, just relying on the statement. What they say there are inconsistencies between what he says and the documentation. They say it’s a fabrication of lies and distortions and that he’s a conspiracy theorist.
ALEC HOGG: And an unreliable witness…
ERIC VAN DEN BERG: And an unreliable witness… Our experience of him is not that. But he will have to get into a witness box and he will have to withstand cross-examination, and I’m sure that’s going to be a fairly rigorous process.
ALEC HOGG: Why go to the United States first?
ERIC VAN DEN BERG: I think, as I understand from Patton Boggs and the counsel who represented Turkcell there, there was a proper argument to be made that the United States courts had jurisdiction. There was a recent Supreme Court decision, I think called Kiobel, which then said they don’t have jurisdiction. They’d had a whole argument going around MTN funds passing through America, and then of course, there’s the United States/Iranian unhappiness. From a litigation perspective, that would have been a good place to litigate it.
GUGULETHU MFUPHI: The move to a South African court: does that maybe show confidence in South Africa’s legal system from Turkcell’s perspective?
ERIC VAN DEN BERG: Turkcell have had meetings with a number of South African lawyers, obviously including myself. They certainly asked questions about our legal process, about the reliability of our courts. The things that I certainly said to them was that it’s a slow process. It can be much quicker. Hopefully, there will be changes here particularly around Road Accident Fund type litigation, which should speed the process up. I think our courts work.
ALEC HOGG: What are they hoping to achieve?
ERIC VAN DEN BERG: What are they hoping to achieve?
ALEC HOGG: Do they want the license in Iran?
ERIC VAN DEN BERG: They can’t get the license in Iran through this litigation. This is a damages claim – it’s based in delict. It’s based on delict-caused interference with contract, and they seek to recover the profits that they have lost/would have made, in Iran, and that’s the number of $4.2 billion US.
ALEC HOGG: How have they worked that out?
ERIC VAN DEN BERG: It’s primarily on the profits MTN have made. Remember that MTN stepped right into Turkcell’s shoes, so it’s the same business plan. It’s the same business model.
ALEC HOGG: Go back a little. What was the situation before the alleged bribe was paid?
ERIC VAN DEN BERG: The situation was that Turkcell had won the tender. There were certain things that needed to be signed off, the corporation of a company, and the foreign investment licence. All of those things were done. There were some changes in legislation, which affected the shareholding, but ultimately all those things were done. The basis, upon which Turkcell won the bid, was that it had a revenue-sharing arrangement of 28 percent, which was almost double what MTN were prepared to pay. It was almost double, what MTN’s bid was and once Turkcell was extracted from the consortium and MTN were placed in the consortium, the numbers were exactly the same. MTN are on a 28 percent revenue-sharing arrangement
GUGULETHU MFUPHI: When you say Turkcell was extracted, what were the reasons behind that? MTN stepping up to the plate…?
ERIC VAN DEN BERG: The allegation was that there was interference with their contract through a number of different things, so through the bribes, the attempt to influence the International Energy Agency, the nuclear things, introduction to South African politicians, introductions to Denel, etcetera.
ALEC HOGG: And you have all of this that you’re going to present to the court.
ERIC VAN DEN BERG: Yes, we will.
ALEC HOGG: When will we see the founding affidavits?
ERIC VAN DEN BERG: Well, the Summons has been issued. The Summons is in the hands of the Sheriff. I did give a copy to MTN’s legal representatives – to Webber Wentzel – but that was a courtesy copy. That’s not proper service, so the Summons is in the hands of the Sheriff. It should be served during the course of – hopefully – today/early next week. They then have the opportunity to deliver a formal notice, but we won’t really see what their defence is until, I would think, sometime into next year. We’re going into a sort recess period at the courts, so it will be a while before they set out what their defence is.
ALEC HOGG: But the Summons presumably, carries all of your…
ERIC VAN DEN BERG: It carries all of our allegations and contains some of the supporting documentation.
ALEC HOGG: Is that now in the public domain?
ERIC VAN DEN BERG: That’s in the public domain.
ALEC HOGG: Is there anything in there that we should know about as South African citizens, or as South African media – any new discovery?
ERIC VAN DEN BERG: I don’t think that there’s anything new in it. It’s pretty much what was put up in the American complaint. However, it was written as you would write it for a South African court.
ALEC HOGG: So this is all going to come down to whether Chris Kilowan and Mousa are reliable witnesses or not, and you’re confident that our courts in South Africa will find that they are reliable.
ERIC VAN DEN BERG: Yes, and it’s really very early days. There’s a whole discovery process, so we must put up the document that we have, MTN must put up the documentation they have, and the nature of litigation is that witnesses appear.
ALEC HOGG: Just one final point: the timing is interesting. It was a year ago that you decided not to pursue it in the American courts. I’m talking about you as Turkcell. Phuthuma Nhleko has only recently… The CEO at the time of the alleged corruption has only recently become Chairman of MTN. Did this have any influence?
ERIC VAN DEN BERG: No, I’m not sure what the delay was in instructing us.
ALEC HOGG: So there’s no settlement here. This is going to court. This is going to be open to the public. We can get hold of the documentation and see exactly what it that you allege now.
ERIC VAN DEN BERG: Yes, I’m happy to send it to you. We’ll get to trial – I would guess with a little bit of luck – probably early in 2015. That’s my guess as to how long it’s going to take.
ALEC HOGG: The wheels of justice grind slowly.
GUGULETHU MFUPHI: Eric, it has been a pleasure speaking to you. Doubtless, we’ll get you in for an update very soon. That was Eric van den Berg, who is a partner at Fasken Martineau.
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