The mysterious Scottish shell companies linked to an Uzbek business empire

New research shows that eight Scottish shell com­pa­nies hold size­able com­mer­cial inter­ests in an Uzbek busi­ness con­glom­er­ate linked to the country’s president

On the ground floor of one of Southside Glasgow’s trade­mark sand­stone ten­e­ments, oppo­site a 1970s parade of dis­count super­mar­kets and real estate offices, is the offi­cial head­quar­ters of a firm called Yardrock Development.

The mod­est address, a branch of cor­po­rate ser­vices giant Mailboxes Etc, may not scream “mil­lions”. Yet that is exact­ly what this busi­ness has – at least on paper.

A new inves­ti­ga­tion has revealed that Yardrock Development is a major investor in a con­glom­er­ate linked to the fam­i­ly of Uzbek pres­i­dent Shavkat Mirziyoyev.

The firm, accord­ing to fil­ings made at Uzbekistan’s cor­po­rate reg­istry, has an equi­ty stake of near­ly $21m in Orient Group, a boom­ing net­work of com­pa­nies front­ed by a mem­ber of Mirziyoyev’s extend­ed family.

There is no way of know­ing who ulti­mate­ly owns or con­trols Yardrock Development – and there­fore a chunk of Orient Group.

The Glasgow firm is a Scottish lim­it­ed part­ner­ship or SLP, a kind of busi­ness struc­ture described by anti-cor­rup­tion group Transparency International as “the UK’s home-grown secre­cy vehicle”.

Yardrock Development is not the only firm of its kind to invest in Orient Group, which has sub­stan­tial inter­ests in Uzbekistan’s bank­ing, freight, agri­cul­ture, man­u­fac­tur­ing, retail and real estate sectors.

In a report pub­lished this month, UzInvestigations, a group led by Professor Kristian Lasslett of Ulster University and sup­port­ed by the Uzbek Forum for Human Rights, found that eight SLPs, includ­ing Yardrock Development, owned a total of more than $128m worth of equi­ty in Orient Group companies.

This rep­re­sents a sub­stan­tial share­hold­ing in the con­glom­er­ate, which has report­ed­ly thrived since Mirziyoyev replaced his pre­de­ces­sor, Soviet-era hard­man Islam Karimov, after the latter’s death in 2016. UzInvestigations said the Orient Group had risen in promi­nence with the sup­port of the Uzbek state.

One of Orient Group’s founders and share­hold­ers is Oybek Umarov, a broth­er of Otabek Umarov, deputy head of the Presidential Security Service and Mirziyoyev’s son-in-law, UzInvestigations said. Another senior exec­u­tive, it added, is the son of a serv­ing minister.

This, con­cludes UzInvestigations, means Orient Group is “polit­i­cal­ly exposed”. That, the report’s authors stress, does not imply any wrong­do­ing. But it should, they argue, sug­gest a need for greater trans­paren­cy, includ­ing over its ulti­mate ben­e­fi­cial ownership.

There is noth­ing in the report that links any of the eight SLPs that hold equi­ty in the group with either of the Umarov broth­ers or any offi­cial or politi­cian in Uzbekistan.

“As more wealth accu­mu­lates in the hands of those close to senior state offi­cials, the link between extreme eco­nom­ic and polit­i­cal pow­er becomes stronger. This is a sig­nif­i­cant threat to any prospect of democ­ra­ti­sa­tion in Uzbekistan”

Lasslett and his team have gath­ered details of invest­ments from state rail­ways and a sov­er­eign wealth fund, Uzbek Oman Investment Company or UOIC.

They found that some 86% of invest­ments made by UOIC – which is owned by the gov­ern­ments of Uzbekistan and Oman – have gone to projects involv­ing Orient Group.

“The facts we uncov­ered gave rise to an ini­tial hypoth­e­sis that the Orient Group was the ben­e­fi­cia­ry of polit­i­cal favouritism which was poten­tial­ly anti-com­pet­i­tive in nature,” Lasslett said.

“When we attempt­ed to dis­suade our­selves of this pre­lim­i­nary con­clu­sion by request­ing basic ten­der doc­u­ments or infor­ma­tion that might explain the sig­nif­i­cant cus­tom giv­en to the Orient Group, we received noth­ing of any sub­stance from the gov­ern­ment or the com­pa­nies involved,” he continued.

Umida Niyazova, direc­tor of the Uzbek Forum for Human Rights, echoed Lasslett’s con­cerns. “As more wealth accu­mu­lates in the hands of those close to senior state offi­cials, the link between extreme eco­nom­ic and polit­i­cal pow­er becomes stronger,” she said, adding: “This is a sig­nif­i­cant threat to any prospect of democ­ra­ti­sa­tion in Uzbekistan.”

Neither Orient Group nor UOIC respond­ed to requests for comment.

UzInvestigations called on the Uzbek author­i­ties to inves­ti­gate pub­lic mon­ey going to Orient Group and rec­om­mend­ed whole­sale reforms to improve trans­paren­cy in both cor­po­rate struc­tures and gov­ern­ment procurement.

But researchers also called on UK reg­u­la­tors to look at the SLPs it named in its report, includ­ing Yardrock Development, “to deter­mine whether these legal enti­ties have com­plied with UK part­ner­ship and finan­cial laws/regulations”.

It added: “These rec­om­men­da­tions are not intend­ed to imply unlaw­ful activ­i­ty has tak­en place. They are premised on the seri­ous risk fac­tors iden­ti­fied in this study, which it is argued war­rant fur­ther sub­stan­tive inquiry from the rel­e­vant man­dat­ed authorities.”

For years, opaque­ly owned Scottish part­ner­ships have been sig­nif­i­cant play­ers in Uzbekistan, invest­ing in every­thing from cot­ton and steel indus­tries to the con­tro­ver­sial whole­sale rede­vel­op­ment of the country’s cap­i­tal, Tashkent.

Several SLPs have been black­list­ed by the UN Development Programme and the World Bank amid con­cerns about pub­lic pro­cure­ment regard­ing aid pro­grammes in Uzbekistan.

One SLP linked to a play­boy nephew of for­mer Uzbek pres­i­dent Islam Karimov, Akbar Abdullayev, was the cen­tre of a vio­lent turf war over own­er­ship of two hotels in Riga, the cap­i­tal of Latvia.

Embarrassed by such sto­ries, in 2017 the British Government imposed new rules under which SLPs, like lim­it­ed com­pa­nies, have to name a ben­e­fi­cial own­er or “per­son of sig­nif­i­cant con­trol” (PSC), pro­vid­ed they had one. Critics sug­gest­ed these mea­sures would be eas­i­ly bypassed.

The cur­rent admin­is­tra­tion of Prime Minister Boris Johnson has out­lined plans for fur­ther reforms of SLPs – and wider UK part­ner­ship law – and promised to beef up the inves­ti­ga­to­ry capac­i­ty of Companies House, Britain’s cor­po­rate registry.

Alison Thewliss, the SNP MP for Glasgow Central, has long been crit­i­cal of the pace and scope of SLP reform. She said the lat­est rev­e­la­tions from Lasslett’s team showed the struc­tures were still being used to con­ceal ownership.

“UzInvestigations have gone to great lengths to uncov­er a lack of trans­paren­cy and account­abil­i­ty in the busi­ness deal­ings of the Orient Group,” she told openDemocracy.

“Yet again, we see finan­cial vehi­cles in the UK being the weapons of choice to obfus­cate records of own­er­ship and to under­mine fair competition.

“Only recent­ly the UK gov­ern­ment reaf­firmed its com­mit­ment to dri­ving greater ben­e­fi­cial own­er­ship trans­paren­cy, but in truth it has known about the inad­e­qua­cy of its com­pa­ny reg­is­tra­tion appa­ra­tus for years, and con­tin­ues to turn a blind eye to illic­it activ­i­ty hap­pen­ing on its doorstep.”

For Ben Cowdock, lead inves­ti­ga­tor at Transparency International, this is a famil­iar story.

“It is con­cern­ing to see SLPs con­tin­ue to be used to mask invest­ment into high cor­rup­tion risk projects,” he said.

“Unfortunately this will con­tin­ue to be the case until the UK gov­ern­ment fol­lows through on its plans to reform Companies House and for­ma­tion agents here are stopped from offer­ing secre­cy packages.”

Cowdock added: “Not only does this sit­u­a­tion leave the peo­ple of Uzbekistan in the dark on who is tru­ly behind impor­tant projects in their coun­try, it also tar­nish­es Britain’s rep­u­ta­tion as a trans­par­ent and reli­able place to do business.”

A spokesper­son for the Department of Business, Energy and Industrial Strategy, which is respon­si­ble for cor­po­rate reform, said: “The mis­use of SLPs by those with crim­i­nal intent is appalling. We have announced plans to reform the law on lim­it­ed part­ner­ships, but we want to go fur­ther by reform­ing the pow­ers of Companies House to give it a big­ger role in tack­ling eco­nom­ic crime.”

“Since tight­en­ing reg­u­la­tions in 2017, new reg­is­tra­tions of SLPs have fall­en by 80% – but we intend to stamp out mis­use altogether.”

Under those 2017 tweaks, Yardrock Development had to name a ben­e­fi­cial own­er or PSC. It duly did so. Its own­er, the firm said, was a new­ly cre­at­ed SLP called Wallbridge Logistics, now reg­is­tered, as it hap­pens, in the same sand­stone ten­e­ment as its sub­sidiary in Southside Glasgow. And who owns Wallbridge Logistics? According to the company’s pub­lic fil­ings, it does not have a PSC.

OpenDemocracy by David Leask