BAKU -- Later this month, the eyes of the world will be focused on a shimmering glass-and-steel building newly erected on the shores of the Caspian Sea to welcome the pop stars and television crews from the more than 40 European countries that will broadcast the Eurovision Song Contest 2012 spectacle.
Azerbaijan won hosting rights to the popular extravaganza last year, when its pop duo of Ell and Nikki sang their way to victory in Eurovision 2011. The Azerbaijani government responded proudly with plans for a new $134 million concert showplace called the Crystal Hall, which seats 23,000.
Finished only a few weeks ago, it was a tense race to get the venue ready in time. Its importance was signaled by the frequent visits made by President Ilham Aliyev and First Lady Mehriban Aliyeva to the bold geometric structure as it rose amid the construction site.
But their interest was not just ceremonial and patriotic. An investigation by the Organized Crime and Corruption Reporting Project (OCCRP) and RFE/RL has discovered that the first family is personally profiting from the massive construction project through its hidden ownership in the Azenco construction company.
The company contracted for the work has long been identified in all official announcements as Germany's Alpine Bau Deutschland AG. Yet some of the equipment at the construction site is stamped with the company name Azenco. Rolf Herr, a representative of Alpine Bau in Azerbaijan, described Azenco as a subcontractor.
He would give no other details of its involvement. The Alpine Bau press office in Germany did not respond to questions about how subcontractors and vendors had been chosen.
Front Companies
Azenco is owned through a series of front companies that mask the real owners. The official newspaper of the agency for privatization of state property in Azerbaijan announced in 2010 that Baku-based Interenerji MMC acquired 97.5 percent of the shares of Azenco.
In 2010, RFE/RL investigated the privatization of the State Aviation Company's infrastructure, including Azalbank (currently Silkwaybank), which also has as a registered shareholder Arzu Aliyeva, residing at the same address. Presidential spokesman Azer Gasimov at the time confirmed that the shareholder was indeed the president's daughter.
Gasimov did not respond to repeated phone calls and a written inquiry about the presidential family's connection to Azenco and the appearance of a conflict of interest if Azenco is profiting from state-funded construction projects.
Predating Eurovision?
Eurovision 2012 event coordinator Sietse Bakker said it was not the proper organization to answer questions about the first lady or the Crystal Hall construction.
Bakker said the city of Baku commissioned the multifunctional indoor venue before Azerbaijan won Eurovision. "We have no involvement with the construction of the hall, so you should ask this question to the responsible authorities," he said.
Official records do not support Bakker's contention. Presidential Order 1620, from July 2011, to build the concert hall, came after the May Eurovision victory.
"I have not seen written records," Bakker said, "but it doesn't take much to realize that there is quite a lot of planning going into the construction of such [a] venue."
Very Expensive Flag
The Crystal Hall is the second project to raise conflict-of-interest questions about Azenco.
It also helped construct the grandiose $38 million State Flag Square near the Crystal Hall, which briefly held the "Guinness Book of World Records" title for tallest flagpole in the world.
Two-thirds of the cost of the square in Baku came from the Reserve Fund of the head of state by presidential Decrees 532 (October 26, 2009) and 1052 (August 3, 2010). The other one-third came directly from the 2011 state budget in accordance with a decree by the Cabinet of Ministers 260 S (August 25, 2011).
A spokesman for the cabinet, Akif Ali, refused to respond to questions about how Azenco came to be chosen as a partner in the project.
Looting State Coffers
Azenco has been employed on numerous state-funded projects less showy but possibly no less profitable than the Baku work. State Procurement Agency records show that in 2010 alone the company was awarded contracts worth $79 million. The company also recently gained control of Sumqayit Technology Park, a former state-funded enterprise started by Azerenerji, the government-owned energy producer.
Azer Mehtiyev, director of the Center for Assistance to Economic Initiatives, a politically independent think tank, says Azenco looks like a clear example of a scheme to "misappropriate" some of the country's oil wealth.
"With the big oil money flowing into the budget, a parallel process of monopolization of spheres of economy, redivision of state property...[made] way for the misappropriation of revenues," Mehtiyev said.
"Big infrastructure projects financed by oil revenues are mainly distributed to companies which belong to high-ranking officials. The government keeps the information about owners of the companies secret. The state contracts are assigned to companies established in offshore zones with unknown owners making public control over the process impossible," he added.
According to Mehtiyev, it is especially difficult to get information about the business interests of the president's family.
Anticorruption Talk, No Action
Azerbaijan adopted an Anticorruption Law in 2004 that obliges officials to declare the income and property holdings of themselves and their relatives.
The presidential administration and the Central Election Commission will not respond to questions about their property. A written inquiry sent to the first lady's website was not answered.
In January 2011, President Aliyev declared that the government would take serious measures against corrupt officials.
The 2012 Eurovision event will have one other tie to the first family besides the new showcase auditorium: The president's son-in-law, singer Emin Agalarov, was chosen to entertain the crowd between acts.
Azerbaijan won hosting rights to the popular extravaganza last year, when its pop duo of Ell and Nikki sang their way to victory in Eurovision 2011. The Azerbaijani government responded proudly with plans for a new $134 million concert showplace called the Crystal Hall, which seats 23,000.
Finished only a few weeks ago, it was a tense race to get the venue ready in time. Its importance was signaled by the frequent visits made by President Ilham Aliyev and First Lady Mehriban Aliyeva to the bold geometric structure as it rose amid the construction site.
But their interest was not just ceremonial and patriotic. An investigation by the Organized Crime and Corruption Reporting Project (OCCRP) and RFE/RL has discovered that the first family is personally profiting from the massive construction project through its hidden ownership in the Azenco construction company.
The company contracted for the work has long been identified in all official announcements as Germany's Alpine Bau Deutschland AG. Yet some of the equipment at the construction site is stamped with the company name Azenco. Rolf Herr, a representative of Alpine Bau in Azerbaijan, described Azenco as a subcontractor.
He would give no other details of its involvement. The Alpine Bau press office in Germany did not respond to questions about how subcontractors and vendors had been chosen.
Front Companies
Azenco is owned through a series of front companies that mask the real owners. The official newspaper of the agency for privatization of state property in Azerbaijan announced in 2010 that Baku-based Interenerji MMC acquired 97.5 percent of the shares of Azenco.
The Crystal Hall under construction, with Azenco equipment taking part
According to privatization records from March 2010, ADOR MMC, another Baku-based company, controls 70 percent of the ownership of Interenerji. Company registration documents list ADOR's legal address as "7 Samed Vurgun Street." The registered occupants of that address at the time were Mehriban Aliyeva, Leyla Aliyeva, and Arzu Aliyeva, the wife and daughters of the president, respectively.In 2010, RFE/RL investigated the privatization of the State Aviation Company's infrastructure, including Azalbank (currently Silkwaybank), which also has as a registered shareholder Arzu Aliyeva, residing at the same address. Presidential spokesman Azer Gasimov at the time confirmed that the shareholder was indeed the president's daughter.
Gasimov did not respond to repeated phone calls and a written inquiry about the presidential family's connection to Azenco and the appearance of a conflict of interest if Azenco is profiting from state-funded construction projects.
Predating Eurovision?
Eurovision 2012 event coordinator Sietse Bakker said it was not the proper organization to answer questions about the first lady or the Crystal Hall construction.
Bakker said the city of Baku commissioned the multifunctional indoor venue before Azerbaijan won Eurovision. "We have no involvement with the construction of the hall, so you should ask this question to the responsible authorities," he said.
Official records do not support Bakker's contention. Presidential Order 1620, from July 2011, to build the concert hall, came after the May Eurovision victory.
"I have not seen written records," Bakker said, "but it doesn't take much to realize that there is quite a lot of planning going into the construction of such [a] venue."
Very Expensive Flag
The Crystal Hall is the second project to raise conflict-of-interest questions about Azenco.
It also helped construct the grandiose $38 million State Flag Square near the Crystal Hall, which briefly held the "Guinness Book of World Records" title for tallest flagpole in the world.
An enormous Azerbaijani flag flies above the construction site of the Crystal Hall on the Caspian shoreline in Baku earlier this year.
A few months after it was put up, Azerbaijan's 162-meter flagpole was surpassed by an even taller flagpole in Dushanbe, Tajikistan.Two-thirds of the cost of the square in Baku came from the Reserve Fund of the head of state by presidential Decrees 532 (October 26, 2009) and 1052 (August 3, 2010). The other one-third came directly from the 2011 state budget in accordance with a decree by the Cabinet of Ministers 260 S (August 25, 2011).
A spokesman for the cabinet, Akif Ali, refused to respond to questions about how Azenco came to be chosen as a partner in the project.
Looting State Coffers
Azenco has been employed on numerous state-funded projects less showy but possibly no less profitable than the Baku work. State Procurement Agency records show that in 2010 alone the company was awarded contracts worth $79 million. The company also recently gained control of Sumqayit Technology Park, a former state-funded enterprise started by Azerenerji, the government-owned energy producer.
Azer Mehtiyev, director of the Center for Assistance to Economic Initiatives, a politically independent think tank, says Azenco looks like a clear example of a scheme to "misappropriate" some of the country's oil wealth.
"With the big oil money flowing into the budget, a parallel process of monopolization of spheres of economy, redivision of state property...[made] way for the misappropriation of revenues," Mehtiyev said.
"Big infrastructure projects financed by oil revenues are mainly distributed to companies which belong to high-ranking officials. The government keeps the information about owners of the companies secret. The state contracts are assigned to companies established in offshore zones with unknown owners making public control over the process impossible," he added.
According to Mehtiyev, it is especially difficult to get information about the business interests of the president's family.
Anticorruption Talk, No Action
Azerbaijan adopted an Anticorruption Law in 2004 that obliges officials to declare the income and property holdings of themselves and their relatives.
President Ilham Aliyev (second from right) and his wife, Mehriban (right), attend the opening of the Crystal Hall.
In August 2005 (order No. 278), the president ordered the Cabinet of Ministers to prepare a special form on which officials would give that information within two months. But the forms were never drafted and officials never provided the information. It is not clear if the president or the first lady, who is also a member of parliament, have submitted declarations in the past decade.The presidential administration and the Central Election Commission will not respond to questions about their property. A written inquiry sent to the first lady's website was not answered.
In January 2011, President Aliyev declared that the government would take serious measures against corrupt officials.
The 2012 Eurovision event will have one other tie to the first family besides the new showcase auditorium: The president's son-in-law, singer Emin Agalarov, was chosen to entertain the crowd between acts.