The Coca-Cola Company was aware of potential legal challenges when Uzbekistan's government seized control of a successful bottling venture from U.S. citizens nearly 20 years ago, an RFE/RL investigation has found, raising renewed questions as the Central Asian state now moves to sell control of the venture.
The findings, documented in e-mails, memos, and other materials, some of which have never been made public, add fresh uncertainty to what Uzbekistan has hoped would be one of its biggest, most lucrative, and highest-profile investment auctions in years.
Expected to be valued at tens if not hundreds of millions of dollars, the Coca-Cola bottling venture controls almost half of the soft-drinks market in the country of 34 million people. Beyond bringing an infusion of cash into state coffers, the sale of the government's stake could bolster Uzbekistan's international campaign to trade the reputation of a corrupt investment backwater for the image of a lucrative emerging market.
The sale of the Coke stake had already attracted some suspicion: Just a few weeks after the government publicly invited potential buyers to submit bids, in December 2020, the country's anti-corruption agency released -- and then quickly withdrew -- a statement claiming that the process was flawed and calling for its suspension. A short list of final bidders includes a company that is connected to a son-in-law of President Shavkat Mirziyoev.
The RFE/RL investigation pulls back the curtain on the company's history in Uzbekistan, revealing details of a two-decade-old struggle that has involved the now-jailed elder daughter of Mirziyoev's autocratic predecessor, Islam Karimov; a powerful Washington lobbying firm; U.S. lawmakers; and a tenacious Uzbek-American family that has long argued the Uzbek government stole its stake, which it says was worth more than $300 million.
E-mails and other memos obtained by RFE/RL show that Coke executives were aware that the transactions in the early 2000s, in which the Uzbek government acquired the stake once held by the New Jersey-based Maqsudi family, could be vulnerable to legal challenge.
And later, when the government moved to resell that stake to a joint venture owned by a little-known U.S. company at what appeared to be a fire-sale price, Coke executives moved forward even as they were aware of significant red flags.
That U.S. company, it later turned out, was closely linked to Karimov's elder daughter, Gulnara.
"I would say that if there is no outright 'hands off' from the US government then we can proceed but we must always remember that to do so is risky and we may be faced at some time with a partner that runs into some trouble in one form or another," a regional Coca-Cola finance director warned in a May 2004 e-mail to regional executives. The addressees also included what appeared to be a top lawyer at Coca-Cola's U.S. headquarters in Atlanta.
"We will have to accept that the price of operating in Uzbekistan will be continued uncertainty and considerable risk," the director wrote.
Gulnara Karimova, daughter of Uzbek President Islam Karimov, presents her Guli Collection at China Fashion Week in Beijing in October 2012.
As it turned out, that risk included Coca-Cola Bottlers Uzbekistan (CCBU) being taken over and controlled -- "stolen," the Uzbek-American family that first set up the Coca-Cola joint venture alleges -- by Gulnara Karimova, whose father ran the country with an iron fist from 1991 until his death in 2016. Karimova is now sitting in a Tashkent prison and is charged, among other things, with illegally acquiring the Coca-Cola ownership at an improper discount.
In the United States, Karimova has been indicted on bribery and corruption charges stemming from a separate but related effort involving telecommunications companies. She has also been hit with sanctions by the Treasury Department.
The Maqsudis, the Uzbek-American family that first set up the Coca-Cola joint venture, said they planned to sue in U.S. courts or elsewhere.
'Keep Pepsi Out'
In Uzbekistan, Coca-Cola's history dates back to just two years after the Soviet collapse.
In 1993, the company's wholly owned subsidiary, the Coca-Cola Export Corporation, agreed to invest in a three-way joint venture to bottle and market the American soft drink and other beverages. The other two partners were the official Uzbek food-industry association Uzpischeprom and Roz Trading, a company incorporated in the tax-haven jurisdiction of the Cayman Islands.
Roz was owned by members of the Maqsudi family, ethnic Uzbeks with historical ties to Afghanistan. Much of the family moved to the United States in the 1970s; the father, Abdul Maqsudi, was a successful, influential businessman who stayed in Afghanistan for several years even after the 1979 Soviet invasion.
Two years before the creation of the joint venture, one of the Maqsudi sons, Mansur, married Gulnara Karimova, the elder of Karimov's two daughters.
Shares in the venture were initially split evenly three ways; later, Roz Trading increased its holdings to a majority 55 percent, while Coca-Cola raised its investment to 43 percent.
The venture, called Coca-Cola Bottlers Uzbekistan Ltd., was successful. By 2000, it had over $100 million in annual sales and had the largest beverage bottling plant in Central Asia.
In 1996 and 1997, Mansur Maqsudi and his brother Farid were named "Bottlers of the Year," and they attended an awards dinner in their honor at Coca-Cola's U.S. headquarters in 1998.
Over the course of 2001, relations between Mansur Maqsudi and Karimova spiraled downward, until July 29, when, after a series of fights between the couple, Karimova fled the United States with their two children, flying home to Tashkent.
Days later, Maqsudi filed for divorce in New Jersey, where his family lived, alleging that Karimova had kidnapped their children.
Uzbekistan's internal security agency began harassing Maqsudi relatives in Tashkent, as well as workers at the main Coca-Cola bottling plant, and staff at the Tashkent office of the family business. Three relatives, including Mansur's uncle, were arrested and detained. Another employee was detained later. Three top executives fled the country. Operations at CCBU's four facilities ground to a halt.
Mansur (2nd left) and Farid (right) Maqsudi pose for a photo at the Coca-Cola plant in Tashkent. (undated)
Back in the United States, the Coca-Cola Company was concerned. Janet Howard, then a senior vice president, and other company executives held a meeting with the Uzbek ambassador in Washington on August 17, 2001.
The ambassador "said this commercial dispute must be separated from 'family matters,'" Howard wrote in an e-mail dated the same day, adding, "According to the ambassador, 'Farid [Maqsudi] has declared war on the Uzbek Government.'"
Four months later, on December 24, 2001, Uzbek security forces detained more than two dozen Maqsudi relatives living in and around Tashkent, including women and children and an elderly grandmother. They were driven more than 15 hours to the border with Afghanistan, where they were left and told not to return.
That same day, Coca-Cola's president for Eurasia and the Middle East, Ahmet Bozer, wrote an e-mail to senior Coke executives discussing "shareholder issues in Uzbekistan."
"The final resolution will be a new partnership structure without the Maqsudis," Bozer wrote.
"We will 're-set' government relations (this has already started)," he wrote. "This is an opportunity for us to establish strong relationships between [the Coca-Cola corporation] and the Uzbek government."
Bozer also made clear one of Coke's paramount concerns: "A key priority for us is to keep Pepsi out," he wrote in the December 24 e-mail.
Bozer, who years later rose to become Coca-Cola's worldwide executive vice president until his retirement in 2016, did not respond to messages from RFE/RL seeking comment.
For Coke executives, the overriding concern appeared to be not who controlled the Uzbek venture but ensuring that its operations would continue.
"There's no debate the Maqsudis built a success story," Tim Lane, a retired beverage-industry executive who sat on the advisory board of CCBU, told RFE/RL.
But, he said: "Coke was listening to whomever was in control. They undoubtedly needed to do what they needed to do to protect the brand, and whatever the story line was, they backed it."
'In Accordance With Applicable Law'
The September 11, 2001, terrorist attacks on the United States, which took place about six weeks after Karimova fled for Uzbekistan, scrambled U.S. priorities for Central Asia -- and U.S. foreign policy more broadly. President George W. Bush's administration persuaded Karimov to let U.S. forces use a former military base, and the country's airspace, to support military operations in neighboring Afghanistan.
Over the next nine months, Uzbek authorities continued to pressure the Coca-Cola venture, alleging fraud and theft.
Uzbek courts issued a series of rulings liquidating Roz Trading's shares. The Uzbek government also forbade the venture from allowing any of its domestic revenues -- valued in Uzbek soms -- from being exported and converted into U.S. dollars.
Among other things, Uzbek authorities accused Roz Trading of mismanagement and improper bookkeeping; later, the company was accused of mistreating employees.
In June 2002, Coca-Cola hired the Washington lobbying firm Stonebridge International to help resolve the dispute. The lead intermediaries were Roald Sagdeev, a former scientific adviser to Soviet leader Mikhail Gorbachev, and Sagdeev's then-wife, Susan Eisenhower. Payment terms included a $200,000 fee plus 2 percent for each U.S. dollar transferred out of Uzbekistan, according to the engagement letter sent to Stonebridge.
"Of course, all of the efforts of Stonebridge and the Company shall be carried out fully in accordance with applicable law," the letter said.
After traveling to Uzbekistan to work out a settlement with the authorities, Eisenhower forwarded a six-page internal memo dated August 6, 2002. The memo, which is a summation of the Uzbek government's allegations, shows Karimova was directly involved in the talks.
"Given the international exposure and her past relationship with the New Jersey family this has become a high-level political issue, which, she recognizes, could have an impact on her father," the memo said.
"Most importantly, the [Karimov] family is concerned that any help for Coca-Cola or CCBU is aiding the 'M' family," the memo said. "M" appears to refer to the Maqsudi family.
The Albright Stonebridge Group, the successor firm to Stonebridge, did not respond to multiple emails from RFE/RL.
While the Stonebridge intermediaries were traveling, Coca-Cola's U.S. executives met with Uzbekistan's ambassador. On July 31, Howard, the vice president, wrote to several other U.S.- and Turkey-based company executives, saying that "there has been a breakthrough via a private channel to the family" -- a reference to the Karimov family.
Howard also proposed a letter to the Karimov family indicating that Coca-Cola accepted that ''M would be replaced by a third party friendly to the Uzbek side."
Deeper insight into Coca-Cola's strategy, however, came in an earlier memo from Bozer, e-mailed to several European and U.S. executives.
In that memo, dated July 22, 2002, Bozer laid out various options for resolving the impasse. Bozer also wrote, however, about the government's liquidation of Roz Trading's shares: "Contrary to Uzbek law, the Uzbek Council of Ministers then awarded this 24 percent to the government agency that holds the State's 33 percent interest."
An attachment that was also forwarded by Bozer explicitly states that Uzbek courts were being used as a cudgel against the Maqsudi holdings.
"Uzbek courts are being used in a systematic way (often taking actions which are contrary to Uzbek law) to reduce the shareholding of the Roz Group from 55 percent in May 2001 to 0 percent in July 2002," the memo says.
'Eager To Please Ms. Karimova'
Throughout 2001, 2002, and subsequent years, outside observers assumed that Gulnara Karimova was involved in the shuttering, and later the takeover, of the Coca-Cola venture.
The extent of her involvement, however, only came into sharper focus years later, in court papers filed as part of lawsuits brought in U.S. federal court by the Maqsudi family.
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In April 2003, the Uzbek government advised Coca-Cola that the state's share of CCBU would be privatized and turned over to another joint venture called Muzimpex. The venture's parent company, Zeromax, was a conglomerate that was originally founded in the U.S. state of Delaware in the late 1990s.
Zeromax later reorganized and reincorporated itself in Switzerland, in part to avoid legal challenges by the Maqsudis.
Court filings include copies of signed contracts and incorporation papers that show Karimova set up a company in the United Arab Emirates that received contracts valued at $1.75 million in 2002 and 2003 to supply raw materials to CCBU.
The man principally involved in setting up that company, Revi Holdings, was Farhod Inogambaev.
In an August 2007 affidavit filed as part of the Maqsudi lawsuit against Zeromax in U.S. court, Inogambaev said he was coerced into working for Karimova. He said Karimova threatened his relatives.
Among other things, he said he was forced to compose false reports of tax fraud and corruption against the Maqsudis.
She "knew that this takeover would advance her mission of destroying Mansur Maqsudi, his family, and his businesses. Second, she was well aware of the enormous financial value of the CCBU business and its facilities," Inogambaev said in the affidavit.
"Ms. Karimova personally coordinated with top officials in the Uzbek government...to orchestrate the destruction of Roz in Uzbekistan," he stated.
Inogambaev later fled Uzbekistan with the Maqsudis' help and received political asylum in the United States. Inogambaev declined to comment further when contacted by RFE/RL.
Inogambaev said that in September 2002, acting on behalf of Karimova, he met with Bozer at the Intercontinental Hotel in Tashkent.
"Mr. Bozer supported Ms. Karimova's effort to take over control of CCBU through one of her companies. Several times during the meeting Mr. Bozer said something like, 'we are on the same side of this dispute,'" Inogambaev said in the affidavit."Coca-Cola officials were particularly eager to please Ms. Karimova because they were concerned that she might allow Pepsi to do business in Uzbekistan," Inogambaev alleged.
In an e-mail to other Coke executives, Bozer denied there were any discussions with Karimova despite multiple memos to the contrary, including one from an American who headed the Uzbek telecom company Uzdunrobita.
In the May 2004 e-mail to regional executives, Rodney Stiles, the finance director for Coca-Cola's Eurasia and Middle East Group, suggested Coca-Cola faced potential future problems if it proceeded with the proposal that would end up giving Muzimpex and its parent, Zeromax, control over CCBU.
"We will have to accept that the price of operating in Uzbekistan will be continued uncertainty and considerable risk," he wrote in the e-mail whose recipients included what appeared to be a top lawyer at Coca-Cola's U.S. headquarters.
Later that year, Muzimpex formally acquired the majority stake previously owned by Roz Trading from the government for $14.1 million.
A 2005 audit commissioned by the Uzbek Prosecutor-General's Office asserted that theft and fraud at CCBU had cost the Uzbek government about $6 million. According to one person with direct knowledge of the audit and the investigation, the "whole process" was set up to justify the Uzbek government's seizure of Roz's shares.
"There were violations at CCBU, but there wasn't any basis for seizing the assets," the person told RFE/RL, speaking on condition of anonymity because he was not authorized to discuss the contents of the audit publicly.
Telecoms Scandal
By 2007, tensions between the Maqsudis and Karimova -- and the Uzbek government -- had devolved into trench warfare. The New Jersey court where Mansur Maqsudi's divorce from Karimova was granted had awarded Mansur custody of their two children four years earlier. An international arrest warrant had been issued for Karimova as a result of the New Jersey court ruling stemming from the divorce case and her flight to Uzbekistan with her children. That sharply limited her ability to travel internationally.
The Uzbek government, meanwhile, issued a "red notice" request through the global police organization Interpol that called for the arrest of the Maqsudi brothers.
In May 2008, Karimova and the Maqsudis agreed on a settlement that resulted in several Maqsudi relatives being released from Uzbek government custody, in exchange for court proceedings in the United States being dropped.
Later that year, an arbitration panel in Vienna dismissed Roz Trading's legal claims against Zeromax.
By 2010, the Uzbek government moved to close down Zeromax. The company was forced into bankruptcy.
In 2012, meanwhile, a Swedish documentary detailed leaked documents that showed Karimova allegedly received nearly $320 million in bribes from a major international telecommunications company that sought access to the Uzbek market. Two top employees with CCBU were detained in Geneva as they were trying to withdraw money from a bank account linked to Karimova.
A Russian telecommunications company, MTS, was later accused by U.S. authorities of paying bribes to Karimova; the company ultimately paid $850 million to settle the charges.
In 2013, Uzbek authorities launched criminal investigations into, and then seized, Muzimpex's holdings in the Coca-Cola venture.
The moves against the telecom venture and Coca-Cola holdings, meanwhile, culminated in 2014 with Karimova being charged by Uzbek prosecutors with theft, bribery, and "membership in an organized crime group" and taken into custody.
In 2017, Uzbek authorities announced additional charges against Karimova, including embezzlement of state property. Among the allegedly stolen items was the 57.1 percent stake in CCBU that had been seized by the Uzbek government and then privatized in 2004.
After a period under house arrest, Karimova was abruptly sent to a Tashkent women's prison, where she is believed to remain to this day. Her exact condition is unknown, a reflection of how opaque Uzbekistan's judicial system is. Her daughter has sought to publicize her plight, saying she suffers from health problems.
A lawyer appointed by a Swiss court to represent her interests after Swiss authorities seized bank accounts containing hundreds of millions of dollars has been unable to visit her in prison since June 2019.
A 2016 report by the Swiss Federal Police, which investigated whether Gulnara had used Swiss banks to launder or hide illicitly obtained funds, also made the ownership of Zeromax clear. "According to Swiss legal proceedings, Zeromax is part of a company conglomerate owned by Karimova," it said.
Gulnara's father, who had ruled the country since before independence in 1991, was hospitalized in late August 2016 and declared dead on September 2.
Officials at Coca-Cola's corporate headquarters in Atlanta did not respond to a series of questions sent by RFE/RL in multiple e-mails. Instead, CCBU in Tashkent replied.
"Coca-Cola has been refreshing Uzbek consumers for over 3 decades," spokeswoman Nazee Aripdjanova said in an e-mail.
"We require the highest standards of ethics, transparency and compliance to all laws and regulations, from all our stakeholders, both in letter and spirit. We support the decision of the Uzbek Government to privatize the bottling business in the country and we are convinced that an experienced bottling partner will further bring value to the consumers, customers and communities in the country," she said.
"We also recognize the key steps that the Government is taking to ensure an objective, fair and transparent privatization process, including putting together a global team of reputable institutions and confirmation of adherence to existing regulations and laws in Uzbekistan," Aripdjanova said.
Lane, the former beverage executive, said that officials at Coca-Cola headquarters were likely very aware of the ongoing sale process and the fraught history.
"If the history has all been cleaned up, and someone is trying to regularize the country and there's an appropriate transaction to be had and there are legitimate investors, I'm sure Coke would listen to that," Lane told RFE/RL.
'Many Reform Promises Remain Unfulfilled'
Karimov's successor, Mirziyoev, has embarked on a series of reforms aimed at purging some of the vestiges of Karimov's decades in power. He has also sought to burnish the country's battered image and attract badly needed foreign investment to help modernize the economy.
"The government has taken some concrete steps to improve the country's human rights record," Human Rights Watch said in a 2021 report. "Nevertheless, Uzbekistan's political system remains largely authoritarian. Many reform promises remain unfulfilled."
Uzbek President Shavkat Mirziyoev
In 2018, the government announced it would sell its stake in CCBU, and enlisted the European Bank for Reconstruction and Development to help organize the sale. However, the participation of the London-based bank, whose mandate is to help countries in Eastern Europe and the former Soviet Union build market economies, was later halted due to the Uzbek government's decision to suspend the process, according to a bank spokesman.
"The EBRD is ready to consider and support bankable projects, which facilitate foreign direct investment and meet our criteria," spokesman Anton Usov told RFE/RL in an e-mail.
In 2019, meanwhile, Mirziyoev signed a decree to auction off shares in dozens of state-owned enterprises and properties. Last June, the government announced that its 57.1 percent holding in CCBU would be sold.
According to the government statement, the venture remained highly lucrative, earning about $160 million in 2020, a 46 percent increase from the previous year.
In its December 16, 2020, announcement, the state assets management agency said it would accept letters from would-be bidders by December 31 and select the participants of the first stage of the sale process by January 14. It also named European banking giant Rothschild & Co. as the exclusive adviser to the deal.
Two weeks later, Coca-Cola's Turkish unit, which already runs operations in much of Central and South Asia, announced that it would submit a bid. If successful, that would effectively return complete control of the Uzbek bottler to Coca-Cola's main corporate structure.
That prospect rankled several interested bidders within Uzbekistan and led the country's newly established anti-corruption agency to take the unprecedented step of asking for the tender to be frozen.
One day after releasing its statement, however, the agency withdrew the demand and stated that the auction "was being conducted with utmost rigor and integrity."
On February 10, a Tashkent lawyer named Zafar Solijonov published a list of the finalists being considered by the Uzbek assets agency. Among the names was Coca-Cola's Turkish unit, as well as Danish beer giant Carlsberg.
Also included in the list was an entity known as the Uzbek-Oman Investment Company, a little-known company whose main partner lists Otabek Umarov, Mirziyoev's son-in-law, among its primary shareholders.
On June 4, the State Assets Management Agency announced that the tender's third stage had been completed and that "additional negotiations [would] be held with the bidders in order to clarify the sale price and improve the terms of sale of the state share."
No information about the names or number of bidders was released, and the statement did not say when the winner would be announced.
Asked by RFE/RL's Uzbek Service to comment on the entire bidding process, Mumin Ibodov, a spokesman for the state assets agency, referred questions to the foreign companies advising the Uzbek government, including Rothschild.
Rothschild did not respond to an e-mail seeking comment.
"How many times will the Government of Uzbekistan attempt to 'privatize' shares of Coca Cola Bottlers Uzbekistan Ltd.?" the Maqsudis said in a statement sent to RFE/RL. "It has been almost 20 years of an ongoing corrupt process beginning with illegal confiscation of our 55 percent shares of CCBU and then 'privatizing' over and over the CCBU shares by the Government of Uzbekistan."
"We are the rightful 55 percent owners of CCBU," they said.