Long List of Corruption and Embezzlement in Teachers’ Pension Fund

The Education Commission of parliament sent the inspection report on the performance of the Teachers’ Pension Fund to the judiciary after approval. Financial corruption and embezzlement in this fund had been causing factional disputes between supporters and opponents of the Rouhani government for two years prior.

The open session of parliament on Sunday, April 9, 2017, was dedicated to reviewing an inspection report on the performance and violations of the Teachers’ Pension Fund. In a 60-page summary of a report that totals approximately 580 pages, figures of the fund’s violations, the Teachers’ Investment Company, and Capital Bank were presented and reviewed.

The report states that an investigation and inspection of the Teachers’ Pension Fund and all of its subsidiaries and expert assessment and auditing of the resources and expenditures of this economic organization requires a long time and participation of many experts. However, wherever the inspection team found anything, “major violations” were observed: “to the point that experts were compelled to conclude that violations and crimes in the Teachers’ Pension Fund have become institutionalized.”

An embezzlement of 8 trillion tomans in the Teachers’ Pension Fund with 25 subsidiary companies was one of the reasons representatives called for an impeachment of Ali Asghar Fani, Minister of Education. On October 19, 2016, while the 10th parliament was preparing for Fani’s impeachment session, Fani resigned from his position.

The main points of the inspection report on the Teachers’ Pension Fund of Iran are as follows:

● The Ministry of Education was obligated to comply with the laws and general regulations of the country, but the minister at the time of the fund’s establishment violated Article 130 of the General Accounting Law and created deviation in the fund’s method of operation from the beginning.

● The total assets of the fund based on financial statements ending September 2016 were approximately 5,600 billion tomans, and the only physical asset in the fund’s possession was the central building located at Vanak Square, Attar Street, No. 10, with a book value of approximately 147 billion tomans.

● Approximately 788 million tomans were paid as bonuses and session fees without any authorization or order from the fund’s board of trustees.

● Capital Bank paid 800 billion rials at a rate of 1.5 percent as facilities in favor of the broker without any commitment in the amended agreement.

● The broker company was initially named Faraz Rayaneye Mandegar (Lasting Computer), later changed its name to Faraz Aftab Caspian with the same registration number, while the scope of activities of Faraz Rayaneye Mandegar did not align with the nature of the contract at the time of conclusion.

● In September 2012, investment and legal participation in the construction, completion, financing and sale of units of a commercial and administrative complex known as “Gol Nabi” for 3,900 billion rials took place, lacking credible expertise in calculating properties and costs in the field of the contract, and after the failure of the above project on December 14, 2015, without considering the latest valuations of three official court appraisers, the managers of the Teachers’ Pension Fund proceeded to barter and purchase shares of a project known as “Paj Mashhad” for 5,040 billion rials.

Pervasive Investments

Part of the violations, according to the inspection report, are attributable to losses of the subsidiaries of the Teachers’ Investment Company. The report includes:

● In the meeting of September 15, 2014, the board of directors of Tadbiran Atlas Investment Company approved investment and contract execution for 6 billion tomans with the UAE company “Century General Trading L.L.C” representing full powers of Homan Commerce Amin Company for car imports, which ultimately resulted in the failure to fulfill the contract obligations by the UAE company and the return of all checks from the UAE company, and given the unknown location of the check issuer, a total amount of over approximately 14 billion tomans in principal and interest of this investment caused losses to Tadbiran Atlas Company affiliated with the fund.

● Contract with Hermez Pasargad Company brokered by Tejarat Afrin San Qeshm Company, which as a result of this transaction caused losses from the guarantees issued by the Teachers’ Investment Company of approximately 28 billion tomans.

Contract with Hermez Pasargad for the purchase of bitumen for 660 billion rials in exchange for guarantees issued by Capital Bank to the benefit of Hermez Pasargad Company in four phases of bitumen shipments purchased placed at the disposal of a company, but the operating contract of Tadbiran Atlas Teachers’ Investment Company – inspection of various types of bitumen, the amount of this company’s debt to Capital Bank for paid guarantees and its interest and late payment penalties until October 4, 2016 amounted to 24 billion tomans.

● In the project to purchase shares of Amirabab Steel Company, the Teachers’ Investment Company proceeded to recognize approximately 100 billion tomans worth of shares of a company in which it had no ownership. Similarly, the amount of late payment penalties for the company’s construction delays in two documents totaling approximately 7 billion tomans was recognized in the investment company’s accounts, which given the lack of certainty and formal realization of ownership is unjustified.

“A Handful Represents the Bushel”

The report emphasizes that only a few examples of violations are mentioned in this document and it is necessary for all competent authorities, including the Court of Accounts and the judicial inspection, to enter into unreviewed cases and restore the squandered assets.

The formation of Capital Bank and family shareholding were also reviewed in the report.

● In 2006, some shareholder companies and a number of shareholders with less than one percent transferred their shares in Capital Bank to subsidiaries of the Tehran Municipality in the form of power of attorney, and until 2012 no significant changes occurred in the composition of shareholders, finally in 2012 all proxy shares of Capital Bank that were in the possession of subsidiaries of the Tehran Municipality were transferred to a group affiliated with Behrouz Rikhte-garan.

● In 2014, 14.38 percent of the amount of capital increase by the Rikhte-garan group was paid in the names of 8 natural persons who were all relatives of Mr. Rikhte-garan, such as spouse, sister’s spouse, brother’s spouse, cousin, brother-in-law’s spouse…

● Facility payments to Capital Bank were made through directives, telephone calls, and without registration in the audit system.

The report states that according to law, all assets of the fund belong to teachers, who have not yet participated in 42 percent of the fund’s profits, which amounts to 36 thousand billion rials; therefore, in calculating the fund’s profits after setting aside legal reserves and appropriating reserves and deducting expenses, the total profit should be calculated and paid in the name of teachers.

At the end of the report, it is expressed hope that the judiciary will deal decisively with official court appraisers who have made unrealistic evaluations and exaggerations. The report states that official court appraisers were one of the factors causing corruption in the fund complex; the Central Bank did not perform its duty regarding supervision of Capital Bank, and there is suspicion of collusion and barter among them.

Formation Process of the Fund

The Teachers’ Pension Fund was established in 1995 with the aim of “improving the livelihood and welfare of teachers.” Currently, this fund has 27 subsidiary companies in groups of construction, welfare services, educational industries and IT, energy, industry and stock exchange, banking and insurance.

The fund’s capital is financed by deducting 5 percent from the salaries of teachers who are fund members and depositing the government’s 5 percent share as well as voluntary contributions from members.

The Minister of Education is the chairman of the fund’s board of trustees, and the deputy minister for development management and support is the vice chairman of the board, and 5 to 7 members of this board are also selected by the chairman for a period of 4 years or longer.

In fall 2016, four people were arrested in connection with “corruption in the Teachers’ Pension Fund.” Shahab al-Din Ghondali, CEO of Capital Bank, was among those detained. The investigation plan for this fund was first presented to the eighth parliament.

Jabar Kochakinezhad, chairman of the committee investigating the Teachers’ Pension Fund in fall 2017, had stated that the exact amount of embezzlement and financial violations in this case was close to 15 trillion tomans.

The investigation report on the performance of the Teachers’ Pension Fund of Iran, with 183 votes in favor, 10 votes against, and 3 abstentions out of 238 representatives present in parliament, was sent to the judiciary for review and follow-up.

Source: DW