Bidding Secrets of the Armed Forces Part 5: Bogus company names

This is the fifth in a series of articles exposing corruption in the Azerbaijani military.

"Seyid Ahmed" Companies in the Ministry of Defence and Internal Troops.

"Seyid Ahmed" is a name used for fake companies. Such companies are established mainly by civil servants. Following the proverb “a snake shall be caught by Seyid Ahmed’s hand”, oligarchs  establish fake companies under false identities in order to benefit from participation in large-scale state projects. Radio Liberty Azerbaijan exposed the details of such ‘Seyid Ahmeds’ in 2012. They found that such companies have been created both offshore and in Azerbaijan. In an interview with Radio Liberty, former MP Nazim Mammadov notes that the phenomenon of fake companies is not new. During the Soviet period, there were many such entities operating in Azerbaijan. But since 2003, the number of these companies has grown. “They are created to carry out financial fraud both during implementation of investment projects and when more money is allocated to the projects. These companies are particularly common in the booming construction sector, where they are established to carry out financial fraud and tax evasion and then closed soon after. A company is established, a tender is won, then the company – which has absorbed millions – disappears”.

"Seyid Ahmed" companies actively participate in bidding conducted by the Armed Forces as well. The list of tenders conducted between 2012-2014 presented by the State Procurement Agency documents a significant number of "Seyid Ahmed Ltd.s", which acquired money allocated for the Armed Forces.

Agharahim Garibshah Mammadov was the legal representative for four of the companies that won a number of tenders held by the Ministry of Defence in 2014.

Texno KO Ekstra-400 Ltd,  Texno KO PERESPEKTİV-18 Ltd,  Texno Invest -LHK Ltd, Smark Texmontaj -KC Ltd, and Yunayted Texno Rem Park Ltd were all founded on November 5 2013 and registered in Geraybeyli in the Ismayilli region. Agharahim Mammadov was the legal representative for all four. According to an investigation by Turan Information Agency, an Agharahim Garibshah Mammadov registered 76 companies from November 18 2013 to January 9 2014. The investigation also revealed the prior existence of a number of other companies all registered by him. We did not find his name on Geraybeyli village’s electoral register, but we found an Agharahim Garibshah Mammadov on the electoral register of polling station 12 of Sumgayit Election Constituency no. 42. However, according to information from the APA Information Agency, a “Agharahim Garibshah Mammadov” was arrested by the Sumgayit Police for allegedly “teaching young people about the criminal world”. The report also mentions Mammadov's previous criminal record.

Another suspicious winner of Ministry of Defence tenders is Allahyar Adishil Mirzayev, who is the legal representative of: Primodern Ltd (registration address: AZ1116, Baku, Binagadi district, Binagadi ShTQ, microdistrict 7, house 7b, fl.43. registration date: 23-12-2013);, Chiragnur Ltd (registration address: AZ1111, Baku, Nasimi district, Ali Mustafayev microdistrict 3, house 30/14, fl.2. registration date: 18-12-2013); Foster Ltd (registration address: AZ1111, Baku, Nasimi district, Ali Mustafayev microdistrict 3, house 30/14, fl.2. registration date: 18-12-2013); and  Asirus Ltd (registration address: AZ1111, Baku, Nasimi district, Ali Mustafayev microdistrict 3, house 30/14, fl.2. registration date: 18-12-2013). Again, all of these were founded on the same date in December 2013. In the first 5 months of 2014 each of these companies won Ministry of Defence tenders.

This occurs despite the requirement under Azerbaijani law that companies participating in tenders have proven professional experience in the related sphere.

According to an investigation by Turan Information Agency, 31 companies were registered by Mirzayev between November 2013 and January 2014. Our search for Mirzayev himself was not successful.

Azmashkom Tex Ltd and Treyder Ltd, both registered at Nasimi district, M.Aliyev 28, fl.3/2 Baku, won a number of tenders from the Internal Troops between 2012-2013. Another company, A.B.-ALYANS Ltd, registered at that same address, won a number of tenders opened by the Ministry of Defence.

Through the Ministry of Taxes’ registry information, we identified the owner of Azmashkom-Tex Ltd. Chingiz Huseyn Jafarov. Jafarov also owns Sputnik-12 Ltd, the winner of a number of tenders conducted by both the Internal Troops and the Ministry of Defence. That these companies are registered at the same address as the elusive Mirzayev’s shows that Jafarov is the real owner of those companies too.

As the tables show, the aforementioned companies all won tenders from the same Ministry of Defence military base. For example, Mammadov’s companies won tenders conducted by the Goradil Military Rest Centre for purchase of cleaning materials, stationery and maintenance works. Companies owned by Mirzayev won tenders conducted by the 052 and 193 military bases of the Ministry of Defence. Again the tenders cover purchase of stationery, maintenance of cars and other spheres.

Lawyer Elman Fattah stresses that the law must be taken seriously when holding tenders: “The procedure of tender conduct is defined and regulated by law. The law specifies all the procedural requirements, regulations, and documents that the bidding commission requires from the legal bodies that wish to participate in the tender."

Fattah continued: "the organisation of the Tender Commission by the side announcing the tender; the announcement of bidding results, including the list of winners and losers; eligibility for commission membership; the responsibility of commission members for violation of procedures; schedule of execution of the tender all are clearly defined and regulated by the existing law.”

But in our country tenders (particularly tenders held by the state structures) are all touched by corruption. All stages – announcement, determination of the contender, and the list of participants – are marred by serious violations of the law. We have witnessed this on numerous occasions, through media reports on various tenders and the participating companies.

For example, according to the provision of the law, the Tender Commission shall collect the list and forms demanded from the contenders to define their technical and financial capabilities and bank information from the past year, to define the financial situation of the contender. But in the information that we have examined, some companies that win tenders have share capital of just 10 AZN in total (approximately 10 Euros), with no significant financial circulation until they win the tender. On the other hand, the legal addresses of the companies are indicated as residential units, with areas as little as 15-20 square meters. These companies fail to provide information of any other physical addresses, production sites, or office space. That these companies win tenders – companies which lack the most basic of standards required for even participating in, tenders, let alone winning them – gives cause for serious suspicion on corruption.”

Fattah also notes that is illegal for more than one company owned by the same person to win tenders conducted by the same state agency:

“Instances where entities that win tenders are owned by a single physical or legal body, or of multiple companies owned by the same person participating in the same tender are fairly widespread. This strongly indicates that the winner of the tender is known in advance, and that this tender process is a sham. However, according to the laws regulating tenders, each contender can only make one bid. Contenders create the illusion of complying with the law, but “secretly” violate it giving tenders to the companies controlled by the high state officials, or by “cashing”, a slang term for appropriating state assets”.

The Ministry of Defence and the Internal Troops failed to respond to our requests for information.

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