Nordic Monitor
Burak Erdoğan, the ghost son of President Recep Tayyip Erdoğan who prefers to lie low and makes public appearances only rarely, found himself under the spotlight in a months-long project by the European Investigative Collaborations network, which became famous worldwide as the Malta Files. This massive investigative journalism effort essentially laid bare how a small island-country in the Mediterranean became a platform for people involved in entangled business relations to evade taxes in their own countries. It also exposed shady connections between businessmen and politicians all around the world. The files showed how Burak, along with his uncle Mustafa Erdoğan and his aunt’s husband Ziya İlgen, obtained a ship valued at $25 million without paying anything. Erdoğan’s family members made the headlines for another scandal, publicized by Kemal Kılıçdardoğlu, leader of the main opposition Republican People’s Party (CHP). Members of the Erdoğan family, all of whom make efforts to remain in the shadows, received millions of dollars from selling their company through a tax haven to evade taxes, which otherwise would have amounted to millions of lira.
The Erdoğan family’s first company in the marine transportation business was founded on April 10, 2006 under the name of Turkuaz. Its founding capital was TL 1 million ($751,800 as of the day of the transaction). Erdoğan’s son Burak, his brother Mustafa and his brother-in-law Ziya İlgen all had a 25 percent share in Turkuaz. Burak’s father-in-law Osman Ketenci had a 15 percent share, while the remaining 10 percent belonged to Erdoğan’s confidant and long-time friend Mustafa Gündoğan.
Four months later, likely because there was another marine company operating under the same name, Turkuaz was renamed Bumerz, derived from the initials of the major partners. Around the same time, the headquarters was moved to a mansion in Emirgan, an elite neighborhood in İstanbul’s Sarıyer district. The mansion had belonged to an Austrian national. He was reluctant to sell his property to anyone and therefore set a price of TL 1.7 million, which he thought would deter any potential buyers. It didn’t. The person who purchased this luxury villa for the benefit of Bumerz was none other than Sıdkı Ayan, another long-time acquaintance of Erdoğan.
Ayan deserves a special mention in terms of his relations with Erdoğan and his family. Ayan’s company, Turang Transit, was awarded the second largest investment incentive in the history of the Turkish Republic, amounting to TL 11.5 billion ($5.2 billion). Ahmet Çalık’s conglomerate, Çalık Holding, is still the leader with TL 14.5 billion worth of incentives from Erdoğan’s administration. Like Ayan, Çalık also shares common business interests and actual partnerships with Erdoğan’s family members, such as Erdoğan’s son-in-law Berat Albayrak, who served many years as Çalık Holding CEO before Erdoğan installed him in his cabinet.
The incentive granted to Ayan included exemptions from the value-added tax, customs duty, employee insurance premiums and the like, which provided Ayan with more than enough for the job of building the 1,789-kilometer-long Turkey section of a pipeline that will carry Iranian and Turkmen natural gas to the European interior. The construction work was pretty lucrative in and of itself, and its awarding to Ayan without a properly organized, openly held public tender had sparked reactions. Criticism notwithstanding, the incentive offered to him was like a dream. Erdoğan first awarded the job to Ayan’s company without a tender, but since Ayan wasn’t financially able to carry out the project, Erdoğan this time extended adequate resources to him from the state coffers. But why did he do him such a tremendous favor?
A few of the phone conversations wiretapped as part of the technical surveillance phases of the infamous corruption operations of December 2013 are related to Ayan. Erdoğan was talking in one of these phone calls to his younger son Bilal. Bilal informs his father about receiving a call from Ayan, who said he could muster only $10 million for now and that he could hand it over immediately. The other part will soon be ready, Bilal reports to his father, quoting Ayan. But this information angers Erdoğan, who interrupts his son, saying: “Don’t take it. He must bring whatever he has promised us. If he’s not going to bring that, there’s no need.” Erdoğan continued: “The others are bringing it, so why can’t he do the same? What do they think this business is? But don’t worry, they will fall into our lap.” Burak is heard saying “OK, Dad.” This same Ayan will later reappear in a more intricate web of relations involving Burak, Mustafa Erdoğan, Ziya İlgen and the Isle of Man.
Erdoğan’s relatives and confidant established another Bumerz in the Isle of Man on October 15, 2008. This caused criticism among the public since people so close to the country’s prime minister were evading taxes. A law on the taxation of earnings realized in jurisdictions known as tax havens was effective starting from January 1, 2006, envisaging a 30 percent additional tax on revenues earned by Turkish nationals registered in tax haven countries.
Bumerz in the Isle of Man was a limited company with capital of just 2 pounds. Because of the privacy measures on the island, the actual shareholders were not revealed, but Ziya İlgen’s name was entered as director in the declaration form dated March 8, 2009. Nevertheless, the Malta Files indicate that the partners are Burak Erdoğan, Mustafa Erdoğan and Ziya İlgen. Ketenci and Gündoğan seem to have been left in the cold in this offspring company.
Only two days after its foundation, Bumerz Limited purchased Pal Shipping Trader One Co Ltd. Pal Shipping, which was located in Malta, another tax haven island. There is no record in the open sources as to how much Bumerz paid for the company. Pal Shipping’s owner was Azeri billionaire Mubariz Mansimov, who had a fleet of more than 100 ships in his İstanbul-based conglomerate, the Palmali Group. Mansimov would become a Turkish citizen in 2006 thanks to a suggestion by Erdoğan and would increase his investments in Turkey under the auspices of Erdoğan. Pal Shipping owned a ship named the Agdash, which was appraised in the ballpark of $25 million back then. Agdash, an oil tanker with an overall length of 150 meters and a breadth of 17.3 meters, was built in Russia for Pal Shipping. Therefore, when Bumerz finalized the purchase of Mansimov’s Pal Shipping, it automatically became the new owner of the ship, too.
The relationship between Mansimov and the Erdoğans in the Agdash deal can best be described by the word “tangled.” What makes this acquisition hard to follow is an underlying series of transactions by seemingly non-relevant parties that worked to make the deal possible by infusing money in a way that can hardly be explained by the laws of commerce.
Mansimov’s Pal Shipping placed the order for the tanker early in 2007 and applied for a loan of $18.4 million from Latvian bank Parex. The ship was delivered to him late in the year, but the loan had yet to be approved. While transferring ownership of the tanker to the Erdoğans’ Bumerz, Sıdkı Ayan first stepped up and defrayed about $7 million as the advance payment. Just one day after Bumerz acquired Pal Shipping, Parex Bank decided to extend the $18.4 million loan for the benefit of Bumerz. However, Erdoğan’s family wouldn’t pay anything. The family leased the tanker to one of Mansimov’s companies in the Caribbean for seven years, and Mansimov pledged to assume all installments of principal and interest on the loan.
So, in a nutshell, Erdoğan’s family acquired a $25 million, one-year-old oil tanker via a brass plate company that had only 2 pounds in capital. Mansimov, for an undisclosed reason, transferred ownership of his oil tanker to Erdoğan’s company cloaked in the form of an acquisition. Ayan was involved in this business by giving $7 million without getting anything in return. Afterwards, Mansimov decided to lease back the ship he had just sold and started repaying the loan. In this unfathomable business transaction, Mansimov and Ayan collaboratively gifted an oil tanker to Erdoğan’s son, brother and brother-in-law. This largess by the two businessmen could possibly be explained by the great love and admiration the two businessmen had for Erdoğan. But there is another, more rational, explanation, that can be backed up by actual events such as getting favors in public tenders, incentives and tax concessions and the facilitation of investments by easing bureaucratic procedures and the like.
Ayan was on stage once again two years following this deal, on August 1, 2011, when a consultancy company incorporated Bellway Limited in the Isle of Man. The next day an executive board meeting convened and decided to transfer the firm to Ayan. On November 15 of the same year, Ayan handed Bellway over to another person named Kasım Öztaş. On December 5, Bumerz registered Öztaş along with Murat Teke and Erol Koç, also from Bellway Limited, as board members. This move can be interpreted as a preliminary step to bring the two companies together and an apparent signal for the Erdoğans’ decision to sell their company to Ayan.
The sale materialized 10 days later, when Bellway started sending millions of dollars to Bumerz’s founding partners. The SWIFT receipts for all these transactions, which amounted to $15 million in total, were shared with the press by main opposition leader Kılıçdaroğlu. On December 15, 2011, Bellway sent $2.5 million to Ziya İlgen and Mustafa Erdoğan. On December 26, İlgen and Mustafa Erdoğan both received $1.25 million. The next payments were made the following day, $1.25 million to both Ketenci and Gündoğan. On December 28, Ketenci and Gündoğan this time got only $250,000 each. The next day it was Burak’s turn. He was paid $1.45 million by Bellway. And on January 4, 2012, the last payment was made to Burak in the amount of $2.4 million.
To sum it up, Ayan established a new brass plate company in the same tax haven as Bumerz and transferred this brand-new company to lesser-known businessman Öztaş. This firm had possibly agreed to take over Bumerz as Öztaş and several other directors of Bellway moved to Bumerz’s board without a publicly announced sale. The use of such a tangled web of company establishment and frequent management changes instead of directly paying millions of dollars to the relatives and friends of Erdoğan is nothing less than tax avoidance.
The SWIFT receipts shared by Kılıçdaroğlu show money goes from the company’s accounts in a bank in the Isle of Man to the accounts of these five men in Turkey, and in this process, not even a single penny of tax is paid.
Erdoğan confirmed it in a public speech while refuting the claims asserted by the opposition leader, who had initially, wrongfully, said Erdoğan’s men sent a total of $15 million to a company in the Isle of Man. Erdoğan mocked Kılıçdaroğlu, saying the partners of Bumerz didn’t send anything outside the country but instead received millions for selling their shares in a company that was founded abroad. But this defense was problematic in itself and implicated his relatives in tax avoidance. Naturally, Kılıçdaroğlu didn’t miss out on the opportunity and asked which company it was and where it was founded. He wanted Erdoğan to give details concerning who the partners were, what the name of the businessman who bought their shares was and how much this investor paid to each and every one of the partners in return. But not a word from Erdoğan was heard about these specific issues.
Instead of answering such critical questions, Erdoğan resorted to his usual method of dealing with opposition. He filed a lawsuit against Kılıçdaroğlu, demanding millions of lira in damages, as a result of which he and his relatives were awarded a total of around TL 1 million. During the court proceedings, the judges originally assigned to hear the lawsuit were replaced, then the judges of the appeals court were pressured when they were considering the subsequently filed appeal, with the CHP’s legal challenge failing in the end. Immediately after Kılıçdaroğlu put forward his assertions, media outlets under the direct influence of Erdoğan started spinning stories about how patriotic Erdoğan’s family members had been and how evil Kılıçdaroğlu had been in attacking Erdoğan with such libels and fabrications. They even claimed that the documents Kılıçdaroğlu offered were fake. The court, however, had to admit to the authenticity of the documents, but declined to consider them valid proof on the grounds that they were not obtained lawfully. When the CHP lawyers demanded an inspection of the details of these transactions, the court refused since these were commercial secrets.
Kadir Çöpdemir, a comedian and a part-time journalist, asked then-Prime-Minister Erdoğan in 2007, when it was still possible to ask him disturbing questions, how his son, who wouldn’t even have been able to finish university without financial aid from one of Erdoğan’s businessman friends, manage to buy a ship. Erdoğan said his son had capital of about $500,000 and was able to secure the remainder from a bank under acceptable terms, adding that anyone with some capital could do the same. This answer was far from convincing, and it didn’t explain the source of Burak’s money.
Still, there is yet another explanation concerning where and how Burak could muster such a huge amount of capital to establish a marine company and buy a ship shortly thereafter. According to this claim, Erdoğan was still active in business life although he was at the same time the prime minister of the country. The laws clearly prohibited a parliamentary deputy from pursuing an active role in any private business. Erdoğan was defending himself, saying, “I have to do it, or else I can’t earn a living.” Facing pressure, Erdoğan eventually decided to get rid of his shares in three food distribution companies and sold it to a businessman named Ahmet Günaydın on February 2, 2005, just a day before he was to declare his wealth as per the legal requirements. He earned TL 1.2 million from the sale. Erdoğan would always use a proxy for his business operations from that day on, and his son Burak was the first of these pawns- This role was not insignificant, though. According to an estimate by the German Bild daily in May 2016, Burak’s personal wealth was at least $80 million.
