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A Case Of Corruption And Embezzlement Angering Iranians

Depositors protest for their lost investments in Samen al-Hojaj financial institution, July 2018.
Depositors protest for their lost investments in Samen al-Hojaj financial institution, July 2018.

A court in Tehran has been silently investigating a major financial corruption case during recent weeks, reformist daily Sharq revealed on Wednesday July 18.

The case is about Samen al-Hojaj Finance and Credit Institution, one of many similar institutions that offered unusually high interest rates to investors, but failed to honor their commitments due to mishandling of funds.

Subsequently, when these institutions proved to be unable even to return the original investments, thousands of investors took to the streets staging protests almost all over Iran for nearly a year now.

Samen al-Hojaj was one of the biggest of these institutions that no one had regulated or supervised.

On Wednesday, after nine sessions at the court, the media revealed that it was an “illegal” financial institution.

It was licensed to operate in Sabzevar, a town in the province of Khorasan, where Iran’s Supreme Leader Ayatollah Ali Khamenei was born. Nevertheless, it opened nearly 500 branches all over Iran and managed to attract hundreds of millions of dollars from middle and working-class Iranians who wanted to make ends meet in the country’s difficult economic situation by getting some interest on their deposits.

Tehran: protesters urge financial institutions to return their money. November 2017.
Tehran: protesters urge financial institutions to return their money. November 2017.

Paying and receiving interest money is prohibited by the Islamic laws, however, banks and financial institutions compete with each other to pay more interest disguised under the name of “profit” to lure customers to deposit their hard-earned cash.

Some of these institutions offer up to 27% “profit” on investment in monthly instalments, for a while, that is. This comes while a normal interest rate for a short-term deposit at Iranian banks is around 6% and a long term investment would get a maximum 15%.

As the economy failed under pressure from sanctions, most institutions found it difficult to earn enough out of banking or industrial investment and pay interest to their customers.

After a year of outcry by investors that sometimes turned violent, and contributed to general protests last January and again in June, finally last week Khamenei ordered the government and Judiciary to deal with the institutions that took advantage of the people’s trust and failed to deliver their promises.

According to Sharq, Samen al-Hojaj did more than that. It lent tens of millions of dollars of investors’ money to government and military officials as well as all sorts of celebrities at an interest rate of 3% and paid astronomical salaries to some officials and their family members for work they supposedly did for the institution.

One prominent Iranian journalist published pictures of a high ranking police officer and claimed he and his family were given unusually high salaries as well as very low interest loans they never repaid.

Sharq revealed that , in what may appear as an elaborate case of bribery or money laundering, the institutions bought a small flat in Isfahan and an equally small plot of land from the general’s family against billions of tumans each, nearly 200 times the real price of the properties.

Sharq also cautiously introduced some of the celebrities, including two showmen from the state TV who received unusual sums as “gifts,” loans and salaries from Samen al-Hojaj. Based on Sharq’s reporting, Samen al-Hojaj has been playing with investors’ money to buy influence that made it immune to prosecution for several years.

Iran’s hardline dominated Judiciary has so far given away the names of only three of those involved and implicated them in the case: Abolfazl Mir Ali, the institution’s managing director, his wife Robabeh Ebrahimi and a third person named Mehdi Ramezanian. The trio are reportedly under arrest but none of them have appeared before at court in any of the nine hearings so far.

Mir Ali is said to have once brandished a gun to intimidate Central Bank Governor Valliollah Seyef who refused to legalize Samen al-Hojaj as a legitimate financial organization, Iranian media reported.

Sharq reported that some 119 of his checks had bounced before he joined the institution, after a few years of working as a farmer.

Meanwhile, the Twitter account of the administration-owned daily, Iran, published an apparently recent picture of Mir Ali next to Iran’s Prosecutor-General Mohammad Jafar Montazeri and Mashad’s hardline Friday prayer leader Ahmad Alamolhoda, indicating his links and influence.

After a year of daily protests in front of failing financial institutions in Iran, it looks like Khamenei finally heard the message and ordered the Judiciary to stand up against at least this form of financial corruption.

However, what is being done, might to be too little, too late to regain the confidence of the population in the integrity of state institutions.