Turkish Demir Caused Damage Worth $1.2mln to Uzbek Economy

Business Materials 5 November 2008 11:35 (UTC +04:00)

Uzbekistan, Tashkent, 5 November/ Trend , corr T. Zhukov/ The Uzbek authorities exposed fraud with securities and evasion of taxes by company Demir of Turkey.

Demir has been registered in Uzbekistan in 1992. The key founder of the company is the well-known Turkish holding Demir Metal. Demir has opened two super markets in the heart of Tashkent and several textile and food enterprises.

The investigation revealed that in March 2003 the company issues bonds worth 1,350,000,000 Uzbek soums (about $1.1mln) with two-year period. The bonds were successfully realized by the local insurance companies and business banks. However, the interest rates of shareholders were not paid out when the term expired.

New Uzbek-Turkish joint venture Demir Tekstil with capital of $8.5mln was established in 2005. New securities were issued on behalf of the newly-established joint venture and proceeds were used to pay debts left from the bonds issued previously.

"So, the Turkish company could avoid responsibility," Prosecutor's Office said. "All operations related to the realization of new bonds were carried out without notifying Uzbek founder. The bonds were realized by the National Bank of Uzbekistan, Uzaqrossugurta state-owned insurance company, Uzbek Ravnak-Bank and Ipak Yuli business bank".

Afterwards, the proceeds (1,205,000,000 Uzbeks soums) were moved from the settlement account of Demir Tekstil JV to that of Demir and were used to pay off debts left from the bonds of the Turkish company. As a result of a fraud, Demir Teksyil JV caused financial damage of 1.33bln Uzbek soums. "Give persistent tax evasion and obligatory payments, government incurred damage of 1.42bln soums (about $1.2mln), Tashkent Prosecutor's Office said.

"The investigation completely proved fraud by Turkish citizens and they were imposed a penalty of 1,424,630,000 soums. Tashkent city court brought up respective decision on the case according to which the guilty men got punishment in accordance with what they did," Prosecutor's Office said.

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