Report on the Corruption Case of Refah Chain Stores and the Role of the Zanjan Network

Introduction

The corruption case of Refah chain stores is recognized as a widespread economic misconduct. This misconduct involves a large network of banking managers, high-ranking government officials up to the level of ministers of the time, and a range of economic rent networks that appear as chain companies in other cases such as the Zanjan Urea and Ammonia project.

This network is a circle of decision-makers, role distribution, and a recurring pattern of transferring risk from themselves to public resources and small investors. From the transfer of Refah store shares to the allocation of hundreds of millions of euros in foreign currency credit in the Zanjan Urea and Ammonia project, the names and roles are repeated; only the facades have changed. 

At the center of this network, companies like Baztab Saham Toos and Danayan Financial Group emerge as operational tools, forming a core of real decision-making within this company, which is part of a larger network, including individuals such as Hossein Abdeh Tabrizi, Mohammadreza Modiri, Babak Jahan Ara, Farhoud Saberi Sarabi, and Asghar Fakhri Kashan.

The purchase of Refah company shares at a price lower than the real value, amounting to 4,544,427,165,280 rials (the price difference of 280,104,970 million traded shares based on the net asset value calculation) led to participation in collusion to conduct a government transaction without observing legal formalities and buying and selling shares without the opinion of an official judicial expert and at a price lower than the real value, disregarding the interests of shareholders.

The Long List of Defendants

Refah Acquisition Based on Rent and Collusion Pattern

The transfer of Refah chain stores in the years 1395 and 1396, within the framework of implementing the general policies of Principle 44 of the Constitution and the obligation of banks to exit from business activities, was carried out. Apparently, everything proceeded according to the rules of the capital market: block offering, competition, and transfer of shares to the private sector.

The issued indictment and the preliminary judgment of Branch 1065 of the Criminal Court Two of the Economic Affairs Judicial Complex in Tehran, provide a clear picture: Banks Mellat, Saderat, and Tejarat, which were the initial and main shareholders of the Refah complex, in a rent-based cycle and political collusion, initially transferred a significant portion of their shares to their subsidiary companies such as Omid Investment Group, Tarh va Tose'e Ayandeh Pouya Management, and then, in a situation where some of the network of managers, shareholders, and board members of the registered Refah company and these parent companies are present in the management body of Baztab Saham Toos and Sepehr Navid Afarin companies, this transfer is made without expert evaluation on the subject of Refah company's share price. This action takes place while the main shareholders, who are the three introduced banks, still had a significant portion of their shares as government-owned at the time of this stock market transaction, turning the essence of the transaction into an accusation of selling government assets.

Ambiguous Financing of a Controversial Purchase

Another significant part of the misconduct relates to the financing method of the share purchase. Reports indicate that the share buyers used substantial bank facilities; facilities that, in some cases, were directly or indirectly related to the Refah complex or its affiliated companies. Experts consider this method a case of conflict of interest and using the target company's resources for acquiring the same company; a practice that is highly criticized in the financial and banking system.

The Key Role of "Baztab Saham Toos"

Among the players in this case, Baztab Saham Toos Company plays a pivotal role. According to documents, this company is one of the main links in the chain of Refah share acquisition and has exerted effective control over the company through it. Official reports show that Baztab Saham Toos has benefited from undervaluation of shares and has been actively involved in the structure of transactions and financing. Additionally, the arrangement of transactions and corporate relationships has been such that effective supervision by responsible institutions has faced serious challenges.

However, the turning point occurred when Baztab Saham Toos Company, on May 3, 1396, became a controlling shareholder by acquiring 42.62 percent of the shares. From that moment, decisions were made that later became the subject of dispute not in the media, but in judicial documents.

After the transfer, numerous reports emerged of: valuation inconsistent with the regulations of Principle 44, incorrect calculation of net asset value (NAV), ignoring the profit of the installment period in the sale price, widespread sale of company assets and properties to pay share purchase installments and diversion of resources through intermediary companies were published. These issues eventually brought the Inspection Organization, the Stock Exchange Organization, the Economic Security Police, and the Ministry of Intelligence into the case.

The importance of Baztab Saham Toos is not only in the list of accusations. This company was the tool for exercising the network's will in the Refah case; a company that took control of management and enabled decisions to be made that would not have been possible without such control.

Danayan Financial Group (Zanjan Network); Changing Facade, Continuing Network

Examining the composition of the board of directors and shareholders of Baztab Saham Toos shows that some influential individuals in this company, have been present in various periods in the Danayan Financial Group, known as the Zanjan Network, and its affiliated companies, which is not coincidental.

Danayan, in this analysis, is not a single company, but another facade of the same network; a facade that: enables the network to continue its activities after each case, keeps financial, commercial, and service routes open, and makes it more difficult for supervisory institutions to identify individual responsibility. In such a structure, even if a company is accused, the network continues to operate under a different name and format.

In the network of managers of Baztab Saham Toos, names like Saeed Aboutorabian are seen, who, in addition to being a member of the board of directors of Baztab Saham, has previously been a member of the board of directors of Danayan Financial Services. Aboutorabian is also one of the shareholders and managers of Refah Company, effectively acting as a seller and a beneficiary shareholder of one of the main buyers.

Amirhossein Aboutorabian, Saeed Aboutorabian's brother, is one of the board members and shareholders of Sepehr Navid Afarin, one of the two final buyers, showing how this misconduct is not only network-based but also relies on familial relations.

Another name that is directly mentioned in the case alongside the Aboutorabian brothers is Hossein Abdeh Tabrizi, one of the owners and shareholders of Danayan Financial Group, who, in this case, as a member of the Supreme Council of the Stock Exchange, was prohibited from any stock exchange transactions due to his position, but as an advisor to the then Minister of Roads, Abbas Akhoundi, facilitated the transfer of Refah stores to Baztab Saham Toos at a price below their true and real value. The company is a subsidiary of the larger Danayan Pars Financial Group. Abdeh Tabrizi, in Danayan Pars Financial Group, not only held an official advisory position but also owned 8.5 percent of the company's shares.

According to the letter dated 12/09/95 Danayan Pars Financial Group announced that Mr. Abdeh Tabrizi worked as an advisor in this company for 95 days.

Additionally, Babak Jahan Ara is also one of the main figures who was one of the main shareholders of Danayan Financial Group until 2017 and was the vice-chairman of the board of directors of Baztab Saham Toos, indicating that according to this network's pattern for evading accountability and creating a cover, he stepped down from this position to conceal the relationship between Baztab Saham and Danayan Financial Group.

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Zanjan Urea and Ammonia Project; The Same Pattern, This Time with Currency

Understanding this network requires recalling the corruption case of the Zanjan Urea and Ammonia project. If the Refah case was the point of the network's exposure in the privatization sector, the Zanjan Urea and Ammonia project is the manifestation of the same network on a currency and industrial scale. According to a documented report published about this project, more than 530 million euros from the Foreign Exchange Reserve Fund were allocated through the opening of a letter of credit by Bank Melli Zanjan.

Repetition of Names, Repetition of Roles

In the Zanjan case, the same names appear that are connected to Baztab Saham Company and the Refah corruption through a multi-layered network. Mohammadreza Modiri as the main executor and CEO, Hossein Abdeh Tabrizi as an influential figure in bringing the unfinished project to the stock exchange, Asghar Fakhri Kashan as a facilitator and using domestic and foreign cover companies for financial advancement of the project. This repetition elevates the "network-based" hypothesis from the level of media analysis to the level of a documented pattern.

A comparative analysis of the Refah case and the Zanjan project shows a precise role distribution:

1. Structure architect and legitimizer: Abdeh Tabrizi

Designing models, using specialized literature, and creating theoretical cover for decisions.

Abdeh Tabrizi is the only individual from this network whose name is clearly mentioned as one of the defendants in the corruption case. In the indictment and preliminary judgment issued by Branch 1065 of the Criminal Court Two of the Economic Affairs Complex in Tehran, Hossein Abdeh Tabrizi's name is listed as a defendant. His presence as a defendant indicates that the prosecutor's office and the court did not consider his role to be merely advisory or theoretical. The charges attributed to Hossein Abdeh Tabrizi within the overall framework of the case fall under the following headings:

• Participation in breach of trust through effective role-playing in processes that led to the dissipation of public and bank assets;
• Using company assets and credits against its interests directly or indirectly;
• Violations subject to Article 49 of the Securities Market Act, including breach of legal duties regarding transparency and market health;
• Participation in obtaining property through unlawful means within the financial and managerial mechanisms mentioned in the case.

According to the preliminary judgment, Abdeh Tabrizi's role as one of the effective components of the decision-making chain, alongside other defendants, has been examined, and the court, having established sufficient evidence, has entered into the substantive examination of his charges.

2. Operational executor: Modiri

Advancing contracts, negotiations, and daily execution of decisions.

3. Financial arm: Jahan Ara

Managing money circulation routes, exchanges, and banking communications, and the bridge between this network and Baztab Saham Company and the Refah corruption case

4. Hidden layer: Saberi

Using modern tools and structures that make financial tracking difficult.

5. Institutional liaison: Fakhri Kashan

Facilitating the passage of projects through institutional and administrative bottlenecks.

This role distribution is not only observable in the two cases but also in the overall structure of the network.

Common Pattern of Misconduct; Why is this Network Reproduced?
In the Refah case, important questions arise. Judicial experts have emphasized that by examining the documents and financial records of shareholders, it becomes clear that the valuation schedule of shares was offered by Bank Mellat, Bank Tejarat, a consortium consisting of Bank Saderat and Tarh va Tose'e Ayandeh Pouya Management Company (Bank Melli), Omid Investment Management Group (belonging to Bank Sepah), for which there is no clear form of separation.
Additionally, this important question arises whether the financial and accounting documents submitted and sent to the OTC market before and during the offering were made with non-transparent evaluation and fake pricing, leading to ambiguity regarding the accumulated loss to match the loss of Refah Company contrary to reality.
The main owners and buyers in this case also tried to keep a crucial point in this transaction whether Refah was profitable or loss-making at the time of the offering hidden.

In the view and report of official experts, the price of the shares transferred at the time of the offerings, considering all the effective indicators in the share value (regardless of the price realized in the offerings), had a significant price difference with the realized price. As stated in the expert report and the issued indictment: " Refah store company, by creating grounds for shareholder loss through the diversion of Refah store resources and participation in obtaining property through unlawful means along with other defendants with knowledge and awareness of buying shares at a price lower than the real value and amounting to 4,544,427,165,280 rials (the price difference of 280,104,970 million traded shares based on the net asset value calculation) engaged in collusion to conduct a government transaction without observing legal formalities and buying and selling shares without the opinion of an official judicial expert and at a price lower than the real value, disregarding the interests of shareholders."

Other questions also arise. Considering the price of the offerings and its difference with the real share price, given the overall conditions of Refah Company at the time of the offering, which appropriate method should have been used? Also, considering the overall conditions of Refah Company, was the distribution of shares at the announced prices in the offerings fair, just, and in line with protecting shareholder rights?

And finally, this key question that considering the overall conditions of the company, how much of the offerings were directed towards the shareholders?

The Refah case and the Zanjan Urea project clearly show that the main issue is not "which company was guilty?" The right question is:

Which network decides, with what tools and how does it divert the path of accusation and exposure of corruption from itself?

As long as the ambiguities of this case, along with the misconducts in similar cases like the Zanjan Urea and Ammonia project, are not deeply and accurately monitored and do not come under institutional and judicial scrutiny, we should expect the repetition of the same pattern in another case, with another name and another company.

Full report and related documents in the attached PDF file