Orange has ramped up its legal action against local shareholders in Iraq Telecom, the joint venture that it set up in 2011 together with Kuwaiti conglomerate Agility.
The partners have filed a petition with the Southern District of New York to release information relating to the financial arrangements of five banks – among them Citibank and HSBC – with the intent of proving their allegations of “self-dealing, material misappropriation and mismanagement” by the shareholders, and in particular the prominent Iraqi businessman Sirwan Barzani.
The legal action relates to Korek Telecom, an Iraqi operator which acquired a licence in August 2007 for $1.2 billion. The unit received a convertible loan note worth $250 million from Agility later in the year, which it used to pay for its licence. After Orange and Agility formed Iraq Telecom in 2011, the JV obtained a 44% stake in Korek for $810 million, receiving approvals from regulator CMC. They also received a call option that would have allowed them to assume full control over Korek after four years.
Towards the end of 2011, Korek took out a loan worth $150 million from Lebanese bank IBL without the knowledge of Iraq Telecom or its parent companies. Orange and Agility’s legal petition has revealed that funds related to this loan were moved between several accounts associated with Korek and Barzani’s personal accounts.
Iraq Telecom claims that the arrangement has allowed Barzani to profit at Korek’s expense. Meanwhile, Orange and Agility have alleged that “cash pay-offs and nefarious real estate transactions” took place between Korek’s local shareholders and CMC officials, with intent of preventing their planned takeover of the operator.
Speaking to the Financial Times, an Orange spokesperson said: “Orange takes the issues raised in the petition very seriously…Iraq Telecom has pursued various means by which to further reveal and rectify the self-dealing and misappropriations that Barzani and others are engaged in”.
In a statement, Korek described Orange and Agility’s petition as part of a “scorched earth” policy aimed at ruining the operator. They claimed that the firms were “grossly misrepresenting and mis-characterising facts” and that Barzani “has acted and will continue to act in the best interest of Korek, its shareholders and the people of Kurdistan and Iraq.”
