Third realm of power in Iran — property

Ayatollah Ali Khamenei: Along with his grip on Iran’s politics and its military, the Reuters investigation into Setad shows there is a third dimension to his power: economic might.

THE 82-year-old Iranian woman keeps the documents that upended her life in an old suitcase near her bed. She removes them carefully and peers at the tiny Persian script.

There’s the court order authorising the takeover of her children’s three Tehran apartments in a multi-storey building the family had owned for years. There’s the letter announcing the sale of one of the units. And there’s the notice demanding she pay rent on her own apartment on the top floor.

Pari Vahdat-e-Hagh ultimately lost her property. It was taken by an organisation that is controlled by Ayatollah Ali Khamenei. She now lives alone in a cramped, three-room apartment in Europe, thousands of miles from Tehran.

The Persian name of the organisation that hounded her for years is “Setad Ejraiye Farmane Hazrate Emam” — Headquarters for Executing the Order of the Imam. The name refers to an edict signed by the Islamic Republic’s first leader, Ayatollah Ruhollah Khomeini, shortly before his death in 1989. His order spawned a new entity to manage and sell properties abandoned in the chaotic years after the 1979 Islamic Revolution.

Setad has become one of the most powerful organisations in Iran, though many Iranians, and the wider world, know very little about it. In the past six years, it has morphed into a business juggernaut that now holds stakes in nearly every sector of Iranian industry, including finance, oil, telecommunications, the production of birth-control pills and even ostrich farming.

The organisation’s total worth is difficult to pinpoint because of the secrecy of its accounts. But Setad’s holdings of real estate, corporate stakes and other assets total about €90bn, Reuters has estimated.

Just one person controls that economic empire — Khamenei. As Iran’s top cleric, he has the final say on all governmental matters. His purview includes his nation’s controversial nuclear programme.

It is Khamenei who set Iran’s course in the nuclear talks and other recent efforts by the new president, Hassan Rouhani, to improve relations with Washington.

The supreme leader’s acolytes praise his spartan lifestyle, and point to his modest wardrobe and a threadbare carpet in his Tehran home. Reuters found no evidence that Khamenei is tapping Setad to enrich himself.

But Setad has empowered him. Through Setad, Khamenei has at his disposal financial resources whose value rivals the holdings of the shah, the Western-backed monarch who was overthrown in 1979.

How Setad came into those assets also mirrors how the deposed monarchy obtained much of its fortune — by confiscating real estate. A six-month Reuters investigation has found that Setad built its empire on the systematic seizure of thousands of properties belonging to ordinary Iranians.

Setad has amassed a giant portfolio of real estate by claiming in Iranian courts, sometimes falsely, that the properties are abandoned. The organisation now holds a court-ordered monopoly on taking property in the name of the supreme leader, and regularly sells the seized properties at auction or seeks to extract payments from the original owners.

The supreme leader also oversaw the creation of a body of legal rulings and executive orders that enabled and safeguarded Setad’s asset acquisitions. “No supervisory organisation can question its property,” said Naghi Mahmoudi, an Iranian lawyer who left Iran in 2010 and now lives in Germany.

Khamenei’s grip on Iran’s politics and its military forces has been apparent for years. The investigation into Setad shows that there is a third dimension to his power: economic might. The revenue stream generated by Setad helps explain why Khamenei has not only held on for 24 years but also in some ways has more control than even his revered predecessor. Setad gives him the financial means to operate independently of parliament and the national budget, insulating him from Iran’s messy factional infighting.

The US government has acknowledged Setad’s importance. In June, the US Treasury Department imposed sanctions on Setad and some of its corporate holdings, calling the organisation “a massive network of front companies hiding assets on behalf of … Iran’s leadership”. The companies generate billions of euro in revenue a year, the department stated, but it did not offer a detailed accounting.

The Iranian president’s office and the foreign ministry didn’t respond to requests for comment. Iran’s embassy in the United Arab Emirates issued a statement calling Reuters’ findings “scattered and disparate” and said that “none has any basis”. It didn’t elaborate.

Setad’s director general of public relations, Hamid Vaezi, said by email in response to a detailed description of this series that the information presented is “far from realities and is not correct”. He didn’t go into specifics.

When Khomeini, the first supreme leader, set in motion the creation of Setad, it was only supposed to manage and sell properties “without owners” and direct much of the proceeds to charity. Setad was to use the funds to assist war veterans, war widows “and the downtrodden”. According to one of its co-founders, Setad was to operate for no more than two years.

Setad has built schools, roads and health clinics, and provided electricity and water in rural and impoverished areas. It has assisted entrepreneurs in development projects. But philanthropy is just a small part of Setad’s operations.

Under Khamenei’s control, Setad began acquiring property for itself, and kept much of the funds rather than simply redistributing them. With those revenues, the organisation also helps to fund the ultimate seat of power in Iran, the Beite Rahbar, or Leader’s House, according to a former Setad employee and other people familiar with the matter. The first supreme leader, Khomeini, had a small staff. To run the country today, Khamenei employs about 500 people.

A complete picture of Setad’s spending and income isn’t possible. Its books are off limits even to Iran’s legislative branch. In 2008, the Iranian parliament voted to prohibit itself from monitoring organisations that the supreme leader controls, except with his permission.

But Reuters has put together the fullest account yet of the organisation’s holdings. They include:

— A giant property portfolio: The head of Setad’s real-estate division said at a ceremony in 2008 that the unit was worth about €48bn. The value of Iran’s currency has plunged since then, while property values have soared. The property portfolio has also changed, so its current value is hard to establish.

— An investment unit worth tens of billions of dollars: In June, the US Treasury Department sanctioned Setad and 37 companies it controls over the organisation’s alleged role in “assisting the Iranian Government’s circumvention of US and international sanctions”. The treasury also said Setad played a role in “generating revenue for the Iranian leadership”, and that one of its investment companies alone was worth about €35bn in late-2010.

In practice, Setad controls many businesses in which it holds very small stakes. Reuters identified at least 24 public companies in which Setad — or a company it invested in — held less than 50%.

All told, Reuters was able to identify about €90bn in property and corporate assets controlled by Setad. That amount is roughly 40% bigger than the country’s total oil exports last year.

In an interview in April with the Iranian reformist newspaper Shargh, Ali Ashraf Afkhami, who was identified as the head of Tadbir Economic Development Group — the main unit that handles Setad’s financial investments — called the organisation a “custodian” of “property without owners”, and suggested that none had been confiscated. He also described the way Setad had accumulated its real estate as nothing unusual.

“Imagine that a property or piece of land has been left behind by someone after their death without any heirs or, for example, property that has been freed by customs but remains without an owner,” he said. “These properties must be managed somehow. If the lack of ownership is confirmed through the order of the court, then the property is given to Setad.”

Charities have played an important role in the Islamic Republic. Setad controls a charity but it’s unclear how much of its revenue goes to philanthropy. Iranians whose properties have been seized by Setad, as well as lawyers who have handled such cases, dispute the argument that the organisation is acting in the public interest. They described what amounts to a methodical moneymaking scheme in which Setad obtains court orders under false pretenses to seize properties, and later pressures owners to buy them back or pay huge fees to recover them.

“The people who request the confiscation … introduce themselves as on the side of the Islamic Republic, and try to portray the person whose property they want confiscated as a bad person, someone who is against the revolution, someone who was tied to the old regime,” said Hossein Raeesi, a human-rights attorney who practised in Iran for 20 years and handled some property confiscation cases. “The atmosphere there is not fair.”

Several other Iranians whose family properties were taken over by Setad described in interviews how men showed up and threatened to use violence if the owners didn’t leave the premises at once. One man said he had been told how an elderly family member had stood by distraught as workmen carried out all of the furniture from her home.

Some of the properties under Setad’s control were confiscated from religious minorities, including members of the Baha’i faith, a religion founded in Iran that is seen as heretical by the Islamic Republic. Baha’is are a persecuted religious group in Iran, with some followers blocked from jobs and universities. Baha’i shops and cemeteries also have been vandalised.

Figures compiled by the United Nations office of the Baha’i International Community, a non-governmental organisation, show that Setad was occupying 73 properties seized from its members as of 2003, the most recent data available. The real estate was then worth about €9m.

That figure captured only a fraction of the value of Baha’i properties taken by Setad.

Mohammad Nayyeri, a lawyer who worked in Iran until 2010 and now lives in Britain, said he handled a case involving Setad in which a Muslim man’s house had been confiscated in part based on rumours that he had converted to the Baha’i faith and had ties with the monarchy.

The man — Nayyeri declined to name him because he still has family in Iran — relocated to the United States soon after the 1979 revolution. The new government seized the man’s home, in a wealthy Tehran neighbourhood.

“The Baha’i rumour was one of the triggers of this,” Nayyeri said. “They found that this house is empty and the owner had left the country so they came and seized the place.” Around 1990, the property was given to Setad, which sold it at auction.

Nayyeri said that in 2008, the owner’s son contacted him. By then, the man had died. The son — who told the lawyer his father had never converted to the Baha’i faith and had no ties to the monarchy — wanted to clear his name and try to recover the house.

Nayyeri said he lodged a complaint against Setad and the current owner and successfully challenged the original confiscation. He ultimately obtained a judicial order that the property be returned to the son.

But Setad refused to give it back unless the son offered a “khoms,” a religious payment mandated under Islamic law, Nayyeri said. It totalled $50,000 — 20% of the property’s assessed value. According to the lawyer, the son had no choice, and paid it.

Ross K Reghabi, an Iranian lawyer based in California, said he, too, won a number of property seizure cases involving Setad. But he said no case was simple — the hurdles involved not only untangling a property’s ownership and challenging decades-old court decrees, but also identifying and paying off people with connections to the key decision maker.

“The real stuff is what goes on behind the doors,” he said. “You have to find the right person.”

Reghabi said his clients were responsible for paying the various fees, which were all “subject to negotiation” and could reach millions of dollars.

He added that he always advised clients whose properties had been sold by Setad to try to recover some of the sale proceeds in cash. “That is my advice to them — don’t try and be stupid and get your property back.”

“This was my property and my family’s property that was built with the blood of myself and my husband,” said Pari Vahdat-e-Hagh, 82, whose Tehran apartment building was seized.

The case of Vahdat-e-Hagh, who is Baha’i, involved several Iranian organisations over the years, but none was more relentless than Setad, she said.

She said her troubles began in 1981 when her husband, Hussein, began working for a company called Asan Gas that had been set up in part to assist unemployed members of the faith.

In Sept 1981, he was arrested and imprisoned in Tehran. According to Vahdat-e-Hagh, after five months, a cleric from a court sentenced him to death, with no chance to appeal. He was executed in Feb 1982.

“He was shot with nine bullets,” she said, her voice cracking.

To protest her husband’s execution, she began writing letters to senior government officials, including Khamenei, then Iran’s president. In 1985, she said, she was jailed for three months.

Her protests continued, including a call to Khamenei’s office. “I kept begging them to tape my voice, to take my message to Khamenei,” she said. Instead, she said, the clerk recorded the conversation and turned the tape over to the intelligence ministry.

The widow’s account of what happened next is supported by legal notices and official correspondence seen by Reuters.

A court later ordered the confiscation of her family’s apartments in an affluent area of north Tehran. Her children were out of the country at the time and the court order accused them of proselytising the Baha’i faith abroad, she said.

Two Iranian foundations pressed Vahdat-e-Hagh to turn over her properties to them. She refused, and both eventually dropped the matter, she said.

Then, in Nov 1991, Setad entered the picture. Another court authorised it to confiscate the family’s properties in Tehran and the southern city of Shiraz.

According to Vahdat-e-Hagh, Setad representatives came to her apartment and threatened to beat her if she did not leave.

“One even had his fist balled up one time to punch me,” she said. “I told them, ‘You can come and kill me.’”

In Jan 1992, Setad wrote to the property registry office requesting that the names of Vahdat-e-Hagh’s children be removed from the deeds to their apartments. A year later, Setad sent a letter to Vahdat-e-Hagh offering to sell her one of the units.

Setad sold the apartment to an official from Tehran’s revolutionary court, she said, who flipped it within a month for a quick profit. Setad later sold three more apartments that belonged to her two other children and late husband.

In the fall of 1993, Vahdat-e-Hagh quietly left Iran, telling only a few friends and relatives. It took six years before Setad authorities realised she was no longer living in her apartment, which she had been renting out.

In a letter in Nov 1999, Setad offered to sell her own apartment to her at a discount. She refused. It then demanded she pay rent on the unit. She refused again. The organisation eventually sold it.

Vahdat-e-Hagh said she later telephoned the new buyer. “This was my property and my family’s property that was built with the blood of myself and my husband,” she said she told the man. She said he offered her some money, which she refused out of principle.

Today, the building appears to be vacant, except for a business on a lower level. Merchants in the neighbourhood said the property’s present ownership isn’t clear and the building may be under the control of an Islamic organisation.

On the top floor, where Vahdat-e-Hagh once lived, most of the windows are broken.


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