Pro-gov't Cengiz Holding committed tax evasion, show Pandora Papers

According to the trove of documents released by the International Consortium of Investigative Journalists (ICIJ) exposing the tax havens of the ultra-wealthy and powerful, collectively known as the Pandora Papers, Turkey's Cengiz Holding, which has been awarded many public contracts during the reign of the AKP, has been evading taxes through an offshore company in the British Virgin Islands.

Thursday October 07 2021 11:16 pm

Mehmet Cengiz standing to the left of former Prime Minister Binali Yıldırım and President Erdoğan.

Duvar English

According to reporting by DW Turkish, Mehmet Cengiz, the chair of Cengiz Holding and close ally of President Recep Tayyip Erdoğan, is implicated in the recently released trove of tax documents known as the Pandora Papers. According to the documents, Cengiz Holding has been sending wealth to an offshore company in the British Virgin Islands and purchasing property in the UK to avoid taxation.

Cengiz Holding is one of the top government contractors in Turkey, having received private tenders to develop such mega-projects as the new Istanbul Airport and the Ankara High-Speed Rail station. The company also owns electricity distribution companies in Istanbul and throughout the country. According to World Bank Data, Cengiz Holding doesn’t just receive the highest number of public tenders in Turkey - between 2002 and 2020, the company received 42.1 billion dollars in tenders, making it one of three companies to receive the highest number of public tenders in the world. The Istanbul Airport tender alone, granted to the company in May 2013, was worth 22 billion 152 million euros.

Mehmet Cengiz is the chairman of Cengiz Holding and has himself has amassed an estimated wealth of at least 2.2 billion dollars, according to Forbes. He rose to power with President Erdoğan and former Prime Minister Binali Yıldırım, snapping up tender after tender in the ruling Justice and Development Party (AKP)’s widespread development and privatization effort. He is also known for involvement in a widespread 2013 corruption scandal in Turkey - on surreptitiously recorded tapes, he famously cursed at Turkish citizens.

According to the Pandora Papers, Cengiz Holding hides its wealth in an offshore company in the BVI called MEFA Cengiz Holding. MEFA was founded in 2011 by a company called Trident Trust, a global corporate and fund administrator, with a capital of $50,000. The company was established with proxies representing Mehmet Cengiz, including Uğur Cengiz, who also sits on the board of Cengiz Holding. In 2015, Uğur Cengiz became the director of the company and all proxies were removed, making Mehmet and Uğur Cengiz sole shareholders.

The offshore company is controlled by Standard Chartered Trust (Guernsey) Limited, a subsidiary of Standard Charted PLC, a British financial services company. Mehmet and Uğur Cengiz do not personally control the company due to their busy schedules, the documents stated.

Mehmet Cengiz refused an interview request by DW Turkish. However, he submitted a written statement in which he claimed he had no link to MEFA Cengiz Holding or any of the companies named in the documents.

When analyzing the documents, DW Turkish reporters noted that MEFA Cengiz Holding was closely linked to the Istanbul IGA Airport - all leaders of the offshore company are employees of the airport, including the airport planning manager and the chief planning officer. In his written statement, Mehmet Cengiz said that these employees did not receive additional salaries for their work in the holding company.

DW Turkish also found that Mehmet Cengiz used MEFA Holding to purchase low-tax property in the UK. According to the documents, the offshore company purchased a £3.7 million (44.7 million Turkish liras) house on Brompton Road in London, allowing the family to evade taxes. In his statement, Mehmet Cengiz said the house was used by the Cengiz family. However, the documents show that Cengiz Holding purchased several properties around the world, which allowed them to avoid taxation. This includes a lavish apartment for Mehmet Cengiz’s wife of 30 years, who divorced him in 2019 for "severe incompatibility and adultery.”

Mehmet Cengiz also attempted domestic Turkish purchases through his offshore accounts - in 2016, Cengiz engaged a BVI-based consultancy to assist him in purchasing a 49% share of the Russian-built Akkuyu Nuclear Power Plant in Mediterrenean Turkey. The deal, worth $15 million, eventually fell through.

In addition to taxes evaded through its offshore accounts, Cengiz Holding has been granted an estimated 30 tax deductions over ten years in Turkey. Though the total number of tax deductions given to Cengiz Holding is not known, according to a statement by the Ministry of Finance approximately 425 million Turkish Liras of the company’s tax debt was cleared with the stroke of a pen. Other deductions were gained through tax incentives seemingly crafted specifically for the holding company - for a copper and chemical fertilizer plant, operated by Cengiz subsidiary Eti Bakir, the company received a project-based 1.6 billion Turkish Lira tax incentive. For a hotel project in Turkey's Black Sea province of Rize, where President Erdoğan’s family is from, the company received a nearly 50 million lira credit. Opposition figures claim that Cengiz Holding is one of Turkey’s biggest tax evaders.

Cengiz was also implicated in the 2016 Panama Papers, the leaked tax documents of Panama-based law firm Mossack Fonseca. These revealed that Cengiz laundered his wealth through six different offshore companies in Niue and the British Virgin Islands. He used these companies to make purchases and sales, conduct market research, and pay for consultancy services and customs agreements. The Panama Papers also revealed that the Cengiz family was transferring wealth earned from an Ankara-based company called Digital Internet Services to a BVI offshore company called Digital European Company Ltd.

Mehmet Cengiz denies any wrongdoing and says he and his company are not linked to the offshore holdings named.