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Goldman Sachs' Questionable Connexions - Part 1
Monday August 13, 2012
Banking: A Dirty Business but someone’s got to do it
Banking has become a Dirty Word. Banksters and Scandals, a perfect marriage of words like Fish n Chips, and all one hears in the news on the banking sector these days, the most recent scandal being Barclays’ and RBS involvement in the LIBOR Rate Rigging Scandal with Bankers rewarding themselves with huge bonuses and guzzling Bollinger Champagne to celebrate their frauds. HSBC scandal money laundering for Mexican Drug Cartels, rogue states even terrorists; and Standard Chartered Bank caught money laundering 60,000 secret transactions worth $250bn Iranian financial institutions. All of this, headline news within a six-week period.
Goldman Sachs, no stranger to public hatred and scandal, was charged $1 billion by the SEC for its involvement with Sub-Prime Mortgage Fraud, also most likely linked to LIBOR Rigging. Plus, it's widely accepted Goldman Sachs “COOKED GREECE’S BOOKS” and facilitated complex Derivative-based loans to the Greek Government collapsing the Greek economy. So whatever Goldman Sachs ventures into and its connexions can be deemed as another scandal.
Two Controversial Firms & Red Flags
July 25th 2008 Goldman Sachs announced a joint venture partnership in Turkey with Emrullah Turanli’s Tasyapi to develop Hydro Electric Power Plants in Turkey, a partnership that came as a shock to Turkey’s business community, especially when considering that Tasyapi is a company with no experience in constructing energy projects much less hydroelectric power plants. This raises many serious questions about what Goldman Sachs knew when Tasyapi announced its joint venture partnership with Goldman Sachs and that $8.3 billion USD / €6 billion would be invested in renewable energy projects in Turkey in the middle of the global financial crisis.
At the height of the financial crisis, Goldman Sachs entered into a joint venture – involving a commitment of more than $8 billion USD – to obtain large-scale government tenders in Turkey’s renewable energy sector with Tasyapi Energy Grubu to develop these projects throughout Turkey. Tasyapi’s primary role (and arguably sole responsibility) was to obtain government tenders and licenses under Turkish Prime Minister Recep Tayyip Erdogan’s administration.
What is interesting is that Goldman Sachs announced their investment plans for Turkey at a time when there was a court case to close the AK Party and a change in laws regarding foreign ownership of property and investments in Turkey where both events actually discouraged foreign firms investing in Turkey, where many foreign firms postponed plans to invest in business ventures in Turkey due to uncertainty of the political climate and statutes for foreign firms owning assets in Turkey.
Investment at height of Global Crisis & $10 Billion TARP Funds
Goldman Sachs received $10 billion from the U.S. Government Treasury under the TARP program (Troubled Asset Relief Program) just three months after the joint venture announcement. From a business decision viewpoint only, for Goldman Sachs to agree to fund any amount in any location during the financial crisis – much less a commitment to fund $8.3 billion for renewable energy projects in Turkey – Goldman Sachs had to be extremely confident that its partner Tasyapi would continue to obtain government tenders and licenses.
Tasyapi issued press releases boasting that Goldman Sachs, via its wholly-owned subsidiary Cogentrix Energy LLC (“Cogentrix”), is Tasyapi’s new joint venture partner to fund the development of the six hydro-electric licenses that Tasyapi somehow had obtained from the Turkish government, as well as future renewable energy tenders that it expects to receive. The Turkish business community as a whole were completely stunned that Goldman Sachs would collaborate with such a company involved in numerous controversies.
Upon closer examination into the renewable energy sector in Turkey, choosing a Turkish joint venture partner with expertise and experience in developing and constructing renewable energy projects more feasible Turkish partners would have been reputable publicly listed firms Turkish like Akfen, Dogus Group and Enka, all of which are reputable publicly listed companies which have long successful track record in developing and constructing large scale infrastructure projects especially Hydro Electric Power Plants. So, one has to ask what are the benefits of selecting a partner in Turkey like Tasyapi.
Why No Disclosure to the SEC?
In the US, companies such as Goldman Sachs are required under SEC rules and law to do extensive research and due diligence in order to qualify all potential JV partners, even all third parties and consultants. In addition, are required by law to disclose all transactions to the SEC in the form of 10K filings on an annual basis and 10Q filings on a quarterly basis.
To date Goldman Sachs has not made a single mention of Tasyapi in any of their 10K and 10Q filings to the SEC and disclosed absolutely nothing about its relationship with Tasyapi. This raises many questions of Goldman Sachs' lack of filings that mention or even reference Tasyapi.
This also begs the questions does Goldman Sachs have anything to hide? Was Goldman Sachs aware of widely reported public allegations of corruption against Tasyapi and the longstanding relationship between Turkish PM Recep Tayyip Erdogan and Emrullah Turanli? Was Goldman Sachs aware that some of the tenders that had been given to Tasyapi came under investigation for bidding irregularities or were challenged in court?
Like Goldman Sachs, Tasyapi is no stranger to controversy in Turkey. There are wide spread allegations of Tasyapi of receiving preferential treatment over government tenders on high profile and controversial infrastructure and construction projects for which Tasyapi did not even qualify on many grounds; building outside of zoning permissions before planning permission was even approved, questions over its finances, corruption and much more. All this facilitated by alleged close ties between Emrullah Turanli, the owner of Tasyapi and officials high up in current government.
Calls for Investigation into Tasyapi
Were Goldman Sachs aware that a prominent Turkish MP Kamer Genc called for much publicised investigations into Emrullah Turanli and his company Tasyapi’s connexions with senior city and government officials, even certain officials' relatives’ interests in Tasyapi, questioning the methods and justifications by which Tasyapi received preferential treatment in gaining many government tenders, and was able to vastly breach zoning and planning permission constraints on construction projects, as well as get planning permission approval on those projects in very short periods of time.
Even if Goldman Sachs were not aware of reported allegations of corruption against Tasyapi, Goldman Sachs can still be held accountable for not conducting mandatory, thorough and extensive due diligence. Another fact about Emrullah Turanli, who came from one of Istanbul’s roughest neighbourhoods and emigrated to Germany as a teen to work as a brick layer, is that he did not even attend High School; what would Goldman Sachs be doing with someone who is regarded in Turkey as uneducated and a questionable background? As for Emrullah Turanli’s company Tasyapi, its success was very suspiciously sudden, wining large-scale municipal and government construction tenders only after the current AK Party government came to power in 2003.
This was the first energy project for Goldman Sachs’ wholly owned subsidiary Cogentrix venturing outside of the US and into Turkey, which is regarded as a risky market. There are markets with less risk, more transparency and with major demands for energy such as in the EU. The European Parliament is eagerly pushing for investment on government sponsored renewable energy projects in countries such as Spain, Italy even the UK and Germany. Germany is one of the highest domestic producers of renewable energy per capita in the World, utilising Solar Photo Voltaic systems installed in individual homes, where no massive infrastructure costs are required to distribute electricity to homes via a power grid. So are these projects even feasible?
In light of the amount of Goldman Sachs’s investment and expected return, a conservative estimate of projected earnings over the next several years would be hundreds of millions of U.S. dollars. These earnings would be subject to disgorgement if they have been obtained by practices that violate the United States Foreign Corrupt Practices Act [FCPA enforced by the US Justice Department], including illegal acts committed by its joint venture partner Tasyapi. Put another way, Goldman Sachs is not allowed to purchase or make use of assets that it either knew or should have known were obtained illegally through bribery by its joint venture partner.
Why Turkey? Why Tasyapi with no experience in Energy?
Tasyapi had no expertise or experience in developing renewable energy projects in Turkey or anywhere else. To date, executives from Goldman Sachs and Emrullah Turanli set up companies in Turkey under the Tasyapi Energy Group and its subsidiaries. One thing is certain; the construction sector in Turkey is one of the most lucrative speculative and corrupt sectors in Turkey, generating suspiciously high returns on investment.
Supposedly, the partnership Goldman Sachs/Cogentrix and Tasyapi partnership is over due to an alleged dispute between Emrullah Turanli and Goldman Sachs over money. However, according to public information sources and Cogentrix’s website, one of the hydroelectric dam projects is still on going. Another group involved in the joint venture was Habboush; however they have removed all trace of their involvement from their website of the venture with Goldman Sachs and Tasyapi.
Another Bankster Debacle?
Nevertheless, there are still many Red Flags over Goldman Sachs/Cogentrix justifications for the partnership by in the first place. The initial joint venture was supposed to be an $8 billion initiative. In excess of $220 million USD was received in early 2010 by subsidiaries of the Tasyapi Energy Group through the United Kingdom and the US, assumedly from Goldman Sachs or its subsidiary Cogentrix. Is this another debacle by Goldman Sachs, or was there another questionable agenda? Who knows, as there is a severe lack of transparency when it comes to Turkey, according to organisations like Transparency International. Regardless, one is entitled to ask questions and Goldman Sachs are fully accountable in such a matter.
The partnership between Goldman Sachs and Tasyapi certainly raises many questions and one has to analyse then ask why, under certain circumstances why a global banking giant like Goldman Sachs would select Tasyapi; a company with no prior expertise or experience in designing, developing or constructing energy projects yet alone complex hydroelectric power plants, not even managing them; and to be granted so many licenses and permits within a short period of time.
From a due diligence perspective, such a joint venture can be regarded as a major risk with negligence of risk management procedures, furthermore perceived as irresponsible investment practices, but more critically the relationship between Goldman Sachs and Tasyapi itself is questionable and the joint venture merits a serious investigation.
Related Links:
Goldman Sachs
Cogentrix Energy
Habboush Group
UK Legislation Portal
FSA - UK Financial Services Authority:
Anti-Bribery & Corruption Systems & Controls in Investment Banks
U.S. Department of Treasury
United States Department of Justice:
Foreign Corrupt Practices Act of 1977
US Securities & Exchange Commission SEC
SEC - Securities Exchange Act of 1934
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"Rather fail with honour than succeed by fraud." - Sophocles
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