Investigation 15 Jun 15

Fraudulent Debt Collection Schemes Cost Albania Millions

After CEZ bought the power utility in Albania, it partnered with a local businessman to collect unpaid bills – but ended it up being swindled by him.  

Besar Likmeta and Flamur Vezaj
CEZ Shperndarje's heaquarter office in Tirana | Photo by : LSA

Documents obtained by BIRN show that the former head of the board of directors of CEZ Shperndarje, CEZ’s group’s subsidiary in Albania, Josef Hejsek, and an Albanian businessman, Kastriot Ismailaj, were at the centre of a fraudulent debt collection scheme that cost the company millions of euro.

The scheme emerged after the CEZ group bought a controlling stake in Albania’s electricity distribution company, OSSH, in 2009, and it appears that it was intended to influence Albanian politicians and the country’s Energy Regulatory Agency, ERE, through bribes.

However, the scheme went awry after Ismailaj, the owner of Debt International Advisory, DIA, CEZ’s debt collection partner in Albania, pocketed the money from the contract without doing any real work.

Ismailaj’s schemes are believed to have wrecked CEZ’s relation with the Albanian government, which in January 2013 stripped CEZ Shperndarje of its operating license, in effect nationalizing it.

CEZ in turn initiated arbitrage proceedings against Albania for damages.  The dispute was later resolved after Tirana, under pressure from the Czech Republic over its EU integration bid, paid CEZ 95 million euro for its share of the company. 

Ismailaj, who has since been arrested, accused of money laundering and aggravated fraud, has also sued CEZ Shperndarje, now under ownership of the government and rebranded as OSHEE. He is seeking 130 million euro for breach of contract in a case still pending in the Vienna International Arbitral Center.

Documents obtained by BIRN show that when CEZ contracted DIA, Ismailaj was already under investigation in Albania for money laundering.

The businessman is accused of using fake documents to seal his contract with CEZ Shperndarje, while CEZ executives turned a blind eye.       

 “This is the biggest fraud in Albania’s history,” a former DIA employee who spoke on condition of anonymity told BIRN.

BIRN has also discovered that DIA was not the only debt collection company to obtain a dubious debt collection contract from CEZ.

In 2012, at least four other companies had similar, equally suspicious, contracts and had also showed poor results.   

Hejsek did not respond to a request for a comment by BIRN. Ismailiaj who is under arrest, denied wrong doing at his arraignment hearing. Meanwhile, the CEZ Group has also failed to respond to requests to comment on the allegations.

The wrong business partner:

The CEZ Group bought Albania’s state owned electricity distribution company in 2009, paying 102 million euro for a stake of 76 per cent while promising to invest 200 million euro over the next four years.

After CEZ took control and rebranded the company as CEZ Shperndarje, the Czech power giant started looking for partners in Albania to facilitate its dealings with Albanian authorities. 

Hejsek’s testimony given to Albanian authorities says the company first contacted a former Albanian ambassador to Prague and, through him, the former foreign minister and current speaker of parliament, Ilir Meta.

Hejsek says Meta referred them to Ismailaj as someone who enjoyed the support of the Albanian government. Meta acted as the guarantor of the deal.   

A similar accusation of undue influence against Meta was made in 2011 by a former economy minister, Dritan Prifti.

Prifti told Albania’s Top Channel TV that Meta traveled to the Czech Republic to negotiate the contract for Ismailaj, “a person with a [criminal] record”.

The idea was that there was 200 million euro of debt and, if he collected it, “he gets half”, he added.

Meta’s spokesperson did not return a request to comment on the allegations to BIRN.

Through his lawyer’s office in Tirana, Haxhiaj & Hajdari, Ismailaj registered the company, Debt International Advisory, DIA, in the British Virgin Islands, BVI, on July 7, 2010

The sole director was Juliana Muço, the niece of his Tirana lawyer, Artan Hajdari.

The company then on August 4th, 2010 registered a subsidiary in Tirana, Debt International Advisory-Albania, whose administrator was named as Ismailaj. 

On September 1, 2010, DIA signed a contract with OSSH to collect debts owed to the electricity distribution company by public institutions and private customers that were 90 days old.

According to evidence collected by Albanian prosecutors, based on emails between CEZ Albania and CEZ a.s in Prague, the agreement between DIA and OSSH signed on September 1, 2010 was based on “lies’ and “fake documents”.

Five months before the contract between DIA and OSSH was signed in 2010, Ismailaj sent Hejsek an email through his brother-in-law, which contained details of his company as well as a presentation on how the debt collection scheme would work.

According to the document, which Hejsek forwarded later to the board of CEZ a.s. in Prague, Ismailaj claimed that DIA had 22 employees in his Tirana headquarters as well as departments in the cities of Elbasan, Shkodra and Fier.

In the email, he also claimed that the presentation for the debt collection scheme had been prepared by the Austrian company Pasut & Partners sa. 

However, the investigation by Albanian prosecutors later revealed that the information that Ismailaj sent OSSH about DIA and the debt collection scheme, which later Hejsek forwarded to the board of CEZ a.s in Prague, was untrue.

In the period over which the presentation was prepared, when Ismailaj claimed to have dozens of employees and several departments, DIA ltd had not even been registered in the BVI.

The company Pasut & Partners, which Ismailaj claimed had prepared DIA’s presentation, also did not even exist at the time when the presentation was prepared. 

According to the business register of the city of Villach in Austria, Pasut & Partners changed its name to International Corporate Consultants, AG in November 4th, 2009.  

Contrary to Ismailaj’s claims, the report had been prepared in a two-week period in April 2010 by two Albanian energy experts.

According to testimony that Elvis Mataj, former executive director of DIA, gave to prosecutors, Ismailaj, Sokol Hysenaj and Petrit Ahemti prepared the report.  

Hysenaj was an employee of OSSH at the time and would later become executive director of DIA after Mataj resigned. Ahemti was an advisor to the Energy Regulatory Agency, ERE, and in October 2013 became the chairman of the agency.

“Ismailaj enlisted the help of Ahemti and Hysenaj because of their insider knowledge of the electro energetic system of Albania,” the prosecutors wrote in Ismailaj’s indictment.

“The manipulation and inclusion of the name of an Austrian company in the proposal was meant to convince high-level Czech CEZ officials that it has been prepared by DIA ltd,” they added.    

The fake debt identification report

Although DIA and OSSH signed a debt collection agreement on September 1, 2010, the contract still needed the approval of the board of the electricity distribution company to become active.

On November 25, 2010 the supervisory board of the company, now renamed CEZ Shperndarje, held a meeting, where the first article on the agenda was the debt collection contract with DIA.

However, because the contract presented to the board of directors at the meeting did not have its annexes attached, the supervisory board refused to vote on it.

Although the contract had not been approved by the board, on the same day DIA invoiced CEZ Shperndarje for 1 million euro and later for 500,000 euro, both of which bills the utility company paid.

In his testimony to Albanian prosecutors, Hejsek says this payment was made to DIA for the so-called Debt Identification Report.  However, according to prosecutors, this report was not sent by DIA to CEZ Shperndarje until March 24, 2014       

Evidence collected during the investigation shows that the so-called Debt Identification Report send by DIA to CEZ was a fake document.

Emails between Hejsek and Ismailaj obtained by prosecutors show that he asked DIA to carry out the debt identification process several times, “to justify the issued invoices.”

In an email sent to Ismailaj on December 13, 2010, titled DIA Invoice cleansing for customer’s database, Hejsek writes that they need the reports for the invoices that CEZ had paid.

“Dear Kastriot, for the first three months of collaboration with CEZ, the period of debtor identification, we also need the reports for invoices that you issued lately,” Hejsek wrote.

However, data collected by the prosecutor’s office show that DIA never carried out the debt identification process.

In the documents produced as the Debt Identification Report, DIR, the DIA claims it started the process on September 1, 2010 by engaging 360 people in 40 offices to identify debtors, door to door.

However, data obtained by prosecutors from the tax office show the DIA had a maximum 122 of employees.

“This company never had 40 offices or either the human and material resources to identify 318,000 consumers spread across Albania, as the company claims,” the prosecutor’s indictment against Ismailaj said.

“Such work it is claimed started on September 1, 2010 when the only employee of the company was Kastriot Ismailaj,” they added.

Prosecutors also found out that in November 2010, CEZ Shperndarje initiated the Master Data Cleaning Project, which had the same goal as the Debt Identification Report.

Their conclusion is that none of the invoices issues by DIA and paid by CEZ Shperndarje had “any legal or contractual basis and are only theft through fraud of the company’s accounts”.

A former employee of DIA who spoke on condition of anonymity told BIRN that CEZ had no need for DIA’s debt identification process.

“The money they paid to Ismailaj was meant to bribe Albanian officials on behalf of CEZ,” the ex-employee said.  

Doubts about DIA emerge:

After the CEZ Shperndarje board refused to approve the September 1, 2010 agreement with DIA, board members sought information from Hejsek regarding DIA’s background.

They wanted to know who the owners of DIA were and what the company’s financial situation was, as well as about its previous experience with debt collection and references.  

After Hejsek forwarded the request to Ismailaj on December 10, 2010, the DIA sent an email to CEZ claiming that it was the only company in Albania with debt collection experience.

Ismailaj claimed the DIA was a branch of Debt Advisory International LLC, a multinational headquartered in Washington D.C., which manages debt collection portfolios across the developing world.

According to Ismailaj, the shareholders of DIA in 2010 had invested more than 2.5 billion euro in the developing world and the company had debt collection contracts with two municipalities in Albania - Shkoder and Lezhe - and with several banks, among them Raiffeisen Bank, Emporiki Bank, Credit Agricole and Veneto Bank.

Ismailaj also claimed Albania’s Central Bank had audited the company and had given it a clean financial and legal bill of health.

However, prosecutors have since deemed all the information supplied by DIA to CEZ “completely false”. It turned out the DIA had no affiliation to DAI, had no debt collection contract with Albanian banks and that Albania’s Central Bank never audited it.

However, this false information, including the information supplied earlier by DIA, convinced CEZ’s supervisory board to approve the contract at its meeting in Prague on February 14, 2011.

Company only worked on paper:

Following approval by the board of CEZ Shperndarje, the contract signed between DIA and the electricity company was equipped with annexes. 

Annex 8, which BIRN has obtained a copy of, splits DIA’s payment into two tariffs, a fixed fee and a success fee.

The fixed tariff that CEZ would pay DIA was 512,000 euro per month, while the success tariff was based on a number of coefficients based on the monthly results of the debt collected.

Based on the agreement, 210 employees of CEZ Shperndarje who were involved in debt collection were transferred from the utility company to DIA. Employees who did not agree to transfer to DIA were fired.

The two-year term agreement was divided into three collection periods of eight months. The target for the first collection period was 18 million euro. Under the contract, DIA was entitled to 512,000 as fixed costs if it collected at least 33.4 per cent of the target of 18 million euro during the debt collection period.

The monthly fixed rate of 512,000 euro was meant to cover all the internal and external expenditures of DIA, including staff, working spaces, cars, IT, insurance, taxes – virtually all of the costs that the company needed to operate.

Although DIA did employ some of the employees fired by CEZ, it did not carry out any of the promised investments and did not secure the basic material it needed to carry out the work that it had undertaken

Former DIA executive director Elvis Mataj said in his testimony to prosecutors that “in the first two months, some employees worked with their own cars, gas and equipment, with the idea that they would be compensated later, but this never happened.

“The symbolic number of employees, the total lack of logistics, the lack of orders and methodology from DIA headquarters, would not justify in any way… the engagement that DIA had undertaken,” Mataj added.

Mataj told prosecutors that Ismailaj showed no interest in collecting debts but only in producing documents that justified the work of identifying debtors.

“Several times he told me, ‘You produce the papers and I will take care of the rest,’” he recalled. 

A former employee of the company who spoke to BIRN on condition of anonymity told BIRN that the company’s running costs “were a maximum of 50,000 euro per month - Ismailaj pocketed the rest”.

According to testimony given to prosecutors by Elvis Gjergji, supervisor of collections from third parties at CEZ Shprendarje, DIA was not interested in debt collection because the agreement ensured it got paid anyway.

“It was not clear what work DIA really carried out,” Gjergji said. “The company would report as work all repayments of 90-day-old debts by state institutions and schools, which CEZ Shpendarje was collecting on its own,” he added.

History of money laundering:

When prosecutors launched an investigation over the DIA affair in 2012, Ismailaj was already well known to them.

The Tirana-based businessman had been under investigation since 2008 for money laundering for a number of suspect transactions that spread from the Balkans to Malaysia, the British Virgin Islands, the Unites States and other countries.

One of his companies registered in Tirana, Adriatic Development Corporation LTD, had received millions of euro in suspect transactions from companies from all over the world from 2007 to 2010.

Although the company had no apparent activity, a criminal indictment obtained by BIRN said that in a three-year period it received $9.7 million and €800,000 from several companies, while it transferred outside the country $4.13 million and 10,973 euro.

A Tirana District Court order in May 2015 sequestered both Adriatic Development Corporation Ltd and the accounts of five other companies registered by Ismailaj in Albania, including Debt Advisory International.  

Albanian prosecutors say Ismailaj’s money laundering activities stretched from the Balkans to the UK, France, Germany, Switzerland and Gibraltar to the Democratic Republic of Congo, Pakistan, Kurdistan and the United States - and other places.

Ismailaj cooperated in his laundering activities with an American banker based in Africa, Rebecca Gaskin Gain.

“Rebecca Gaskin Gain secures funds across the world and seeks to launder them in the Balkans before the countries in the region join the EU,” Albanian prosecutors wrote in a review of their investigation, obtained by BIRN.

Gaskin Gain was a former country manager in Congo for Standard Bank, one of South Africa’s biggest banks, and is reported to have introduced Ismailaj to international money laundering operations.  

A report published in 2009 in the Neue Zürcher Zeitung, the Swiss newspaper, said Ismailaj and Gaskin were involved in the shady privatization deal of the Kipushi mine in Congo through a Swiss shell company, United Resources AG.

United Resource AG and Gaskin Gain, appear in the transaction records of Adriatic Development Corporation, which Albanian prosecutors sequestered. 

A source in Tirana who chose to remain anonymous told BIRN that Ismailaj and Gaskin Gain met in Ohrid, Macedonia, in 2006, when he acted as a middleman in a shady privatization deal. The two then fell in love.

“Ismailaj even promised her that they would have a child together,” the source said. 

The same source said Gain transferred part of the money made in the Kipushi deal to Ismailaj after the latter convinced her that bank interest rates in Albania were higher. “The money that was sequestered here was Rebecca’s money,” he added.

Like many of the people that Ismailaj dealt with, Gaskin Gain ended up convinced the Albanian businessman defrauded her.

BIRN has learned that she is now cooperating with Albanian authorities, helping them dismantle the 130-million-euro arbitrage case brought by Ismailaj against the CEZ Shperndarje.   

Contract is finally dissolved:

Although CEZ executives were aware that DIA’s work in terms collection was completely fictional, Ismailaj became increasingly difficult to contact immediately in the first collection period of contract.

One suggestedreason for CEZ’s dissatisfaction with Ismailaj is that he was not funneling the bribes he had promised to local officials but was keeping the money to himself.

“In one case he promised a 500,000-euro bribe to the commissioners of the Energy Regulatory Energy for a favourable decision but never paid the bribe,” a former employee of the company told BIRN.   

Ismailaj also often missed appointments with CEZ executives and rescheduled them using flimsy excuses. 

BIRN has learned that by the end of 2011, after a meeting in Vienna with Ismailaj and Gaskin Gain, CEZ sought to increase DIA’s collection target from 18 million euro to 45 million euro.

DIA accepted the target but put extra conditions on CEZ, which convinced the power giant it was time to end cooperation with the businessman. 

On November 28, 2011, CEZ Shperndarje officially notified DIA’s Albania branch that it was ending the debt collection contract.

After the contract was dissolved, Ismailaj filed the lawsuit seeking 130,000 million euro with the Vienna International Arbitral Center.

Hejsek and Gaskin Gain both turned on Ismailaj and are now cooperating with Albanian authorities in their case against him.

Gaskin Gain has used a temporary power of attorney contract to take over DIA’s ownership in the British Virgin Islands, leading to a new court battle between her and Ismailaj in the Caribbean Island.

She also sent a request to the International Arbitral Center to withdraw the case against CEZ Shperndarje. However, the arbitrage chamber is awaiting the results of the BVI case between Gaskin Gain and Ismailaj before deciding whether the case will go forward or be archived.

Court records in the British Virgin Islands show a decision on the dispute over DIA’s ownership between Gaskin Gain and Ismailaj is expected in July 2015.   

On May 12, based on a Tirana court order, police arrested Ismailaj in Tirana. He was accused of a long list of financial crimes, ranging from aggravated fraud to money laundering.

He was reportedly snared at his mother’s apartment in Tirana, hiding on the balcony. When the police moved in to arrest him they discovered a stash of fake documents that he was preparing for the arbitrage case in Vienna.

Not the only dodgy debt collector:

Ismailaj’s DIA was not the only company that was engaged in debt collection scheme for CEZ in Albania.

A confidential report prepared by the accounting firm BDO, a copy of which BIRN obtained, says CEZ Shperndarje entered into debt collection agreements in 2012 with at least four other companies, including Mercl Consulting Sh.p.k, CE2 Services Sh.p.k, CE2 Debt Management Sh.p.k and CE2 Debt Management Sh.p.k.

The BDO report notes for the nine months up to September 2012 the companies were paid a total of 421,476,564 lek [3 million euro] and the total for 2012 was expected to be 4.4 million euro.

According to BDO, these collection companies were paid a “success” fee of between 28 and 50 per cent of the collected debt, which it said “appears to be high.

“We are also concerned that these collection companies appear to have been appointed without any competitive tendering process,” BDO noted.

BDO also spotted a series of other problems with CEZ Shpernadrje’s debt collections contracts.

The auditing company noted that the contracts with MERCL and DIA were signed by the administrators of CEZ Sh.a., namely Hejsek and Ian Ivan, rather than by the supervisory board of CEZ Sh.a.

Despite declaring that it collected large amounts of money, MERCL only had one registered employee, which makes it unlikely that it would have been able to provide the contracted services to CEZ Sh.a.

No documents have been seen in relation to any services performed by MERCL. We have not been able to locate any document showing the amounts collected as a result of its activity.

CEZ Sh.a. was not able to provide any evidence of what debts had actually been collected by the collection companies.

Instead it gained its information from the billing system, assuming that all the revenue earned following payment of the invoices was a result of the work of the collection company.

“The Government of Albania is suspicious that these Collection Agreements were an organized scheme to defraud CEZ Sh.a by employees within it,” BDO writes.

“This suspicion is based on the fact that CEZ Sh.a declared itself in financial difficulties, which led to it being unable to realize its investment plans, yet it was still paying up to 50 per cent of the debts collected to the collection companies,” it adds.

According to BDO, CEZ’s management of the utility company was disastrous if not criminal.

While the value of the company at the moment of privatization was 102 million euro, at the end of the 2012 it was practically worthless.

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