Economy Minister Ali Tayyebnia said Padideh Shandiz Company’s shares will be offered on the Iran Fara Bourse, a day after the company’s chief executive is arrested on charges of fraud, disruption of the national economy and illegal confiscation of land.
“We have a positive view about letting the company into an exchange and we will show the utmost leniency in procedures and regulations to solve this investment firm’s problem,” said the minister on Thursday in a press conference in Mashhad.
“Mohsen Pahlevan Moqaddam, the company’s chief executive, was summoned to court and later jailed on a court order,” Gholamali Sadeqhi, Khorasan Razavi Province’s district attorney said on Wednesday, IRNA reported.
Pahlevan had previously denied all wrongdoing and brushed off suggestions that he could face arrest or even the death penalty, which has been imposed on businessmen convicted of disrupting the national economy.
The executive’s bail was set at 42 trillion rials ($1.18 billion at market exchange rates). Iranian media reports claim the fraud case is worth as much as 940 trillion rials ($34.3 billion), although judiciary officials say the value is still under investigation.
Pahlevan is one of a generation of businessmen who rose quickly with the support of senior authorities under the previous government of Mahmoud Ahmadinejad (2005-13). Iran has been rocked by revelations of large-scale corruption in the past few years.
In 2009, Pahlevan set up Padideh Shandiz Construction Company, a construction arm of his Padideh Shandiz Company, which lured investors by promising huge returns on their shares in projects launched in Shandiz, a suburb of the holy city of Mashhad, and in the resort island of Kish, according to the Financial Times.
An advertising campaign on state television was taken as reassurance that the government backed the company; investors felt their money was safe in the construction of high-rises, hotels, shopping malls, recreation complexes and a Dubai-style tourist development.
Around 120,000 bought the company’s stocks and banks gave Padideh Shandiz loans on the basis of brochures, unfinished construction projects and promises that investments would constantly grow.
Now, thousands are trying to sell their shares having heard that the company has huge debts, although judiciary spokesman, Gholamhossein Mohseni Ejei said the exact sum was under investigation.
Government Intervention
The judiciary and the government have intervened, as public anger over the corruption case could pose a security threat.
The government is going out of its way to redeem duped investors. This brings up the question that how far is the government willing to go in its use of public resources for protecting disgruntled investors.
Why is the administration spending public funds on investors duped by a fraudulent scheme with the goal of becoming millionaires overnight?
Government officials have already said what they are doing is out of the ordinary, though this has been the case with many illegal financial institutions with ties to quasi-state organizations.
“It has been announced many times and I give assurance that people’s investments will be safeguarded and the government has done everything to resolve the issue, although we had no responsibility toward the issue,” Interior Minister Abdolreza Rhamani Fazli was quoted as saying by SENA.
Public Listing
Analysts told the Financial Times that although Padideh was registered as a private joint stock company with limited liability, it behaved like a public company by selling stocks.
Over five years, the share price jumped from 2,000 to 100,000 rials. When news of the alleged fraud emerged in late 2014, the share value dropped by 20%.
Now the government wants to list the company on an exchange to help its investors. Listing the company will allow easy trading of the company’s stock and better valuation of its shares.
Investors have been continuously pressuring the government by holding protests in Tehran and Mashhad, about their inability to offload their shares, though this is natural for a private joint stock company. At present, the company reportedly has over 114,000 shareholders.
The governor’s office has appointed a new board and the company’s shares are being valued. His office is communicating with securities market authorities to list Padideh Shandiz as a public company.
The company does not meet the financial criteria to get listed on Tehran Stock Exchange, but the more relaxed requirements of IFB can be met. According to Tayyebnia, Padideh Shandiz’s books have to be audited first before it can apply to join the IFB.
