The Turkish president's son-in-law is involved in an offshore tax scheme

President Recep Tayyip Erdoan's son-in-law helped his company evade millions of dollars in taxes by setting up an offshore structure in Malta and Sweden. Albayrak is a part of SALAK Holding, Turkey's giant energy, textile and construction conglomerate.

In the end the devious structure was not needed for Albayrak, who was then-CEO of the Turkish multinational.

Why? In 2015, he was appointed as Turkey's Minister of Energy and Natural Resources. In this capacity, he pushed through preferential tax amnesty legislation written by former Çalık associates. *al*k will be able to repatriate unlimited amounts of offshore cash under the law, called the 'Wealth Peace Act'. Free of tax.

As part of the European Investigative Collaboration (EIC) network's #MaltaFiles, Albayrak's offshore dealings are revealed in leaked financial documents and e-mails from Redhack.

This raises serious questions regarding the government's penchant for political favors towards big business, and in particular *al*k Holding, which in the past has received billions of dollars in government incentives.

Mission: bring the cash home from Dubai

An email dated 4 November 2011 contains the following warning: "Brother, the new system will be established; however, this system will be based on tricking the [Turkish] finance authority; it is not a secure system.". If the finance authority discovers this, it wouldn’t be good for [Çalık’s] reputation.”

The author of the note is Metin Atalay, Çalık Holding’s man in Dubai.

Albayrak, 33, is the recipient. He was the CEO of *al*k, which has interests in textiles, real estate, telecommunications, mining, and energy. A billionaire friend of President Erdogan, Ahmet *al*k, owns this property. Albayrak is also the husband of eldest daughter Esra Erdoan.

Atalay was hired by Albayrak to run an office in the Dubai Free Trade Zone, a tax-free zone meant to attract foreign investors.

It's a strawman whose "job doesn't matter" since he was hired to handle only "the delicate matters", which includes signing documents without asking any questions. As a result, * al * K in Dubai is little more than a shell for the company's worldwide business activities. Each month, millions are generated by the offshore operation. From Atalay's email, it is stated the Dubai company * al * k Enerji FZE holds 34.7 million USD for the first half of 2011.

This money will be returned to the United States. However, transferring directly from Dubai to Turkey would mean paying 20% of this - and future profits - to Turkish tax authorities.

Is there a way to transfer money from Dubai to Turkey paying as little taxes as possible? Al*k's Director of Foreign Affairs, *afak Karaaslan, is responsible for the mission. He responds by setting up offshore structures through Malta and Sweden.

*al*k plans to transfer the Dubai millions to companies in Malta, paying 35 percent tax to the Maltese authorities. On paper, this appears to be a bad idea. However, read the fine print. Due to the fact that *al*k's shareholders do not reside in Malta, nor does the company undertake significant activity on the Mediterranean islands, the company is eligible for an 80 percent refund, creating an effective tax rate of only 5 percent.

Cash now in the EU can be transferred to Swedish accounts. *al*k avoids further deductions by falsely stating to Swedish authorities it already paid 35 percent in tax in Malta.

The tax authorities in Turkey believe the money has come from a high-tax jurisdiction in Scandinavia, so they do not raise an alarm when it reaches al*k.

Here is a picture of the scheme:

Atalay is not convinced of the plan's viability. However, his chagrin is mostly fuelled by his aversion to moving his family from Dubai to Malta. Albayrak is told by him to skip the complicated tax system and wait for the Turkish government to offer a tax amnesty-parliamentary bills that would allow the tax-free and legal repatriation of offshore funds. “We are talking about Turkey,” Atalay writes, “there is always a tax amnesty [coming].”

Atalay persists. On 24 January 2012, he sent another email to his boss, *afak Karaaslan, complaining further about the new system that would require him to move to Malta.

Karaaslan wants to go ahead with the plan: "I'm just laughing, and I can't say anything." “[Çalık] compulsorily takes a decision regarding tax planning in accordance with its interests.”

Karaaslan works on the scheme over the next year or so. He incorporates four new companies in Sweden in 2012: *al*k Textile, *al*k Energy, *al*k Marketing, and Çalık Construction. He then opened eight more companies in Malta the following year: Fashion Zone Textile Holding, Fashion Zone Textile, Synergy Marketing Holding, Synergy Marketing, Technological Energy Holding, Technological Energy, White Construction Holding, and White Construction.

As of today, these companies are in liquidation, and only one was ever reported in *al*k Group's Turkish annual reports: *al*k Energy in Sweden, which was listed as "inactive".

Furthermore, none of the company accounts in Malta or Sweden indicates cash transfers, and *al*k never moved Atalay to Malta as planned.

Since Albayrak was on his way to the top, he didn't require a complicated and potentially illegal scheme.

A Turkish prince

After the Maltese companies were established, Berat Albayrak resigned as CEO of *al*k to run as an MP for Erdogan's Justice and Development Party (AKP) in the June 2015 Turkish elections.

After winning the election, he was named Minister of Energy and Natural Resources of Turkey five months later.

Berat Albayrak is the son of Sadik Albayrak, a conservative writer and close friend of President Erdoan. Erdo*an's eldest daughter, Esra, married Berat in 2004. In 2007, when he was only 29 years old and working for *al*k Holding since 1999, he became CEO of the Turkish business giant. Ahmet *al*k, chairman of *al*k, is close to Erdo*an and has connections to a number of foreign leaders.

He oversaw a company that grew ever-closer to the government of Erdogan and ever-richer, earning billions in public tenders, from March 2007 until he left for politics in 2013.

Albayrak was promoted to CEO one year after purchasing Sabah-ATV, Turkey's second-largest media company and owner of the Sabah daily newspaper, which had been seized by the government. Çalık was the only bidder, offering a 1.1 billion USD bid that was reportedly financed by loans from two Turkish banks and Qatari investors, Turkish news reports said.

Albayrak has been the Turkish Energy Minister since November 2015, even though he lacks a background or experience in politics. A lot of people now believe that Erdogan is grooming Albayrak to succeed him. Albayrak accompanied Erdogan on his recent visit to the U.S., where the pair were filmed together watching their security detail beat peaceful protesters outside the Turkish embassy in Washington.

But it appears that his former company is never far from his thoughts.

“Don't call it a tax amnesty”

After five months, *afak Karaaslan sends Albayrak a message on his private e-mail address. He attaches another document. This article explains why the U.S. refused to join the Common Reporting Standard, a global anti-money laundering initiative. If Turkey does not join, it is a good sign.

So it might be the right time for *al*k to finally return its Dubai millions.

“There are two options left for people who have wealth abroad,” Karaaslan writes. “They either take their wealth to the USA … or states can make it easy for citizens to bring their wealth back.”

"Using a tax amnesty that guarantees privacy will help [Turkish] citizens bring their wealth back into the country...", he continues. Adding "Because this needs to move quickly.". People need to be informed well and those with wealth need to understand its importance.”

Albayrak seems to need little convincing. Karaaslan sends another email to the energy minister a month later, on 3 June 2016. There is a draft bill for a new "tax amnesty" to go before the Turkish parliament.

Karaaslan sells the law to his government friend, even suggesting its title: "Wealth Peace". "As we all know, the CRS [Common Reporting Standard] has been signed," he writes. "The USA is an exception, therefore, world trade and bank accounts will most likely direct money to the USA. By establishing a Wealth Peace, Turkey will be able to use this to its advantage.

“We specifically are not using the word ‘amnesty’ here,” Karaaslan writes.

He Albayrak advises that the law should be marketed well. "Before it becomes law, the issue needs to be marketed very well. People need to know about the information exchange system [CRS] and should become concerned about it, so they will see the law as a positive step..”

Although Karaaslan's draft bill is similar to a tax amnesty law passed by the Parliament in May 2013, *al*k's Foreign Affairs Director adds his own touches.

“Even though we think it is generally a good law,” he writes, “we have included additional points where we think it is lacking.

Karaaslan's "additional points" include allowing companies or individuals to repatriate money - electronically or physically - without questions until December 31, 2016. Also, he generously deletes an article that taxes funds coming into Turkey at two per cent.

Additionally, Karaaslan’s law allows the appointment of external parties to transfer cash on others’ behalf, without any legal rights for the state to investigate the source or beneficiaries of the money, nor prosecute anyone who might be committing crimes.

Minister to business leader on law draft: “Final version. Is it OK?”

Albayrak is now serving as a conduit for the new law, ping-ponging emails between Turkey's Finance Minister, Naci A*bal, and Calik's Karaaslan. Erdogan even finds himself involved with the law. Of course, unofficially.

In a move that raises serious constitutional questions, Albayrak forwarded the attachment on 21 June to Erdogan's personal secretary, Hasan Dogan.

While Erdogan's loyalty to the AKP is no secret, the implication that he actively interfered with the party's policy making may violate the constitution of Turkey, which demands the president "take no sides" in political matters.

It is not known whether Erdogan or Dogan reacted to Albayrak's transparent gesture. The next day, the energy minister emailed his old friend Karaaslan with a copy of the bill, asking, "Final version.". Is it OK?”

Two In the weeks that followed, Turkish Prime Minister Binali Y*ld*r*m presented a new 'Draft Bill to Amend Laws to Stimulate Investment' to the parliament, which included 'Temporary Article No.2', containing the Wealth Peace provisions, written by *al*k's Karaaslan.

Çalık’s 'Article no.2' caused mayhem in the Parliament, with opposition MPs claiming it would open Turkey’s doors to illicit money. Opposition parties threatened to block the whole draft consisting of 77 articles if the AKP refused to remove the Article no.2.

However, the AKP caved in on 14 July 2016. *zgür *zel, a member of the opposition Republican People's Party (CHP), declared victory, vowing to fight it again if it reappeared.

The victory was short-lived.

Next day, factions within the Turkish army attempted to overthrow the government. The weeks that followed saw parliamentary business preoccupied with passing emergency laws in order to combat the rebels, and attacking the network of the exiled preacher, Fetullah Gülen, whom many suspect was responsible for the coup. *al*k Holding, however, had not forgotten its priorities in the chaos of the government's crackdown, mass arrests, and firings.

The Budget Commission added *al*k's Wealth Peace provisions to another draft bill a week after the coup, 22 July 2016.

However, little had changed. In little over a week, the bill passed, and was sent to President Erdo*an for his signature. During his tenure, he signed a law legalizing money laundering - the "Wealth Peace".

The Black sea quoted CHP MP Mehmet Bekarolu as saying, "The economy of Turkey is in shambles.". “They enacted this law because we are looking for money everywhere,” he said. The Ministry of Finance and I asked many times in the parliament about this law - who brought in money, how much, and whether it stayed in the country afterward. No information is available from them. Clearly, something is wrong.”

Çalık declined to answer The Black Sea's questions, stating only that our allegations are inaccurate and we strongly deny them. Our group has never engaged in any illegal activities."

Neither Berat Albayrak nor Naci Agbal responded to requests for comment.