Corruption Investigation at Giant Gold Mine Embarrasses Uzbek Government - Dispatch Weekly

The Government of Uzbekistan is facing scrutiny over its anti-corruption controls after an exposé revealed that $400 million may have been stolen from one of its largest enterprises.

A report by The Sunday Times revealed that PwC, the accountancy firm, had been hired to investigate corruption in the supply chain at Navoi Mining and Metallurgical Company (NMMC), which is owned by the Uzbek state.

The alleged corruption found by PwC has thrown a spotlight on the role played by the National Agency of Perspective Projects (NAPP), an agency of the Uzbek government run by Dmitriy Li.

NAPP was responsible for monitoring procurement processes at state-owned enterprises until about 2019, when the agency’s focus shifted to crypto currencies. Dmitriy Li is controversial in Uzbekistan after his failed attempts to build a crypto industry in the country, despite significant investment in various projects.

According to The Sunday Times, NMMC hired PwC to review equipment contracts signed by NMMC between 2019 and 2021. PwC was, therefore, reviewing a procurement system put in place and regulated by Dmitriy Li’s NAPP agency.

“PwC concluded that Navoi had been the victim of over-charging totalling hundreds of millions of dollars in its supply chain,” The Sunday Times wrote. “They were caused, PwC said, by serious weaknesses in its procurement system.”

NMMC operates the Muruntau gold and uranium mine and is a massive contributor to the Uzbek economy, accounting for approximately 8% of the country’s GDP.

However, the PwC report found that middlemen companies including Trade Group and Empyrean Heavy Machinery Spare Parts Trading, based in Dubai, had ripped off NMMC by rigging the procurement system.

The Sunday Times wrote: “PwC’s damning study, commissioned by Navoi’s supervisory board and seen by The Sunday Times, found that Navoi had bought machinery from the likes of the digger giants Caterpillar and Komatsu through middleman companies that artificially inflated the amount Navoi was paying.”

NMMC is estimated to have overpaid for equipment by between $380 million and $427 million in the three-year period studied.

Empyrean claimed on its website to be a distributor for major multinationals including Komatsu, Caterpillar and Michelin, despite these companies having no formal ties to it.

Empyrean was founded in November 2018 and almost immediately started winning big supply contracts from NMMC. Between 2019 and 2021 it won tenders worth $293 million.

The Sunday Times said: “One contract, in 2020, was for $41 million worth of Komatsu mining trucks, yet Empyrean was competing against several companies that did not submit tender proposals or submitted paperwork that was allegedly forged.

Empyrean is owned by Akmal Mamarahimov, whose brother Muslim Mamarahimov was formerly a senior manager at NMMC. Mamarahimov is a former hotel manager from Navoi whose previous supply chain company, which was based in Moscow, failed after 18 months.

The Uzbek government has yet to comment on The Sunday Times’ report but attention is expected to focus on Dmitriy Li’s role as regulator of the procurement processes at state-owned enterprises such as NMMC.

Since relinquishing oversight of procurement, Li’s NAPP agency has attempted to develop crypto currencies in Uzbekistan but has so-far managed to attract just one exchange, called UzNex.