Summary: A 2013 news investigation of Iranian corruption by Reuters news service has been cited by at least four books published one after another, the most recently in 2018.
It has also been cited by US Secretary of State Mike Pompeo in 2018 speech. Given the article's ongoing influence, this article will scrutinize flaws in the reporting techniques and raise reasonable questions about several of its findings. The article will also mention, a piece of important historical context, that was long assumed, but made official in 2013 - the same year the story was published - when the US government released classified documents about its involvement in the overthrow of Iran's democratically elected leader in 1953 and the establishment of the Shah. The purpose of this article is not to stain the reputation of an entire news agency - but to simply lay out an alternative context for interpreting a single, influential story.
Ever since the beginning of the Iranian Islamic Revolution, the United States has been leading a propaganda campaign against Iran, minimizing own harmful role in key historical events, justifying an ousted monarchist regime, and demonizing the new political system. Frequently it is done in lighter forms, for example by claiming that new government is far from perfect or even the same as a previous one, but the methods can sometimes be so radical that the characteristics of the two systems are completely inverted.
While the Reuters claims Iran is active in spreading disinformation online, the history of the agency’s reports about Iran shows the opposite. The latest of such reports is a false report about Iran’s missile program. The falsehood of the article has been dissected here. The case which I have dissected is a 2013 article authored by Steve Stecklow, Babak Dehghanpisheh, and Yeganeh Torbati. The article represents a perfect example of such radicalism and disinformation reporting about Iran.
The Reuters report has been cited by at least four books published one after another, the most recently in 2018. The books are “Iran's Political Economy since the Revolution” by Suzanne Maloney (2015); “Democracy in Iran: Why It Failed and How It Might Succeed” by Misagh Parsa (2016); “Challenging Theocracy: Ancient Lessons for Global Politics” by David Tabachnick, Toivo Koivukoski, and Herminio Meireles Teixeira (2018); and “Losing Legitimacy: The End of Khomeini's Charismatic Shadow and Regional Security” by Clifton W. Sherrill (2018).
The chorus doesn’t stop there and it’s not limited to academic publishing or book industry. The 2013 report lays the ground for an ongoing war of words and decisions to impose more sanctions on Iran. Speaking at Ronald Reagan Presidential Foundation and Library in July 22, 2018, Secretary of State Mark Pompeo used the 2013 Reuters report to attack Iran; he said: “And not many people know this, but the Ayatollah Khamenei has his own personal, off-the-books hedge fund called the Setad, worth $95 billion, with a B. That wealth is untaxed, it is ill-gotten, and it is used as a slush fund for the IRGC. The ayatollah fills his coffers by devouring whatever he wants. In 2013 the Setad’s agents banished an 82-year-old Baha’i woman from her apartment and confiscated the property after a long campaign of harassment. Seizing land from religious minorities and political rivals is just another day at the office for this juggernaut that has interests in everything from real estate to telecoms to ostrich farming. All of it is done with the blessing of Ayatollah Khamenei.” The speech applauded by Iran hawks in Washington.
The year 2013 was the year of big news about Iran. Four months before the release of the Reuters’ article, CIA finally admitted role in 1953 Iranian coup. “Marking the sixtieth anniversary of the overthrow of Iranian Prime Minister Mohammad Mosaddeq, the National Security Archive is today posting recently declassified CIA documents on the United States' role in the controversial operation. American and British involvement in Mosaddeq's ouster has long been public knowledge, but today's posting includes what is believed to be the CIA's first formal acknowledgement that the agency helped to plan and execute the coup.” Disinformation is dangerous. It used once to oust democratically elected Prime Minister Mohammed Mossadegh, and has been leveraged again to bring back the Shah of Iran, William David Pear writes. He continues, “Since Iran was a developing democracy, an excuse had to be found for a US intervention. Churchill accused Mossadegh of being a communist. There was no evidence that he was. Mossadegh was an anti-colonial nationalist who cared about the welfare of the Iranian people, and that was all the evidence that Eisenhower needed. Mossadegh had to be punished for standing up to the British and demanding Iran’s natural resources for the benefit of the Iranian people.” The 2013 article of Reuters reminds us of the same pattern of disinformation about Iran.
The 2013 Reuters story claims that the Execution of Imam Khomeini's Order (EIKO), also known as Setad, a little-known organization created to help the poor, morphed into the $95 billion financial empire controlled by Iran's Supreme Leader, Ayatollah Ali Khamenei. More precisely, they uncovered something unknown to Western intelligence services, economists and most prominent scholars of Iranian studies, even to the Iranian leadership themselves. In fact, much to the contrary, among ordinary Iranians the organization is known for their social programs, helping the poor families and doing charity works.
According to the Reuters article, the Iranian president's office and the Foreign Ministry didn't respond to requests for comment. Iran's embassy in the UAE issued a statement calling their findings "scattered and disparate" and said that "none has any basis," but it didn't elaborate. Hamid Vaezi, the Setad's then director general of public relations, said that the information presented is "far from realities and is not correct," but he also didn't go into specifics. Their short denials are understandable, considering that the same response would be received from a scientist if asked to make a serious review of a fantasy book. For the same reason, there is no scientific review of Reuters' article. Fortunately, this review will go deeply into the details, focusing on personal testimonies and claims of several groups of informers, thus developing a linear counter-story.
Baha'i personal testimonies
First, there's the story of Pari Vahdat-e-Hagh, an 82-year-old Baha'i woman living in Europe, who claims that she lost family's property, more precisely three apartments in a multi-story building in Tehran, allegedly "built with the blood of herself and her husband." She further claims that her husband Hussein was imprisoned in 1981 because he began working for a gas company that had been set up to assist unemployed members of the Baha'i faith, and finally executed a year later. All of this happened, as the article claims, just because they were Baha'i.
The article does not mention the fact that her husband, alleged philanthropist, was actually a lieutenant in Pahlavi regime's military. It neither mentions the conditions for obtaining such amount of property in Iran's capital city center at that time. Ordinary military personnel were provided with an apartment, but not three apartments, nor was it possible to earn such vast properties with a salary of a lieutenant and teacher, no matter how hard you work. Miss Vahdat-e-Hagh explicitly stated that all had been obtained by herself and her husband, so it's very easy to exclude the possibility of inheritance.
The only way of being awarded with three apartments was, in fact, an extraordinary and obedient service to the Pahlavi's regime, and taking into account that Hussein Vahdat-e-Hagh's career was military as well as the only war that Shah led was one against his own people, his merits to the dictatorship become crystal clear. This also perfectly explains why Hussein Vahdat-e-Hagh was imprisoned and executed, while tens of thousands of other Baha'is and hundreds of ordinary lieutenants, those without 'special merits' and three apartments, were not. In other words, the only blood that Vahdat-e-Hagh mentioned can be the blood of the people and the blood on her husband's hands. Fake philanthropy and contradictions do not stop here.
Pari Vahdat-e-Hagh, also known as Paridokht Khaze, lives in Berlin where she earns a living by giving interviews and selling memoirs about the Baha'i victimhood. In the preface of her 2014 book titled "In Search of Justice," Vahdat-e-Hagh claimed that before the 1979 revolution she had hoped to one day fulfill her dream of serving the needy in Africa. Before selling fictitious biographies, according to her own personal testimony to Reuters, during the 1980s she was living in one of the above-mentioned three apartments and was earning by renting other two. During these years of war the country was full of orphans and the poor, but giving any free accommodation was obviously out of the question for a self-proclaimed philanthropist.
Her lucrative rental business continued in the 1990s when she was living in Germany, taking the rental income out of all three apartments. According to the Reuters article, she left Iran in 1993 and it took six years before Iranian authorities realized she was no longer living in the country. This information contradicts her other statement that government representatives came to her apartment and threatened to beat her if she did not leave, while she bravely opposed them and yelled: "You can come and kill me." So this old lady, allegedly under constant pressure and control, indeed left her apartment and was further able to leave the country, and the government, allegedly so greedy for her properties that it sent thugs at her doors, did not even notice that she's out of the country and renting the same properties for six years. Makes perfect sense, isn't it?
In both the Reuters article and the Vahdat-e-Hagh's memoirs, her departure from Iran is described as some sort of "courageous escape" typical for a dissident genre, from books to Hollywood movies. In reality, she was free to leave the country and there was no any ban, no control, no chase at the airport. In the Reuters article, her false courage and principles are additionally enhanced by claims that government finally discovered her absence and demanded to pay rent on the unit, but she refused. The reality is again quite the opposite: she was actually refusing to pay tax on the rental income profit for six years, and in the meantime, she did not even report the change of address i.e. living abroad. Putting aside the controversial origin of properties, the consequences of such long-term lawbreaking are pretty much identical all over the world.
The Reuters' caricature story of courage and injustice ends with a claim that Vahdat-e-Hagh's "stolen" building appears to be vacant, most of the windows are broken, and property's ownership isn't clear. This rumors allegedly came from merchants in the neighborhood, but how three Reuters journalists based in New York, London and Dubai managed to obtain the information in the streets of Tehran, also isn't clear. Even less clear is their message, which may imply either that the building remains unused since Vahdat-e-Hagh stopped renting it, or it is basically worthless. Both possibilities make the whole story even less credible than it already is. Most likely, it is only a dystopian allegory or their own fantasy conception of post-revolutionary Iran.
Besides the story of Vahdat-e-Haghs, the Reuters article also offers the story of Katirais, yet another Baha'i family, whose narrative is similar in terms of structure. Again, there's a rented three-story building in central Tehran, owner's emigration to Canada, controversial ties to the Pahlavi regime, and of course, "just because they're Baha'i" cliche. Apart from the building, there're also 750 hectares of land around the city of Hamedan in northwest Iran. The Iranian official version says that owner had left the country and had abandoned properties, as well as that prior to 1979 he collaborated with the Pahlavi government, while owner's daughter Heideh Katirai claims that he was being targeted solely because of his religion and never had any ties to the Shah's government. Now, who to trust?
Making a choice on this question is much easier if we consider there was the Shah's White Revolution of 1963 which its purpose was to weaken those classes that supported the traditional system, primarily landed elites. Virtually all landlords lost their possessions, with only a few exceptions, i.e. just those with close ties to the government were spared. Taking also into account that the general status of Baha'is during the Pahlavi period was far from thriving, the claim that a Baha'i person without any connections to the Shah's regime could keep 750 hectares of land and stay intact by land reforms, is clearly an insolent lie.
Instead of sticking to the facts known to every historian and Iranian, Reuters journalists use logically fallacious methods like appeals to emotion through empathy, false dilemmas, and good ol' victimhood. For example, an article quotes Katirai's daughter saying "I took my kids there every Friday to see the family" and "each corner of that house is a memory for us." One may wonder whether these trite phrases can be applied in the same way to their former land holdings, perhaps "every single square meter is a memory for them" also, out of 7,500,000 square meters in total. Such colossal amount of land was highly uncommon even for the richest landlords, and since Katirais weren't historically attested among noble or wealthy merchant families prior to the Pahlavi period, it is clear that they did not just keep the property due to the ties with the Shah's regime, but they also gained it.
Other statements are less subtle and bear aggressive religious and political messages. "We know that Islam is a religion of peace, but how can a government that claims to be an Islamic government allow this to happen?" Katirai's daughter had asked, and thus offered the false dilemma: either the Iranian government is not Islamic, or Islam is not a religion of peace. The third option, unoffered in the article but the most realistic one, is that she is a liar and demagogue. Additional evidence for it is yet another her claim that legal representatives refused to consider her father's case solely because he did not belong to any of three constitutive minorities: Zoroastrians, Jews or Christians. This implies that all others, from Iranian Hindus to foreign-born East Asian communities, have no any legal rights. Utterly bizarre.
Legal and human rights "experts"
Another group of people used as a reference in the Reuters article are self-proclaimed human rights "experts" and lawyers, all Iranian-born and living abroad. The first one is Naghi Mahmoudi who in the introduction claimed that Khamenei as the Supreme leader oversaw the creation of a body of legal rulings and executive orders that enabled and safeguarded asset acquisitions, as well as that no supervisory organization can question its property. The article represents him as a "lawyer" and uncritically accepts his allegations which serve as the basis for further elaboration.
In reality, Naghi Mahmoudi is only a pity political activist who has a history of lying and manipulating. Back in mid-2010, Mahmoudi and his colleague Javid Hustan Kian claimed to be defectors and "lawyers" of an Iranian woman sentenced to lapidation, but the whole case turned out to be a well-organized hoax, while they were disclosed as impostors and members of the MEK terrorist cult. In the meantime, he almost completely vanished from the media, held several pro-MEK speeches in Germany, and sometimes shared a propaganda material on Twitter, including ridiculous pan-Turkist claims that "40% of Iranians are Azeri Turks deprived of basic human rights." Ironically, even Ali Khamenei was born into an Azeri family, as the Reuters article correctly mentions.
The biographical details of other informers are no less controversial. Ottawa-based Hossein Raeesi is a legal advisor to the IHRDC, a US government-sponsored organization blacklisted as subversive by the Iranian Interior Ministry, and London-based Mohammad Nayyeri is a close associate of Shadi Sadr, an anti-Iranian activist who publicly advocated Arab separatism in Iran. It is interesting that both of them, along with certain Beverly Hills-based Reghabi couple, complain about legal complications over the return of property, but at the same time, they confirm it is actually possible and feasible. It only takes time, and money, as everywhere.
However, the informers could not agree on a precise legal fee, some of them claiming it is 20% while others even over 50%. Since both amounts are obviously extremely exaggerated and hardly provable, for this purpose two anonymous jump into the story and Reuters journalists use their testimonies as evidence. The first is an Iranian Shi'ite Muslim businessman now living abroad who put fee at 55%, and the second is alleged Nayyeri's client who recovered the house but had to pay 20% of the property's assessed value, a religious payment called "khoms" mandated under Islamic law. No names, no documents, and no sense. To fill such logical gaps and inconsistent claims, journalists also used orientalist cliché of ubiquitous corruption.
Finally, the last group of informers consists of individuals more deeply involved in politics, comparing to the previous activists who operate under the guise of human rights. The Reuters article intentionally conceals the organizations they represent and introduces them as respectable scholars and politicians, allegedly authoritative on the subject. For example, three journalists first claim that they had identified "about $95 billion in property and corporate assets controlled by Setad" and that amount "surpasses independent historians' estimates of the late shah's wealth," and as an evidence for such comparison they further used statements by Abbas Milani who believes the estimate of the Shah's fortune was "extremely exaggerated" and stood at "a billion dollars." In other words, about $3 billion in today's money, or only a fraction of the worth of Setad's holdings, Reuters concluded.
It is hard to enumerate how many manipulations this escapade contains. First of all, there are no "historians" here, but only one, namely Abbas Milani, who is far from "independent" because he is a member of the neoconservative Hoover Institution, an advocate of multilateral crippling sanctions against Iran in the US Congress. His books are full of revisionist portrayal of the US role in the 1953 coup, support of the Pahlavi regime's oppression, the 1979 Revolution and afterward, and he offers other contorted interpretations like a claim that "Iran went from politically moderate Monarchy to totalitarian Islamic Republic." Milani's statement about the Pahlavi fortune does not represent a historical consensus, nor a serious scholarly assessment, only utter whitewashing of the Shah's financial crime.
Already in January 1979, the New York Times reported that the Pahlavi wealth is rivaled in the Middle East only by the holdings of the Sauds of Saudi Arabia and the al‐Sabah dynasty in Kuwait, and according to bankers, the Shah's personal portfolio is worth "well over $1 billion." New York bankers told journalists that "a substantial part of the $2 billion to $4 billion belongs to the Pahlavi family," speaking only of the sums that have been "transferred from Iran to the United States during last two years" [1977 and 1978]. The NYT article further states that "the accumulation of immense sums was made possible through the blurring of state funds and royal funds in Iran," primarily the Pahlavi Foundation which the Shah controlled absolutely.
In 1958, the Shah formed the Pahlavi Foundation, declaring at the time that he was transferring 90% of his holding to the new institution, a combination of charitable organization and family trust. Documents proved the royal family's penetration of almost every corner of the nation's economy, including among other things 17 banks and insurance companies, an 80% ownership in the nation's third-largest insurance company, 25 metal enterprises, 8 mining companies, 10 building materials companies, 45 construction companies, 43 food companies, and 26 enterprises in trade or commerce, and a share of ownership in almost every major hotel in Iran, or 70% of the hotel capacity. Some of these holdings are joint ventures with American corporations.
Behind a facade of charitable activities, the NYT article continues, "the foundation is apparently used in three ways: as a source of funds for the royal family, as a means of exerting control over the economy through the foundation's holdings in key sectors, and as a conduit for rewards to supporters of the regime." The transfer of billions of dollars out of Iran had started already in 1974, partly in the form of loans to members of his family that were never repaid, and numerous transactions from Iran were made through American corporations and banks as well as some New York investment houses. The additional uncounted resources were deposited in banks in Switzerland and other countries with strictly enforced bank-secrecy laws.
In the autumn of 1978, during the revolutionary turmoil, 64 members of the Pahlavi family have gone abroad. Like other wealthy Iranians, they all have made substantial deposits in Swiss bank accounts and bought luxury residences in Europe and North America. Of course, the court never revealed the true extent of its wealth, but Iranian and Western estimates place the fortune accumulated by the royal family, both inside and outside Iran, far above Abbas Milani's "a billion dollars" claim. As New York bankers, Ervand Abrahamian and Michael Axworthy, both highly critical of the Islamic Republic but still regarded as authoritative historians of modern Iran in the West, offer a completely different picture.
According to Abrahamian's monographies, the royal family's total assets were estimated "anywhere between five and twenty billion dollars" (1982:437) or "in excess of $20 billion" (2008:131). With inflation, that would equal up to $60 billion by today's currency. In Axworthy's book, the capital that had been sent out of the country was "estimated around $120 billion" (2013:297). This figure includes the comprehensive wealth of all Iranian emigrants, but there is no doubt that the majority was concentrated in hands of the ruling family.
In January 1981, the Iranian government filed a $36 billion lawsuit in New York against 65 defendants, most of them relatives of the Shah, in an attempt to recover stolen wealth. Reuters journalists mentioned this fact but in the context of denying figures. "The suit was dismissed," their paragraph ends, and therefore imply that "claimed" figure must be false. It is again a gross manipulation because the New York courts did not deny the amount of money, they dismissed the proceedings on the ground of 'forum non conveniens' though they admitted that there was no alternative forum. According to the book by Trevor C. Hartley, Emeritus Professor of Law at the LSE, this was an abuse of the doctrine, for political reasons, the courts were determinated to shield the Shah, and 'forum non conveniens' was the tool they chose (2009:238). After all, those are the same courts which recently ordered Iran to pay billions to relatives of 9/11 victims.
In addition to Abbas Milani, the Reuters article also quotes Mohsen Sazegara, introduced as a co-founder of the Revolutionary Guards who is now in exile in the United States, and David S. Cohen, then undersecretary of the Treasury for Terrorism and Financial Intelligence who also served as deputy director of the CIA. The former is a member of the Washington Institute for Near East Policy (WINEP), a subsidiary of the notorious American Israel Public Affairs Committee (AIPAC), while the latter is a member of the Foundation for Defense of Democracies (FDD), a hawkish and neoconservative organization led by Mark Dubowitz that was intensively lobbying for the anti-Iranian and anti-Setad sanctions for years.
All of the above-mentioned lobbyists and their advocacy groups, along with three Reuters journalists, have the same agenda and are trying to convince the world that Iran's Supreme Leader Ali Khamenei is the same as Shah Mohammad Reza Pahlavi, while Setad is no different than the Pahlavi Foundation. There is, however, a serious problem with this picture. More precisely, there are no Khamenei's jewels, crowns or designer clothes, no luxury cars or art collections, no luxurious villas or expensive estates, either in Iran or abroad. There are no rich members of the family, no foreign bank accounts, no documents, no independent experts, no New Yorker or Swiss bankers. There is absolutely nothing which proves their claim.
There is, indeed, the Reuters "investigative" article with fancy charts and listed properties. Only a few months before the publication of Reuters' article, Washington imposed sanctions on Setad and some of its alleged corporate holdings, and the Treasury Department issued a press release containing boring numbers, hard charts, Persian-named properties and other dull text, incomprehensible for wider audiences. And that's why the Reuters article jumped out.
Investigative journalism is when a report is built on the basis of the collected data, but here is an opposite case, all the details serve as buttress or decoration of the central point. In other words, when you take off all worthless tree charts, personal testimonies, stories of poor old ladies, allegations by fake human rights activists and lobbyists, and numerous other cliches, the only thing left standing is the official US press release and accompanying political rampage against the Iranian leadership. Nothing more.
Regarding Setad itself, as seen through the eyes of the US government, it serves as a useful bogeyman and has multiple purposes. Its first dimension is political-ideological because it follows the old discourse of bashing Iranian leaders and veterans, equalizing them with corrupt royal elites. Second, the economy of Iran is now being discussed under the guise of "Setad" name, a sort of trade name which sounds less offensive in public debates and official documents. Third and most important, it is a perfect tool for further targeting Iran's economy and expanding sanctions, because any new emerging company can easily be declared as a Setad holding.