Financial Times FT.com

Tesco dragged into Turkish bribery case

By Alex Barker in Ankara and Tom Braithwaite in London

Published: August 14 2008 23:33 | Last updated: August 14 2008 23:33

Tesco has become embroiled in a Turkish political scandal after the development of its largest store in the country was caught up in bribery allegations.

An entrepreneur, whom the UK retailer paid $13m for a prime site near Istanbul, is accused of bribing a leading politician of the governing AKP party with $1m to push through an ambitious planning application.

Tesco is not accused of any wrongdoing in the case and Mehmet Karasu, the entrepreneur, and Saban Disli, deputy leader of the AKP, have denied any wrongdoing.

Mr Karasu was able to navigate Turkey’s cumbersome planning bureaucracy, gaining permission to move a park and a road and changing municipal planning regulations within a year. The decision was unusually fast and favourable, said a local planning expert.

Opposition politicians have led the accusations against Mr Disli, following a complaint from someone involved in the deal. A Turkish prosecutor is now examining the complaint.

“Tesco Kipa purchased this land with commercial planning consents in place and was not involved in any application for rezoning,” said the supermarket group. “The allegations that have surfaced in Turkey are a political matter and have nothing to do with our purchase of the land or subsequent store development. We acted entirely properly throughout the commercial negotiations to buy this land, ensuring that we complied with all local regulations.”

Tesco has opened more than 65 stores since entering Turkey with the £75m acquisition of the local Kipa chain in 2003. In a notarised contract seen by the Financial Times, Tesco made an “initial payment” of $1.5m to help Mr Karasu in buying the land and pledged to pay a further $6.9m after he obtained planning permits. The original lease allowed only non-commercial development.

The deal came 20 days after Mr Karasu reached a separate agreement with Mr Disli, deputy leader of the ruling Justice and Development party (AKP). The signed contract, which emerged in a court case, said Mr Karasu would pay Mr Disli $1m once the land was bought and planning permission granted.

Tesco eventually paid about $13m for the land, almost $5m more than first agreed. This gave Mr Karasu’s consortium a profit of almost $10m within two years of buying the land – with the support of Tesco – for $3.5m.

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