ALBANIA'S INSURANCE PRIVATIZATION: DIRTY MONEY?

C O N F I D E N T I A L SECTION 01 OF 02 TIRANA 000892

SIPDIS

DEPT FOR EUR/SCE JISMAIL, TREASURY FOR VIMAL ATUKORALA
SOFIA FOR P.ROBERTS

E.O. 12958: DECL: 12/18/2018
TAGS: EFIN ECON KCRM PREL AL
SUBJECT: ALBANIA'S INSURANCE PRIVATIZATION: DIRTY MONEY?

Classified By: A/DCM Paul Poletes, reasons 1.4 (b),(d)

Summary
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1. (C) Dallas-based American Reserve Life Insurance Company
(ARL) on December 9 was awarded the tender for the GOA's 61
percent of Albanian insurance company INSIG for 25 million
euro. The remaining 39 percent is owned by EBRD and IFC.
The Ministry of Finance organized the tender, which to many
observers seemed less transparent than most. The MOF refused
to release the names of interested companies prior to the bid
opening, as has been the practice with past tenders. When
the MOF awarded the tender to ARL, open-source inquiries
revealed that ARL and several U.S. interlocking insurance
companies are owned by Texas businessman Gene Phillips and
run by members of his family. Phillips has been implicated
in numerous fraud and bribery schemes and was arrested by the
FBI on racketeering charges in 2001, but later acquitted.
According to Post sources, Phillips and business associate
Ron Finley have links to Bulgarian crime organization
Multigroup. Finley recently bought controlling interest in
Albania's digital TV company DigitAlb and both Finley and
Phillips are behind CableTel, a large cable TV company
operating in Bulgaria, Macedonia, and Kosovo. End Summary.

Note: Please see Post's classified Intellipedia site for
background information and open-source URLs:
http://www.intelink.sgov.gov/wiki/Albanian Insurance Company
INSIG Sold To American Reserve Life Insurance

Albania's Last Privatization
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2. (U) On December 9, Albania marked the end of an era. The
GOA sold its last state-owned company, insurance provider
INSIG, to Dallas-based American Reserve Life Insurance
Company (ARL) for 25 million euro. INSIG was established in
1991 as a state-owned monopoly, but lost much of its business
when the GOA opened the insurance sector to private companies
in 1999. INSIG has life and non-life operations in Albania,
Kosovo, and Macedonia. 2007 profits were 1.8 million euro on
revenues of 17 million euro. Reported assets totaled 50
million euro.

Shady Money?
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3. (C) While there have been many rumors of Albania's
organized crime (OC) gangs laundering money by investing it
in construction and other infrastructure projects, it is
reasonable to assume that OC gangs from other countries could
also find Albanian investments lucrative, particularly given
allegations of pervasive corruption of government officials.


4. (C) The INSIG tender process seemed less transparent than
most. The MOF refused to answer our questions concerning
which companies had expressed an interest in bidding and
simply announced the winning bidder. Apparently, 12
companies expressed interest initially while only three - a
Slovenian company, a German company and ARL - submitted bids.
On the surface, everything seemed reasonable and ARL's bid
was considered fair by industry experts. However, a check on
ARL using public sources turned up some disturbing facts.
ARL is part of a network of insurance companies owned by
Dallas businessman Gene Phillips. Phillips has had many
encounters with law enforcement agencies, including an arrest
in 2001 by the FBI on racketeering charges, although he was
acquitted two years later. He was also linked to Texas
insurance commissioner Carroll Fisher, now serving time in
jail for taking bribes. Fisher allegedly received money and
property from Phillips.

Bad Company
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5. (C) One of Phillips' business associates was Ron Finley,
who, with brother Jeffery owned Finley Equities. According
to Philip Bay, president of AmCham of Albania and regional
director of U.S. real estate firm Colliers, the Finleys were
associated with Bulgarian OC gang Multigroup, with which Bay
had some encounters when he was working in Sofia. The
Finleys own CableTel, a large cable operator in Bulgaria,
Macedonia, and Kosovo, in which Phillips, through his maze of
companies, is also a shareholder. In October 2008, CableTel
bought Albanian digital TV company DigitAlb.

EBRD Is Concerned
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TIRANA 00000892 002 OF 002




6. (C) EBRD and IFC bought 39 percent of INSIG in 2004,
intending to sell their shares to the new owner or exercise
their put options to sell the shares back to the GOA. EBRD
Country Director Dan Berg told Econoff that he wanted to do
additional investigation into ARL's background, but EBRD
headquarters apparently thought that was not necessary. Berg
has asked his headquarters to look into ARL and will decide
what to do based on that information. Berg said EBRD has the
right to disqualify ARL if enough negative information is
discovered.

Comment
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7. (C) How much OC money has fueled Albania's economic growth
is impossible to estimate, but what we suspect about ARL
could well be just the tip of the iceberg. Albania's vast
and largely unexploited tourist potential will likely attract
not just tourists, but also money launderers and other shady
businesspeople, underlining yet again the need for continued
U.S. and EU assistance to Albania's fledgling oversight
bodies.
WITHERS