Tehran shuts Swedish cosmetics firm, arrests five

STOCKHOLM — Iranian authorities have arrested five employees of Swedish direct-sales cosmetics firm Oriflame and shut its Tehran office amid reported Iranian allegations of a massive pyramid scheme.

By (AFP)

Published: Mon 23 Aug 2010, 8:54 PM

Last updated: Mon 6 Apr 2015, 5:51 AM

“The authorities have now closed Oriflame’s operation in Tehran (and) have also detained three members of staff and two sales consultants without disclosed reasons,” the company said in a statement on Monday.

The Oriflame Tehran branch was on Sunday “abruptly shut down with authorities coming into the office,” the company’s chief financial officer Gabriel Bennet told AFP.

“We are working with the embassy to find out why this is, and to try to secure (our employees’) release,” he said, adding that a Swede and another foreigner were among those arrested.

Bennet said the company so far had received no explanation from authorities about the closure and arrests, but believed they may be linked to its business model.

“Our business model is to sell cosmetics and give 40,000 Iranians, mainly women, a possibility to earn money through direct sales,” he said, adding that the arrests could be seen as a sign that business conditions in Iran were worsening.

Iranian media meanwhile reported Monday that the closure and arrests were linked to suspected fraud in connection to a massive pyramid scheme.

According to hardline Iranian daily Kayhan, the Oriflame headquarters in Tehran had on Sunday morning been “searched and sealed” and “four top managers were arrested on accusations of 250,000 cases of fraud” linked to a 70-million-dollar (55-million-euro) pyramid scheme.

The conservative Tehran Emrouz newspaper also said tax officials had seized Oriflame documents and had halted all its operations over suspected fraudulent operations.

“The company managers did not have a convincing answer when asked about compulsory sales of products, charging membership fees and recruiting members as consultants,” Hassan Radmard, the head of the Traders’ Centre at the Iranian commerce ministry, told the paper.

Oriflame “has over 200,000 members so it is a pyramid scheme with unlimited members,” he added.

Oriflame’s Bennet said he would not comment on these “rumours” further than to say any reference to a pyramid scheme was “ridiculous.”

“We work the same way in Iran as in the rest of the world, in over 60 countries ... A pyramid firm could not run an internationally recognised business for more than 40 years,” he said.

Oriflame acknowledged in its statement that business conditions were difficult in Iran, but said it was intent on staying in the country, which is an important part of its growing Asian business.

The company’s business in the country represents 20 percent of its sales in Asia, a region which produced fast growing sales totalling 39.2 million euros during the second quarter, according to an earnings report published this month.

Oriflame’s annual sales last year reached 1.32 billion euros worldwide.

The company said a definitive closure in Iran may lead to extraordinary costs of approximately 10 million euros this year, although it maintained its overall sales target.

Following the news Monday, Oriflame’s share price fell 3.36 percent in early afternoon trading on the Stockholm stock exchange, which was up 0.1 percent overall.

A spokeswoman for the Swedish foreign ministry meanwhile confirmed that one of the people detained held dual Swedish-Iranian nationality, something that could limit Swedish authorities’ ability to help him, since Tehran does not recognise dual nationalities.

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