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Unravelling Viktor Khrapunov’s fund diversion chain: a mini-version of Ablyazov’s

Author: admin | 27 Mar 2012

Under investigation first, charged later and eventually wanted for a number of administrative and financial abuses in his home country Kazakhstan, the former mayor of Almaty, now living in Switzerland pending his application for Swiss citizenship, is the subject of a thorough investigation concerning the way in which he funneled hundreds of millions, and possible billions, in hard currency out of the country. Should hard evidence of his transactions be put on the table regarding the illicit origin of the money he and his relatives already had invested  are now in the process of investing into project development in and around Geneva, it should lead to related investigations by the Swiss authorities as well. Documentation filtered through to the public domain by Kazakh authorities so far tend to point in that direction – even though much of the information still requires to be completed and made coherent.

BY CHARLES VAN DER LEEUW, KZW SENIOR CONTRIBUTOR

Unravelling Viktor Khrapunov’s fund diversion chain: a mini-version of Ablyazov’sAs related as early as the middle of June 2010 by the local newspaper La Tribune de Gen?ve, suspicions that the 10 million US dollar used by Ilyas Khrapunov, son of the former and later disgraced mayor of Almaty Viktor Khrapunov, as capital for his Swiss Development Group, is part of a money laundering operation by the family to stash the bounty of supposedly hundreds of millions in illicit gains by fraudulent and otherwise abusive real estate operations at the time he held office in tghe former Kazakh capital, would look all too justified. SDG through various ventures is currently engaged in a large-scale beach resourt on Lake Geneva, a luxury villa resort on the nearby mountain slopes, a tower plaza in the diplomatic area of the city, a hotel complex in the suburb of Lo?che – just to name a few.

SDG has been looking for partners, but conditions to team up with them include own contributions bound to reach the order of hundreds of millions if not billions in order to turn capital injections into adequate property value. The family has been listed in Switzerland by the local periodical Bilan among the country’s richest, with an accumulated fortune estimated at between 300 and 400 million Swiss francs. Last, year, the ex-mayor, now residing with his family in Switzerland, became subject to criminal investigations in his former home country, followed by charges. Early this year, his name was put on the Interpol mail list. Prosecutors have recently released part of the preliminary results of their investigations with the aim to make it plausible for Swiss authorities to take a serious look at the case – eventually leading to the culprit’s extradition and/or retribution of the diverted funds either in cash or in the form of property rights in the objects in which it has been stashed away.

If it is true that money originating from profits on racketeering, extortion, insider dealing, bribes and other administrative and/or corporate abuses (in this case a combination of both) should be considered illicitly obtained gains and therefore bear the colour black, using such money to fund investments abroad in themselves legitimate should indeed be considered money laundering. Usually, the launderer bears an entirely different identity from the abuser with the aim to hide the latter’s identity from the authorities both in the country of the money’s origin and within the jurisdiction of its destination. In the case of former Almaty mayor Viktor Khrapunov, the possibility to identify both the embezzler and the launderer seems to come within reach in the process of investigations carried out on behalf of Kazakh prosecutors. According to their preliminary reports, in this manner at least a total sum close to 50 million US dollar – meaning not taking possible other, yet unexplored transactions under consideration – in illegally obtained funds has made its way from Almaty to Geneva shortly before Khrapunov arrived on the Swiss scene himself. This should be enough reason for Swiss authorities to take a closer look at the issue, of which, so far, no sign has been made.

As earlier media reports downtown Almaty have revealed, at least 16 prime sites have been allocated in closed procedures circumventing all open bidding requirements through corporate stock swaps, facilitated by municipal authorities on Khrapunov’s order and carried out by companies under control of the mayor, in most cases through his spouse and relatives. Some of these larger objects appropriated by the Khrapunovs included a plaza on the corner of Gogolya and Panfilova Streets, apartment and shopping space blocks on Furmanova Street Dostyk Avenue, both on the edges of the uppity business neighbourhood of Samal-2. Further uphill, property, comprising parts of protected natural zones, included a forest site named Wood Fairy Tale and another one known as Oak Grove were purchased by a company called Gulmira Ltd., run by one of the Krapunov pair’s associates by the name of Shebityevov and believed to be closely affiliated to VILED, for the negligible amounts of 1.8 and 2.1 million tenge respectively. Public property has also been sold illegally to another one among Khrapunov’s shell firms called Phoenix Unlimited, run by a certain G. Mukashev, who in particular obtained blue-chip locations with permission to demolish the kindergardens, pensioners’ homes and other social facilities located on them, with the aim to build commercial glamour objects on them.

Now, it seems as though VILED was only part of a far more sophisticated network used by Khrapunov and family to accomplish their overall scheme – a master plan with striking resemblance of those applied on a much larger scale but following the same pattern by BTA’s former president and major shareholder Mukhtar Ablyazov, whose daughter for all it matters is married to Khrapunov’s son Ilyas. Apart from VILED, companies either directly or by proxy controlled by Viktor Khrapunov included  According to an attempt by investigators on behalf of the Kazakh authorities to unravel the entire scheme, VILED was to be sold at some point after Khrapunov left office as mayor of Almaty to a company called System Oil LLS for the sum of 684.3 million Kazakh tenge – at the time worth in the order of 3.2 million euro or 4.5 million US dollar. Another sale bringing in half a billion tenge concerned the sale of a 50 per cent stake in a company called Ayt Housing Complex LLP by the Swiss Kazakh Phoenix Holding to an unknown buyer. Subsequently, just over 2 billion tenge were cashed in on the sale of all the stock in Building Service Company LLP, on top of another 38.6 million tenge received for some of BSC’s assets sold separately. The shares were purchased by an Almaty-based firm called StroyTech LLP – assumedly in good faith where the latter was concerned.

Thanks to such contributions, the accumulated sum of 4.54 billion Kazakh tenge – worth in the order of 30 million euro or 42 million US dollar at the time, was to appear on the sheet of the personal account of Madame Leyla Khrapunova by the middle of the first decade of the new century. Apart from the abovementioned transactions, sources would appear to include what prosecutors’ documents refer to as “refunding of financial aid” for the allocation of real estate sites in Almaty and on its outskirts from two named companies, Khachatrian AS and Ilyasov AK, which had paid up for 1.22 billion and 108.7 million tenge respectively. Together with existing cash deposits and “other receipts” the thus accumulated sum of 4.54 billion tenge was transferred from Leyla Khrapunova’s account at the Eurasia Bank, the property of three of Kazakhstan’s richest oligarchs Alexander Maskevich, Alizhan Ibrahimov and Patokh Chodiyev, who also together control the country’s mining and metallurgic giant ENRC. In turn, the bulk of the money, consisting of 46.4 million US dollar and 7.7 million euro, was transferred to “accounts in [unnamed] Swiss banks” on the name of Elvira Belmadani, alias Elvira Viktorovna Khrapunova, the daughter from the ex-mayor’s first marriage. Separately, 5.8 million euro were transferred to accounts in “Italian banks” belonging to unnamed “contractors” for what seems to be the construction of a number of chalets – either on the outskirts of Almaty or in the area of Geneva, which the available documents fail to specify – along with 7.5 million US dollar to “other accounts” – equally unspecified.

But Leyla’s transaction would appear to be only part of the entire story. In a parallel transaction, an extra sum of 7.5 million US dollar was transferred from a company called Elias Import Export LLP, of unknown nationality but said to have been “represented” in Kazakhstan by a certain M. Z. Nishnianidze – judging by the name of Georgian origin. The payment was done for the purchase by Elias of Asia Holding Development LLP, the assets consisted of three building sites on Gornaya Street on the southern outskirts of Almaty, close to the crossroad of Furmanova St. and Al-Farabi Avenue, around which Almaty’s new business boomtown was meant to arise. Today, the south-end of Al-Farabi Avenue has only a limited number of fancy business plazas ready, standing amidst undeveloped infrastructure and with most of the available space remaining empty. The financial crisis which took off in 2008 has taken its toll here in a very visible manner indeed. On the land plots on Gornaya Street under question in relation to Khrapunov and family residential and hotel complexes have been built, with an alarming part of the apartments also remaining vacant and the hotels empty for most of the time.

In all: the deal between Asia Holding Development and Elias Import Export might well have been meant to take profit on speculation. For the former, it was easy money since they had obtained the property for next to nothing. For the latter, it was disappointment at best. As for the $7.5 million, it was to be transferred to another personal account at Eurasian Bank belonging to Ilyas Viktorovich Khrapunov, by that time already high and dry on the banks of Lake Geneva. Later, $2.2 million was transferred to the account in Switzerland on the name of Elvira Belmadani, while the remaining $5.3 million are said to have been “withdrawn for personal expenses”. It is very well possible either amount has ended up in the investments done (in name) by young Ilyas in property in and on the outskirts of Geneva later on.

Together with the transfers through mother Leyla’s account at the Eurasian Bank, 48.6 million US dollar plus 7.7 million euro were accumulated in this manner – more than enough for Ilyas’ 10 million dollar “gift” but by and large insufficient to finance his share in the ambitious Swiss project he was cherishing. It should therefore be assumed that the two mentioned transfers from Eurasia bank represent only part of a bounty adding up to the hundreds of millions Khrapunov junior’s aspirations are bound to require. Yet, the two proven cash deviations should be enough reason for Swiss authorities to render assistance to Kazakh investigators with the final aim to bring the main culprit along with his associates to justice either at home or, if this would prove impossible because of Europe’s suspicions regarding Kazakhstan’s controversial reputation in terms of detainees’ rights, in Switzerland.

As for the main suspect, he finally decided to give comment on all the allegations in December 2011 through an interview with a Swiss magazine, claiming that the allegations consisted of sheer makebelief and that in reality the family’s existing property in and around Geneva – including a luxury apartment downtown, a lavish ch?let uphill, a hotel and a jewelry store chain – had been funded through mortgages. He further elaborated on accusations against the Kazakh government in pretty much the same style used by Mukhtar Ablyazov and Kazakhstan’s “prodigal son-in-law” Rakhat Aliyev, both of whom are also suspected to have used Swiss channels for their embezzlement schemes, referring to an alleged witch hunt against “political dissenters” regarding the powers that be in their country of origin. It remains to be seen in how far Swiss authorities will take such allegations for granted or prefer to look at the hard facts concerning the cash involved first.

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