Mukhtar Ablyazov’s Russian roulette: deposuit humiles de sede et exaltavit potentes

It has taken quite a while, but on January 11 this year RBC Daily, one of Russia’s leading post-Soviet financial and economic newsreels, finally pulled the word out: the 13.5 billion Russian rouble credit from the Russian Central Bank absorbed at the tie by AMT, the banner under which formerly BTA Russia continued to work even after Ablyazov was ousted from BTA’s main Kazakh banking corporation,, should never have been allocated to begin with. According to information sent into the public domain, the money should be considered simply stolen and diverted to offshore mailbox companies under the ultimate control of Ablyazov’s gang of swindlers with the help of US Morgan Chase and American Express. This in turn should qualify AMT’s bankruptcy, confirmed by a Russian court of law in June last year, fraudulent – and could in the end result in criminal charges against the two American banks.

BY CHARLES VAN DER LEEUW, specially for BETTER.KZ

Mukhtar Ablyazov’s Russian roulette: deposuit humiles de sede et exaltavit potentesAccording to the RBC report which quotes deputy general director of the Russian Bank Account Insurance Agency (ASV in its Russian acronym) Valery Miroshkinov, claims against AMT as of now, following a payout of 12.2 billion rouble to deposit holders up to 700,000 rouble per account plus 8.6 kopek on the rouble for deposit money topping that amount, remains at 31.9 billion rouble. The limit on retail pay-outs leaves anyone with more than roughly 20,000 euro in the bank with a 91.4 per cent haircut. As opposed to corporate creditors who could swap unpaid debt against paper, private clients are left with nothing whatsoever – hitting mainly small-size business extremely hard. The next move could be that the ASV, which has the right to do so, will challenge the decision by the Central Bank to grant AMT its credit to begin with. Auditors reports on AMT’s balance sheets appear to have been forged, with liabilities understated and assets overstated, RBC’s report suggests.

For most of last year, RBC has been chasing the Morgan Chase case concerning Ablyazov, in turn closely followed up by Kazakhstan’s leading independent news agency Tengrinews. “During the crisis of 2008 the bank received several collateral-free loans from the Central Bank for over 27 billion rubles (around $915 million). The majority of this money was almost immediately transferred to two American banks, JP Morgan Chase Bank and American Express, via a chain of companies,” one report by Tengrinews dated April 24 2012 was to read. “According to the document, 24.2 billion rubles ($819 million) received from the Bank of Russia as collateral-free loans were immediately transferred by AMT Bank as funding to a group of companies connected with Ablyazov. Around 11 billion rubles ($372 million) out of these funds were returned by the companies to Kazakhstan’s BTA Bank as a debt payment. After that the money were transferred to an account in American Express via nostro account of AMT Bank in JP Morgan Chase Bank,” the article [by RBC] states. According to the author, “the remaining part of the collateral-free loan from the Central Bank, apparently, also settled in JP Morgan Chase Bank. In particular, according to the Central Bank, from October to December 2008 AMT Bank transferred 18.8 billion rubles ($638 million) to support its nostro account in JP Morgan Chase Bank. The money was transferred for purchase of the foreign currency for client payments.”

“Ablyazov’s representative did not deny the fact of siphoning the funds from AMT Bank to American credit organizations, but noted that such transfers were made by the clients and the bank was just acting on their orders,” RBC reported on the occasion as quoted by Tengrinews. “Formally all the loans were given to the companies related to Ablyazov on security of the lands in Domodedovo region of Moscow oblast,” the agency’s article continued. “However, Russian Central Bank discovered many violations in evaluation of the pledged lands. “Currently the market cost of the land (3.2 billion rubles or $107 million) is 10 times lower than their assessed value in the security agreements (31.5 billion rubles or $1.05 billion). Most probably, these loans will be unlikely returned, as the debtor would rather give in over-estimated land than cold cash,” RBC was quoted as stating. “The Central Bank’s documents state that AMT Bank mainly used the assessments of two independent appraisers,” Yusta Invest and Spetsfinconsulting, for assessment of the collateral value of the land provided as security under loan agreements,” Tengrinews’ reporte proceeded,. However, Ablyazov’s legal representative referred to Finekspertiza company that assessed the property under the contract with the Central Bank and did not discovery any serious discrepancies in the property value.”

From the very beginning, the “Russian dimension” of Ablyazov’s operations consisted of a heap of pieces of a jigsaw that stretched far beyond its borders. Nevertheless, the Russian autorities must have felt that something had to be done at the stage where it had arrived in the course of 2009. As noted earlier, on March 18 2010, a number of arrests was carried out in the Moscow branch office of Kazakhstan’s troubled Bank TuranAlem (BTA), in the process of being renamed ATM, as its local general director Alexander Volkov, financial director Artem Bondorenko, economic director Alexei Byelov and the head of the legal department Denis Vorotyntsev were carried off in handcuffs. The three former were apprehended on the premises, while Vorotyntsev was caught in Krasnodar where he was on holiday. The arrests were part of a broad investigation by Russian authorities into embezzlement schemes masterminded by former BTA president Mukhtar Ablyazov and a number of his associates. Close to the equivalent of 5 billion US dollar in various currencies has slipped out of BTA’s current owners, dominated by Kazakhstan’s state fund Samruk Kazyna through its Russian operations, investigators think. One of the schemes under scrutiny, worth alone in the order of $1.5 billion, concerns Eurasia Logistics, a company engaged in the construction of trade and transportation centres in the regions of Moscow (Northern Domodedovo), Yekatarinaburg (Pyshma), Kazan (Byek Tau) and Novosibirsk (Tolmachevo).

According to data compiled by one of Russia’s corporate watchdogs Slavinvest which keeps record of corporate conglomerates’ ownership structures in the Russian Federation including their offshore connections, as of spring 2011 AMT’s shareholders included Drey Associates Ltd. controled the company DeltaTorg LLC, which held, and supposedly still holds, 19.7706 per cent in AMT Bank LLC, the former Russian subsidiary of BTA which had changed its name and brand in 2010. According to Slavinvest, Drey Associates was held by another firm called Powermatic Data Ltd., in turn under control of Intercon Ltd., with the latter standing under personal control of Mukhtar Ablyazov. In the track list, the names of the Wilson couple were not mentioned. They were, however, noted as the owners of a company named Interfunding Facilities Ltd., which in turn controlled Rikas (or Ricas) Finance LLC, which owned 19,3920 per cent in AMT Bank. Drey and Ricas would lead to an innocent-looking base – but no less weird for it when taking a closer look. In its report published on April 12 2011 and quoted earlier, the Evening Standard referred to a company called Drey Associates Ltd as “…a tiny firm based in Guildford apparently run by a British family but controlled by Ablyazov”. But in reality, the enterprise hid sums behind its modest profile that are a lot more impressive than its looks would suggest. “Anthony Stroud, 76, his schoolteacher daughter Sarah Wilson, and her husband, John, 47, were all directors of Drey Associates when Ablyazov transferred $295 million from BTA’s coffers to it in 2007,” the article read. “At the time, BTA told the Kazakhstan stock exchange that Drey Associates owned 9.8 per cent of the shares in BTA Bank, which were worth hundreds of millions of pounds. But according to documents registered at Companies House, the firm’s declared assets were worth just 46,000 pound in 2007 and 38,000 in 2008.”

Two other shareholders in the Moscow-based bank at the time of writing were AMK-Invest, described as a “project and construction company”, and TuranAlem Capital LLC. AMK, which had a stake of 18.988 per cent in AMT Bank, stood under control of AHA Management Inc., in turn owned by Squarecut Trading Ltd., in turn controlled by a firm called Multiserve Ltd., behind which the name of Ablyazov’s longstanding associate Rinat Batyrgareyev could be found. Behind TuranAlem Capital, which held 19.5905 per cent in AMT, stuck a company called Solent Management Ltd., owned by three individuals called Stanley Edward Williams and Monique-France Kellee, and Nurgali Berkinbayev – the latter being yet another member of Ablyazov’s inner circle. He currently lived in Vilnius, and had Lithuanian nationality. All this left BTA Kazakhstan with a share of no more than 22.2589 per cent in MTA, sharing the Moscovite bank’s boardroom with the very representatives of the same man who had emptied its coffers to the amount of 10 to 12 billion US dollar.

Authorities in the Russian Federation – not unlike those elsewhere – have been slow to react. “Russia’s Central Bank has pulled the banking licence of mid-sized AMT Bank, which has some 15 billion roubles ($534 million) in retail deposits, a move that may force the regulator’s largest payout to insured depositors,” Reuters reported on July 21. “The Deposit Insurance Agency (DIA) said each AMT depositor would be covered for up to 700,000 roubles. AMT Bank, in which Kazakhstan’s third-largest lender by assets BTA Bank holds 22.3 percent, with another 19.8 percent controlled by BTA’s former head Mukhtar Ablyazov, is Russia’s 83rd-largest bank with 45.2 billion roubles in assets.“ The agency quoted a statement by the Central Bank saying that AMT Bank “…has invested in low-quality assets without making proper provisions against possible losses” – adding that “…AMT had ignored orders to value its assets soundly, which artificially inflated its equity and concealed evidence that would justify bankruptcy.” The Moscow Times in its edition of July 22 quoted the Central Bank’s statement as noting “substantial reporting irregularities” in AMT’s reporting. “AMT Bank placed funds in low-quality assets without adequate provisioning against possible losses,” the statement was quoted as reading – adding that AMT had “…not complied with repeated instructions from it on the accurate assessment of the bank’s assets and creation of reserves, which significantly affected the volume of bank equity.” Reimboursing small deposit holders was expected to cost 15 billion rouble, 12 billion of which were covered by the Russian state-held deposit insurance company with the remaining 3 billion having to come out of the liquidation process. This would leave other parties, including larger and corporate deposit holders, shareholders and the tax authorities with losses of up to 50 billion rouble – on top of a loan to AMT by the Central Bank of 17 billion rouble in lump sum and arrear debt services which would have to be written off unless at least part of the assets, most of which had been frozen by UK courts of law, could eventually be recovered. For BTA proper, it looked also very likely that it would to have to write off its stock value in AMT. In return, however, they would have the support of the Russian Central Bank in claiming assets stuck on British territory from there on. An international arrest warrant against Ablyazov by the Russian authorities, on top of that issued by Astana, has been in vigour for more than a year by the end of 2011.

All this notwithstanding, claims by AMT have been honoured by Russian courts of law both before and after the bank’s bankruptcy. In May last year a court in St.-Petersburg ordered 75.9 million euro as part of the debt owed to AMT by nearby Logopark Kolpino, one of Eurasia Logistics’ projects in the Russian Federation, Russia’s judicial newsreel RAPSI reported. However, only 1.85 billion rouble had been collected as of early June, RAPSI reminded in a report dated December 27 last year announcing Kolpino’s application for bankruptcy. In November last year, similar logoparks namely Butaysky near Rostov-on-Don and Druzhino near Omsk were summoned by courts of law to pay up for 49 and 3.893 billion rouble respectively. It is not yet known whether or not lack of cash-in-hand will be available or the two enterprises will apply for bankruptcy in turn. If so, those bankruptcies hardly look any less suspicious than that of AMT itself. Moreover, they will be bound to make it all the more difficult for it for BTA to claim its share in the bait. The fact that in Russia civil procedures which go through commercial courts of arbitration and penal ones on the plates of criminal courts seem to lack coordination with the weird-looking effect that whereas the latter chases fraudsters the former reward them through ownership rights even though criminal proceedings shed severe doubts on those rights.

co-owners AMT (former BTA Russia) share
Delta Torg (Mukhtar Ablyazov) 19.77%
AMK Invest (Rinat Batyrgarayev) 18.99%
Ricas Finance (Sarah and John Wilson) 19.39%
TuranAlem Capital (Nurgali Berkinbayev) 19.59%
BTA KAzakhstan 22.26%

source: Slavinvest

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