Mukhtar Ablyazov apprehended in France: what could be in it for Kazakhstan?

He may already have been included in the Guinness Book of Records for having been responsible for the most voluminous financial scam known in world history – and perhaps also could have been a candidate for the most miraculous manner in which he managed to get away with it. The latter option for Mukhtar Ablyazov, Kazakhstan’s former largest bank BTA’s former head and controlling shareholder, may no longer be on the agenda, for after having been on the run from authorities a bit around the globe and lately seemingly freely trotting around the Schengen zone, French police – not Inspector Clouseau but “special forces” in an apparently meticulously prepared operation finally apprehended him. There is a long list of countries to which he could be extradited – with due to international standards Kazakhstan being somewhere on the bottom of them. There is hope for Kazakhstan, though, that if either Ukraine or the Russian Federation, both of which have formally asked for Ablyazov’s extradition, Kazakhstan can successfully reclaim some extra billions, since both Ukrainian and Russian courts of law have formally recognised such claims in the same manner English courts have already acknowledged the equivalent of 3.7 billion US dollar worth in claims, which can be recuperated through a court-appointed receiver. It has already bee observed, though, that procedures once more will take a long haul.

CHARLES VAN DER LEEUW, WRITER, NEWS ANALYST

He may already have been included in the Guinness Book of Records for having been responsible for the most voluminous financial scam known in world history - and perhaps also could have been a candidate for the most miraculous manner in which he managed to get away with it. The latter option for Mukhtar Ablyazov, Kazakhstan’s former largest bank BTA’s former head and controlling shareholder, may no longer be on the agenda, for after having been on the run from authorities a bit around the globe and lately seemingly freely trotting around the Schengen zone, French police - not Inspector Clouseau but “special forces” in an apparently meticulously prepared operation finally apprehended himWestern media have had to scrap bits and pieces together in order to give a more or less comprehensive picture of the way Ablyazov was finally caught. “Mukhtar Ablyazov, a Kazakh businessman accused of embezzling $6 billion from his former bank, BTA, has been arrested on the French Riviera, Reuters [http://in.reuters.com/article/2013/07/31/ablyazov-arrest-idINDEE96U0FU20130731] quoting “two sources” on Wednesday. “Ablyazov was arrested in the village of Mouans-Sartoux about 8 km (5 miles) north of Cannes in southern France, a police source said. A court hearing has been scheduled for 10:30 a.m. (0830 GMT) Thursday, added a second source, who could not confirm the hearing’s location. […] International police agency Interpol said on its website Ablyazov was wanted by Russia on separate charges including ‘large scale fraud’, money laundering and document forgery. Ablyazov spent time in Russia between 2003 and 2005. He had been put on a so-called Interpol “Red Notice,” which is similar to an international arrest warrant. […] One of Ablyazov’s sons, Madiyar Ablyazov, told Reuters in an email his father was in France legally and accused President Nazarbayev of having a ‘personal vendetta’ against his father.” In a separate report [http://www.reuters.com/article/2013/08/01/ablyazov-arrest-interpol-idUSL6N0G22DL20130801] Reuters relates: “Armed police wearing balaclavas surrounded and then stormed the villa at around 11 a.m. He did not resist arrest in an operation that lasted around 30 seconds, a source familiar with the arrest said.”

Bloomberg was to give some more detail over what was due to follow the arrest. “Ablyazov, an opponent of Kazakh President Nursultan Nazarbayev, was arrested by armed officers today at his sister’s house near Cannes, his son Madiyar Ablyazov said by e-mail. The police in Aix-en-Provence, about 150 kilometers (93 miles) from Cannes, confirmed his arrest. Ablyazov is being held in Aix-en-Provence at the request of Interpol, a spokeswoman at the Commissariat de Police said, asking not to be identified, citing internal regulations,” the agency [http://www.bloomberg.com/news/2013-07-31/fugitive-former-bta-banker-ablyazov-detained-in-southern-france.html] reported on the day of the event.

The most exhaustive reporting, however, was done by the Financial Times on July 31 [http://www.ft.com/intl/cms/s/0/d480b556-f9f2-11e2-b8ef-00144feabdc0.html?ftcamp=published_links%2Frss%2Fworld%2Ffeed%2F%2Fproduct#axzz2ahF5CiMy] which read: “Mukhtar Ablyazov, a fugitive opposition politician and former banker from Kazakhstan, has been arrested in southern France, a lawyer for his family said. The lawyer told the Financial Times that Mr Ablyazov was arrested on Wednesday near Cannes by French special forces and that Russia had requested his extradition. The lawyer, who asked not to be named, said at the time of his arrest Mr Ablyazov was with his sister, Gaukhar Ablyazova, who then contacted other family members. Ms Ablyazova, who was granted political asylum in the US in 2004, was not arrested. An official at the Regional Service of France’s judicial police in Marseille also confirmed that police had arrested Mr Ablyazov on Wednesday afternoon in the village of Mouans-Sartoux, just outside Grasse. In contrast to the lawyer, the official said police had acted on an extradition request from Ukraine. He said that Mr Ablyazov, who was alone at the time, might end up going to Paris where the decision to extradite him or not would rest with the judge assigned to the case.” As appears from various news reports, Russian authorities have been helpful in briefing their French peers in providing background information to justify the arrest, but the original request for it appears to have come from Ukraine. The unnamed lawyer was later identified by Reuters as Bruno Rebstock. It would also appear in follow-up reporting that police had been tipped by agents from the same Israeli private detective agency Gadot which had traced him down earlier in Italy. He escaped, but his wife and daughter were swiftly arrested and extradited to Kazakhstan, where they meanwhile have obtained permission to return to Italy should they wish to do so.

As we reported in previous years in these column, on the Ukrainian tracks a number of both familiar and new names in the never-ending Ablyazov saga have appeared at various stages, in particular in a real estate credit-diversion scheme in Kiev – even though there were apparent links with Ablyazov’s Eurasia Holding in Russia. One of them was a Kazakh called Anwar Ayzhulov, the second was the Ukrainian national of Igor Kononko (the “Moscow-link’ since he used to be at the general director of Eurasia Holding before he disappeared and was later supposed to hide by Ablyazov’s side in London) while the third could only be remembered since he was no more: Shabab Aloyan, a 49 year-old business tycoon of Armenian origin working in Ukraine. Aloyan was shot dead by a sniper in broad daylight downtown Kiev in the luxury furniture salon of an uppity shopping centre named Borshchagovkaya Plaza. As the gunman opened fire, Aloyan and his two bodyguards died on the spot. Among Aloyan’s other assets was a participation in a trade centre project known as Petropavlovsky. Behind it was a firm called PSA Real Estate Investment, registered in Belize. Aloyan’s partner in the venture was a certain Merab Suslov; whether or not this points at the gunman was to remain a mystery. In turn, PAS belonged to a Cyprus-based company called EagleCity, which was the former owner of one of Ukraine’s largest construction and property development enterprises, Galyena, in whose portfolio Petropavlovsky would appear. During interrogations, the hired murderer mentioned “certain Moscovite” along with “certain Kazakh” connections in the case, which he apparently failed to specify. According to information published by an author called Alexei Khanov, in late March on one of Ablyazov’s most fanatic fact-hunting networks at the time, a newsreel called kaznet.us, the Petropavlovsky project was being developed with money provided by the Moscow-based holding Eurasia, run by Mukhtar Ablyazov and associates, using cash diverted from beneficiaries in BTA’s Russian subsidiary’s loan portfolio.

Financial resources worth 56 million US dollar for the project appeared to have come from a company registered on the Seychelles by the name of Feston, director of which was Anwar Ayzhulov, but the sole owner of which would turn out to be Mukhtar Ablyazov. As collateral, Feston had been given a share of 50.5 per cent in EagleCity, which it subsequently sold for an undisclosed sum to another Seychelles-based firm named Fexon, the nominal director of which was Igor Kononko – who also has been thought to have a more direct link to the murder case than Ablyazov. Feston had obtained a credit for the purpose from BTA’s main office in Almaty. Repayments and interest payments, however, took place to BTA’s Russian subsidiary. Default would mean that the latter could lay its hands on the collateral rather than BTA proper – if it had not been for the fact that Ablyazov had built in one more safety valve in the form of Fexon which would seize, being the nominal creditor, the asset first in case of non-payment. In this way, not even BTA’s Russian branch would see any collateral.

But things would be getting even more complicated in the process. BTA had not been the only financial source for Galyena, the formal owner of Petropavlovsky, but other resources had come from one more Cyprus-based company called Stantis – a name that was to reappear later on at a London court in relation to purgery charges against Ablyazov. Stantis had provided a credit for a Luxemburg-based firm called Bardon. Should it appear that the Luxemburg trail had Ablyazov’s tentacles in it as well, the sum diverted would become a lot bigger than the 56 million dollar under scrutiny so far. In 2010, according to Ukrainian media, the new government under president Viktor Yukashenko ordered prosecutors to look into money “missing” in BTA-Kiev’s coffers but appearing on the accounts. Fears existed that construction and property licenses had been forged with the aim to obtain credit on the basis of projects that only existed on paper in order to divert the money thereby received. The Stantis case, for all it mattered, would turn out to be one of the stumbling stones due to which Ablyazov was eventually convicted to 22 years in a British jail for “contempt of court” – meaning hiding his identity as ultimate owner of Stantis.

Subsequent investigations were to demonstrate that EagleCity was not the only cover-up tool used by Ablyazov to grant loans from BTA to insolvent enterprises which he subsequently took over through offshore mailbox firms run by proxy, often for symbolic prices, with the aim to get the borrowed money under his own wings and out of BTA’s reach. Another example is an enterprise called GMSI, concerning which court rulings favourable to BTA already exist. “The Kiev Economic Court on March 22, 2011 satisfied a claim of Kazakhstan’s BTA Bank asking it to collect some 1.5 billion Ukrainian hryvna [1 US dollar = approx. 8 hryvna – ChvdL] in compensation from GMSI Ltd. (Ukraine) for losses caused by the improper fulfillment of that company’s liabilities,” Interfax’s Ukraine branch reported on March 23 2011, quoting the press service of the Ilyashev & Partners law firm, which represented the interests of BTA Bank. “The above-mentioned 1.5 billion would be collected from the previous leadership of GMSI, which ran the company into the ground,” the report read further. “The property was arrested to satisfy a claim for some 1.5 billion Ukrainian hryvna to cover the bank’s losses. Earlier the Kiev Economic Court ruled that BTA Bank had the ownership rights to a 99.99% stake in the statutory fund of GMSI.” The news agency added that Oleg Driukov, the former head of GMSI, had been dismissed and was subject to prosecution on charges of embezzlement and related violations of the law. The agency also observed that “GMSI was a structure affiliated with Mukhtar Ablyazov” in its report’s words. What happened to the money never reached the public domain.

The question what happens next is due to remain open probably for several months. After the rather casual extradition of Ablyazov’s wife and daughter from Italy, which caused a political storm in which the ruling coalition narrowly survived a vote of non-confidence in Parliament, France is expected to follow the rules rather strictly. Apart from Kazakhstan, Ablyazov is wanted in England/Wales (the Scots and the Northern Irish having their own jurisdiction), Russia, Ukraine and Kyrgyzstan, while subject to judicial inquiries in Cyprus (proper), Latvia, Ireland, Finland and Hungary – just to name a few. “The 50-year-old businessman, in hiding since being handed a jail sentence for contempt of court by an English judge 18 months ago, has been in custody in France since his arrest on Wednesday near the Riviera resort of Cannes, the Reuters report [http://www.reuters.com/article/2013/08/01/ablyazov-arrest-interpol-idUSL6N0G22DL20130801] quoted earlier noted. “Ablyazov, who denies fraud charges he says are designed by strongman Kazakh President Nursultan Nazarbayev to silence him as a political opponent, was arrested under an order from Kiev and is likely to be sent to Ukraine, the local prosecutor said. However, Russia’s Interior Ministry said it also intended to seek his extradition on fraud and forgery charges linked to the BTA case. Ablyazov cannot be extradited to Kazakhstan, because it is not part of a Council of Europe extradition convention. A lawyer close to the family said he suspected Ablyazov would be sent from Ukraine to Kazakhstan, which are former Soviet republics that have maintained close ties.”

Such procedures in any country, though, automatically mean a fresh series of instant and appeal rulings, which in France alone could last well into the upcoming winter. In England, Abyazov has been barred from defence in court, which was recently implemented without further options for appeal by the Royal High Court, but not in France. It could therefore be considered the best option for Kazakhstan to keep focusing on recovering the stolen money to utmost extents, to prevent BTA from going under or force taxpayers to give it yet one more multi-billion capital injection to keep it afloat. Recent court hearings and rulings in London have demonstrated that this is difficult enough in itself as the accused’s lawyers never cease to look for loopholes in jurisprudence to siphon money away from BTA’s claims. In the order of 40 million Sterling has thus already been secured out of BTA’s reach (see latest episode), and a number of pending cases can only see that amount increase. Of major importance at the present state of affairs is to keep Ablyazov in custody wherever in the world and not give him another opportunity to slip through the net, if it were only to get those facts and figures that have been veiled so far on the table in full detail.

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