The Ablyazov files: the “dissident” image waning, in search for the lost cash

The French government keeps dragging its feet concerning the eventual extradition, primarily to the Russian Federation, secondarily to Ukraine, of Kazakhstan’s notorious master-swindler Mukhtar Ablyazov following a last verdict in appeal allowing it to go ahead. Lawyers are expected to jump in and appeal to the Council of State against a decision to extradite, meaning months of further proceedings, and after that even head for the European Court of Justice which is bound to prolong proceedings even further, and well into the upcoming winter. It means that regular headlines on the case can be expected to appear through the year and beyond – not just about the man but first and foremost, if media do their job, about the bounty he keeps hiding from its original owners in the form of offshore accounts and assets divided over dozens of different jurisdictions, just at a time when his victims are in dire financial straits. It all illustrates that whereas justice knows borders, criminals do not. The damage remains all too real for it.


The Ablyazov files: the “dissident” image waning, in search for the lost cash“He has spread havoc in London, Rome, Madrid,” an article on the affair ad its backgrounds published by the centre-left weekly Le nouvel observateur in early December last year [http://tempsreel.nouvelobs.
oligarque-kazakh-qui-embarrasse-l-elysee.html] was to read. These days, he is poisoning Paris […] From the grounds of his cell, Mukhtar Ablyazov continues to dictate his own rules. Imprisoned at the penitentiary centre of Lyon, pending his eventual extradition, he is treated with consideration, under strict surveillance to avoid having him killed or escape. This tiny man with his bare skull is worth billions as it appears, and the secrets he keeps [are worth] probably more. […] Mukhtar Ablyazov is an infernal machine.” This may be the French government headache, though, while lawyers on behalf of BTA and its current owners as well as the Kazakh state treasury have quite different ones and try to focus on refilling the financial holes left behind by Ablyazov and consorts.

As described earlier, most of Ablyazov’s diversion scheme involved real estate, mostly located in Russia and Ukraine. But there have been transactions involving corporate securities (known as the AAA scheme) and others using fake loan chains. The loan fraud, in contrasts to other files not involving property or corporate paper but exclusively consisting of financial manipulations, is known as the Granton case and involves former BTA subsidiaries in Russia, Ukraine and Belarus. The scheme is best described in an English court document dated March 13 2013 []. „Between March 2006 and August 2008 the Bank made 20 loans to 17 companies totaling US$1,428,840,000 (the Original Loans),” the text reads. “Those 17 companies are listed in Appendix 5 to the Bank’s Skeleton Argument and are known as the Original Borrowers. However, the Original Borrowers paid almost all of the loaned sums to other companies, known as the Original Real Borrowers. […] The Original Real Borrowers then used the funds for a variety of purposes. […] Some funds ended up with the Bank ostensibly in repayment of other loans made to the Original Real Borrowers, others were used to pay for the insurance which was apparently in place as security for other loans and yet other funds were paid to other companies for unknown purposes. […] Between 4 November and 4 December 2008 a number of loans (the Later Loans) totalling US$1,031,263,000 were made. The loan agreements suggest that they were made to four borrowers (the Later Borrowers), Branden, Granton, Zafferant and Aldridge and that the purpose of the Later Loans was to finance the acquisition of oil and gas equipment. But the Later Loans were in fact paid to other companies (the Intermediaries) who were, apparently, to source and deliver the equipment to the Later Borrowers. It is the Bank’s case that in fact the Later Loans, having been paid to the Intermediaries, were transferred to other companies, the Recipients, and applied by them to discharge many of the Original Loans.”

Further down, the sums involved are given in an overview by the court. Their breakdown and position as to the document’s date were as follows:
BTA Moscow Compensation Agreement          $133,876,080
BTA Moscow SPAs          $88,277,663
BTA Belarus Compensation Agreement          $11,349,840
BTA Belarus SPAs          $17,855,709
BTA Ukraine Compensation Agreement          $150,149,477
Total          $401,508,769

“The Bank has retained the shares in the three Target Banks but has given no credit in respect of them because, in the case of BTA Moscow and BTA Belarus there is no evidence that they have a value and in the case of BTA Ukraine (whose shares are worth in excess of $40m.) the Bank is being sued in the Ukraine for the return of the shares and so will either have to return them or pay for them. There is no dispute as to these figures,” Justice Teare commented.

Whether anything has changed regarding the Ukraine’s role in the affair ever since the so-called Maidan Revolution remains unknown and shall be looked into later. For the moment, it remains clear that bringing Ablyazov to justice wherever in the world does not mean that the stolen assets will flow back to their original owners automatically, since they are located in different jurisdictions where many of them have changed ownership more than once. It can be expected that even with the main culprit behind bars, his “infernal machinery” keeps spinning, and a new round of identification of the hundreds of mailbox cover-up firms he controls around the world might be needed. At the moment, lawyers, who only gained access to all available documents in summer last year following years of legal arm-twisting between the bank’s and Ablyazov’s lawyers, are still working their way to (literally) a container full of paperwork to complete the entire picture of Ablyazov’s offshore cash carousel.

What is fading away, however, is the self-made image Ablyazov has been able to uphold for many years as a “political dissident” persecuted by the vilified government of Kazakhstan. “Ablyazov, who was warmly welcomed in Europe in 2009 under the assumption that he was a politician trying to escape the prosecution of his opponents, in reality turned out to be the head of an international criminal group by European courts now, one article posted by the Pakistani newsreel Dispatch News Desk on April 1 [] read. “Russia, Kazakhstan and Ukraine are just a few countries out of many that suffered from his financial frauds. Different sources estimate the amount stolen money to be between $5 billion and $10 billion. The French court regardless of the difficult nature of the case holds the position based on law and objective legal investigation while ordering his extradition despite of the resourcefulness of the fugitive oligarch and the amount of evidences he manipulated and tried to use for misleading the court. Now, all of his attempts to get away are being blocked and Ablyazov was refused to leave his French prison on bail several times. The oligarch has already taught Europe a number of lessons and Europeans are not the ones to make the same mistake twice. For example, when the High Court of Justice in London sentenced Ablyazov to 22 months in prison, he just escaped and was nowhere to be found for a long time. After that, the British court came to a uniform conclusion that Ablyazov was guilty. This was proven over the course of court hearings on the lawsuit filed by BTA-Bank, which suffered the most from Ablyazov’s actions.”

It does not mean, though, that the battle over images has been entirely won. The Ukraine crisis has given new impetus to western pro-war advocates to vilify everything considered formerly of “neo- Soviet: Vladimir Putin in person first of all but also anyone who is on speaking terms with the Kremlin including Central Asia’s “dictators” in the words of American and other western war advocates. But the latter have been on the losing end of late, and the Ablyazov files could be considered pivotal in that process. “Ablyazov’s case is a critical point also because Europe has never before extradited the ‘moneybags’ and fugitives from former USSR countries felt comfortable and safe in the Europe,” the article reads further down. “France proved otherwise- everyone is equal before the law regardless of social status, thickness of the wallet or political beliefs. And this is the real democracy. Of course it is always very difficult to bring to account people like Ablyazov. Stolen money allows the oligarch to hire the best lawyers, wreak havoc in bribed media and prolonging the legal process in all possible ways. This is perhaps the reason why it’s been 6 years after this man arrived in Europe but his fate is being decided just now. On the other hand, it is hard to notice how dramatically Ablyazov’s status has changed over these years. Initially there was London and a lavish countryside mansion, then the court and the escape, and today it is prison and a small cell. Ablyazov, however, keeps politicising the process with maniacal persistence. It is now rather clear that the law is not on his side, so he adopted a different defence tactic. The ex-banker now claims that all of the things he did while being the head of BTA-Bank were not crimes but protective measures against the government’s corporate raid when the Kazakhstani government made a decision to nationalise BTA-Bank (which it considered to be on the brink of bankruptcy). Ablyazov claimed that he opposed the decision, transferred billions of dollars out of Kazakhstan through his affiliates in Russia and Ukraine. In reality the government decided to nationalise the bank after Ablyazov had already transferred the money.” Where it is now, is an obvious question the answer to which, however, remains a lot less obvious.

Even should the cash and assets not be recovered to acceptable proportions, the Ablyazov files will keep some merit as a precedent – since there are hundreds of such cases swarming around the globe most of which have lenient and discrete Europe where it comes to property ownership as their epicentre. “Ablyazov’s case was critical to understand by the European courts and the media because he painted himself as a political leader who was against Kazakh government therefore government was victimising him. His case is prime example how politicians take refuge and enjoy their lives in European after getting away public money from their respective countries. Such example can be found in South Asian states also because a number of criminals from Asia are enjoying their lives in Europe on the pretext of being an opponent of government. Ablyazov is of the view that if France extradites him to Russia or Ukraine, it will automatically bring him to Kazakhstan. However, sources in Kazakh government are of the view that Kazakhstan is not interested to bring Ablyazov back to the country rather it (Kazakhstan) is only interested to take him to the task and recover the stolen money. […] It can be seen that Ablyazov was defeated on both, ideological and legal fronts. The French Court of Cassation dismissed his appeal on the illegality of decisions of the Lyon Court of Appeal. Just to remind, last year in October the court ruled to satisfy the request of Russian Prosecutor General’s Office to extradite Ablyazov. Earlier, the court in Aix-en-Provence made a similar decision, but due to procedural irregularities (formalities that did not affect the essence of the process), the Court of Cassation transferred the extradition case to the court in another region. Today, legal experts believe that there is no space for manoeuvre left for Ablyazov.”

“Recovering the stolen money” more and more appears easier said than done, though. That task is now mainly in the hands of BTA’s new owner Kazkommertsbank, which together with a local tycoon took over its former rival last year. The tycoon lately swapped his BTA shares, close to half, for about one-sixth of the stock in KKB. – meaning that the latter has to continue the efforts to recuperate diverted cash and assets, result of which so far have been hardly worth mentioning except for the negative effect on KKB’s position and appreciation. “Standard & Poor’s Ratings Services kept its ‘B’ long-term issuer credit rating on Kazakhstan-based Kazkommertsbank (KKB) on CreditWatch with negative implications. The rating agency also kept on CreditWatch negative its ‘kzBB’ national scale rating on the bank, its ‘CCC’ rating on its subordinated debt, and its ‘CCC-‘ rating on its junior subordinated debt,” a recent review posted by the Baku-based news agency Trend [] read. “We think that the bank’s capital will likely remain weak given its weak earnings generation and the burden of overwhelming levels of nonperforming assets at both KKB and BTA,” in S&P’s words. “We also expect the bank’s profitability to remain low in the coming two years, largely due to the significant amount of problem assets at BTA and KKB (63 percent of the combined loan book) and low generation of new business.”

The buy-out price KKB paid for BTA to the National Fund Samruk Kazyna was just over half a billion US dollar – less than one-sixth the state had pumped into BTA following the bail-out. And even that is by no means the end of a process in which taxpayers are bleeding for Ablyazov’s schemes, which can be considered to account for about 80 per cent of the losses, time and again. “Given the significant market share of the combined bank in the banking sector of Kazakhstan, the government is willing to provide some support and has set up the Problem Assets Fund (PAF) to facilitate the cleanup exercise,” the report reads further down. “The government has allocated about 250 billion Kazakhstani tenge (about $1.4 billion) to the PAF to help resolve the problem assets of BTA and KKB. In principle, this may enable KKB to clean up its balance sheet, supporting the bank’s capitalization. “However, we are aware that certain changes and approvals are still required for the bank to be able to start transferring problem assets to the fund. We expect these to be received within the next two-to-three months. In addition, we are currently awaiting information on the terms of the asset transfer that would enable us to assess the potential impact of the transfer on KKB’s capital position.” In other words: if today only half of the estimated 10 to 12 billion greenbacks Ablyazov has embezzled in total could be recovered, the balance sheets of BTA, KKB and Samruk-Kazyna could be cleared in a single move and everybody could sleep a lot more peacefully. The sluggishness of proceedings on both sides of the Channel, though, keeps frustrating the victims, already hit hard by oil sales prices cut down to less than half of late.