Mukhtar Ablyazov: Kazakhstan’s And Kyrgyzstan’s Own Guy Fawkes Once More At Large

Mukhtar Ablyazov: Kazakhstan’s And Kyrgyzstan’s Own Guy Fawkes Once More At Large

By purchasing a number of so-called snap banks, meaning built up using the Ponzi scheme formula, in Kyrgyzstan, Kazakhstan’s master-swindler Mukhtar Ablyazov has been instrumental in a scheme masterminded by the Bakiyev gang and meant to hollow out the Kyrgyz financial framework and reduce its mining, industrial and agricultural asset values to hardly more than zero with the aim to see the drop into the gang’s hands for next to nothing. The most revealing of it all is that the entire operation took place under the very eyes of institutions such as the IMF and the World Bank which did nothing to prevent it. The plan, with the prominent involvement of former PM Danyar Usenov, now entrenched in a luxury exile in London protected by the British government against the course of justice, was initiated in the years running up to the so-called Tulip Revolution but eventually stranded. Now, with Ablyazov having escaped justice due to his cronies in US and French high circles, the danger of trouble is rising again as he claims to have “invested” in the first attempt to undermine the Kyrgyz economy. Here is a sum-up of what we know up till now – but more needs to be disclosed.

by Charles van der Leeuw, writer, news analyst

The hunt for white-collar swindlers and racketeers under the regime of ousted President Bakiyev started as early as April 8, when blood on the streets of Bishkek and other towns in Kyrgyzstan was still fresh. The accused was no one less than Mukhtar Ablyazov. That day, revolution or not, the Kyrgyz financial law enforcement office reported that it had filed criminal charges against Ablyazov for having received a credit under his own name for a sum “exceeding 200,000 US dollar” from BTA’s Kyrgyz subsidiary for him to be used “at his own discretion” thereby “abusing the trust of subordinates” and never intending to return the money.

The affair went back to late 2006, when BTA started providing capital in the form of loans to takeover candidates of state-held assets due for sale in a fresh round of privatisations.

Previously, BTA, then still largely known as Bank TuranAlem, had been buying into Kyrgyzstan’s banking business by taking over the latter’s Ineximbank for a sum below the equivalent of 50 million US dollar – a remarkable cheap deal even for an undersized and undercapitalised economy such as that of Kyrgyzstan.

In late December that year, a delegation led by the then all-powerful president of BTA Mukhtar Ablyazov on a visit to Bishkek where he met President Bakiyev, Prime Minister Danyar Usenov and a number of other top officials promised an extra capital injection for his bank’s Kyrgyz subsidiary in the order of $70 million, local news agencies reported. At stake were a number of real estate projects, a new cement factory under construction, coal mines, transportation infrastructure and power generation facilities, food industry projects and a fund meant to grant soft credits to small and medium enterprise in Kyrgyzstan.

Slipped into “invisible pockets”

Usenov was reported as of 2007 to have a direct stake in Ineximbank, which was about to merge with BTA through a share swap, which as it is thought left Usenov with 15.6 per cent of the new tandem, renamed BTA Kyrgyzstan, enabling him to put his son Marat on the board on his behalf. Usenov also shared stakes in a number of privatised former state enterprises, in particular in the construction sector but also in a number of coal mines, with Maxim Bakiyev. The latter’s control over AUB could be supposed to have enabled the couple to shift loan collateral away from the grip of the original creditor, namely BTA, leaving the latter’s cash loans uncovered. Hundreds of millions if not billions in US dollar were thought to have thus slipped into “invisible pockets”.

Born in 1982, Daniyar Toktogulovich Usenov made his career as a graduate from the Bishkek Polytechnic in the laboratory of the Kara Balta uranium upgrading facility – the only one in the entire region of Central Asia. He also became mayor of the nearby town of the same name and governor of the district – not unusual in Soviet times. Following Kyrgyzstan’s independence, he went back to school to obtain a law degree in 1992. He then secured his business interests as CEO of one of the “industrial-financial” private enterprises that mushroomed throughout the former USSR at the time, Eridanus. In 1995, he left this post as he obtained a seat in Parliament which he held till 2000, as he reached the most memorable stage in his career and became chairman of the board of InEximBank. Shortly afterwards, he successfully inked the purchase of his bank by Temirbank, which was later taken over by Bank TuranAlem, then under the fresh reign of Mukhtar Ablyazov.

The years that followed up to the Tulip Revolution remain by and large a blank spot in the overall story. There is, however, reason to assume the possibility that money has been funneled into the “southern” gangs at the origin of the Tulip Revolution’s outbreak and spread. The bazar bosses had certainly never been poor, given the flourishing trade in about everything from cosmetics to concrete mills from China to Uzbekistan and from there further west, oil products, grain and other commodities in the opposite direction, and, of course, narcotics from nearby Afghanistan to everywhere else. But the way the revolt was to spread over the country points not only at a sophisticated level of organisation but also of a well-organised funding network, to which the likes of Usenov and Ablyazov look far from strange – as do US intelligence services.

The ground thoroughly prepared

As known, the trouble that led to the 2005 coup started in Dzhalalabad in the south of the country on March 18, as a few hundred first and a few thousand “protesters” later occupied a number of government buildings and the local radio and television station’s premises. Early in the morning on March 20, police forces which had been mobilised the previous day tried to retake the occupied buildings, arresting hundreds and injuring dozens. In the all-out street battle that followed the mob re-occupied the government house and forced police to free the captives.

On March 21, crowds occupied the airport, the local radio and television station, the main police station and the government house as well. Two constables were caught and tied up to horses to be dragged through the centre of the town. On March 22, similar scenes occurred in the town of Pulgon in Kyrgyzstan’s deep south. The following day saw the first unrest in Bishkek, triggered by a dozen busloads of “activists” brought in from the southern provinces the previous day. How they teamed up with local movements remains unknown but they must have found the ground thoroughly prepared in one way or another.

It was almost a replica of Lenin’s coup back in late 1917 which had been well prepared with revkoms popping up from Minsk to Vladivostok. So who were these “protesters”? Looking back, they seem to have less in common with crowds crying out their discontent than with the private armies Lebanon’s warlords used to deploy during the civil war. This for all it matters could well explain the bloody outcome of the clashes in Bishkek at the height of the confrontation which took place five years later. It can safely be assumed that what was then described as “riot police” were either not police at all or (more likely) mobster armies integrated into the original riot police following the Tulip Revolution.

Back to 2005. In Dzhalalabad, local radio and television stations were occupied and their exhortion to revolt outvoiced Akayev’s dramatic appeal on the national television on the evening of March 22 calling for dialogue within the constitution and for refraining from outlaw action. Less than two days later, the President had slipped across the border into Kazakhstan and from there into exile in Russia. According to independent eyewitness report, among others by Kommersant, the capture of state buildings that followed was led by a number of mobsters, come in from the south, which took for the presidential palace and the house of parliament first.

And it did not stop at that. After the palace, the brave revolutionaries roamed further into the centre of Bishkek, smashing shop windows and taking all they could lay their hands on from mobile telephones to washing machines and cars. Owners of the shops and the merchandise were to try and report the damage done to them by the mob to the authorities later on – all in vain.

Economy ready to be grabbed

It would have shed too much light on the true story behind the Tulip Revolution, which could have a lot more to do with Cold War scenarios revisited than meets the eye. The problem at the time was that the perpetrators of the “southern trouble” that ended in the power takeover were still leading a high-profile life, while knowing too much. This, of course, could not and would not last. For it would soon appear that thugs, not the opposition, had been behind it all – most likely on the payroll of the CIA as generally assumed so far, until recently the just liberated thug-of-thugs Mukhtar Ablyazov claimed that he has been the one who paid for them…

Whatever the case, it all left the foreign instigators with a number of accomplices who clearly knew too much – which explains much of what happened next. On October 25, hardly more than half a year after the Tulip Revolution, a battle between chief-racketeers controlling bazaars in Karasu in the country’s deep south and in Bishkek in the north bearing the respective names of Bayman Erkinbayev and Zhyrgalbek Surabaldiyev broke out, which according to reports in Kommersant (among other, mainly Russian media) led to the bottom of what had been going on on March 24 in the capital. Whereas the former had put cash and clout behind the move against the Akayev government, the latter had tried to prevent the latter’s ousting using the same methods and means.

The newspaper’s investigations led to a third thug named Ryspek Akmatbayev, also from the south but a rival to Surabaldiyev. Akmatbayev was suspected of controlling much of the shady trade route with China and from there to Uzbekistan, was also somehow in the game, as was a fourth called Abdalim Zhunusov who was in the process of wrestling control over the Karasu market place from his foe Bayman Erkinbayev. Following the change of regime, all of them, remarkably all except Ryspek Akmatbayev having taken a seat in Parliament, came to a bad end. All of them had been prosecuted on the basis of an impressive list of charges, which were dropped following the Tulip Revolution with the stroke of a pen.

Surabaldiyev was shot dead on the street next to Bishkek’s Russian Drama Theatre on June 10. The same thing happened to Zhunusov on September 5 and to Erkinbayev on September 22. Followed, only days later, the murder of another member of Parliament named Tynychbek Akmatbayev, Ryspek’s brother. By the time they had been buried, Daniyar Usenov found himself in the comfortable position of chairman of the all-powerful State Committee of Economic Development, Trade and Investment. This institution from now on controlled all cash flows in and out of Kyrgyzstan – including those coming from Kazakhstan in the form of direct investments by also in that of credit lines and bond placements by Kazakh banks, either directly or through offshore agents. It left the entire economy ready to be grabbed.

A Dutch windmill scheme

The BTA bond issue took place shortly after the abovementioned meeting in Bishkek and looked very much indeed like a direct result of it. Now that the clock had been turned (hopefully) back to normal, the blank spots in the alleged sequence of schemes could possibly be identified, more of the culprits’ accomplices and possibly part of the money traced back and returned. Much would depend on the macro-political dimensions of the game. The formation of gangs of Kyrgyz contras in the south of the country would require further financing. The current regime in the USA under Obama was hardly likely to allow lavish cash flows to be attributed to Bakiyev’s gangs. Even more remote involvement would in the end do more damage to America’s position in the region including to its right to maintain its military base near Bishkek. Moreover, such efforts would be directly aimed against the interests of Russia and Kazakhstan, and harvest little sympathy anywhere else in the former Soviet Union. For that, the time was not yet ripe – even though it would be soon.

On 15 September 2009, a private-held fund based in Bishkek and called Investment Holding Co. lost (in appeal) a local court case which would have entitled it to sell a bond package with a deemed par value of 28.4 million Sterling. The bonds, with a nominal value that had been put at 200 million pound when they were first placed back in 2006, had been purchased in June 2009 by IHC’s broker Central Asian Holding. The present owner claims that the broker had been instructed to purchase “reliable” bonds, but bought junk instead, since BTA-Kyrgyzstan’s parent company in Kazakhstan had slipped into default in April that year.

Curiously enough, the nominal issuer of the bonds TuranAlem Finance BV, based in Rotterdam, The Netherlands, also fell into default shortly after the verdict. IHC was ordered by the court to return the bonds to BTA-Kazakhstan, which was supposed to bear “ultimate” responsibility for payments of interest and lump-sum of the bonds, which were due to mature as of December 21 2009. This meant that IHC’s money was likely to disappear into the $10.3 billion abyss of unpaid debt by BTA, but entitled to receive value in paper once the overall debt should be settled. Both BTA-Kyrgyzstan and Dutch TAF were declared liability-free in the pursuit of the money for the bonds. Kyrgyz appeals to the Dutch government to catch the fraudsters on its territory had reportedly been left without response. It was not the only case in the voluminous Ablyazov files where such a Dutch windmill scheme had shown to be an ideal vehicle to steal cash. The so-called Chrysopa affair, on which we exhaustively reported at the time, is another one and similar schemes have come under people’s attention involving Ablyazov’s crony and relative Viktor Khrapunov, another “politically persecuted” criminal hiding in Switzerland.

The Dutch trick would be discovered and prevented at the last minute by Kyrgyz authorities. “The Supreme Court of Kyrgyz Republic has held that it is the Kazakh bank and not “Turanalem Finance BV” (SPV) which shall pay the bondholders for the purchase of the now defaulting bonds of Kazakh BTA Bank,” a press release coming from a Bishkek-based company called Flexi Communications dated September 14, 2009 read. “Turanalem Finance BV (SPV) is the Dutch registered BTA Bank’s special purpose company. The Kyrgyz Supreme Court held this verdict when ruling on a private claim by an aggrieved investor against Investment Company of Central Asia,LLC. The Court ruled that the whole scheme of routing bond investments through a “hollow” special purpose entity was indeed a sham masking the economic transaction of lending money directly to the Kazakh BTA. The Court has established that the SPV had no economically significant activity of its own and all business decisions of the SPV were in fact taken by BTA Bank, the size of the SPV’s capital was very small in comparison with the multi-billion volume of bond issues and the investors understood that the person responsible for the repayment of the funds is BTA Bank and not the SPV. The Court held that the true economic purpose of creating the SPV and the offering documentation was to raise money from investors by BTA Bank and the true intention of the investors was to lend money to BTA, or to accept the BTA credit risk for certain return, in case of the secondary bond market. The Court held that the creation of the SPV and of the offering documentation was a sham. The Kyrgyz Supreme Court excluded the SPV (Turanalem Finance BV) from the list of defendants, held BTA bank directly liable to investors for the face value of the bonds and in return asked the claimant to hand over the bonds back to the bank, as these were held a legal nullity.”

Bedroom secrets, boardroom secrets

IHC had clearly hoped to get its money back by selling BTA-Kyrgyzstan to a third party and pocket the revenue on it. Unless, of course, IHC comes down to little more than Ablyazov and associates. This is what fiscal police in Kyrgyzstan doubtlessly started suspecting when they opened the investigation against Ablyazov. By “losing” the money the bonds are worth today, IHC would thereby obtain 200 million pound in paper once BTA’s debt would be settled. The standoff was to remain in place until well after the downfall of the Bakiyev regime, and only over summer in 2012 a breakthrough in favour of BTA occurred.

The scheme stranded because for once, the law in Kyrgyzstan prevailed over politics. “BTA Bank (BTAS), the Kazakh lender seeking to restructure its debt for a second time, said it won a court case to regain control over its Kyrgyz unit that was lost in a ‘raiding scheme’ three years ago,” Bloomberg reported on October 17 2012. “A court in the Kyrgyz capital of Bishkek on Oct. 12 voided the results of an auction sale of a 71 percent stake in ZAO BTA Bank and ordered its return to the Kazakh parent company, the Almaty-based bank said in a statement e-mailed today. Investment Holding Co., BTA’s bondholder based in Kyrgyzstan, said in October 2009 it was seeking a court order to sell BTA assets in the country at public auction to recover its investment after rejecting BTA’s debt-restructuring offer. The company at the time held 28.4 million pounds ($45.9 million) of BTA’s 7.125 percent bonds due in December 2009. BTA’s previous court appeals had no effect ‘because of the pressure applied by organisers of the raiding scheme,’ the Kazakh bank said today.”

In a review of the case published on November 11 2011, the Kyrgyz independent news agency revealed the structure Ablyazov had created with the aim to get BTA’s Kyrgyz subsidiary out of the parent bank’s control. “In Kyrgyzstan, major shareholders of BTA Bank CJSC are ex-Prime Minister Daniyar Usenov and his spouse Dinara Isaeva, a parliament member,” the text was to read. “The married couple is on the list of persons ‘having significant impact (direct or indirect) on decisions taken by regulatory bodies of the bank.’ Thus, Daniyar Usenov possesses 15.4184 per cent of shares of the CJSC while Dinara Isaeva has 13.3216 per cent. Besides, eight [other] citizens of Kyrgyzstan hold 8.875 per cent of the shares each. The chairman of the Board of BTA Bank CJSC is Murat Kunakunov who occupied the similar post in INEKSIMBANK СJCS. In end of December 2007 the bank’s board took a decision to alter INEKSIMBANK СJCS into BTA Bank CJSC as INEKSIMBANK had become a member of the Kazakh financial BTA group.”

“A strange operation”

“The National Bank imposed a direct supervision in BTA Bank CJSC after April 2010 events that was recently prolonged,” the article continues. “According to the supervision body and the Prosecutor General’s Office of Kyrgyzstan ‘shadow’ schemes were used in the CJSC under the shelter of some high-ranking officials. Thus, a strange operation on buying shares was carried out in BTA Bank in 2009. ‘An obvious splitting up between certain persons took place there that is connected to interests of high-ranking official of that period. This is obvious raiding. Then a huge deposit of the Kazakh party – around $20 million – was withdrawn through AsiaUniversalBank OJSC,’ the vice chairman of the Board of the National Bank of KRG Zair Chokoev said in early October 2011.”

The most remarkable aspect of the Ablyazov files’ Kyrgyz dimension is that in Kyrgyzstan no courts of law in England, Russia or wherever else were needed to solve the issue in a rightful manner. “The Prosecutor General’s Office of Kyrgyzstan has passed a case on illegal acquisition of controlling interest of BTA Bank CJSC by officers of law enforcement agencies to the Pervomaisky court of Bishkek,” reminds. “The reason for prolongation of the banking supervision is the mentioned criminal case. Names of persons, who ostensibly had committed a raider seizure of the bank’s shares, are not mentioned. […] Let us note that according to official information of the bank, as of January 1, 2011, resources of BTA Bank CJSC made up over 3.216 billion som and its credit portfolio is over 1.721 billion. The market share of bank’s assets made up 5.7 percent and 7.2 percent in loans. The core capital of the bank is 1 billion som while total capital is 1.271 billion or 10.8 percent of overall capital of the banking sector.”

Charles van der Leeuw. FUGITIVE LONG-FINGERED GENTRY FROM THE PLAINSNEW eBOOK on sale exclusively by KazWorld
Charles van der Leeuw
The story of Mukhtar Ablyazov, one-time major shareholder and chief executive of Kazakhstan’s BTA bank, tells how well over 10 billion US dollar is supposed to have been reaped through his network of close to 800 fake companies.

“Today BTA Bank (the Bank) announced that the restructuring process initiated by the Bank in the Specialised Financial Court of Almaty was recognised in Kyrgyzstan,” a BTA press release dated November 28, 2012, was to read. “The recognition was received on November 15, 2012 in accordance with the Decree of the Interdistrict Court of Bishkek and provides for the following activities in the Kyrgyz Republic: suspension of court orders under Bank’s liabilities to be restructured; suspension of performance of creditor’s demands on such liabilities; prohibition of foreclosure of Bank’s assets in the Kyrgyz Republic.”

The court order was implemented over the new year. “BTA Bank JSC (the Bank) kindly informs that the order of Bishkek city court to return 71% shares (35.5 mln.units) in BTA Bank CJSC (Kyrgyz Republic) to the Bank entered into legal force,” a follow-up press release dated January 16 2013. “On January 15, 2013 the Interdistrict court of Bishkek sent copies of judicial acts to Registrum OOO under which title for the stake shall be re-registered to the name of BTA Bank (Kazakhstan). As it has been reported earlier, on October 12, 2012 the Interdistrict Court of Bishkek granted claim filed by the Bank on invalidation of bids where 71 per cent shares of BTA Bank CJSC were sold. According to the Court order the stake shall be returned to the Bank. On December 6, 2012 the appellate instance of Bishkek city court upheld the decree of the Interdisctrict court of Bishkek thus fully confirming conclusions of the first instance court on illegal nature of the bids. The illegal bids after which BTA Bank (Kazakhstan) lost 35.5 million.shares in its Subsidiary bank in Kyrgyzstan took place in 2009.”

Given all this, what to make of Ablyazov’s claim that he “financed” the Tulip Revolution? It could well that the man is just bragging, but if not, he could try it again. With so many culprits walking free with hundreds of millions at their disposition, both Kyrgyzstan and Kazakhstan are exposed to high risks. For particularly the way in which the Bakiyev gang tried to suppress all resistance, including a shoot-to-kill order in 2010 followed by a counter-coup attempt using “ethnic” confrontations as a smoking gun, makes it convincingly necessary to deal with such people.

by Charles van der Leeuw, writer, news analyst