The Ablyazov files: after Hillarygate and Donaldgate, now Recepgate (or almost)?

Ablyazov files: battle over cash resumes in London court, enter Trump and the Clintons

It seems that the Turkish government and business community narrowly avoided to become embroiled in the operations of Kazakhstan’s banker/swindler Mukhtar Ablyazov about two years before the latter’s mega-scheme fell through in early 2009. The question remains whether or not them prime minister Recep Erdoğan knew about the backgrounds and connections of the new owners of Turkey’s hapless petrochemical giant Petkim. This is one of multitude of questions which victims of Ablyazov’s fund diversion schemes, i.e. most of all Kazakh taxpayers, hope to get answered during the hearings of the final trial opened by the Almaty court of law against the main culprit and a number of his associates.

by Charles van der Leeuw, writer, news analyst

The Ablyazov files: after Hillarygate and Donaldgate, now Recepgate (or almost)?

Traces of a “Turkish connection” in the voluminous Ablyazov files first came into the open in summer 2007, when Turkish trade unions and opposition parties (who were then not yet overpopulating prisons as they are today) rose in protest against the sale of one of the country’s most valuable state assets for a price deemed be way below its face value. “Turkey’s only petrochemicals company, Petkim Petrokimya, was auctioned off 5 July by the state’s Privatisation Authority in a €1.5 billion transaction that fails simple transparency criteria. The government has failed to provide clear backgrounds on some of the partners comprising the winning bid for a 51% stake in this important Turkish enterprise,” an open letter from the Turkish industrial trade unions’ federation was to read. “That bid was won by a newly-chartered Kazakh-Russian company, Transcentral Asia Petrochem Holding. It is composed of three partners: JSK Caspi Neft, a Kazakh-based oil exploration firm; Investment Production Group Eurasia, reportedly a Kazakh-owned and Russian-based real estate investor; and GK Troika Dialogue, a function of Moscow-based Troika Capital Partners that now has its first foreign holding in Petkim Petrokimya.

The Russian Oil and Gas Report calls it Russia’s fourth largest foreign investment ever, and says it is the largest Russian investment acquisition in Turkey. Immediately after the award was made, an international debt-rating agency put a “negative watch” on the acquisition, a pointed market signal regarding the lack of transparency. Those facts and many more are not lost on Petrol-İş, ICEM’s oilworkers’ union affiliate in Turkey. Petrol-İş will once again argue in Turkish courts that this buy-out, a majority stake in a profitable enterprise that is key to the Turkish plastics supply chain, will harm the public good. The union has previously proven it can win its arguments in Turkish courts on privatisation matters, and this one contains solid facts that have many unanswered sub-facts.”

Caspi Neft was, and still is, fully owned by an offshore firm called Precious Oil Products Investments B.V. based in Amsterdam. Its board consists of John Byrne who is based in Almaty, and David Overbeek, Maxim Kalyuzhny and Jan Bakker, all based in the company’s headquarters, Stravinskylaan 411 (World Trade Centre), Amsterdam, according to company docuentation publicised back in late 2012 by the Almaty Stock Exchange (KASE). According tothat documentation, Caspi Neft posted a net profit of 50 million US dollar over the first half of 2012, which was allocated to its “Dutch” shareholder. According to its most recent reporting  dated October 1 2016, Caspi Neft posted a net profit of 14,810,868.000 Kazakh tenge (1 euro= approx. 400 euro) on a revenue of 41,863,681.000 tenge. Who is behind Precious Oil Products Investments B.V. remains unknown. What also remains unclear is how an oil operator could have posted net earnings of 50 million greenbacks in half a year on a single asset: the South-Alibek block which contains “estimated” reserves between 5 and 10 million tonne, or between 35 and 70 million barrels. Back in 2011, the US independent oil exploration auditor Ryder Scott had assessed the field’s par value at $149 million, as we reported little later. Located north of the Aral Sea in the rock desert of northern Ustyurt, the field was not connected to any trunk pipeline since the oil pipeline from the Caspian into China at the time only existed on paper. Its history merely consists of murky deals and transactions, in which the US company Transmeridian played a key role with Ablyazov at the background.

The Eurokommerz scandal: the man with the baseball club goes multi-billion.

Among the mentioned “unanswered sub-facts) by the Turkish trade unions is the overall relation between Troika Dialog and the Ablyazov gangwhich, as history shows, is a lot more than skin-deep. The most notorious affairs in this context is that of Eurokommerz had been founded back in 2000 by Grigory Karpovsky, a young Russian entrepreneur born in Moscow in 1979 who while still a student at the Lomonosova State University obtained a job at the representative office of Electrolux downtown the Russian capital, where he was put in charge of marketing the AEG brand. He left his job the same year and with a number of partners cofounded the consulting firm Neidemans. In 2001, he sold his stake in the enterprise and established his own consultant and accounting firm called Neumark, which in turn he sold in 2001, in order to spend all his time on a new company he had established with some of his fellow graduates at the university. This was Eurokommerz, the first factoring company in the Russian Federation. Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. A business will sometimes factor its receivable assets to meet its present and immediate cash needs. In all: a modern, more sophisticated version of the classical man with the baseball club in his inside pocket at the door.

In March 2006, according to an exhaustive report by Vedomosti published on December 2009, in an attempt to reconstruct what was to happen in the wake of Karpovsky’s move. While himself keeping a blocking share in FK Eurokommerz, a controlling one was taken by the Russian New Growth Fund on November 21, 2006, under the management of Troika Capital Partners, became the shareholder of Eurokommerz,und (RNGF), a group of investors under control of Troika Capital Partners, according to the article. Half of the latter belonged to Troika Dialog, at the time Russia’s biggest investment bank, while the other half was owned by Temasek Holdings, another Russian investment group. the stake TCP held in RNGF amounted to the equivalent of 75 million US dollar. Minority partners in the RNGF included the European Bank for Reconstruction and Development, Goldman Sachs Asset Management, LGT Capital Partners, AXA Private Equity and Fleming Family and Partners.

Once this structure was in place, Karpovsky, apparently with the consent of his partners, formed a number of enterprises in which FK Eurokommertz held 49 per cent, with the remaining 51 per cent at the disposition of banks for which they granted according credits to each of them. Thus, Stroykredit Credit Bank ventured into a Eurokommerz affiliate called Eurokommerz Stroykredit, Transkreditbank into Eurokommerz TK, NB Trust into Eurokommerz Trust, and the International Moscow Bank into Eurokommerz Factors.

Pouring bulks of cash down the zinc

As things appear today, looking back, BTA obtained on a bit-by-bit basis more and more stock by converting debt after having deliberately allowed it to get overdue. Since these debts were formally owned by proxy collecting firms with no assets belonging to themselves, all “losses” in the form of non-payment by suspicious debtors could serve to write them off and replace them by collateral originally owed to BTA-Kazakhstan first, soon to be transferred to BTA-Russia after which the latter would split off from its Kazakh parent company. All this was to happen within months before BTA’s default in Kazakhstan, followed by Ablyazov’s dismissal and subsequent flight to the UK.

In fall 2008, however, few could guess what was in store for the entire enterprise over the new year. On November 24, Karpovsky was outvoted as president of Eurokommerz, even though by courtesy he was offered a generously paid post of corporate counsel, which he accepted. Two days later, the company’s new management took over 20.9 per cent from RNGF, thereby increasing its stake to 70.7 per cent against 29.3 per cent for its partner. The new man at the helm of Eurokommerz was to be Rifat Rizoyev, a Kazakh businessman who was not only one of Ablyazov’s persons of confidence but also the majority owner in Kazakhstan’s second-largest zinc mining company ShalkiyaZinc. It seems that in the months that followed Rizoyev, through the habitual network of affiliated offshore firms, had managed to get the bulk of Eurokommerz’s liabilities under his own name – possibly using tangible assets belonging to ShalkiyaZinc as collateral.

Rizoyev was arrested in Ukraine in 2010 on request of the Kazakh authorities pending his extradition. After several months of detention, he agreed to return to Kazakhstan “voluntarily” and cooperate with the authorities in their preparation of a case against Ablyazov.

By that time, it had already appeared that things had been going wrong for a long time as the first cracks in Eurokommerz’s shop window had become visible. Putting figures provided by various sources together, it can safely be estimated that the company’s payables were up to the order of 40 billion rouble as the year 2008 drew to a close with receivables accounting for hardly more than 30 billion. As of April 1, 2009, at the Moscow arbitration court alone no less than 93 claims against Eurokommerz had been filed worth 10.152 billion rouble plus 144,33 million US dollar, according to Vedomosti. Worldwide, Nicosia-based Pignataro claimed 7.6 billin rouble from Eurokommerz and JP Morgan Chase Bank 5.7 billion. Defaults in bond pay-ups by that time amounted to 13.194 billion rouble, according to the news agency’s reporting.

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.

“Mukhtar Alblyzov, ex-chairman of the BTA bank Board of Directors, and Zhaksylyk Zharimbetov, ex-deputy chairman of the Managing Board, allegedly laundered over 83 billion tenge ($550 million) through nine shell companies. An interagency investigative group transferred the criminal case against BTA Bank and its subsidiary, Temir Bank, to the PGO in Almaty to file charges on August 3. The criminal case alleges Alblyzov and Zharimbetov led an organized criminal group, which embezzled BTA and Temir Bank funds,” a US Embassy report from Astana posted by Wikileaks on December 30 2009 was to read. “The investigation led to indictments of 12 people, including Deputy Chairman of BTA Genrig Kholodzinskiy, Managing Director of BTA Bagdatkali Tassibekov, Chairman of the Board of Directors of Temir Bank Ablakhat Kebirov, a Deputy Director at BTA, two members of Temir Bank’s Board of Directors, and six executives of other companies. The investigation resulted in the seizure of bank accounts and property, including 136 pieces of land, 12 houses, 924 apartments, 83 luxury cars, and three planes. The PGO has petitioned for the return of 172 billion tenge ($1.1 billion) from foreign borrowers. The investigation continues into the activities of Ablyzov, Zharimbetov, and the former Chairman of the Managing Board of BTA bank Roman Solodchenko, who are believed to have fled Kazakhstan.”

Ablyazov’s nuke schemes

“One of Ablyazov’s alleged accomplices, former Director General of Betpak-Dala LLP Rifat Rizoyev, was arrested in April in Ukraine, but appealed the extradition request to the European Court of Human Rights in Strasburg,” the report reads further down. “On September 26, he unexpectedly and voluntarily returned to Kazakhstan. Rizoyev allegedly helped Ablyazov launder money through various offshore companies. Some believe he only returned because of threats to his family in Kazakhstan from either Ablyazov or law enforcement authorities. His attorney denies these allegations. Law-enforcement agencies may be particularly interested in Rizoyev due to his alleged involvement in both the BTA and Kazatomprom cases, although his Ukrainian lawyer denies these allegations. Rizoyev was not charged in the BTA case, but offered immunity in exchange for his testimony.”

Concerning Rizoyev, the authorities were to keep their word. “On December 25, the Almalin District Court in Almaty city found the first 12 defendants guilty, as members of a criminal group, of fraud, embezzlement, and concealing evidence. However, prosecutors were unable to prove the charges of money laundering,” in the Embassy report’s words. “Six of the defendants were officials of BTA and Temir bank, and six headed affiliated companies. Managing Director of BTA Bagdatkali Tassibekov, Deputy Director of the Bad Loans Department Yermek Dikanbayev, Member of the Board of Temir bank Aidos Mukatayev, and Zhanibek Djumamukhambetov were sentenced to eight years’ imprisonment. Alexei Domashenko, Yermek Zhanybekov, Janna Bekbayeva, and Yerlan Beisekeyev — all from affiliated companies — were sentenced to five years. Chairman of Temir bank’s Board of Directors Ablakhat Kebirov and Daulet Dashev were sentenced to 2 years. […] The prosecution granted immunity to Rifat Rizoyev and up to 40 others in exchange for their testimony.”

Rizoyev also played a key role  in the multi-billion uranium swindle which took place on the eve of the Petkim affair. Key figurehead in that scam was Kazatoprom’s chief Mukhtar Dzhakishev, even though the presence of Mukhtar Ablyazov at the background and as the one who pocketed most of the benefit was striking. “On June 1 [2009], the KNB [Kazakhstan’s national security council] accused Dzhakishev of illegally transferring more than 60 percent of the state’s uranium assets to offshore companies. According to KNB spokesman Kenzhebulat Beknazarov, “Mukhtar Dzhakishev and other top managers abused their authority and caused damage to the state through the sale of state shares in several major uranium fields.  From 2004-07, they allegedly sold state shares in these uranium companies for the benefit of a number of private, offshore companies,” a US Embassy cable labeled “non-classified” but for “internal” use only dated June 9 2009 was to read. “Dzhakishev registered a company called Ken Dala KZ in 2005, which later received a uranium production license for the Tsentralnyi (Central) section of the Mynkuduk field in the Kyzylorda oblast, at no cost.  Also in 2005, according to the KNB, Kazatomprom sold a 30 percent share in Kyzylkum LLP (Kyzylorda oblast), to another offshore company for “the mere sum of 15.6 million tenge” (approximately $130,000 at the time).”

The Ken Dala affair and connected cases involved a number of world celebrities and made worldwide headlines. First, there was the case of a uranium upgrading factory in Stepnogorsk, illegally sold off by the Ablyazov/Dzhakishev tandem to a Canadian company named World Wide Minerals involving the two notorious names of Lev Levayev and Arkadi Gaydamak – both known for their role in the “blood diamonds” affair in which arms were illegally traded against diamonds with Angola, at the time under embargo. Second, there was the Canadian tycoon Frank Giustra, one of Bill Clinton’s close friends, who profited from one of the sales stipulated by Ablyazov and carried out by Dzhakishev. Together with billion after billion diverted from BTA’s own accounts first to offshore subsidiaries, which included Turkey’s Şekerbank, purchased by BTA on the instruction of Ablyazov, and fro there to offshore firms around the globe, the end beneficiary of which was Mukhtar Ablyazov, operating through a complex network of agents and henchmen.

Şekerbank was taken over in early 2012 by its new majority shareholder, the Kazakh national fund Samruk Kazyna, for $166 million under the English court’s freezing order which entitles BTA to exercise its property rights of all assets stolen by Ablyazov and traced down in the course of time. Today, one of the (many) questions now on the table of the Kazakh court concern the construction of Ablyazov’s little known Turkish connection. At the time of the near-takeover of PetKim, the Prime Minister of Turkey and leader of the ruling party Recep Erdoğan. The latter might well boast that he was the one who prevented Ablyazov c. s. from laying their hands on Petkim, but the question remains how they could possibly have come so close to it under the government’s very nose. The Petkim affair, unfortunately, is too little documented to give an indisputable indication concerning the backgrounds and the possible implication of state officials, including Erdoğan, in the near-affair.

Going Dutch: The Netherlands as a primary offshore haven

Rifat Rizoyev’s name in this context, however, could be used as a lead in further investigations. He still controls his largest original asset, a zinc/lead mining and processing combine in the south of Kazakhstan, originally through a Netherlands-based offshore firm, according to Dutch trade registers, called Zinc Investments III B.V.  – Martinus Nijhofflaan 2, Delft, which after a near-bankruptcy in 2008 following the suspension of its mining and processing activity in Kazakhstan,which it blamed on plummeted prices for zinc and lead on the London Metal Exchange, was replaced by another Dutch-based “enterprise” called ShalkiyaZinc N.V. According to some media reports’ suggestions, Rizoyev’s property has been used as collateral by Ablyazov in order to obtain BTA’s board’s nod for a number of ”loans” to Ablyazov’s fake enterprises in offshore havens (including those in The Netherlands, hence the ownership formula of the Shalkiya Zinc mine and combine) and could therefore be reclaimed by BTA, the remainder of which has recently passed from its owner Kazkommertsbank to a state-run fund to support and if needed liquidate troubled banks in Kazakhstan including BTA and eventually also Kazkommertsbank. Should such a claim arise, the government of The Netherlands will have to respond to it in an adequate manner.

As for the involvement of Troika Dialog, which is currently majority-owned by Russia’s state-controlled Sberbank (Savings Bank) even though its founder and original majority-owner Ruben Vardanian, of Armenian breed and a notorious supporter of the self-styled separatist zone in Azerbaijan known as Nagorno-Karabakh, it would be interesting to trace parallels between the Moscovite Eurasia Group, one of Ablyazov’s core vehicles at the time to launder embezzled funds from BTA. After the takeover by Sberbank,the latter’s executives found that Troika has played a pivotal role in the Giustra affair. In all, should Petkim have fallen into the hands of Ablyazov, it would have been added to the list of recoverable assets as a result of the freezing order ruled by an English court and valid worldwide. So in the best case, Turkey and its current head of state have had a narrow escape, but the attempt remains worth looking into a lot more deeply than has been done so far.