Kazakhstan’s Secret Billionaires

A mas­sive leak of doc­u­ments reveals the hid­den own­ers behind Meridian Capital, a major Kazakhstani invest­ment and hold­ing com­pa­ny with inter­ests in oil and gas, real estate, min­ing, banks, avi­a­tion, trans­porta­tion, and more.

For over a decade, Kazakhstan’s most valu­able resources – its oil and gas – have been in the hands of one man. Known for lit­tle else oth­er than his man­age­r­i­al skill, the unas­sum­ing Sauat Mynbayev has nego­ti­at­ed deals on behalf of his gov­ern­ment with oil indus­try exec­u­tives from across the world. Officials from oil titans like Chevron and ExxonMobile, Lukoil, the Korea National Oil Corporation, and many oth­ers have shak­en his hand and signed deals worth billions.

But Mynbayev isn’t what he seems. He’s not just a gov­ern­ment tech­no­crat – he’s a mag­nate him­self. And it’s not just oil and gas.

Over a decade ago, in the secre­tive trop­i­cal tax haven of Bermuda, Mynbayev and a group of pow­er­ful bankers cre­at­ed a com­pa­ny that would become a mul­ti-bil­lion-dol­lar empire, invest­ing in every­thing from real estate to nat­ur­al resources to bank­ing to avi­a­tion, trans­porta­tion, and dairy.

But Meridian’s inner work­ings, the full extent of its hold­ings, and the meth­ods used to acquire them have remained obscured behind a dizzy­ing array of off­shore com­pa­nies that stretch across some of the world’s most secre­tive jurisdictions.

Until now.

Its secrets are revealed in a leak of 6.8 mil­lion con­fi­den­tial records from Appleby, a Bermuda law firm, that were obtained by the German news­pa­per Süddeutsche Zeitung and shared with the International Consortium of Investigative Journalists (ICIJ) and its glob­al net­work of media part­ners, includ­ing the Organized Crime and Corruption Reporting Project (OCCRP).

Appleby office build­ing in Bermuda. Credit: Hidefumi Nogami, The Asahi Shimbun, Japan

Not even Appleby – the firm that han­dled Meridian’s paper­work in Bermuda – was aware of the full extent of their client’s empire. Dozens of leaked emails reveal con­fu­sion on the side of the law firm and repeat­ed requests for more infor­ma­tion about the group’s structure.

In one email, a Meridian staffer polite­ly declines Appleby’s request for infor­ma­tion: “For con­fi­den­tial­i­ty rea­sons we do not believe it is nec­es­sary at present to dis­close the whole group,” he wrote. “Your under­stand­ing is appreciated.”

It took months of por­ing through thou­sands of records for OCCRP reporters to unpeel the mul­ti­ple lay­ers of off­shore com­pa­nies that make up Meridian – and to come to under­stand how its stun­ning suc­cess was possible.

In the company’s ear­li­er years, it was Kazakhstan’s boom­ing oil indus­try that fueled Meridian’s growth. This is no sur­prise, con­sid­er­ing that, for much of his career, Mynbayev was either oil min­is­ter or chief exec­u­tive of the state oil company.

But it wasn’t only Mynbayev who used his pow­er, con­tacts, and offi­cial posi­tion to help Meridian grow.

According to Appleby data, his fel­low co-founders includ­ed top exec­u­tives and share­hold­ers of Kazkommertsbank, the country’s largest pri­vate bank. It was this bank that pro­vid­ed the easy cred­it that made Meridian an empire that now stretch­es from the United States to Europe, Africa, Asia, and even Australia.

The Kazkommertsbank head­quar­ters in Almaty. Credit: Kazkommertsbank web site

The details of how Meridian’s share­hold­ers exploit­ed the bank under their con­trol are revealed in a sep­a­rate leak of Kazakhstani bank­ing data obtained by OCCRP.

That leak reveals that the group used a large por­tion of the bank’s deposits to fund project after project. This enabled them to grow quick­ly, and at lit­tle risk to them­selves. According to an email from a cen­tral bank offi­cial, when­ev­er a project failed, the bank own­ers and exec­u­tives – who were also Meridian’s own­ers – would dump the loss­es onto the bank’s bal­ance sheets.

This free spend­ing on its own exec­u­tives’ ven­tures came back to haunt Kazkommertsbank, which end­ed up need­ing mul­ti­ple gov­ern­ment bailouts. Under a state-run sta­bi­liza­tion pro­gram, infu­sions of gov­ern­ment deposits reached a high of $1.4 bil­lion in 2010. Less than a year after bank was trans­ferred to new own­er­ship, it need­ed anoth­er $7.5 bil­lion bailout. The true cost of the bank’s behav­ior in bailouts and bad deals will like­ly nev­er be known, but Kazakhstan’s cit­i­zens could be on the hook for bil­lions of dollars.

It is not known how much mon­ey Mynbayev and his fel­low share­hold­ers have made in total. A 2006 dis­clo­sure put Meridian’s val­ue at over $3 bil­lion, but the com­pa­ny is so secre­tive that the full extent of its invest­ments may also nev­er be known.

This was pos­si­ble, in part, thanks to Kazakhstan’s noto­ri­ous cor­rup­tion and weak rule of law. But it was the Meridian founders’ exploita­tion of the inter­na­tion­al finan­cial sys­tem that enabled them to hide their rich­es from the eyes of their own people.

An Island Paradise

It’s a safe bet that few Kazakhstanis have ever been to Bermuda. This trop­i­cal par­adise is about as far a cry from the land-locked Central Asian coun­try as you can get.

But the strings that con­nect our mod­ern finan­cial sys­tem are long, and can lead to unex­pect­ed places. For over a decade, this island nation – known as one of the world’s least trans­par­ent tax havens – has been hid­ing Meridian’s big secret.

Elbow beach in Bermuda. Credit: Hidefumi Nogami, The Asahi Shimbun, Japan

In November 2002, a clerk at Appleby’s Bermuda office entered ten names into an inter­nal data­base. A Kazakhstani tech­no­crat and nine bankers joined thou­sands of oth­er busi­ness­men, oli­garchs, politi­cians, celebri­ties, and roy­als who want­ed to ben­e­fit from the anonymi­ty (and tax ben­e­fits) that off­shore com­pa­ny own­er­ship provides.

Their com­pa­ny – Meridian Capital – had been incor­po­rat­ed by Appleby staff sev­er­al months earlier.

The leaked Appleby data is incom­plete, so it’s not clear what per­cent­age of the com­pa­ny each of Meridian’s ten co-founders ini­tial­ly owned. But a 2006 doc­u­ment gives a full pic­ture of the company’s own­er­ship at that time.

Ownership stakes in Meridian Capital Limited as of 2006.

The doc­u­ment shows that Mynbayev was the sec­ond-largest share­hold­er, with 18.75 per­cent. His oth­er co-own­ers in 2006 – by this point there were six – were Askar Alshinbayev, Yevgeniy Feld, Nurzhan Subkhanberdin, Nina Zhussupova, Azat Abishev, and Ian Connor.

This was a ver­i­ta­ble “bankers’ club” – all sev­en share­hold­ers had occu­pied top posi­tions in Kazkommertsbank, the fourth-largest in the for­mer Soviet republics.

By then, three years after its cre­ation, the com­pa­ny had already become mas­sive­ly suc­cess­ful and was pay­ing mil­lions in div­i­dends to its share­hold­ers. Ian Connor, Meridian’s only non-Kazakhstani co-own­er, had done so well for him­self that he was prepar­ing to move to Monaco to low­er his tax payments.

This is accord­ing to notes (obtained from an ear­li­er leak) from a May 2005 meet­ing he held with his bank, HSBC, in the French Riviera.

In that meet­ing, Connor esti­mat­ed the company’s total assets at $1.2 bil­lion, and said he had received a $9 mil­lion div­i­dend pay­ment from the group the pre­vi­ous month.

He described Meridian as a ven­ture cap­i­tal firm “invest­ing in dis­tressed com­pa­nies in com­modi­ties min­ing and resources.” Its invest­ments, he said, includ­ed major Kazakhstani gold min­ing and oil com­pa­nies, though its most recent acqui­si­tion had been a mine in South Africa.

For such a big suc­cess, one would expect the name “Meridian” to pop up every­where. You would at least expect the com­pa­ny to have a web site, but it doesn’t.

An online search of Meridian Capital leads to mul­ti­ple sites that use the same gener­ic name, but none of them are relat­ed to the Bermuda com­pa­ny. Considering it is worth bil­lions, the com­pa­ny is near­ly absent from the web. It keeps its name out of the press and rarely talks to reporters, even when it is involved in mas­sive projects.

But why would some of Kazakhstan’s wealth­i­est and best-con­nect­ed peo­ple go to such lengths to hide their success?

For Mynbayev, the most basic rea­son may have been a straight­for­ward con­flict of inter­est. By the time Meridian was found­ed, he had already occu­pied sev­er­al of the country’s most senior posi­tions, includ­ing Finance Minister, Agriculture Minister, and Deputy Head of the Presidential Administration.

And after Meridian was found­ed in 2002, his career only con­tin­ued to rise. By the late 2000s, he had become the country’s key oil offi­cial, hold­ing the posi­tions of Minister of Energy and Oil Minister, and then becom­ing head of KazMunayGaz, the state oil and gas com­pa­ny, where he remains today. In these posi­tions, run­ning a busi­ness empire fueled by oil would have been unac­cept­able and pos­si­bly ille­gal. In response to reporters’ ques­tions about whether Mynbayev has ever dis­closed his own­er­ship of Meridian, the com­pa­ny replied that he has nev­er been a share­hold­er or founder.

But even aside from the legal require­ments, Mynbayev – known to be the “president’s man” – had a rep­u­ta­tion to uphold.

Unlike oth­er rep­re­sen­ta­tives of the elite, he is … in a shad­ow, in terms of the absence of any neg­a­tive rep­u­ta­tion,” explains Dosym Satpaev, a Kazakhstani polit­i­cal analyst.

This was a par­tic­u­lar­ly use­ful asset for a man charged with rep­re­sent­ing Kazakhstan’s gov­ern­ment in major oil deals with for­eign corporations.

Leaders in this sec­tor must be able to work with the inter­na­tion­al invest­ment com­mu­ni­ty, to find a com­mon lan­guage with for­eign com­pa­nies and busi­ness­es,” Satpaev says. “Mynbayev is some­one who pres­i­dent tries to put into posi­tions where [he needs] to have a pre­sentable, good look.”

Nor would run­ning Meridian open­ly be a good idea for Mynbayev’s banker partners.

Between 2005 and 2011, Kazakhstani leg­is­la­tion banned own­ers of off­shore com­pa­nies from hold­ing shares in the country’s banks. This par­tic­u­lar­ly con­cerns Subkhanberdin and Zhussupova, Meridian share­hold­ers who were both also Kazkommertsbank shareholders.

So Meridians’ co-own­ers need­ed secre­cy. And Bermuda offered the per­fect place to find it. The island doesn’t require com­pa­nies to dis­close their own­ers. This infor­ma­tion is stored only in the records of their reg­is­tra­tion agents – in this case, Appleby – who have no oblig­a­tion to reveal them to the public.

But even beyond going off­shore, Meridian’s own­ers took the secre­cy to a whole new lev­el. In fact, the Meridian reg­is­tered in Bermuda is just the top of an enor­mous pyra­mid that con­sists of hun­dreds of com­pa­nies across dozens of juris­dic­tions, includ­ing some of the most secre­tive places in the world.

Secrecy At All Costs

Most legit­i­mate com­pa­nies use one or just a few law firms to reg­is­ter their off­shore com­pa­nies, even when they have large, elab­o­rate struc­tures. But Meridian had its own in-house ser­vice com­pa­ny, based in the UK, which itself used half a dozen off­shore ser­vice providers or law firms to reg­is­ter small parts of the empire. None of them, includ­ing Appleby, had enough pieces of the puz­zle to under­stand the full extent of its holdings.

The leaked emails show evi­dence of con­fu­sion among Appleby admin­is­tra­tors about some aspects of Meridian’s struc­ture. And when they asked Meridian for clar­i­fi­ca­tion to com­ply with Bermudan reg­u­la­tions, they were some­times sur­prised at their client’s reluc­tance to come clean.

The request­ed list of infor­ma­tion and doc­u­ments seems exces­sive,” read one email from a Meridian staffer.

In anoth­er case, Meridian agreed to pro­vide Appleby with some infor­ma­tion to sat­is­fy Bermuda’s “Know Your Customer” (KYC) rule, which requires a cer­tain lev­el of dis­clo­sure about the iden­ti­ty of one’s busi­ness part­ners. But before pro­vid­ing the infor­ma­tion, Meridian demand­ed that Appleby staff first sign a non-dis­clo­sure agreement.

Appleby seemed sur­prised by the request. “I don’t believe we have ever been required to sign a non-dis­clo­sure agree­ment in respect of KYC, nor do I believe it advis­able,” wrote an Appleby employ­ee in an inter­nal email. “Has Appleby or one of its ser­vice provider enti­ties ever agreed to or signed some­thing like the doc­u­ment in question?”

In at least one case, Meridian pre­ferred to move one of its relat­ed com­pa­nies to anoth­er agent rather than going through what an employ­ee called a “time-con­sum­ing and expen­sive KYC again with Appleby.”

The infor­ma­tion Appleby had request­ed in this case was noth­ing unusu­al: a report of the company’s activ­i­ties over the past 12 months, the sta­tus of its bank account, and the names of its ulti­mate ben­e­fi­cial own­ers. Evidently, this infor­ma­tion was not some­thing Meridian want­ed its Bermuda law firm to have.

Catch Me If You Can

The prof­its from Meridian’s glob­al hold­ings may end up in Bermuda, but that’s not where its oper­a­tions are run from.

The next lev­el in the pyra­mid con­sists of two invest­ment funds – Meridian Capital CIS Fund and Meridian Capital International Fund – which are reg­is­tered in the Cayman Islands, anoth­er secre­tive off­shore jurisdiction.

From there, it gets complicated.

In some cas­es, the Cayman funds form the top of a chain of hold­ing com­pa­nies that – for those who have the patience to fol­low the trail – even­tu­al­ly lead to the actu­al busi­ness­es. For exam­ple, Meridian Petroleum, its domes­tic oil and gas con­sul­tan­cy in Kazakhstan, is owned by a Dutch com­pa­ny that is owned by a Cyprus com­pa­ny which, in turn, is owned by one of the Cayman funds.

In oth­er cas­es, the name “Meridian” doesn’t show up any­where in the pub­licly avail­able chain of own­er­ship of a giv­en busi­ness. Instead, its role as “ben­e­fi­cial own­er” can only be dis­cov­ered in obscure reports, some­times years after it takes con­trol. For exam­ple, TengizTransGaz, a major Kazakhstani trans­porta­tion ser­vice provider, has no men­tion of “Meridian” in any of its four lay­ers of ownership.

In the most com­pli­cat­ed cas­es, Meridian’s busi­ness­es are run by nom­i­nee own­ers or by com­plete­ly par­al­lel struc­tures which lead to sep­a­rate, seem­ing­ly unre­lat­ed, off­shore hold­ings. The mech­a­nisms through which the prof­its from these com­pa­nies end up in Meridian’s hands are unknown. In such cas­es, only a leak of pri­vate cor­re­spon­dence, like the Appleby leak, allows the con­nec­tion to Meridian to be established.

In one leaked email, for exam­ple, a Meridian employ­ee asks Appleby to pre­pare the paper­work to trans­fer shares in Unimilk, a major Russian dairy com­pa­ny, from a par­al­lel struc­ture called Afleet Investments to one of the Cayman funds. “Since Unimilk is now capa­ble of pro­vid­ing required finan­cial infor­ma­tion to com­ply with our strict report­ing require­ments, it was decid­ed to bring this invest­ment into the Meridian Capital group,” the employ­ees email reads.

An Empire of Oil and Luxury

Meridian’s modus operan­di is more about acquir­ing exist­ing busi­ness­es than build­ing them from scratch. Over the years, the com­pa­ny has oper­at­ed and often sold for prof­it every­thing from oil and gas com­pa­nies to glitzy malls to sec­ond-tier air­ports to vast trans­porta­tion com­pa­nies. The company’s share­hold­ers have built a busi­ness empire, the full extent of which has been unex­plored until today. OCCRP reporters spent months piec­ing through Meridian’s web of off­shores to find the main areas from which it makes its billions.

A key area of busi­ness is oil and gas. Over the years, Meridian has made dozens of invest­ments in this sec­tor. In some cas­es, it acquired already-estab­lished com­pa­nies, often for very lit­tle mon­ey, and sold them for huge prof­its. In oth­ers, it part­nered with Kazakhstan’s state oil and gas giants in joint ven­tures or got gov­ern­ment licens­es to set up new projects itself, to which it often invit­ed inter­na­tion­al investors. Today, it con­trols over a dozen of oil and min­ing fields around the world – from Alaska to Africa to Australia.

Meridian also con­trols a major Kazakhstani rail trans­porta­tion com­pa­ny which leas­es wag­ons and pro­vides main­te­nance ser­vices to some of the country’s largest oil and gas com­pa­nies, includ­ing Tengizchevroil, which oper­ates the country’s largest oil field. It also has dozens of invest­ments in min­ing and the extrac­tive industries.

The group also made hun­dreds of mil­lions in real estate, large­ly in Russia and Kazakhstan. When it sold the St. Petersburg Galeria Mall to Morgan Stanley for $1.1 bil­lion, this was, at the time, the largest Russian real estate deal ever. Last year’s Panama Papers leak shows that it also acquired half of anoth­er Kazakhstani real estate empire, Capital Partners, which built and sold projects like Moscow’s Metropolis mall – one of the largest in the coun­try – and Ritz Carlton hotels in Moscow and Almaty.

The Galeria mall in Saint Petersburg. Credit: St. Petersburg tourist portal

Meridian also acquired at least two busi­ness jets and bought a stake in a Russian region­al air­port com­pa­ny which owns 14 air­ports – and is gun­ning for more in Europe.

Finally, it once owned half of Unimilk, a major Russian dairy com­pa­ny which would lat­er be acquired by Danone, the French food giant. Meridian is cur­rent­ly invest­ing in one of Latvia’s largest dairy producers.

Who Owns It Now?

On the rare occa­sions when Meridian has dis­closed any­thing about its own­ers, the names that appear have almost always been Askar Alshinbayev and Evgeniy Feld, two of the company’s orig­i­nal founders.

Their names also fre­quent­ly appear on boards, or as direc­tors, of the group’s var­i­ous projects.

So what about Kazakhstan’s top oil official?

In response to reporters’ ques­tions about Mynbayev’s role in Meridian, KazMunayGaz, the state oil and gas com­pa­ny that he heads, respond­ed with a sin­gle sen­tence: “S.M. Mynbayev is not a founder or share­hold­er of Meridian Capital Limited.” No oth­er share­hold­ers responded.

However, there is one pub­licly avail­able doc­u­ment which does asso­ciate his name with Meridian. A Russian bank then owned by the group filed a 2011 dis­clo­sure to com­ply with new­ly tough­ened dis­clo­sure requirements.

The doc­u­ment con­tained a list of peo­ple who ulti­mate­ly con­trolled the bank at the time: Alshinbayev, Connor, Feld – and Reid Finance, a com­pa­ny incor­po­rat­ed in Bermuda that, accord­ing to the doc­u­ment, was act­ing as a trustee for Mynbayev.

Meridian’s most recent dis­clo­sure, filed just a cou­ple of days ago in the United Kingdom, does not include Mynbayev among its share­hold­ers and lists only Alshinbayev, Subkhanberdin, and Feld as beneficiaries.

The company’s own­er­ship is dif­fer­ent every time it’s dis­closed. The omis­sion of Mynbayev’s name from the lat­est dis­clo­sure could mean that he has recent­ly sold his shares. But because his name was not always revealed in ear­li­er fil­ings, it could sim­ply mean that the com­pa­ny does not give full dis­clo­sures of its ownership.

Two more pieces of evi­dence in the Appleby files sug­gest that Mynbayev has nev­er giv­en up his ini­tial shares.

In one case, a cor­po­rate admin­is­tra­tor not­ed in her time­card for May 21, 2014 that she had spent three hours review­ing email cor­re­spon­dence with Meridian’s lawyer in search of cer­ti­fied doc­u­ments in rela­tion to a “trans­fer of shares for S. Mynbayev.” It is unclear whether he was buy­ing or sell­ing shares, or how much, but this does indi­cate that he was present in the com­pa­ny at the time.

The Appleby leaks also show that, as recent­ly as April 2016, Mynbayev’s name was in a data­base of active PEPs, a des­ig­na­tion that stands for “polit­i­cal­ly exposed peo­ple.” According to a man­u­al for Appleby’s PEP data­base, only PEPs who are active share­hold­ers will show up, indi­cat­ing he still owned a stake in Meridian Capital, the only known com­pa­ny asso­ci­at­ed with his name at Appleby.

Askar Alshinbayev and Evgeniy Feld, two of the company’s orig­i­nal founders and its most fre­quent­ly appear­ing pub­lic faces, are on Forbes’ 2014 list of the top 10 rich­est peo­ple in Kazakhstan.

Considering Meridian’s suc­cess, this should be no surprise.

But giv­en Mynbayev’s major stake at the time, shouldn’t he also make the list? If he ever choos­es to dis­close his own­er­ship, per­haps he can look for­ward to appear­ing in the next edition.

OCCRP will pub­lish addi­tion­al details of the organization’s oper­a­tions in the com­ing weeks.

Contributors to this sto­ry: Olga Gein, Federico Pignalberi, Karina Shedrofsky, Vladimir Petin, Stella Roque, Lejla Camdzic, Chris Benevento, Aubrey Belford, Tessine Murji and OCCRP Kazakhstan.

By Miranda Patrucic, Vlad Lavrov, and Ilya Lozovsky

Kazakhstan’s Secret Billionaires

Related Posts