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Kazakh ex-dictator used UK company to help protect his $8 billion business empire

Kazakhstan’s for­mer dic­ta­tor used the UK to help safe­guard a multi­bil­lion-dol­lar busi­ness empire built dur­ing his three-decade rule, the Bureau of Investigative Journalism and the Telegraph can reveal.

Foundations con­trolled by Nursultan Nazarbayev, a noto­ri­ous auto­crat who was in office until 2019, con­trolled $7.8bn in assets via Jusan Technologies. One of the company’s sub­sidiaries, a Kazakh bank, received a mul­ti-bil­lion dol­lar state bailout and went on to hand a div­i­dend to its par­ent. It is reg­is­tered in the UK, where it has just one employee.

Documents from October 2021 showed Jusan Technologies at the cen­tre of a sprawl­ing cor­po­rate oper­a­tion with pri­vate inter­ests held by well-con­nect­ed mem­bers of the Kazakh elite and busi­ness­es con­nect­ed to the rul­ing fam­i­ly of the United Arab Emirates. Their assets have been held via dozens of busi­ness­es scat­tered across Kazakhstan, Luxembourg, the UAE, the UK, and now the US.

The rev­e­la­tions add to the grow­ing per­cep­tion that the UK is adver­tis­ing itself as a juris­dic­tion where oli­garchs, dic­ta­tors and also klep­to­crats can read­i­ly do busi­ness with lit­tle over­sight. Last month, an out­go­ing min­is­ter claimed the gov­ern­ment had delayed the planned eco­nom­ic crime bill, which would have, among oth­er mea­sures, beefed up Companies House, the UK’s cor­po­rate registry.

Dame Margaret Hodge, the Labour MP, recent­ly claimed in Parliament that Nazarbayev had used char­i­ta­ble foun­da­tions to “secret­ly con­trol” a string of assets, which were part-owned through Jusan Technologies. She said the UK had turned a blind eye to sus­pect wealth and claimed a string of Kazakh elites had become wealthy through crony cap­i­tal­ism under the Nazarbayev regime.

Britain has opened our bor­ders, our prop­er­ty mar­ket, our finan­cial struc­tures to the Kazakh rul­ing class, enabling them to laun­der their illic­it wealth and to spend it,” Hodge said in Parliament. “Worse, we don’t even enforce our exist­ing laws against any of this wrongdoing.”

During his 29 years in office Nazarbayev won elec­tions with more than 90% of the vote, accrued enor­mous wealth for his fam­i­ly and fos­tered a cult of per­son­al­i­ty– the country’s cap­i­tal city was renamed after him. He is gen­er­al­ly believed to have con­tin­ued to wield huge pow­er up until last month’s mass protests, which were met with a police crack­down and result­ed in at least 225 deaths. He has denied reports of hav­ing fled the country.

As first report­ed last month by the Organized Crime and Corruption Reporting Project, three edu­ca­tion­al foun­da­tions, includ­ing the Nazarbayev Fund, con­trolled Jusan Technologies. Nazarbayev over­saw the foun­da­tions. Boies Schiller Flexner, lawyers for the Nazarbayev Fund in London, said the company’s own­er­ship was hand­ed over to a US non-prof­it organ­i­sa­tion as a char­i­ta­ble dona­tion before the end of 2021. As a result, they said, nei­ther Nazarbayev nor the fund owns or con­trols Jusan Technologies.

The new own­er is Jysan Holdings LCC, a com­pa­ny which in turn is owned by NU Generation Foundation, a non-prof­it group, Boies Schiller Flexner said. The pres­i­dent of NU Generation Foundation is Aslan Sarinzhipov, the chief exec­u­tive of the Nazarbayev Fund and Nazarbayev’s edu­ca­tion and sci­ence min­is­ter between 2013 and 2016.

Boies Schiller Flexner said the peo­ple and enti­ties involved were inde­pen­dent of Nazarbayev and the pur­pose of the ven­ture was to fund Kazakhstan’s Nazarbayev University and oth­er edu­ca­tion­al projects.

The change in own­er­ship is not yet reflect­ed in Companies House, though Boies Schiller said they com­plied with all the rules around dis­clos­ing changes in shareholding.

Even before the change in own­er­ship, Nazarbayev did not per­son­al­ly ben­e­fit from the com­pa­ny, because although he has been the fund’s head, its char­ter for­bids him from using its assets for his per­son­al ben­e­fit, Boies Schiller said.

Jusan Technologies’ most recent accounts filed in October 2021 showed $7.8bn in gross assets – which includ­ed more than $3bn in cash – were owned through bank­ing, tele­coms and retail busi­ness­es, main­ly in Kazakhstan. The accounts dis­closed net assets of $1.6bn and net prof­its of more than $550m for 2020.

Several of Nazarbayev’s old asso­ciates have had con­nec­tions to this boom­ing busi­ness empire. Yerbol Orynbayev, who served as deputy prime min­is­ter and assis­tant to the pres­i­dent under Nazarbayev until 2015, was a direc­tor of Jusan Technologies and owned a 4.6% stake. He is also deputy chair of First Heartland Jusan Bank, one of Kazakhstan’s biggest banks and the company’s most valu­able business.

Galimzhan Yessenov, an oli­garch who mar­ried the daugh­ter of Nazarbayev’s nephew – who was in turn head of Kazakhstan’s sov­er­eign wealth fund under Nazarbayev – has had a 20% share­hold­ing in First Heartland Jusan Bank. He did not respond to requests for comment.

Since 2017, we have wit­nessed the brazen con­sol­i­da­tion of the Kazakh bank­ing sec­tor under the Nazarbayev fam­i­ly,” said Kate Mallinson, a Eurasia and Russia spe­cial­ist at Chatham House.

Another notable fig­ure with links to Jusan Technologies is Sheikh Tahnoun bin Zayed al-Nahyan, the half-broth­er of the UAE pres­i­dent and son of the country’s founder.

Among oth­er com­pa­nies, Sheikh Tahnoun chairs Group 42, an arti­fi­cial intel­li­gence busi­ness which held a 3% stake in Jusan Technologies as recent­ly as last year via an invest­ment vehi­cle called QAZ42. He is also one of the UAE’s most pow­er­ful offi­cials, act­ing as the country’s nation­al secu­ri­ty advis­er. Group 42 did not respond to requests for comment.

The immense wealth amassed by Nazarbayev’s foun­da­tions has relied heav­i­ly on Kazakh state funds.

First Heartland Jusan Bank has received at least $2.3bn in gov­ern­ment bailouts in recent years. In ear­ly 2021, it report­ed­ly used some of that mon­ey to pay $430m in div­i­dends to share­hold­ers, defy­ing a require­ment from Kazakhstan’s finan­cial reg­u­la­tor. A num­ber of Nazarbayev’s asso­ciates, via their direct and indi­rect share­hold­ings in the bank, have ben­e­fit­ted from these huge injec­tions of Kazakh pub­lic money.

Irina Velieva, a cred­it ana­lyst for S&P Global, said such cash pay­outs in the wake of gov­ern­ment bailouts “look unusual”.

She added: “The gov­ern­ment in Kazakhstan had a very long track record of pro­vid­ing sup­port to the banks. At the same time, the banks’ own­ers and man­agers were not always held account­able for the finan­cial loss­es caused by the banks before gov­ern­ment sup­port was coming.”

Jusan Bank said the div­i­dends it paid out were legal and jus­ti­fied after the lender had been stabilised.

Companies like Jusan Technologies are in part able to oper­ate in the UK because of the assis­tance of lawyers and accoun­tants who work and advise, per­fect­ly legal­ly, behind the scenes.

Boies Schiller said the UK had been cho­sen as the hold­ing company’s base because of its high­ly respect­ed legal regime.

MHA MacIntyre Hudson chair­man Rakesh Shaunak, who signed off Jusan Technologies’ accounts

The com­pa­ny was reg­is­tered in March 2020 by the US law firm Cohen & Gresser and its most recent filed accounts were signed off in August 2021 by Rakesh Shaunak, the chair­man and man­ag­ing part­ner of MHA MacIntyre Hudson, a UK audi­tor. MacIntyre Hudson was paid $462,000 by the com­pa­ny for the audit and oth­er work dur­ing 2020.

MacIntyre Hudson is under inves­ti­ga­tion by the Financial Reporting Council for its audits of anoth­er com­pa­ny in 2018 and 2019. It has con­firmed it is co-oper­at­ing with the investigation.

The choice of the UK reflects per­cep­tions among Eurasian elites and klep­to­crats that the UK is an effec­tive guar­an­tor of their wealth and prop­er­ty rights,” Alexander Cooley, a Eurasia spe­cial­ist at Columbia University in New York, said. “That’s why it’s more attrac­tive than oth­er enti­ties that might safe­guard secre­cy more. In essence, what they are pur­chas­ing is a kind of legal sta­bil­i­ty and pro­tec­tion. What is hap­pen­ing in Kazakhstan now is exact­ly the kind of con­tin­gency that they prob­a­bly had in mind, or that their enablers who drew up these agree­ments were asked to bear in mind.”

John Penrose, the Conservative MP, said: “We’ve got to be at the lead­ing edge of anti-cor­rup­tion and anti-fraud mea­sures, which means the eco­nom­ic crime bill should be an imme­di­ate, urgent pri­or­i­ty … We will not threat­en our pros­per­i­ty by intro­duc­ing these stan­dards, in fact, we threat­en it if we do not.”

Original source of arti­cle: The Bureau of Investigative Journalism