INVESTIGATIONS PANAMA Papers

Kazakhstan: President’s Grandson Hid Assets Offshore

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In January 2016, as the Kazakh econ­o­my was reel­ing from falling oil prices, its cur­ren­cy lost more than half its val­ue. To meet the needs of the country’s social pro­grams for the rest of the year, the gov­ern­ment would need to use at least 12 per­cent of the National Fund, a hefty reserve fund of  near­ly US$ 62 bil­lion earned from oil, gas and met­als.

President-for-life Nursultan Nazarbayev, who has run this oil-rich coun­try since 1989, appealed to the country’s rich and famous for help. Nazarbayev blunt­ly called on the rich to repa­tri­ate their mon­ey squir­reled away in off­shore accounts.

We’ve raised many rich peo­ple: bil­lion­aires, mil­lion­aires. They are show­ing off; (their) pic­tures in Forbes… They look good, with make­up, well-groomed, well-dressed. But it is Kazakhstan that enabled you to earn all this mon­ey… Bring the mon­ey here. We’ll for­give you,” said Nazarbayev, not­ing that peo­ple couldn’t hide because his gov­ern­ment had agree­ments to exchange finan­cial infor­ma­tion with most of the world’s coun­tries.

In February, his eldest daugh­ter Dariga Nazarbayeva, who is the country’s  deputy prime min­is­ter, echoed her father and called on the Kazakhs to “have a con­science,” “pay tax­es,” and “sleep well.”

However, doc­u­ments obtained by OCCRP show that mem­bers of the Nazarbayev fam­i­ly were reg­u­lar users of these same tax havens.

The doc­u­ments, dubbed the Panama Papers, are inter­nal records from an off­shore com­pa­nies’ reg­is­trar called Mossack Fonseca. They were received by the German pub­li­ca­tion Süddeutsche Zeitung and shared with col­leagues from the International Consortium of Investigative Journalists (ICIJ) and the Organized Crime and Corruption Reporting Project (OCCRP).

The doc­u­ments show that Nurali Aliyev, the president’s grand­son and Dariga Nazarbayeva’s son, had no sec­ond thoughts or con­science when decid­ing where to keep his mon­ey or reg­is­ter his lux­u­ry pos­ses­sions:

Aliyev owned two com­pa­nies reg­is­tered in the British Virgin Islands, one of the world’s least trans­par­ent off­shore des­ti­na­tions, and used the off­shores for oper­at­ing a bank account and a lux­u­ry yacht.

Aliyev did not respond to joint OCCRP and ICIJ request for com­ments by the pub­li­ca­tion date.

A Family Affair

Nazarbayev’s point­ed “we’ve raised many rich peo­ple” speech could have eas­i­ly been writ­ten for his grand­son Nurali Aliyev, a man who has used his family’s wealth and polit­i­cal con­nec­tions to suc­ceed. According to  his offi­cial biog­ra­phy, at the age of 19 in 2004 he became the pres­i­dent of Kazakhstan’s lead­ing sug­ar pro­duc­er, Sakharnyi Tsentr, which was wide­ly report­ed to be owned by his father, Rakhat Aliyev.

Rakhat Aliyev, Nazarbayev’s son-in-law, was a  major insid­er in Kazakhstan pol­i­tics for years and  filled many roles, includ­ing chief of Kazakhstan’s tax police, deputy chief of the state intel­li­gence ser­vice, vice for­eign min­is­ter and ambas­sador. At the same time, he indi­rect­ly owned or con­trolled com­pa­nies in the media, bank­ing and agri­cul­ture indus­tries.

In its July 2015 report “Mystery on Baker Street,” London-based watch­dog Global Witness described Rakhat Aliyev as alleged­ly hav­ing “used his posi­tion as the for­mer deputy head of the country’s secret police to amass a vast busi­ness empire.”

But in 2007 he had a falling out with the pres­i­dent. He left the coun­try and Kazakh author­i­ties  charged him with order­ing the mur­der of Kazakh oppo­si­tion leader, Altynbek Sarsenbayev, and two cas­es of kid­nap­ping, charges that a  US Department of State cable called per­son­al­ly sanc­tioned by the pres­i­dent. Aliyev claimed the charges were polit­i­cal­ly moti­vat­ed because of his activ­i­ties against the pres­i­dent. In February of 2015, Rakhat Aliyev was found hanged in an Austrian jail cell, where he was being held in pre-trail deten­tion on mur­der charges.

Nurali Aliyev, how­ev­er, had no such quar­rel with his grand­fa­ther and even­tu­al­ly assumed his father’s wealth and stand­ing. In 2006, he became deputy head of Nurbank, at the time one of the country’s largest banks, and in 2007 he and his moth­er  became share­hold­ers and Aliyev became  head of Nurbank.

In December of 2008, on the eve of his 24th birth­day, Nurali Aliyev became deputy chair­man of the Development Bank of Kazakhstan, a state-owned finan­cial insti­tu­tion, serv­ing as an invest­ment fund to help grow and mod­ern­ize the non-ener­gy sec­tors of the econ­o­my. It has a cur­rent loan port­fo­lio exceed­ing US $ 4 bil­lion.

And it didn’t take long for the Kazakh edi­tion of Forbes mag­a­zine to  fea­ture Aliyev. In 2012, at age 27, the glossy inter­na­tion­al busi­ness mag­a­zine described his assets as encom­pass­ing “finance, agri­cul­ture, media, tele­coms” and called him “the youngest mul­ti­mil­lion­aire of the coun­try.”

A year lat­er, Forbes esti­mat­ed his for­tune at US$ 200 mil­lion and ranked Aliyev the 32nd rich­est per­son in the coun­try. But then, some­thing changed.

Whether due to the shock­ing dis­play of wealth by a state offi­cial or Nazarbayev get­ting annoyed by his grandson’s promi­nent posi­tion on such a list, Aliyev dis­ap­peared from the Forbes rank­ings of the rich­est after 2013 and nev­er showed up again.

In December of 2014, Aliyev, then 29, had been appoint­ed a  deputy may­or of Astana, the nation’s cap­i­tal.

He report­ed­ly resigned from the deputy mayor’s job last month. As of March 28, after OCCRP called, his pro­file dis­ap­peared from the city offi­cials’ sec­tion of the Astana office of the mayor’s web­site.

The Offshores

The Panama Papers show that on Sep. 15, 2014, a com­pa­ny called Alba International Holdings, reg­is­tered in the British Virgin Islands (BVI),  got a new own­er.

Alba International was a “shelf com­pa­ny,” a com­pa­ny that does noth­ing after its cre­ation, “sit­ting on a shelf” until it is need­ed. Shelf com­pa­nies are typ­i­cal­ly cre­at­ed to save time when clients need to shift mon­ey or assets rapid­ly between a num­ber of com­pa­nies, or to allow an own­er to appear to be a long-estab­lished busi­ness when apply­ing for loans and cred­its or when seek­ing investors.

Alba’s new own­er was anoth­er BVI com­pa­ny named Invigorate Group, about which noth­ing more is known. The Alba International file, how­ev­er, includes infor­ma­tion on its ulti­mate ben­e­fi­cial own­er, the per­son who actu­al­ly owns the com­pa­ny. From the name, date of birth and pho­to pro­vid­ed in the files, it is clear­ly Nazarbayev’s grand­son.

The file describes Alba International’s  activ­i­ties sim­ply as “hold­ing a bank account in Cyprus,” anoth­er off­shore tax haven. At about the same time, the Mossack Fonseca com­pli­ance depart­ment required an “enhanced due dili­gence process” for the com­pa­ny due to Aliyev’s job as a deputy may­or and the pos­si­bil­i­ty of the exis­tence of a con­flict of inter­est.

Alba International is  head­ed by 33-year-old Askar Tarabayev, a Kazakh native who, accord­ing to the fil­ings,  lives in Dubai where he serves as a  legal rep­re­sen­ta­tive of the Dubai-based KZ Capital General Trading LLC, which is engaged in whole­sale and retail trade.

United Kingdom (UK) com­pa­ny records ana­lyzed by OCCRP show that in 2013, Tarabayev  served as a direc­tor in the UK-reg­is­tered Finesse Executive Ltd. along­side Mukhamed-Ali Kurmanbayev, an offi­cer in numer­ous UK and BVI com­pa­nies con­trolled by Aliyev.

Tarabayev is the son of Baltash Tarabayev, the for­mer deputy chair­man of the state-owned Agrarian Credit Corporation, which issues sub­si­dized loans to  Kazakh agribusi­ness­es.

In April, 2011, Baltash Tarabayev was arrest­ed and charged with “fraud, decep­tion, abuse of trust and abuse of office” for alleged­ly extort­ing an agri­cul­ture com­pa­ny that was seek­ing a US$ 850,000 loan by forc­ing it to give him an apart­ment worth near­ly US$ 170,000.  The court sen­tenced him to a five-year sus­pend­ed sen­tence. An appeals court lat­er reversed the sus­pen­sion, mean­ing Baltash Tarabayev would have to serve the five years, but the Supreme Court agreed to review that deci­sion because Tarabayev returned the mon­ey to the firm.

Since November 2012, the elder Tarabayev is list­ed as an  asso­ciate pro­fes­sor in one of the local agri­cul­tur­al uni­ver­si­ties, which praised him for his “life-long achieve­ments, sci­en­tif­ic work and edu­ca­tion.”

The hapless Nomad

Another notable trans­ac­tion that Nazarbayev’s grand­son seems to have tried to shield from pub­lic scruti­ny is the pur­chase of a lux­u­ry yacht.

On April 9, 2008,  Baltimore Alliance Inc., a three-month-old BVI com­pa­ny, bought a 23-meter-long motor yacht described as Astondoa A-76–  via a loan. The yacht appears to have been new, as it was  built by Astilleros Astondoa S.A., Spain, in 2008. Though the price was not men­tioned in the orig­i­nal bill of sale, an  iden­ti­cal used yacht sells for about US$ 1.8 mil­lion.  The Mossack Fonseca doc­u­ments show that Aliyev picked the name him­self: Nomad.

The yacht was  reg­is­tered with the BVI Registrar of Ships on June 11, 2008. On the same day, Aliyev’s name was entered into the  reg­is­ter of share­hold­ers, with the request sub­mit­ted by Kurmanbayev, who appears reg­u­lar­ly in Aliyev-linked off­shore com­pa­nies.

Yet it looks like Aliyev nev­er got to enjoy his new toy.

 On Nov. 20, 2008, the Valencia-based com­pa­ny OPTI Thermal hired Worldwide Shipping Ltd. to trans­port Nomad from the Italian port of Genoa to Jebel Ali in the United Arab Emirates via the car­go ship Emilie K reg­is­tered in the tiny Caribbean nation of Antigua and Barbuda.

But due to bad weath­er, the yacht’s cra­dle col­lapsed and the lash­ing broke, caus­ing Nomad to slip on its star­board side, which bad­ly dam­aged the boat. The cap­tain of the Emilie-K had to stop at the Italian port of Civitavecchia near Rome. He tried to con­tact the ship­ping com­pa­ny for fur­ther instruc­tions but got no response in 17 days, so he offloaded the boat in the Italian port.

Worldwide Shipping esti­mat­ed the dam­ages at near­ly US$ 355,000 plus addi­tion­al dai­ly stor­age fees and filed a peti­tion against Baltimore Alliance ask­ing that the Nomad be held until all mon­ey was set­tled (called a con­ser­v­a­tive arrest in ship­ping par­lance). According to the peti­tion, the Nomad was insured for € 2 mil­lion (US$ 2.26 mil­lion). The seizure was sup­port­ed by the court, but then revoked after Baltimore Alliance  appealed the move.

While the court case against the Baltimore Alliance was devel­op­ing, Aliyev decid­ed to  unload his shares in the com­pa­ny. On Feb. 11, 2009, he trans­ferred his 1,000 shares to yet anoth­er BVI-reg­is­tered com­pa­ny, Schneider System Ltd. On the same date, the rest of the shares, 10,111, were trans­ferred to Greatex Trade and Invest Corp., yet one more BVI com­pa­ny.

According to Global Witness’ Mystery on Baker Street report, Greatex Trade and Invest Corp. held oth­er com­pa­nies that con­trolled and man­aged a £ 147-mil­lion (US $212 mil­lion) London prop­er­ty empire that is con­nect­ed to Nurali Aliyev through Kurmanbayev who appears with him on oth­er com­pa­nies includ­ing Baltimore Alliance Inc.

A pos­si­ble expla­na­tion for the move could be that around the same time, Aliyev assumed the offi­cial state job at the Development Bank of Kazakhstan and may have sought to keep his name from com­ing out in a law­suit regard­ing the yacht.

In 2011, Aliyev decid­ed to  sell the dam­aged yacht.

On July 25, 2011, Greatex Trade and Invest Corp., rep­re­sent­ed by its direc­tor, G Wealth Management Ltd.,  sold Baltimore Alliance Inc., includ­ing the Nomad boat, back to the yacht man­u­fac­tur­er Astilleros Astondoa S.A for “One pound and oth­er con­sid­er­a­tions, free of any debts, charges, liens, mort­gages.”

According to the  Deed of Assignment, Greatex Trade and Invest Corp. was the only share­hold­er and ulti­mate ben­e­fi­cia­ry of Baltimore Alliance Inc.

It is not clear if the sale was done as part of a trade-in for a new yacht. 

by Vlad Lavrov and Irene Velska
04 April 2016
Original arti­cle: https://www.occrp.org/en/panamapapers/kazakh-presidents-grandson-offshores/

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