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Massimov, Kulibayev,Nuriyeva, TeliaSonera. The art of corruption.

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In light of Karim Massimov receiv­ing the new rank of General Lieutenant, we pub­lish infor­ma­tion on his involve­ment as a hid­den investor in a vari­ety of lucra­tive Kazakh tele­coms com­pa­nies, using his friend Aigul Nuriyeva as the proxy share­hold­er. Through this busi­ness Nuriyeva amassed a for­tune of hun­dreds of mil­lions of dol­lars, though this research high­lights evi­dence to sug­gest that she was not the true share­hold­er, and that the ulti­mate ben­e­fi­cial own­er was Massimov and oth­er mem­bers of the Kazakh polit­i­cal elite.

This fea­ture forms the basis of con­tin­u­ing research on the top­ic by a group of inde­pen­dent researchers and aca­d­e­mics includ­ing researchers who worked on pre­vi­ous inves­ti­ga­tion regard­ing Swiss repa­tri­a­tion of laun­dered mon­ey from Kazakhstan whose final report will be pub­lished in due course.

KEY FINDINGS

 Telia has been active in Kazakhstan since the late 1990s. In order to retain its priv­i­leged posi­tion in the Kazakh mar­ket Telia has engaged in cor­rupt activ­i­ties with senior polit­i­cal fig­ures, name­ly Timur Kulibayev and lat­er Karim Massimov.

 The first seem­ing­ly cor­rupt deals were con­duct­ed in the mid-2000s tak­ing two dif­fer­ent forms. Within Kazakhstan Telia acquired dor­mant com­pa­nies such as AR-Telecom and KT-Telecom for $25 mil­lion. Additionally Telia acquired telecom­mu­ni­ca­tion assets owned by Kulibayev’s Visor Group in Nepal and Cambodia for $484 mil­lion. The real val­ue of those assets was sig­nif­i­cant­ly low­er. One such exam­ple was Applifone, a Cambodian telecom­mu­ni­ca­tions com­pa­ny, on which Telia wrote off $100 mil­lion short­ly of its acqui­si­tion.

 In 2012 Telia bought a 49% in GSM Kazakhstan from Kazakh Telecom for $1.5 bil­lion. The price was vast­ly inflat­ed. Massimov and Kulibayev were recip­i­ents through Deran and Bodam, respec­tive­ly, of a large por­tion of Telia’s fee.

 In 2013 and in Telia’s last large cor­rupt pay­ment in Kazakhstan it acquired WiMax licences for $175 mil­lion from enti­ties ulti­mate­ly owned Aigul Nuryieva and Alexander Klebanov, two of Massimov’s prox­ies. The com­pa­nies involved were Lavita Holdings BV and Mymari Holding BV. The $175 mil­lion fee was largest set­tle­ment that Veysal Aral, CEO of KCell and alleged­ly the prin­ci­pal facil­i­ta­tor of Telia’s cor­rupt pay­ments to Massimov, could pass through Telia’s board in Stockholm. Veysal Aral was dis­missed amid alle­ga­tions of cor­rup­tion in 2014.

 In addi­tion to the big tick­et items above Telia and KCell chan­nelled reg­u­lar bribes to Massimov through engi­neer­ing con­tracts via three Kazakh com­pa­nies: Micro Engineering LLP; GSM Tech Management LLP and Micro Wireless LLP. These pay­ments were con­cealed as ser­vice con­tracts for anten­nas in KCell’s net­work which were invoice at $2000 per vis­it; approx­i­mate­ly 10 times the mar­ket rate. To cov­er this scheme in February

2015 KCell peti­tioned the General Prosecutor’s Office in Kazakhstan to ini­ti­ate a crim­i­nal probe into its own exec­u­tives.

 Some of the illic­it monies paid by Telia to Massimov were used to acquire a 50% stake in the Altynalmas gold mine from Canada-list­ed Turquoise Hill Resources. In par­tic­u­lar Massimov put up $51 mil­lion through Lavita Holding in the deal. In 2014 the mine was sold to Polymetal in the region of $1 bil­lion.

TELIASONERA AND KARIM MASSIMOV

BACKGROUND

Karim Massimov. Kazakhstani Prime min­is­ter at 2010

TeliaSonera’s (“Telia”) engage­ment in Kazakhstan dates back to the late 1990s when the com­pa­ny, togeth­er with Turkcell, acquired a 51% posi­tion in GSM Kazakhstan, a mobile net­work oper­a­tor, in which Kazakhtelecom owned the remain­ing 49%. In 2012, how­ev­er, Kazakhtelecom extract­ed itself from GSM Kazakhstan’s share cap­i­tal by sell­ing its stake to Telia, for $1.5 bil­lion.

In 2007, 2008 and 2013 Telia, sep­a­rate­ly from Turkcell, acquired WiMAX busi­ness­es from Kazakhstan-reg­is­tered com­pa­nies. In 2007 and 2008 Telia paid cir­ca $25 mil­lion for WiMAX licences acquired from AR-Telecom LLP and KT-Telecom LLP. In 2013 Telia acquired WiMAX licences from Midas Telecom LLP (“Midas”) for $170 mil­lion.

The same year the com­pa­ny bought a 20% stake in KazTransCom (“KTC”) for a con­sid­er­a­tion approx­i­mate­ly $22.5 mil­lion. The cor­po­rate dis­clo­sures per­tain­ing to the two trans­ac­tions indi­cate that the ulti­mate ben­e­fi­cia­ries of the pro­ceed­ings from the WiMAX busi­ness were Aigul Nuriyeva (“Nuriyeva”) and Aleksandr Klebanov (“Klebanov”), indi­vid­u­als con­sid­ered by sources to be fronts for Prime Minister Karim Massimov (“Massimov”); and Raushan Sagdiyeva (“Sagdiyeva”), a per­son under­stood to have links to both Massimov and Timur Kulibayev (“Kulibayev”). Sagdiyeva was the for­mal recip­i­ent of the $22.5 mil­lion pay­ment. These trans­ac­tions are described in greater detail below.

ORIGINS OF THE RELATIONSHIP

A for­mer offi­cial in the Kazakh Agency of Information and Communications indi­cat­ed that the exis­tence of a rela­tion­ship between Telia and the Kazakh polit­i­cal estab­lish­ment became appar­ent in approx­i­mate­ly the mid-2000s. In that peri­od Kulibayev was engaged with Telia in South Asia whilst Massimov acquired a pro­por­tion of Kazakhtelecom, then Telia’s part­ner in GSM Kazakhstan (lat­er renamed KCell).

Telia and the Visor Group

Documentary evi­dence of a rela­tion­ship between Telia and Kulibayev’s Visor Group can be traced back to 2008. Between 2008 and 2012, Telia, via sev­er­al sub­sidiaries, had chan­nelled sig­nif­i­cant amounts of cash to Visor, which took the form of acqui­si­tions of the latter’s tele­coms assets in Nepal and Cambodia and loans.

Visor Group entered the South Asian tele­coms mar­ket in the mid-2000s. In 2005 Visor Group entered into an agree­ment with a con­sor­tium of investors led by Upendra Mahato (“Upendra”), a Nepalese busi­ness­man, to estab­lish Spice Nepal, a local mobile provider.

Upendra became acquaint­ed with mem­bers of the Kazakh polit­i­cal estab­lish­ment in the ear­ly 2000s. He has had com­mer­cial inter­ests in the post-Soviet space since the 1990s, when he stroke a part­ner­ship with Aleksandr Milyavsky (“Milyavsky”), a Russian busi­ness­man turned politi­cian. Milyavsky and Upendra report­ed­ly pri­va­tised the Rubin fac­to­ry in Moscow, on the basis of which they devel­oped the famous Gorbushkin Dvor com­mer­cial cen­tre. In addi­tion to Russia, Upendra had report­ed­ly owned busi­ness­es in Belarus.

Upendra ini­tial­ly met Visor rep­re­sen­ta­tives through mutu­al acquain­tances. At that meet­ing Upendra is said to have offered Visor a part­ner­ship in Nepal, where he was in the pro­cess­ing of reg­is­ter­ing Spice Nepal. Visor report­ed­ly pro­vid­ed invest­ment in exchange for a 60% stake in the com­pa­ny. In sub­se­quent years it increased its stake in Spice Nepal and had also entered the Cambodian mar­ket, where it acquired mobile provider Applifone (see below).

Telia’s Acquisition of Visor’s Assets

In 2008 Telia acquired part of Visor’s South Asian tele­coms assets. According to TeliaSonera’s annu­al report, in 2008 its sub­sidiary UTA Holding BV (“UTA Holding”) acquired 51% of the shares in TeliaSonera Asia Holding BV (“Asia Holding BV”), through which Visor owned 80% of Spice Cell and 100% of Applifone. This gave Telia con­trol of approx­i­mate­ly 40% of Spice Cell and a con­trol­ling stake in Applifone. The Dutch cor­po­rate reg­istry stat­ed that the total con­sid­er­a­tion paid by UTA Holding to Visor Group was approx­i­mate­ly $484 mil­lion. Visor Group retained a 49% share­hold­ing in Asia Holding BV. In addi­tion to the acqui­si­tion, UTA Holding’s annu­al report stat­ed that in 2008 the com­pa­ny had pro­vid­ed a loan of $26.5 mil­lion to an undis­closed com­pa­ny, which was iden­ti­fied in an inde­pen­dent inves­ti­ga­tion pub­lished online as an unnamed Visor Group enti­ty.

According to Dutch cor­po­rate records, on 8th December 2010 UTA Holding increased its own­er­ship in Asia Holding BV from 51% to 75.45%, by pay­ing Visor anoth­er $160 mil­lion. The same year Spice Nepal was rebrand­ed into NCell. In December 2015 Telia and Visor sold their 75.45% and 24.55% stakes respec­tive­ly in NCell for $1.03 bil­lion.

The buy­er was Cambodian tele­coms con­glom­er­ate Axiata Group.

TeliaSonera: 2013 annu­al report, p.27.

Exit from Cambodia

In December 2010 Telia and Upendra agreed to merge their Cambodian busi­ness­es, respec­tive­ly Applifone and Latezl. Telia received a 25% stake in the new ven­ture. In December 2012 Telia divest­ed the invest­ment by sell­ing to Axiata Group. The price paid for 100% of Latezl was in the region of $155 mil­lion. Telia had writ­ten off approx­i­mate­ly $100 mil­lion in good­will on Applifone.

Nepal Satellite

During the course of 2011 and 2012 Telia acquired Nepal Satellite, described in indus­try reports as a small tele­com com­pa­ny with a mar­ket share of less than one per­cent. In 2011 Telia and Visor, via Asia Holding BV, paid $30 mil­lion for a stake in Nepal Satellite. In Asia Holding BV’s annu­al accounts it is stat­ed that the $30 mil­lion was paid for a 51% stake in Airbell Services Ltd (“Airbell”), the Cypriot com­pa­ny own­ing Nepal Satellite. According to his­tor­i­cal records held by the Cypriot reg­istry, the sell­ing par­ty was BVI-reg­is­tered vehi­cle Zhodar Investments Ltd (“Zhodar Investments”).

Asia Holding BV’s annu­al report stat­ed that in 2012 the com­pa­ny “sold and trans­ferred” its invest­ment in Airbell. Cypriot records state that the trans­fer was done to TeliaSonera Norway Nepal Holding AS, anoth­er Telia sub­sidiary. According to Telia’s annu­al report, on 26th April 2012 Telia bought the remain­ing 49% in Airbell, which brought Telia’s stake in Nepal Satellite from 50% to 75%. Telia booked a good will of SEK 1.2 bil­lion ($157 mil­lion). In September 2013, Telia divest­ed Airbell by sell­ing its stake back to an enti­ty named Zhodar Investments at a declared loss of SEK 389 mil­lion ($60 million).2 Telia explained its deci­sion to sell the busi­ness by quot­ing “reg­u­la­to­ry uncer­tain­ty”. The ben­e­fi­cial own­er­ship of Zhodar Investments was not estab­lished and research did not find any oth­er links that would direct­ly lead to Kulibayev or Massimov.

Archives of the Cypriot cor­po­rate reg­istry indi­cat­ed that local com­pa­ny Anu Oil Ltd (“Anu Oil”) was in 2008 the sole share­hold­er of Airbell. Sources said that Anu Oil was Samata Prasad (“Prasad”), an Indian busi­ness­man. Prasad is a long­stand­ing part­ner of Upendra and Milyavsky.

Dutch cor­po­rate records do not dis­close the cur­rent own­er­ship struc­ture of Asia Holding BV, the hold­ing com­pa­ny for Telia and Visor’s assets in Asia. From 1st September 2008 until 1st October 2008 the company’s sole share­hold­er was Netherlands-reg­is­tered enti­ty SEA Telecom Investments BV (“SEA Telecom”), a vehi­cle incor­po­rat­ed on 30th July 2008 whose sole share­hold­er is Panorpa Holding BV (“Panorpa Holding”). Panorpa Holding is whol­ly owned by Visor Growth Fund BV.

Between 30th July 2008 and 8th July 2011 SEA Telecom was owned by Alkatento Trading Ltd (“Alkatento”), a com­pa­ny reg­is­tered in Cyprus on 5th June 2008 and dis­solved on 21st October 2015. Alkatento’s share­hold­er at liq­ui­da­tion was BVI-reg­is­tered ASIA Telecom Grouping Ltd and its direc­tor was Kazakh nation­al Shyngys Utepov. The company’s past share­hold­ers includ­ed Meridian CIS Ltd. The lat­ter com­pa­ny appears to be affil­i­at­ed with Meridian Capital Ltd, the invest­ment fund wide­ly acknowl­edged to have been pre­vi­ous­ly con­trolled by Kulibayev and Kazakh busi­ness­man Nurzhan Sukhanberdin.

KEY FIGURES

Goga Ashkenazi with Timur Kulibayev

The rela­tion­ship between Telia and the Kazakh gov­ern­ment has been ini­tial­ly chan­nelled through Kulibayev. In approx­i­mate­ly 2011–2012, how­ev­er, Massimov took charge. A source in the Presidential Administration of Kazakhstan said that this was due to Kulibayev’s fall­out with Nazarbayev over the issue of Kulibayev’s lover in London. The source con­sid­ered that Kulibayev sim­ply did not have the time and admin­is­tra­tive reach to con­tin­ue his engage­ment with Telia at that lev­el.

According to two for­mer Telia exec­u­tives, through­out the years Kulibayev, and lat­er Massimov, ensured — via bureau­crat­ic mech­a­nisms — that no major com­peti­tors arose for Telia. KCell, Telia’s local sub­sidiary, had enjoyed a mar­ket share of cir­ca 50% for a long time and the rev­enues were con­stant­ly on the rise. In 2013 KCell declared total rev­enue of $1.02 bil­lion. In return for this sup­port as agreed with Kulibayev, Telia have been pay­ing kick­backs.

The major­i­ty of kick­backs took the form of reg­u­lar pay­ments – masked as mar­ket­ing and ser­vic­ing con­tracts to com­pa­nies close to the Kazakh polit­i­cal estab­lish­ment as well as KCell man­age­ment. The big­ger kick­backs, which were direct­ed per­son­al­ly to Massimov and Kulibayev, were done via acquir­ing over­in­flat­ed assets. The prin­ci­pal Telia senior exec­u­tive coor­di­nat­ing the rela­tion­ship between Kulibayev, Massimov and the Board of Directors in Stockholm was Veysal Aral (“Aral”), KCell’s CEO and a for­mer Ericsson exec­u­tive, who sources under­stood to enjoy a cor­dial rela­tion­ship with Kulibayev. A Telia source said that, the way the rela­tion­ship func­tioned was that Aral first reached an agree­ment with the Kazakh politi­cians and then would con­vince Telia’s Board in Stockholm to approve the dif­fer­ent deals. Telia’s Board of Directors was aware of the way things were done by Aral in Kazakhstan and did not oppose to this as long as KCell’s rev­enues would con­tin­ue to increase.

From 1992 until 2007 Aral worked at Ericsson in Turkey, where he rose through the ranks to the role of Vice President. In 2007 he was named CEO of GSM Kazakhstan, lat­er renamed KCell. He retained his posi­tion at KCell until 2013, when the Board in Stockholm pro­mot­ed him to the role of Head of Business Area Eurasia. In 2014 he was dis­missed from this posi­tion.

Initial Contact with Massimov

According to the for­mer offi­cial in the Kazakh Agency of Information and Communications, since 2008 Massimov held a num­ber of meet­ings with Telia’s then CEO Lars Nyberg (“Nyberg”) and Tero Kivisaari, Head of TeliaSonera Eurasia. Preliminary intel­li­gence sug­gests that the ini­tial con­tact between Massimov and Telia has been facil­i­tat­ed by Kulibayev, who is also under­stood to be a ben­e­fi­cia­ry of Kazakhtelecom and who was already engaged in dif­fer­ent deals with Telia in South Asia.

The first doc­u­ment­ed instance in which Massimov had act­ed on behalf of Telia was in 2009, when he coor­di­nat­ed the nec­es­sary legal arrange­ments for GSM Kazakhstan to receive a 3G licence. Primarily, a source in the Kazakh gov­ern­ment advised that Massimov request­ed the rel­e­vant state agen­cies to make avail­able the 3G fre­quen­cy band which the com­pa­ny neces­si­tat­ed. In the sec­ond phase of this process, Massimov, in his capac­i­ty as the Prime Minister, order the exist­ing leg­is­la­tion on tele­coms licences to be amend­ed. Specifically, he has reduced the annu­al pay­ments required by hold­ers of 3G licences from KZT 2.8 bil­lion (approx­i­mate­ly $8.2 mil­lion) to KZT 500 mil­lion ($1.4 mil­lion).

In November 2010 these amend­ments were signed into law by President Nursultan Nazarbayev (“Nazarbayev”) and in November 2011 GSM Kazakhstan received the 3G licence. A source in the Presidential Administration stat­ed that with­out Massimov’s sup­port Telia could have not obtained the desired amend­ments in such a time­ly man­ner.

TRANSACTIONS WITH DORMANT ENTITIES

AR-Telecom and KT-Telecom

The first ques­tion­able trans­ac­tions of con­sid­er­able pro­por­tion in which Telia has been involved in Kazakhstan date back to 2007 and 2008, when the com­pa­ny acquired two dor­mant com­pa­nies for a total con­sid­er­a­tion of cir­ca $27 mil­lion.

According to the 2008 annu­al report of Fintur Holdings BV (“Fintur”), of which Telia is a major­i­ty share­hold­er, on 20th June 2007 KCell acquired 100% of AR-Telecom LLP (“AR-Telecom”), an enti­ty incor­po­rat­ed on 24th October 2003. AR-Telecom is described in Telia’s dis­clo­sures as an enti­ty “which was dor­mant since estab­lish­ment”. The pur­pose of the acqui­si­tion, accord­ing to the same source, was “to get a WiMAX licence held by AR-Telecom that pro­vides a right to organ­ise wire­less radio-access net­works over 3.5 MHz spec­trum.” According to offi­cial Kazakh cor­po­rate doc­u­men­ta­tion, AR-Telecom was bought from GSM Telecom, where both Telia and Kazakhtelecom were at the time share­hold­ers.

Fintur’s annu­al report fur­ther says that the “acqui­si­tion of AR-Telecom was account­ed for as an acqui­si­tion of group of assets (licences) rather than a busi­ness. […]Total con­sid­er­a­tion paid for the licences amount­ed to USD 5,587”. However, accord­ing to KCell’s 2012 prospec­tus, the amount paid for AR-Telecom was KZT 677.8 mil­lion, or $5.5 mil­lion.

In 2008 Telia paid KZT 2.6 bil­lion, or approx­i­mate­ly $21.5 mil­lion, for KT-Telecom LLP (“KT-Telecom”), reg­is­tered on 19th September 2006 in Kazakhstan. KT Telecom was also described as a dor­mant com­pa­ny and the pur­pose of the trans­ac­tion was also obtain­ing WiMAX licences held by the Kazakh enti­ty. Research into the own­er­ship of KT Telecom is ongo­ing.

Acquisition of GSM Kazakhstan LLP

In 2012 state-con­trolled Kazakhtelecom sold its 49% stake in GSM Kazakhstan to Telia for approx­i­mate­ly $1.5 bil­lion and was rebrand­ed KCell. A source in the inner cir­cle of Kulibayev said that it was the Kulibayev who has ini­tial­ly been respon­si­ble for the terms of the deal. However, due to Kulibayev falling out with Nazarbayev in 2011, he was replaced by Massimov who finalised the nego­ti­a­tions.

Initially Sonera Holdings BV Telia’s Dutch sub­sidiary, acquired Kazakhtelecom’s 49% posi­tion in GSM Kazakhstan. In December 2012 Telia list­ed 25% of KCell on the Kazakh Stock Exchange (“KASE”).

A for­mer Telia exec­u­tive said that this was the first sig­nif­i­cant kick­back paid by Telia to Kulibayev and Massimov. The source under­stood that Kulibayev and Massimov ben­e­fit­ed from the over­in­flat­ed price through Bodam and Deran, vehi­cles through which each was then the ben­e­fi­cia­ry of Kazakhtelecom. Similar pay­ments were con­duct­ed through the acqui­si­tion of 20% in KazTransCom and the $175 mil­lion pay­ment for WiMAX licences.

WiMAX 2012 Transaction

In December 2012 Telia announced it would acquire KazNet Media LLP (“KazNet Media”), a Kazakhstan-reg­is­tered tele­coms com­pa­ny for a con­sid­er­a­tion of $170 mil­lion. The sell­er was Midas Telecom, the company’s sole share­hold­er, which was whol­ly-owned by Mymari Holding BV, a Netherlands-incor­po­rat­ed com­pa­ny pro­filed below. According to Telia’s dis­clo­sures, the $170 mil­lion fig­ure con­sist­ed of a $106 mil­lion cash pay­ment and a fur­ther $64 mil­lion in share­hold­er con­tri­bu­tion. The deal was report­ed­ly con­clud­ed on 11th January 2013.3 Kazakh cor­po­rate records con­firmed that KazNet Media’s cur­rent share­hold­er are Telia’s sub­sidiaries Sonera Holding BV and TeliaSonera Assignments BV.

3 http://annualreports.teliasonera.com/en/2013/annual-report/board-of-directors-report/acquisitions-and-divestitures/

Aral and Kulibayev/Massimov under­stood that the pre-exist­ing cor­rupt arrange­ment could not con­tin­ue when the scan­dal per­tain­ing to Telia’s cor­rupt prac­tices in Uzbekistan emerged in the pub­lic domain. The deci­sion tak­en by the trio was to mask one last sig­nif­i­cant kick­back under WiMAX trans­ac­tions, which was described by the source as a stan­dard method to for­malise a bribe. The price which Telia paid, $175 mil­lion, was the amount which Aral man­aged to con­vince the Board in Stockholm to sign off on.

The most evi­dent indi­ca­tion to sup­port a cor­rupt rela­tion­ship in Kazakhstan was that months after the acqui­si­tions of the WiMAX licences in Kazakhstan, Telia’s new man­age­ment had writ­ten off most of its val­ue. In Telia’s 2013 annu­al report Telia said it had writ­ten off the val­ue of com­pa­nies acquired by SEK 500 mil­lion (approx­i­mate­ly $58 mil­lion). This deci­sion was “based on the view that it will take longer than expect­ed to achieve full use of the acquired fre­quen­cies due to the cur­rent lack of a 4G license.” Telia’s CEO Nyberg resigned on 1st February 2013.

KazNet Media was found­ed on 31st March 2009 in Almaty under Business Identification Number (BIN) 090340020625. Together with the acqui­si­tion of KazNet Media Telia stat­ed it had received own­er­ship over Aksoran LLP (‘‘Aksoran’’) and Instaphone LLP (‘‘Instaphone’’), two Kazakh com­pa­nies each of which was said by Telia to have owned cer­tain radio fre­quen­cy per­mits capa­ble of being deployed for the oper­a­tion of Telia’s future WiMAX activ­i­ties in Kazakhstan.

Instaphone was incor­po­rat­ed on 11th April 1997 in Almaty under BIN 970440001647. Kazakh cor­po­rate records indi­cat­ed the company’s sole share­hold­er to be KazNet Media.

Aksoran was reg­is­tered on 7th December 2001 under BIN 011240000487 and its sole share­hold­er is Alem Communications Holding LLP (“Alem”). The lat­ter was incor­po­rat­ed on 23rd December 2008 in Almaty under BIN 081240013967. According to Kazakh cor­po­rate data, its share­hold­ers are Midas Telecom and Mymari Holding BV (“Mymari Holding”).

Mymari Holding is a Netherlands-incor­po­rat­ed com­pa­ny reg­is­tered on 14th June 2007 in Amsterdam under com­pa­ny num­ber 818136364 and is the sole share­hold­er of Midas Telecom. Mymari Holding is whol­ly-owned by Rimbor Holding & Finance BV (“Rimbor”), a com­pa­ny incor­po­rat­ed on 14th June 2007 in Amsterdam. Rimbor’s sole share­hold­er is Lavita Holding, the enti­ty that fea­tured in the KTC trans­ac­tion flow.

As detailed above, the lat­ter is cur­rent­ly ulti­mate­ly owned by Nuriyeva and Klebanov on a par­i­ty basis.

Aigul Nuriyeva who, accord­ing to the arti­cle, helps man­age the Nazarbayev fam­i­ly finances

A source in the Kazakhstan Financial Police stat­ed that the WiMAX deal was signed and com­plet­ed out­side Kazakhstan and there was no evi­dence to sug­gest that the pro­ceed­ings have reached bank accounts in Kazakhstan. The banks used for this trans­ac­tion have, accord­ing to the same source, been DHB Bank and Triodos Bank in the Netherlands.

KazTransCom Transaction

In December 2012 Telia announced that it had finalised the nego­ti­a­tions to acquire an approx­i­mate­ly 20% stake in KTC, the Kazakh tele­coms ser­vices provider. The mechan­ics of the trans­ac­tion, which was said to have been com­plet­ed on 11th January 2013, are out­lined below and are also illus­trat­ed in a chart accom­pa­ny­ing this report.

At the time of the trans­ac­tion, KTC had the fol­low­ing own­er­ship struc­ture:

Shareholder Stake (%)

TOO Rodnik Ink 79.9

TOO Telekom Asia 9.9

Others (not dis­closed) 10.2

Telia acquired a 50% in Alatau LLP (“Alatau”), a Kazakhstan-reg­is­tered com­pa­ny. Alatau owned a 50% inter­est in TOO Rodnik Ink, anoth­er Kazakh enti­ty, which in turn was a 79.9% share­hold­er in KTC. Kazakh cor­po­rate records indi­cate that at the time of the trans­ac­tion, Alatau’s sole share­hold­er was Sagdiyeva, whom sources iden­ti­fied as a per­son close to both Kulibayev and Massimov. Sagdiyeva start­ed her career at Halyk Bank and in the ear­ly 2000s, when Kulibayev acquired local invest­ment com­pa­ny Merkury 1999, Sagdiyeva became its CEO. The infor­ma­tion per­tain­ing to the fee paid by TeliaSonera to Sagdiyeva was indi­cat­ed in Telia’s annu­al accounts to have been $22.5 mil­lion. The press, how­ev­er, report­ed it to be in the region of $35 mil­lion.

At the same time Sagdiyeva sold the remain­ing 50% shares in Alatau to Lovou BV, a com­pa­ny reg­is­tered on 25th April 2005 in the Netherlands under com­pa­ny num­ber 814471249. Lovou’s sole share­hold­er is Panorpa Holding BV, which is owned by Visor Growth Fund BV. The lat­ter enti­ty is under­stood to be part of the Visor Group of com­pa­nies con­trolled by Kulibayev. Visor financed its acqui­si­tion of the stake in Alatau through a SEK 182.5 mil­lion (approx­i­mate­ly $22.5 mil­lion) loan pro­vid­ed by Telia. The loan has nev­er been re-paid.

Remaining Shares in TOO Rodnik

At the time of Telia’s acqui­si­tion of KTC, the remain­ing 50% shares in TOO Rodnik were owned by Almaty Engineering Company LLP (“AEC”), the sole share­hold­er of which was iden­ti­fied by Kazakh cor­po­rate records as Abdukalyk Nalibayev (“Nalibayev”). Nalibayev pre­vi­ous­ly served as Massimov’s deputy at both Halyk Bank and also in the gov­ern­ment. In October 2012 Nalibayev sold his shares in AEC to Lavita Holding BV (“Lavita Holding”), an enti­ty reg­is­tered in the Netherlands, for a fee of $51 mil­lion.

Lavita Holding was incor­po­rat­ed on 5th May 1997 in Amsterdam under com­pa­ny num­ber 806125792. Dutch cor­po­rate records indi­cate that from 10th December 2008 until 22nd December 2011 Lavita’s sole share­hold­er has been Nuriyeva. On 22nd December 2011 Nuriyeva trans­ferred own­er­ship of its shares to UNA SCA (“UNA”), an enti­ty reg­is­tered on 21st December 2011 in Luxembourg under com­pa­ny num­ber B166810. As of 2015 the com­pa­ny is in vol­un­tary liq­ui­da­tion.

Luxembourg cor­po­rate records iden­ti­fied UNA’s orig­i­nal share­hold­ers as UNA Management S.a.r.l. (“UNA Management), a com­pa­ny incor­po­rat­ed on 3rd February 2012 in Luxembourg under com­pa­ny num­ber B166810, and Panev SA (“Panev”), a vehi­cle estab­lished on 12th August 1992 in Luxembourg under num­ber B41036. On 23rd August 2013 Kauz Services S.a.r.l. (“Kauz Luxembourg”) became UNA’s third share­hold­er fol­low­ing an increase in share cap­i­tal.

Kauz Luxembourg was estab­lished on 16th December 2011 under com­pa­ny num­ber B166778. According to avail­able cor­po­rate records, until 5th February 2015 when Kauz Luxembourg was liq­ui­dat­ed, the company’s sole share­hold­er has been Nuriyeva.

UNA Management has been whol­ly-owned by Panev since its incor­po­ra­tion until 2012, when Panev trans­ferred 50% of its stake in UNA Management to Nuriyeva, and the remain­der 50% to Pieter Hamelink (“Hamelink”), a fidu­cia­ry known for his ser­vices to mem­bers of the Kazakh elite.

Further, on 19th November 2014 Hamelink trans­ferred his stake in UNA Management to Keisecker, which appears to be the cur­rent share­hold­er.

According to infor­ma­tion held by the Luxembourg cor­po­rate reg­istry, Keisecker was incor­po­rat­ed on 22nd December 2011 under com­pa­ny num­ber B166777. At incor­po­ra­tion its sole share­hold­er was Alexander Klebanov (“Klebanov”), a Kazakh nation­al born on 27th April 1963. No infor­ma­tion was found to sug­gest that the company’s own­er­ship struc­ture has changed since incor­po­ra­tion. Klebanov is a promi­nent Kazakh busi­ness­man best known as a major share­hold­er of the Central-Asian Power Energy Company. According to a source in the Presidential Administration, Klebanov is known to hold oth­er inter­ests on behalf of Massimov. The source indi­cat­ed that he man­ages Massimov’s media port­fo­lio, which is under­stood to include news web­site Vesti.kz and radio sta­tion Tengri FM.

Turquoise Hill Resources

A source close to Nalibayev said that the lat­ter sold the 50% stake in Rodnik upon instruc­tions he had received from Massimov, who need­ed to legalise $51 mil­lion which he then pro­vid­ed to Kulibayev as part of the $235 mil­lion acqui­si­tion from Turquoise Hill Resources of a 50% stake in Altynalmas Gold Ltd (“Altynalmas”). The lat­ter owns the Kyzyl gold project in North-east­ern Kazakhstan.

According to infor­ma­tion held by the Kazakh Stock Exchange (“KASE”), after the trans­ac­tion, the own­er­ship struc­ture of Altynalmas was as fol­lows:

Shareholder Stake (%)

Sumeru Gold BV 50.0

Sumeru LLP 50.0

Sumeru Gold BV was estab­lished on 1st February 2013 in Amsterdam under com­pa­ny num­ber 852454922. According to the Dutch cor­po­rate reg­istry, Sumeru Gold BV is whol­ly-owned by Steppe Unity Cooperative UA. Sumeru LLP is a Kazakhstan-reg­is­tered com­pa­ny incor­po­rat­ed on 28th December 2014. It is whol­ly owned by Aquila Properties Investments BV. According to reports in the main­stream busi­ness press, Kulibayev is the ben­e­fi­cial own­er of Sumeru and Aquila.

This is sup­port­ed by the fact that both Aquila and Sumeru Gold BV has list­ed as one of their admin­is­tra­tors Olga Aristova (“Aristova”), a Kazakh nation­al born on 8th August 1973. Aristova was pre­vi­ous­ly named in the Russian press as Kulibayev’s trust­ed man­ag­er.

Terra Management

In 2011 Rodnik was a share­hold­er in TOO Terra Management, a com­pa­ny found­ed in Almaty on 6th June 2007. In 2012, one year pri­or to the acqui­si­tion by Telia, the own­er­ship of Terra Management was trans­ferred to Dekcon Services BV (“Dekcon”), a vehi­cle reg­is­tered in the Netherlands on 22nd August 2011, whose sole share­hold­er is Luxembourg vehi­cle Verbela Participations SA (“Verbela”) which was incor­po­rat­ed on 18th June 2010 under com­pa­ny num­ber B153691. The ulti­mate ben­e­fi­cia­ries of Verbela were not estab­lished. However, the method in which the com­pa­ny is owned – Dutch and Luxembourg enti­ties – is in line with the method in which Nuriyeva and Klebanov own the major­i­ty of the com­pa­nies.

TOO Telekom Asia

TOO Telekom Asia (“Telekom Asia”) was reg­is­tered in Kazakhstan on 6th December 2012. Its sole share­hold­er is Bleston Finance Ltd (“Bleston”), a vehi­cle reg­is­tered in the BVI. It was not pos­si­ble to ascer­tain Bleston’s own­er­ship struc­ture as BVI-domi­ciled com­pa­nies are not legal­ly oblig­ed to dis­close share­hold­er infor­ma­tion. In KTC’s 2015 annu­al report, Telekom Asia is no longer list­ed as a share­hold­er. The com­pa­ny appears to have trans­ferred its stake to Murat Abdrakhmanov, KTC’s CEO.

A for­mer Telia senior exec­u­tive said that Veysal Aral (“Aral”), a Telia Vice President, was also a ben­e­fi­cia­ry of KTC.

KICKBACKS THROUGH SERVICE CONTRACTS

Sources indi­cat­ed to the fact that the KCell senior man­age­ment were siphon­ing sig­nif­i­cant funds from the company’s books through pay­ments for fic­tious ser­vices. The recip­i­ents, accord­ing to two Telia senior exec­u­tives, were both Kazakh polit­i­cal fig­ures and KCell senior man­age­ment.

The Ericsson Connection

One Telia and one for­mer KCell senior exec­u­tive con­curred that the major­i­ty of the ser­vice con­tracts were con­duct­ed with the col­lab­o­ra­tion of old acquain­tances of Aral from Ericsson in Kazakhstan.

The most reg­u­lar­ly-occur­ring scheme in which the low lev­el kick­backs were paid were the con­tracts between KCell and Ericsson, where the for­mer sub­con­tract­ed Ericsson to con­duct month­ly inspec­tions of its anten­nas. Then, Ericsson for­mal­ly out­sourced these ser­vices to shell com­pa­nies which were used to divert the funds. The inspec­tion of one anten­na, for which KCell paid cir­ca $2,000 per month – described by one source as ten times exceed­ing the aver­age cost of the ser­vice – was nev­er car­ried out and the funds ulti­mate­ly reached either Kazakh politi­cians or KCell senior man­age­ment.

This is sup­port­ed by infor­ma­tion pub­lished avail­able in the pub­lic domain. The impli­ca­tion of Ericsson was ini­tial­ly flagged up in 2011 by Turkcell, a minor­i­ty share­hold­er in KCell. Telia lat­er announced that it would inves­ti­gate the mat­ter. In February 2015, KCell request­ed the General Prosecutor’s Office of Kazakhstan to open a crim­i­nal inves­ti­ga­tion into sev­er­al of its senior man­age­ment on sim­i­lar grounds. No fur­ther infor­ma­tion was report­ed. It is under­stood that KCell sus­pect­ed the cul­prits to be for­mer General Director Ali Agan and Financial Director Baurzhan Ayazbaev, both of whom resigned in 2014.

The shell com­pa­nies used in the embez­zle­ment of funds were under­stood to have includ­ed Kazakhstan-reg­is­tered enti­ties:

 Micro Engineering LLP was incor­po­rat­ed on 24th July 2007 and since 2014 has been under spe­cial admin­is­tra­tion fol­low­ing bank­rupt­cy pro­ceed­ings ini­ti­at­ed against it. In 2011 the com­pa­ny was owned by Mohammed Agbulut, iden­ti­fied by the Kazakh press as an erst­while acquain­tance of Aral.

 GSM Tech Management LLP was found­ed in Almaty on 27th January 2009. It is cur­rent­ly owned by an indi­vid­ual named Kadyr Yusupov. Previous share­hold­ers includ­ed Aleksandr Yakovenko and DatCom Resources Ltd, a com­pa­ny incor­po­rat­ed in the BVI.

 Micro Wireless LLP, was incor­po­rat­ed in Kazakhstan in 2008 and is owned by an indi­vid­ual named Ozturk Orchun.

This fea­ture forms the basis of con­tin­u­ing research on the top­ic by a group of inde­pen­dent researchers and aca­d­e­mics includ­ing researchers who worked on pre­vi­ous inves­ti­ga­tion regard­ing Swiss repa­tri­a­tion of laun­dered mon­ey from Kazakhstan whose final report will be pub­lished in due course.

Related inves­ti­ga­tion on TeliaSonera and Gulnara Karimova, daugh­ter of Uzbekistan’s for­mer President Islam Karimov. (1991–2016). Subsequently, the United States Department of Justice launched.

A Dance With The Cobra
International State Crime Initiativestatecrime.org › Full-Report-with-Executive-Summary, PDF

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