Tag Archives: corruption

Kyrgyzstan accuses Centerra of corruption at Kumtor

BISHKEK, JUNE 14 2016 (The Conway Bulletin) — Kyrgyz President Almazbek Atambayev instructed state prosecutors to investigate agreements signed by Canadian miner Centerra Gold in 2003-04, after corruption charges emerged against both Centerra and former officials at the state-owned Kyrgyzaltyn.

Earlier this week, the country’s security service said that Dastan Sarygulov, the 69-year-old former head of Kyrgyzaltyn from 1992 to 1999, had been charged with plotting a coup earlier this year and taking bribes in the 1990s.

The charges appear to be based on accusations made last week by Len Homeniuk, former head of Centerra and Kumtor Gold, who sent a letter to Kyrgyz prosecutors alleging corrupt practices that had involved the miner over its entire lifetime, explicitly naming Mr Sarygulov.

In the letter, Mr Homeniuk said that the companies he headed were regularly asked for bribes by Kyrgyzaltyn, which owns a 32% stake in Centerra.

“[Their requests] were sometimes very significant, more than $200,000 in a given month,” Mr Homeniuk wrote. “Dustan Sarygulov and Kamchybek Kudaibergenov always explained such requests that they were under pressure by the office of the President.”

Centerra, Kumtor Gold and Kyrgyzaltyn have not commented on the allegations.

The revelations seem to be well- timed for Kyrgyzstan.

Sarygulov was already under house arrest, accused of having participated in the coup plot.

Now, analysts say, the Homeniuk letter could be a powerful tool for Mr Atambayev to both discredit his predecessors and taint Centerra’s record in Kyrgyzstan, just as it prepares an arbitration case in Stockholm against the government for blocking its business development.

“Timing is important. Homeniuk’s revelations seem a gift to Mr Atambayev now,” Mars Sariyev of the Institute of Public Policy, a Bishkek-based think tank, told The Bulletin.

Centerra owns the Kumtor Gold Company, which operates the country’s largest gold mine, which accounts for around 7% of Kyrgyzstan’s GDP.

In March security forces raided the office of Kumtor in Bishkek looking for evidence of financial wrongdoing. Centerra has said that Kyrgyzstan is using heavy-handed tactics to try and claim more direct ownership of Kumtor.

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(News report from Issue No. 285, published on June 17 2016)

US court to seize Uzbek President’s daughter’s accounts

JUNE 12 2016 (The Conway Bulletin) – A US court said that it is ready to seize assets linked to Gulnara Karimova, daughter of Uzbekistan’s President Islam Karimov, in Ireland, Belgium and Luxembourg, if a corruption case in New York courts is not resolved soon. US authorities said these assets are valued €269m ($303m). In February, Ms Karimova was named as the beneficiary of bribes paid by telecoms companies seeking licences in Uzbekistan, the largest foreign corruption probe in US history.

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(News report from Issue No. 285, published on June 17 2016)

Business comment: Gold in Central Asia

JUNE 17 2016 (The Conway Bulletin) – Gold prices climbing up towards $1,300/ounce, but not everyone in the mining sector in Central Asia is happy.

In Kazakhstan, Russian miner Polymetal received a much-needed lifeline from Sberbank to push forward with its Kyzyl project in north-eastern Kazakhstan. The gold sector in Kazakhstan is enjoying a positive season, as production numbers in the country are up 3.7% to 13 tonnes of fine gold in the first five months of the year, compared to Jan.-May 2015.

The steady growth is paired with increased investment, as Polymetal is focusing its growth outside Russia on Kazakhstan and Armenia.

But this year has not brought only good news in Kazakhstan. In March, Alhambra Resources said it was seeking damages against Kazakhstan’s government, via the World Bank’s International Centre for Settlement of Investment Disputes, for the bankruptcy of its Kazakh subsidiary.

Recovering commodity prices, however, can do little to improve the mood in Kyrgyzstan, where Centerra Gold and the government are increasingly entangled in what could become a decisive legal battle.

Centerra sought the resolution of the continuous fines and corruption probes at the Stockholm court of arbitration.

The Kyrgyz government responded with more fines and charged a former director of Kyrgyzaltyn — which owns a stake in Centerra — of taking bribes from the Canadian miner.

These charges, fuelled by allegations from a former Centerra director, would make the Canadian company guilty of paying bribes, serving an order to the government, which is trying hard to show Centerra under a bad light.

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(News report from Issue No. 285, published on June 17 2016)

Kazakh court sentences former head of EXPO-2017

JUNE 8/9 2016 (The Conway Bulletin) — A court in Kazakhstan sentenced Talgat Yermegiyayev, the former head of the Astana EXPO-2017, and Kazhymurat Usenov, one of its former directors, to 14 and 2 years in jail for corruption. They are the two most prominent figures in a trial of 23 officials accused of stealing from the state budget. Yermegiyayev was found guilty of having embezzled 10.2b tenge ($31m).

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(News report from Issue No. 284, published on June 10 2016)

Business comment: Corporate Governance in Central Asia

MAY 13 2016 (The Conway Bulletin) – These are tough times for corporate governance and the general business climate in Central Asia.

In rapid succession, news of a raid at a gold company in Kyrgyzstan, the seizure of a Kazakh refinery in Romania, an allegedly fraudulent scheme to fake sales of Uzbek cars and the freezing of a murky hotel sale linked to two exiled Kazakhs in New York came to our readers’ attention over the past two weeks.

Since the raid at its subsidiary’s office in Bishkek, Centerra Gold has reiterated its readiness to cooperate with the authorities and the government to negotiate a solution. We think the raid was a way for the government to flex its muscles.

A bizarre scheme to fake car sales from Uzbekistan to Russia was unearthed this month, perhaps reminding us of how two plus two is not always equal to four in Central Asia. Undoubtedly, the current economic crisis has sparked more corruption.

The seizure of KMG Romanian refinery allows us to look back into the murky deal that first brought Kazakh state-owned business into Romania. Authorities didn’t seem impressed with acrobatic financial manoeuvres performed by former managers at Rompetrol. They’re now seeking damages and a court sentence might negatively affect China’s CEFC, which just bought into the venture.

Lastly, it’s not a surprise that a US court froze the sale of a hotel owned by Mukhtar Ablyazov and Viktor Khrapunov, two Kazakh businessmen and arch-rivals of President Nursultan Nazarbayev. They seemed to be needing some cash but their involvement in court cases in Kazakhstan, the US and Europe turns their transactions into red flags.

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(News report from Issue No. 280, published on May 13 2016)

US freezes Kazakh businessman’s assets

MAY 6 2016 (The Conway Bulletin) – A US court froze a $21m payment that Kazakh businessmen Mukhtar Ablyazov and Viktor Khrapunov had sought from the sale of their stakes in Chetrit’s Flatotel, a hotel located in New York City. In 2013, French police arrested Ablyazov, charging him with embezzlement. Courts in Kazakhstan, Switzerland and the US have opened investiga- tions into corruption allegations aimed at Khrapunov when he was mayor of Almaty between 1997 and 2004.

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(News report from Issue No. 280, published on May 13 2016)

Editorial: Corruption in Georgia

MAY 13 2016 (The Conway Bulletin) – Georgian PM Giorgi Kvirikashvili said at an anti-corruption conference in London last week that he would “explore” the possibility of setting up a database in Georgia that would mean all companies will need to reveal their secret beneficiary owners.

If Mr Kvirikashvili is serious then now is the time for his to move and fast. He has a real opportunity to chisel a niche for Georgia and to set the pace as a global leader in the fight against corruption.

It’s a theme that is very in-vogue at the moment and also one that should play nicely to audiences in the West that Georgia is trying to impress. These are mainly NATO members and European Union member states. Georgia wants to join both clubs and if Mr Kvirikashvili can fund, organise and manage a meaningful database that improves transparency in business, he should impress his potential suitors.

Mr Kvirikashvili needs to be brave and move from exploring options on setting up a database outlining companies’ real beneficiaries to actually doing it.

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(Editorial from Issue No. 280, published on May 13 2016)

Telenor manager quits due to Uzbek corruption incident

MAY 9 2016 (The Conway Bulletin) – Norwegian telecoms company Telenor said that its deputy chair- man Frank Dangeard had stepped down as the company continued to grapple with corruption allegations over VimpelCom’s dealings in Uzbekistan. Telenor owns a 33% stake in Amsterdam-based, Russian telecoms operator VimpelCom. Telenor wants to sell its stake in VimpelCom, valued at around $2b.

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(News report from Issue No. 280, published on May 13 2016)

Georgian PM attends anti-corruption summit

MAY 12 2016 (The Conway Bulletin) – At an anti-corruption summit organised in London by British PM David Cameron, Georgian PM Giorgi Kvirikashvili said his government will consider creating a public register of company information that includes data on beneficial owners. He also said that the government will set up partnerships with other countries to improve cooperation between different intelligence agencies.

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(News report from Issue No. 280, published on May 13 2016)

Business comment: Corruption in telecoms

MAY 3 2016 (The Conway Bulletin) – Telia Company, the re-branded version of Swedish company TeliaSonera, scored a small victory this week as Swedish prosecutors dropped a bribery case related to its dealings in Azerbaijan in 2008.

Allegedly, it paid bribes to public officials to obtain licences for its subsidiary, Azercell, but prosecutors said they couldn’t prove their claims.

This, though, still leaves Telia, and other companies, entangled in an investigation linked to corruption in Uzbekistan, where they allegedly paid hundreds of millions of US dollars to obtain licences.

The beneficiary of the bribes is said to be Gulnara Karimova, the once-extravagant eldest daughter of Uzbek President Islam Karimov.

VimpelCom, an Amsterdam- based Russian company, has already settled its Uzbek bribery case with US and Dutch courts by paying a penalty of $795m, effectively admitting wrongdoing.

The Uzbek case had negative repercussions across Scandinavia.

In Sweden, perhaps in an effort to erase recent memories, TeliaSonera changed its name, colours and branding and is now registered as Telia Company.

In Norway, heads started rolling last year at the state-owned telecoms company Telenor, which owns 33% in VimpelCom.

CEO Svein Aaser was sacked in November and the Norwegian former CEO of VimpelCom Jo Lunder was arrested a few days later.

Last autumn, both Telia and Telenor said they wanted out of their operations in the South Caucasus and Central Asia, allegedly because of market pressures, but their exit, rebranding and apologies can only really be read as last minute attempts to pull their hands out of the cookie jar.

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(News report from Issue No. 279, published on May 6 2016)