Ablyazov files: who do and who do not stand trial in Almaty

    It looks pretty arbitrary to outsiders, but two of those accused in the ongoing trial concerning the multi-billion theft fr om BTA bank, except for the main culprit who is on the run thanks to the judicial sabotage by the French government, have unfamiliar names, while the third one is only one out of at least two dozens of co-perpetrators. Taking after earlier rulings by Russian courts against other accomplices, it can be expected that mild verdicts will be passed in Almaty since the perpetrators will be considered “cooperative” which could lead to prosecutions of other co-defendants, including a number of foreigners.
    Three former executives of the now defunct BTA Bank are currently on trial in Almaty for their role in the multi-billion corporate theft carried out by the main culprit, Mukhtar Ablyazov. With the latter’s place on the bench empty, the three present are Zhaksylyk Zharimbetov, chair of loan committee at BTA bank and a former No.2 to Ablyazov, who admitted full guilt on all charges, Saduakash Mamesh, chair of the board, and Kairat Sadykov, loans director, who pleaded only partial guilt. But during the first session, prosecutors made it clear that well over a hundred accomplices should be charged, in part Kazakh citizens, in part foreigners.
    While the names Mamesh and Sadykov remarkably fail in materials compiled on the Ablyazov files so far, the name Zharimbetov appears prominently in various chapters, including those summarised and recognised as felonies by English courts of law. The most significant test for BTA and Kazakh prosecutors was successfully passed in a historic court ruling by Judge Teare on March 19 2013. The schemes under question were those commonly known as the Granton case, the Drey case, and the Chrysopa/Usarel case. While the first two were centered in English jurisdiction (along with mainly Cyprus), the latter two took place in The Netherlands. Unlike the UK, no legal action concerning them was ever taken in The Netherlands.
    In many court documents, the name Zharimbetov is often mentioned with that of Ildar Khazaev, a co-defendant still on the run. Zharimbetov returned to Kazakhstan in late January this year and surrendered to the authorities to clear all judicial accounts, hopefully in return for a mild verdict. Other “absent defendants” include the Shalabayev brothers Salim and Shirin, brothers-in-law of Ablyazov, former BTA executives Roman Solochenko, Alexander Udovenko and Anatoly Ereschenko, and a number of westerners including a Cypriot named Paul Kythreotis.
    “Between March 2006 and August 2008 the Bank made 20 loans to 17 companies totalling US$1,428,840,000 (“the Original Loans”). Those 17 companies are known as the Original Borrowers. However, the Original Borrowers paid almost all of the loaned sums to other companies, known as the “Original Real Borrowers”,” the court document’s paragraph on the Granton case reads. “The Original Real Borrowers then used the funds for a variety of purposes. Some funds ended up with the Bank ostensibly in repayment of other loans made to the Original Real Borrowers, others were used to pay for the insurance which was apparently in place as security for other loans and yet other funds were paid to other companies for unknown purposes. It is the Bank’s case that the Original Loans were “a misappropriation of money fr om the Bank by Mr. Ablyazov on a massive scale, crudely disguised as commercial lending.” The Bank says that the companies involved in the Original Loans were affiliated to Mr. Ablyazov, that this affiliation was not disclosed to the Bank’s Board of Directors and that the true purpose of the loans, namely, to benefit Mr. Ablyazov, was not disclosed to the Board. Mr. Zharimbetov did not have a case as to whether the Original Borrowers were owned or controlled by Mr. Ablyazov but if they were his case was that he was unaware of that. As to the Original Loans being for the purpose of benefitting Mr. Ablyazov Mr. Zharimbetov does not accept that they were but if they were his case was that he was unaware that they were. He says that effective due diligence took place and that the loans were in the best interests of the Bank. Between 4 November and 4 December 2008 a number of loans (“the Later Loans”) totalling US$1,031,263,000 were made. The loan agreements suggest that they were made to four borrowers (the “Later Borrowers”), Branden, Granton, Zafferant and Aldridge and that the purpose of the Later Loans was to finance the acquisition of oil and gas equipment. But the Later Loans were in fact paid to other companies (“the Intermediaries”) who were, apparently, to source and deliver the equipment to the Later Borrowers. It is the Bank’s case that in fact the Later Loans, having been paid to the Intermediaries, were transferred to other companies, the Recipients, and applied by them to discharge many of the Original Loans. The Bank says that the companies involved in the Later Loans were affiliated to Mr. Ablyazov, that this affiliation was not disclosed to the Board and that the true purpose of the loans, namely, to benefit Mr. Ablyazov, was not disclosed to the Board. Mr. Zharimbetov accepts that the purpose of the Later Loans was to provide funds to the Recipients so that the Original Loans might be repaid. He says that the loans were “to be used in the refinancing of the Original Loans but subsequently to develop oil and gas exploitation in the Caspian Sea.” He says that the “refinancing” scheme was in the Bank’s best interests and that he had no knowledge of any fraudulent purpose to the scheme.”
    Zharimbetov’s name appears in relation to the Drey scam as well. “In mid-2008, at a time when the AFN was investigating the Bank’s loan portfolio, the Bank, under the control of Mr. Ablyazov, entered into transactions to purchase a controlling interest in three foreign banks in Moscow, Belarus and the Ukraine. It is the Bank’s case that these transactions were in reality a means by which Mr. Ablyazov procured the payment out by the Bank of its money for Mr. Ablyazov’s purposes,” the court ruling reads further down. “The scheme was in two parts. First, the Bank entered into agreements relating to the Bank’s purchase of shares in three foreign banks, BTA Moscow, BTA Belarus and BTA Ukraine (“the Target Banks”). The structure of the purchase involved (i) a number of sale and purchase agreements with selling shareholders (“the SPAs”) and (ii) three “compensation agreements” with Drey, an English company, whereby Drey was to be paid for procuring the agreement of various (non-selling) shareholders in the Target Banks not to exercise alleged pre-emption rights. The Bank says that the Target Banks were owned and controlled by Mr. Ablyazov, that his affiliation with them was not disclosed to the Bank’s Board of Directors, that the total price to be paid by the Bank was greatly in excess of the market value of the Target Banks and that because the Target Banks were owned and controlled by Mr. Ablyazov there was no need for the compensation agreements.”
    “Thus the Bank says that Mr. Ablyazov engineered a scheme whereby (i) the money paid by the Bank under the compensation agreements was used for his own purposes (in particular repaying loans made by the Bank to other companies owned or controlled by Mr. Ablayzov) and (ii) the Bank overpaid for the shares in the three foreign banks. The second part of the scheme was a plan, in relation to at least BTA Moscow and BTA Ukraine, whereby there would be a new share issue by those banks and that more of the Bank’s money, under the guise of loans to companies owned or controlled by Mr. Ablyazov, was to be used to purchase the new shares issued by the Target Banks with the result that, notwithstanding the purchase of the old shares in the Target Banks, Mr. Ablyazov would remain in control of the Target Banks. This second plan was reflected in a remarkable email dated 26 May 2008 sent by Mr. Kamalov, the Bank’s Financial Director, to Mr. Ablyazov and Mr. Zharimbetov entitled Ukraine and Russia: new Issue of Shares.” In the Chrysopa files Khazaev’s name appears prominently but not Zharimbetov’s.
    Further down, the court document gives a detailed impression of Zharimbetov’s involvement in Ablyazov’s activity. In 1992 Mr. Zharimbetov was introduced to Mr. Ablyazov by Mr. Tatishev (who later became the Chairman of the Bank). He formed a business which traded with companies owned or controlled by Mr. Ablyazov and Mr. Tatishev. Between 1993 and 1996 Mr. Zharimbetov worked in a bank of which Mr. Ablyazov was deputy chairman of the board of directors. In 1996 Mr. Zharimbetov worked at a grain company in which Mr. Ablyazov and Mr. Tatishev were shareholders. Mr. Zharimbetov sold his interest in it in 2000 to Mr. Tatishev. Thereafter, when Mr. Ablyazov was head of the company operating the Kazakhstan Electric Grid, Mr. Zharimbetov joined that company. In about 2000 both Mr. Ablyazov and Mr. Zharimbetov were imprisoned by the authorities in Kazakhstan though Mr. Zharimbetov was never convicted of any offence. After his release he left Kazakhstan and lived and worked in Moscow. Upon Mr. Ablyazov’s release from prison in 2003 Mr. Zharimbetov sold his trading company in order to move to a coal mining business in Siberia at the request of Mr. Ablyazov. Finally, when Mr. Ablyazov became Chairman of the Bank Mr. Zharimbetov accepted office as a director and subsequently became First Deputy Chairman of the Management Board and Chairman of the Credit Committee.”
    “It would thus appear, at the very least, that Mr. Ablyazov was willing to place considerable trust in Mr. Zharimbetov’s abilities and that Mr. Zharimbetov was willing to work closely with Mr. Ablyazov. It does not appear that Mr. Zharimbetov held any position in the Bank whilst Mr. Tatishev was the Chairman of the Bank. Mr. Zharimbetov said that when he was offered a position in the Bank there were disputes between Mr. Ablyazov and the Tatishev family but that the latter was content for Mr. Zharimbetov to join the Bank “as a kind of compromise” between the Ablyazov and Tatishev interests. However, he said that he never had to get involved in any disputes between Mr. Ablyazov and the Tatishev family. Mr. Norbury QC submitted on behalf of Mr. Zharimbetov that the connections between Mr. Ablyazov and Mr. Zharimbetov prior to the latter’s involvement at the Bank were secondary to the Tatishev connection. Mr. Zharimbetov appears to have had connections with Mr. Tatishev but I was not persuaded that they were more solid or more potent than his connections with Mr. Ablyazov. There is also evidence that Mr. Zharimbetov was trusted to deal with companies owned or controlled by Mr. Ablyazov. Thus Mr. Zharimbetov held powers of attorney in respect of many such companies. Mr. Zharimbetov suggested that such powers of attorney were a form of security provided by companies which borrowed money from the Bank. But this seemed a most improbable explanation; first, some powers of attorney were granted after loans had been made, second, some powers of attorney were granted in respect of companies which were not clients of the Bank, and third, neither of the experts on Kazakh banking practice was familiar with powers of attorney being used as security.”
    “In his oral evidence Mr. Zharimbetov said that powers of attorney held by him in relation to companies involved in the Drey litigation related to his role as a trusted compromise figure between Mr. Ablyazov and the Tatishev family. This also seems improbable because it is difficult to see how they would assist in that regard and in any event, as stated by Mr. Zharimbetov in his witness statement, he never had to get involved in disputes between Mr. Ablyazov and the Tatishev family. There was, in addition, evidence that Mr. Zharimbetov had real familiarity with Eastbridge and its role in administering the many off-shore companies owned or controlled by Mr. Ablyazov. Mr. Norbury submitted that the court could not draw inferences from isolated emails wh ere the context in which the emails were sent could not be explored. He also submitted that there were surprisingly few of those emails which related to Eastbridge which were sent or copied to Mr. Zharimbetov. But in my judgment there were enough emails to paint a consistent picture. The material was not, as Mr. Norbury put it, “thin”. Thus, on 23 December 2005 Mr. Udovenko emailed Mr. Zharimbetov with regard to a number of companies of which at least three were amongst the Real Original Borrowers (Advisys, Highview and Solent) which he described as “active” and “under our control”. On 2 May 2006 Mr. Udovenko emailed his “colleagues”, one of whom was Mr. Zharimbetov, with draft instructions for dealing with off–shore companies which were to be submitted for approval by “the boss”. “The boss” can only have been Mr. Ablyazov. In those instructions Mr. Zharimbetov was one of the “persons responsible” who had, in particular, responsibility for approving obligations of a company in excess of US$1m. On 27 July 2007 Mr. Udovenko informed Mr. Khablov by email that Mr. Zharimbetov was to approve the functions of Eastbridge Capital Kazakhstan, no.7 of which was that Mr. Zharimbetov was to determine the budget and personnel. On 24 September 2007 Mr. Udovenko emailed Mr. Zharimbetov informing him that “the boss” had approved a payment of US$1.25m to be made to Devesta and asking him to order that the payment be made “ASAP.” On 21 July 2008 Mr. Udovenko informed his colleagues, one of whom was Mr. Zharimbetov, that the “new procedure” for dealing with holding and financial companies within Eastbridge’s responsibility had been tested and he hoped that it would be accepted.”
    “Although Mr. Zharimbetov’s pleaded position was that he knew little of Mr. Udovenko’s association with Mr. Ablyazov such position cannot withstand exposure to the contemporaneous documents (of which the above is a sample) which indicate that Mr. Zharimbetov was closely involved with Mr.Udovenko in running companies which were owned or controlled by “the boss”, Mr. Ablyazov. Such was his involvement with Mr. Udovenko, Eastbridge and Mr. Ablyazov’s companies, as revealed by the contemporaneous documents, that the reality must have been, as submitted on behalf of the Bank, that Mr. Zharimbetov worked closely with Mr. Udovenko and Eastbridge from 2005. Mr. Zharimbetov suggested that the explanation for some of the contemporaneous documents was that he was mediating between Mr. Ablyazov and the Tatishev family and Mr. Norbury submitted on his behalf that the contemporaneous documents can be explained as emails which were sent to Mr. Zharimbetov as a senior manager within the Bank and the person nominated by the main shareholders as their conciliator. But the suggestion does not sit comfortably with Mr. Zharimbetov’s witness statement wh ere he said that he was not called upon to get involved in disputes between Mr. Ablyazov and the Tatishev family and the submission does not sit comfortably with the text of at least some of the contemporaneous documents. I have therefore concluded that it is more probable than not that the reason Mr. Zharimbetov held powers of attorney over companies owned or controlled by Mr. Ablyazov was to assist Eastbridge in the administration and management of such companies. Thus on 11 December 2009, after the nationalisation of the Bank, Mr. Zharimbetov was able to give instructions for certain companies to be put into liquidation. That Mr. Zharimbetov had this role in connection with Mr. Ablyazov’s companies indicates that Mr. Ablyazov was willing to place considerable trust in Mr. Zharimbetov not only with regard to the running of the Bank but also with regard to the companies owned or controlled by Mr. Ablyazov.”
    “I am unable to accept Mr. Norbury’s submission that Mr. Zharimbetov did not perform a high level role for Mr. Ablyazov personally as opposed to the high level role he performed at the Bank. With that background to the close and trusted relationship between Mr. Ablyazov and Mr. Zharimbetov I can turn to Mr. Zharimbetov’s work in the Bank. There can be no doubt that he held a very senior position in the Bank. In 2006 he was a member of the Credit Committee and by mid-2007 Chairman of the Credit Committee. By 2007 he was Deputy Chairman of the Management Board and by May 2008 First Deputy Chairman of the Management Board. When, in 2008, the AFN requested that he be dismissed, Mr. Ablyazov refused to do so. He was not on the Board of Directors but he must have worked closely with Mr. Ablyazov in running or operating the Bank. That is indicated by the fact that the remarkable email dated 26 May 2008 concerning the plan to dilute the Bank’s shares in BTA Moscow and BTA Ukraine was sent by Mr. Kamalov, the Bank’s Financial Director, to two people, namely Mr. Ablyazov and Mr. Zharimbetov.”
    “Mr. Zharimbetov accepts that this elaborate plan was devised or approved by the Bank’s Strategy Committee. The contemporaneous documents indicate that Mr. Zharimbetov was a member of that committee. At first Mr. Zharimbetov said that he was not a member of the committee but when cross-examined he said that he could not remember whether he was a member of the committee. That seems improbable since it was, according to him, “second only to the Board of Directors in the bank’s hierarchy of decision making”. I accept the clear indications in the contemporaneous documents that he was a member of the committee and had particular responsibility for the “allocation of finances” relating to “bank capital deals”. There was also a dispute as to Mr. Zharimbetov’s role in UKB6. But it is clear that he had an important role in connection with it. In December 2006 a decree or order stated that loans made by UKB6 had to be authorised by minutes of the Credit Committee signed by Mr. Mameshtegi and Mr. Zharimbetov. In September 2007 he received an email entitled “regarding the credits of UKB6” which suggested that the large loans issued by UKB6 be divided into smaller loans so that the borrowers from UKB6 did not feature in the list of the Bank’s major borrowers. In December 2007 he was described as the “immediate supervisor” of UKB6. In January 2008 he received an email entitled “UKB6 analysis for Zh. Zharimbetov.” In May 2008 a decree or order stated that loans made by UKB6 had to be authorised by minutes of the Credit Committee signed by Mr. Zharimbetov (Mr. Mameshtegi having left the Bank.) In October 2008 Mr. Zharimbetov set up a working party to “develop the proposals on performance of the relevant measures to decrease the debt of [the UKB6] portfolio”. He appointed himself the Chairman of the Working Group and reserved to himself “control over performance of this Instruction.” I have considered the submission of Mr. Norbury that Mr. Zharimbetov merely had UKB6 under his “indirect supervision” or “indirect control”. I think this greatly understates Mr. Zharimbetov’s involvement with UKB6. The losses claimed exceed US$401 million. They are made up as follows:
    BTA Moscow Compensation Agreement $133,876,080
    BTA Moscow SPAs $88,277,663
    BTA Belarus Compensation Agreement $11,349,840
    BTA Belarus SPAs $17,855,709
    BTA Ukraine Compensation Agreement $150,149,477
    Total $401,508,769
    The Bank has retained the shares in the three Target Banks but has given no credit in respect of them because, in the case of BTA Moscow and BTA Belarus there is no evidence that they have a value and in the case of BTA Ukraine (whose shares are worth in excess of $40m.) the Bank is being sued in the Ukraine for the return of the shares and so will either have to return them or pay for them. There is no dispute as to these figures.”
    Written by Charles van der Leeuw for KazWorld.