The hunt for Mukhtar Ablyazov: Banker, criminal, fugitive, victim?
What is the truth about Mukhtar Ablyazov? Is the former head of Kazakh bank BTA a fraudster on a par with Madoff and Stanford, as prosecutors from Russia and Ukraine to England and France claim? Or is he the persecuted victim of his home country’s political elite? One thing is for sure: the hunt for Ablyazov, and billions of dollars in assets he is alleged to have illegally appropriated, is one of the great sagas of our time.
The lavish life of Mukhtar Ablyazov – financial fugitive, convicted fraudster, political patsy, British jailbird-in-absentia – was all but over on July 13 2013.
Not that he knew it. Kazakhstan’s most wanted man, on trial in London on charges of eye-watering financial fraud – charges he continues to deny – was rather enjoying life on the run. Safely ensconced in a plush villa on the outskirts of Nice, he was awaiting the arrival of a very special guest.
Just over a thousand kilometres away, in the Rolls Building on Fetter Lane in the heart of London’s legal district, Ablyazov’s name, once unimpeachable, now scuffed and sullied, was suffering its latest bruising. Justice Nicholas Hamblen, just one of the many High Court judges to oversee one of the most sinuously winding cases ever heard in a British court, presided. To one side of Hamblen sat the claimants, led by the London law firm Hogan Lovells, representing their client, BTA Bank, once Kazakhstan’s mightiest lender, now hobbled and humbled. The opposite bench, bearing the defence team, was empty bar a single person: a tall, slender, blonde Ukrainian woman in a tight, zip-up purple dress.
The bank’s argument was simple, and had been since bringing the case to the High Court in April 2009. BTA Bank was nationalized in early 2009 at the height of the financial crisis and restructured on two further occasions, and lost its creditors and the Kazakh state billions of dollars. The bank claimed it had failed because Ablyazov, during the course of five tumultuous years as chairman, had transformed it from a profitable and credible regional lender with a sturdy retail customer base into a de-facto Ponzi scheme.
Ablyazov and a select group of loyal fellow-travellers had bled his former bank dry, the claimant’s lawyers alleged, by assembling a mind-bogglingly complex network of offshore companies that stretched from Europe to the Caribbean, and from the US to the western Pacific Ocean, in which to house assets and capital once the purview of BTA.
The defence argument, advanced by Addleshaw Goddard, the third London legal firm hired by Ablyazov in four years, took a very different view of its client’s alleged culpability. His trial, and the tribulations he suffered, stemmed, the defence maintained, from two events outside his control. BTA’s collapse was caused not by its client’s financial delinquency, but by Kazakhstan’s decision to forcibly nationalize a perfectly healthy bank.
Second, the defence insisted, this was all part of a political power play. Ablyazov had long ago fallen out with the long-time Kazakh leader, Nursultan Nazarbayev, briefly spending time in jail for the temerity of forming an opposition party more than a decade before. Ergo, the trial was all merely a handy diversion, an elaborate way of publicly shaming a potential political opponent. A stretch in jail would, after all, deny Ablyazov the right to run for public office.
That July day, however, Addleshaw – which did not respond to repeated requests for comment from Euromoney – was nowhere to be seen. This part of the case involved a dispute over ownership of a share in the profitable Vitino Port on Russia’s White Sea coast near Murmansk. Hogan Lovells averred that the stake’s ultimate beneficial owner was Ablyazov. But they were stymied, as they had been before on several occasions, by the sudden appearance of a hitherto-unknown claimant – in this case the Ukrainian woman.
Hogan Lovells cried foul. This was the latest in a long series of obstructionist manoeuvres, they charged, designed to buy Ablyazov and his cronies more time, while adding new layers of complexity to an already insanely opaque case.
Advisers to BTA say that Ablyazov’s tactics had been simple: to stall and to rack up costs. Ablyazov appealed against everything, including procedural motions, and even sought to appeal against decisions made following appeals. Judges have complained about the court’s time being wasted.
Unable to rule due to a paucity of detail, Justice Hamblen brought an abrupt end to proceedings. The blonde woman, drinking in events from behind a pair of voluminous dark glasses, smiled broadly then departed swiftly – shadowed at a careful distance by a team that had been tracking her movements for months.
This surveillance team, hired by BTA and overseen by Hogan Lovells and John Howell & Co, a London-based risk and regulation specialist, had first come in contact with Yelena Tischenko in late 2012 when her name began appearing on legal documents. She claimed to be Ablyazov’s Ukraine lawyer (though no one with her name has ever been appointed to the bar in Kiev).
She had only recently left her husband – her divorce was made final the week after the July 13 hearing – and she spent increasing amounts of time on the 21st floor of Tower 42, a soaring office block on London’s Old Broad Street that housed Eastbridge Capital, an investment holding firm allegedly used by Ablyazov to shuffle money around the world.
BTA’s investigators had discovered something else about Tischenko other than her legal connections to Ablyazov. Only one person was named in the divorce proceedings, which were initiated by Tischenko’s husband, as grounds for seeking the divorce, and that name was Ablyazov.
The team deduced that Tischenko was in fact the erstwhile Kazakh banker’s mistress. And that since Ablyazov fled the UK in February 2012, just days before receiving a 22-month prison sentence for contempt of court, Tischenko had been a key point of contact, monitoring events both in court and from afar. It was worth following her, the team thought. Who knew, they might get lucky? She might take them directly to Ablyazov.
Luck was on their side. Tischenko, clearly unschooled in the dark arts of subterfuge, remained oblivious of her tail. After black-cabbing it from the Rolls Building to London’s Gatwick Airport, she milled around for a few hours before catching a delayed easyJet flight to Nice, landing at 1.30am.
She drove to a rambling seafront villa jointly owned by her outgoing husband and containing her four sleeping children. She then changed quickly into a short skirt and high heels before legging it to a second residence on the Nice seafront, arriving shortly before 3am.
As the surveillance team passed stealthily by on foot, they spotted a familiar figure preparing for Tischenko’s arrival. He was sporting a wispy goatee beard and was clearly visible through white sheer drapes, wearing just a pair of underpants and laying lilies on a cavernous bed.
After 16 months of intense and often frustrating work, BTA finally had its man.
|Fighting extradition: Madina (L), the daughter of Mukhtar Ablyazov, her husband Elias (2ndL) and Bruno Rebstock (R), lawyer of Mukhtar Ablyazov, are seen after a hearing at the Aix-en-Provence courthouse, southern France, August 1, 2013.
Word quickly made its way back to London. Orders came from BTA’s defence team: don’t spook him. Over the next fortnight, the team followed Ablyazov around Aix-en-Provence, and from one villa to the next: he moved regularly between three local rented properties in all, they ascertained, but spent most of his time in a fourth and much larger villa set back from the coast, a few miles from Cannes, visited at least once more in that two-week period by Tischenko. The gumshoes mixed reconnaissance with paperwork to inform the region’s advocate-general, Solange Legras, of the presence of one of the world’s most wanted financial fugitives in her jurisdiction. His arrest came early on the morning of Wednesday, July 31. A van driven by Filipino gardeners was stopped by French paramilitary police as it left Ablyazov’s main residence, enabling a special forces team, using "powerful means" that included air and tactical support, to storm the main gates and enter the villa.
In the end, Legras’ not unreasonable fears that Ablyazov, who was rumoured to have a private militia and would defend himself to the death in some kind of Butch Cassidy and the Sundance Kid shootout, proved unfounded. He was discovered eating breakfast while chatting with Tischenko over Skype.
The two now languish separately in jail. Tischenko was arrested in a Moscow hotel on September 2 and charged with money laundering.
Ablyazov, as the year ended, remained in a hotel in Aix-en-Provence fighting extradition hearings. The latest of these came on December 12; proceedings were delayed until January 9.
Just where Ablyazov will be extradited to – Legras’ team is confident he will be deported – is unclear. It’s unlikely to be Kazakhstan, with which France has no extradition treaty. It might be Ukraine. But lawyers close to the case think that, on January 9, Ablyazov’s most likely destination will be Russia.
In court on December 12, Legras said Ablyazov should be seen as a "criminal on a grand scale", adding "it’s easy to be an opponent to hide one’s true nature as a fraudster".
She went on: "When you have so much money, you can buy everything. But you cannot buy the French justice system. You will have to submit to its rules. The budget of the French justice system is less than the sum diverted by Mr Ablyazov from the Russian Federation alone."
Ablyazov continued to protest his innocence, saying in court: "Everything is untrue. Everything has been fabricated in Kazakhstan. There is no proof of this diversion. This money is still in the bank’s accounts. It was never stolen. I’m convinced I am being persecuted for political reasons."
Given the extraordinary amount of time and money spent on the various cases, both completed and pending, brought by BTA against its former chairman, three facts, other than the vivid colour surrounding the story, catch the eye.
First, how little is known about Ablyazov, given the central role he has played in shaping modern global financial opinion about Kazakhstan. Second, the sheer complexity of the mesh of companies he created, which allegedly harboured and husbanded assets stripped out of the pre-nationalized lender.
And lastly, despite the weight of evidence damning and condemning the banker, brought and heard openly over the course of years in London’s High Court, how divided public opinion, both in Kazakhstan and across Europe, remains over his guilt or innocence. To some, particularly in the French media but also in certain quarters of the British press, Ablyazov is David, pelting pebbles squarely in the eyes of a bullying and tyrannical Kazakh state, now BTA’s ultimate owners.
To many, perhaps now the majority, he is what plaintiffs claim him to be: a fraudster who siphoned as much as $15 billion in assets out of Kazakhstan between 2005 and 2009, of which $4 billion, as of December 2013, has been proven in court. That figure will likely rise past $6 billion. Some go farther, viewing Ablyazov as a pathological liar and world-class manipulator who used BTA, once Kazakhstan’s largest retail bank, as his personal ATM machine.
"This is one of the largest financial frauds the world has ever seen," says an individual close to the case. "It’s on a par with Bernie Madoff or Sir Allen Stanford, or BCCI. But people say: ‘Oh well, it’s just Kazakhstan, it doesn’t matter quite as much’."
His early years remain cloaked in mystery, as do the résumés of many of the now-powerful and mighty who survived Kazakhstan’s wrenching early years of post-Soviet independence. An investment vehicle, Astana Holding, that he established in 1992 at the tender age of 29, gave him a foot in the door. After that, his commercial rise was swift. In 1997, Nazarbayev appointed him minister of energy, industry and trade; a year later, he joined forces with a group of investors to buy out a recently merged lender, Bank TuranAlem, later renamed BTA, for $72 million.
By 2001, Ablyazov’s business interests spanned sectors from grain to chemicals to amusement parks. He owned TV stations and car showrooms, as well as a majority stake in Irtysh Avia, then a leading airline.
During this period, he befriended individuals who would come to serve him loyally in the years to come. Roman Solodchenko, a capable banker who spent three years in the late 1990s at the European Bank for Reconstruction and Development, would later be tapped by Ablyazov as BTA’s chief executive. Other enduring allies included Alexander Udovenko, later his point man in London; Zhaksylyk Zharimbetov, a long-time loyalist who first met Ablyazov in 1992 and later rose to become deputy chairman of BTA’s management board; and his wife’s two brothers, Syrym and Salim Shalabayev.
Then things fell apart. In an unwise political diversion in 2001 Ablyazov co-founded an opposition party, Democratic Choice of Kazakhstan. Nazarbayev’s reaction was swift, stripping away most of his assets (but not, it seems, his stake in BTA) and dispatching him to a Kazakh jail. At the time, the Conference on Security and Co-operation in Europe labelled his imprisonment "politically motivated", a phrase that, while almost certainly accurate, would come in handy years later in London’s High Court. Later video testimony shows Ablyazov maintaining he was beaten "black and blue" during his incarceration.
After he emerged from prison in 2003, Ablyazov’s second life began, one that proved in equal measures exacting, exhilarating, humiliating, exotic and, often, downright weird. On September 8 of that year, Eastbridge Capital was formed in London. Nominally based on Chelsea’s Sydney Street – though at first it changed its address like many change their shirt – it was overseen for its first five years by Udovenko. The following year Ablyazov was appointed BTA chairman after his predecessor, Yerzhan Tatishev, was killed in a freak hunting accident.
It is shortly after nailing his name to the chairman’s door that Ablyazov allegedly started moving money quietly offshore. The amounts, say experts involved in the continuing legal fight between BTA and its former chair, started small but rose quickly. Those were the financial go-go years, and money was flooding in the front door, from retail and corporate depositors in Kazakhstan, and global investment banks – Barclays, Credit Suisse, HSBC, RBS – desperate to profit from the nation’s fast-growing economy. During this period, BTA was feted as the leading bank in the country. Ablyazov basked in the glow of its successes.
Court papers show that over the next four years, accounts and corporations were established in virtually every tax haven imaginable, as well as several more sombre jurisdictions.
As Mr Justice Teare summed up on February 16 2012, in one of many judgements handed down in the case: "Although not the registered owners of any shares in any company, [Ablyazov] is the ‘ultimate beneficial owner’ of them and can dispose of the assets held by the company as if they were his own by reason of being able to instruct his nominee."
|The extent of Ablyazov's financial subterfuge was revealed in the Granton judgement of March 2013.
Documents seized by Hogan Lovells following a coordinated February 2011 raid on a storage facility in north London, as well as from a search granted on Syrym Shalabayev’s Yahoo! email account, show the increasing complexity of Ablyazov’s offshore operations. More than a thousand companies were created during this period, all on Ablyazov’s command, the bank alleges and, in cases where enough compelling testimony and data are available, prove his involvement beyond all reasonable doubt. The list is dizzying, involving companies domiciled in Austria, Delaware, the Netherlands, Panama, Belize, the Seychelles, the Dutch Antilles, and two particularly favoured destinations, Cyprus and the British Virgin Islands (BVI). Company names range from the philosophical (Orwell Import/Export) to the delusional (Iamgold Corporation) to the borderline litigation-risky (Facebook Trading). Until 2008, all these corporations had two names in common: Alexander Udovenko and Eastbridge Capital, the investment firm he oversees, and from which all offshore investments are directed and redirected.
In the years leading up to early 2009, BTA evolved – or in many ways devolved – into two, wildly divergent entities. The bank’s public face remained shiny and wholesome: an apparently wildly successful outward-looking Kazakh bank boasting rising profits and net interest margins. But behind the scenes, lawyers later claim, Ablyazov was gutting the shop, leveraging deposits to buy assets at inflated prices, mostly in Russia, Kazakhstan and other former Soviet states.
An Ablyazov-owned Russian real estate firm, Eurasia, bought a prime chunk of property next to Pavletskaya Station in central Moscow for $300 million, well over the asking price. (Ablyazov pledged to turn it into a $1 billion entertainment complex, yet it remains a big hole in the ground, muddy in summer, frozen in winter). He boasted of having created a $3 billion conglomerate, Eurasia Logistics, secured huge tracts of land close to Moscow’s Domodedovo Airport, and bought mines in Kyrgyzstan, and banks and prime commercial real estate in the Ukraine.
Ablyazov’s lending and spending only really got out of hand in 2007, legal documents later presented to the High Court by BTA’s team show. That year, he bought a series of properties in London at eye-watering prices: a £20 million ($33 million) mansion on a Hampstead road known as ‘Billionaire’s Row’, complete with Turkish bath and a Thunderbirds-style car lift; and a 100-acre estate in Windsor once owned by tycoon Michael Dell, also valued at £20 million.
But that is nothing compared with the money that continued to flood out of BTA. In early 2008 Elena Bakhmutova, then-deputy head of AFN, Kazakhstan’s financial regulator, started raising red flags about the regularity and the size of the unsecured offshore lending approved by Ablyazov. The regulator inspected the lender three times in 2008, in January, June and finally October, the latter just a week after the collapse of Lehman Brothers.
By then, BTA had, in the words of one source close to the continuing legal case, "long become essentially a Ponzi scheme". In late 2008, following a final demand by the regulator to boost its capital reserves, BTA lent $1 billion to a series of offshore oil companies that claimed to be in the market for new drilling equipment.
But there was no oil, no business, and the type of drilling equipment specified in the loan contracts – a mix of floating and secured platforms – didn’t exist. Yet the deal did enable Ablyazov to recycle $200 million back into BTA through offshore subsidiaries, allowing him to stave off the increasingly agitated regulators, at least for a while.
The extent of Ablyazov’s financial subterfuge was revealed in the Granton judgement of March 2013.
Mr Justice Teare noted that: "Between November 4 and December 4 2008, a number of loans totalling US$1,031,263,000 were made...to four borrowers [including Granton – the other four borrowers were also offshore companies, namely Branden & Associates, Zafferant Partners, and Aldridge Ventures], and that the purpose...was to repay loans made earlier to Mr Ablyazov’s secret companies".
The judge also found that Zharimbetov "knowingly assisted Mr Ablyazov to defraud the Bank by means of the Original and Later Loans. Mr Zharimbetov is liable under Kazakh law for the loss thereby caused which amounted to US$1,145,231,078.17."
By now the wolves were howling at the door. Halyk Bank had cancelled lending lines to BTA as early as mid-2008; as winter drew in, it was clear that BTA’s days were numbered. Finally, on February 2 2009, the Kazakh government pulled the plug on BTA, taking it into majority national ownership; a few hours previously, with regulators and politicians breathing down his neck, Ablyazov hopped aboard an Air Astana flight, headed for another new life, this time in London.
Yet the now-defrocked bank chair was anything but humbled by events. He moved full-time to the house on Billionaire’s Row that was already occupied by his wife, Alma, and three of his children, all ferried to and from a nearby private school by a chauffeur. Eastbridge Capital continued to direct capital around the world. Ablyazov hired the eminent City firm Clyde & Co to defend him; he later dropped them for Stephenson Harwood, a firm replaced in turn by his current advisers, Addleshaw Goddard.
A financial communications firm, Gardant, later renamed Meade Hall & Associates, briefed journalists with two clear messages: BTA failed because of a heavy-handed government’s desire to nationalize a perfectly well-managed lender, not because of errant mismanagement; and that the removal of Ablyazov was caused by a long-standing political feud with president Nazarbayev: a tussle over power that Ablyazov lost.
These claims of victimization, or that the Kazakh state has meddled in the never-ending legal proceedings in London, are not wholly without merit. Ablyazov did spend time in jail at the behest of Nazarbayev. And curious events do occur. When the former head of BTA Ukraine, Anuar Aizhulov, testified under oath in December 2011 that signatures of his appearing on documents related to a BVI-domiciled company, Bubris, were forged, Justice Nigel Teare took him at his word.
Yet in his summation, and while dismissing the likelihood that BTA had paid directly for Aizhulov’s testimony, Mr Justice Teare, who has overseen most of the winding Ablyazov case, added that it was "not clear" how Aizhulov managed to maintain a generous London lifestyle, with children in private education and a £70,000-a-year rented apartment in Gloucester Place, while supported by an annual income of £60,000.
Ablyazov’s early public relations strategy – to seduce the court of public opinion, if not the High Court itself (which tends to disapprove of the entire media circus) – was enormously effective. Proprietors, journalists and readers rooted, at least for a while, for the self-styled "little guy" from the former Soviet bloc.
|Ablyazov continues to insist he is the victim of persecutions by Kazakhstan's president Nursultan Nazarbayev.
The incarceration of former Yukos owner Mikhail Khodorkovsky and the poisoning of Alexander Litvinenko, both fresh in the memory, helped garner a reflected sympathy. A London Evening Standard story from August 2010 summed up the prevailing mood. "Living in fear," screamed the headline; the story pressed claims of Ablyazov’s innocence, and bemoaned the "persecution" meted out by "Kazakhstan’s dictatorial president". In the wake of his July 2013 arrest in France, a new official page – ‘Stop the Extradition of Mukhtar Ablyazov’ – popped up on Facebook, describing the former banker as a "visionary" persecuted "for his belief in a democratic Kazakhstan". BTA took a different approach to the case from the start: slow and methodical, quiet as a church mouse, forsaking the path of media saturation. Key politicians and financial leaders in Kazakhstan, notably Anvar Saidenov, picked to head a newly nationalized BTA in early 2009, and Grigoriy Marchenko, the outgoing governor of the central bank, were clear from the start: this would be an open and transparent process, and one that could not be carried out in Kazakhstan.
"The Kazakh authorities were sending out a clear signal: that the government would not tolerate this type of behaviour. This had to be done in a professional independent tribunal," says an individual close to BTA.
Given that Ablyazov, his leading financial allies and Eastbridge Capital were all based in London, there really was only one possible venue. And besides, notes the individual, "the last thing we wanted was a Kazakh bunfight". BTA hired lawyers Hogan Lovells, bringing in PricewaterhouseCoopers as forensic accountants. John Howell & Co, which, with Oxford-based academics, had warned the National Bank of Kazakhstan about looming financial stability risk in 2007/08, was retained as coordinator.
Now the legal fun really started. If Ablyazov’s mood was darkened by a series of damaging hearings in the High Court, he didn’t show it. In November 2009, the court maintained a freezing order on his UK assets, although lawyers maintain that proxies continued to shuffle his assets between foreign-domiciled accounts. In late 2010, he lost a fight to prevent assets being subject to a receivership order. Between November 2012 and March 2013 Justice Teare granted BTA more than $4 billion in judgments against Ablyazov and his associates; a board member at BTA, Pavel Prosyankin, special adviser to the current BTA chairman, Kadyrzhan Damitov, previously told Euromoney the total "will rise to $6 billion".
And the hits kept on coming. In November 2012, Lord Justice Maurice Kay, vice-president of the civil division of London’s Court of Appeal, labelled the former bank chair "devious" and "cynical". Ablyazov claimed not to notice, or care. His sense of victimization appears to have been heightened after finding his first High Court hearing presided over by Mr Justice William Blair, older brother of former British prime minister Tony Blair, a close acquaintance of Kazakh leader Nazarbayev.
|Ablyazov's house on 'Billionaire's Row' in Hampstead, London is being sold by receivers. It has a target price of almost £16 million.
In March 2013, the High Court ruled that BTA was entitled to a further $2 billion in assets held by Ablyazov and his associates. Even the Swiss got in on the act, after an Astana-based official accused Viktor Khrapunov, a former Kazakh government official, of investing Kazakh public money – assets siphoned out of the country by Ablyazov pre-2009 – in European commercial property. Khrapunov recently nailed his colours to Ablyazov’s mast by self-publishing a Kazakh-language hagiography of the financial fugitive. What really stands out from the trial, though, apart from the usual ‘he said, she said’, are the data and the kookiness. Receivers say it’s the most complex case they’ve worked on in decades. More new law has been written as a result of five years of almost constant written and verbal testimony, rebuttal witnesses, and cloak-and-dagger surveillance than any case in living memory.
Five law firms have been used, including more than 100 leading lawyers. No fewer than 23 new points have been added to the White Book, the single-source encyclopedia on all civil procedural law; boundaries have been stretched to include new rights associated with freezing orders, search orders and disclosure orders. London’s reputation as the leading venue for the arbitration of complex corporate casework, which stems from the original international freezing orders of the 1970s, has only been enhanced, as has the City’s reputation for creating an environment in which to allow the original sin of financial skullduggery to exist.
Only by pushing back the boundaries of international law – for example, a worldwide asset-freezing law that has now become the global standard – have BTA’s legal and investigative teams managed to convince the UK courts that Ablyazov is the main owner and driving force behind both Eastbridge Capital and the thousand-plus offshore companies wired loosely to one another around the world. Only thanks to a mix of luck and careful observation was the same surveillance team that tailed Tischenko and nobbled Ablyazov able to locate a key stash of documents connecting Ablyazov to his ethereal empire.
Hogan Lovells had asked to see Eastbridge’s computer records, only to be told the company had been sold "for a pound", and its documents and computers lost for ever. Yet on a cold day in January 2011, the team followed Salim Shalabayev to a storage facility in north London. They quickly secured a search order and raided the unit, securing 25 boxes of documents and computers connecting Eastbridge with companies around the world.
Eastbridge itself (officially comprising Udovenko and six Russian administrators) then disappeared, popping up again in Cyprus under a new name, Euroguard, this time run by Ablyazov’s brother-in-law. But the damage had been done. Along with the cache of Yahoo! emails, also secured by an extended search order, Ablyazov’s connection was, in the view of the High Court, finally proven.
In the Granton case, involving a company called Granton Trading Ltd which was registered in the British Virgin Islands, Mr Justice Teare stated that Ablyazov "must have orchestrated or, at the least, authorized this fraud". Regarding the connected Drey proceedings – covering assets linked to offshore companies of the same name – he noted that it was "much more probable than not" that the company was a "dishonest and fraudulent device" set up specifically to harbour assets siphoned out of BTA.
At the same time as Mr Justice Teare was ruling on Granton, he passed judgement on what appears to have been another shell company – Drey Associates.
This was for many years just a small trading firm set up by a now-retired British businessman named Tony Stroud. At some point around 2007 – no one knows the true timeline, and Stroud declined to talk to Euromoney – Eastbridge Capital bought Drey, the latter at that point a zombie company that had been unused for several years.
Eastbridge then transferred $295 million from BTA’s coffers into Drey, meaning that, for an unidentified but short period of time at the height of the financial bubble, a tiny firm based in the London commuter town of Guildford, ostensibly owned by a 78-year-old grandfather; his daughter Sarah, a primary school teacher; and her husband, an electrician at British Gas, owned 10% of Kazakhstan’s largest bank.
BTA alleged that there followed a series of improper payments made in 2008 totalling $400 million, where Ablyazov sought to buy added shares in BTA Russia, BTA Ukraine and BTA Belarus, but was in fact siphoning money into and around his offshore companies.
Teare noted in his judgement: "Mid to late 2008 was not an auspicious time to acquire a controlling interest in three foreign banks. Lehman Brothers collapsed in September 2008... The Drey transactions were in reality a rather complicated scheme to appropriate the bank’s [BTA’s] money for Mr Ablyazov’s purposes."
The Drey case also casts the sheer financial scale of Ablyazov’s fraud directly under the spotlight. Take FM Company, incorporated in the tiny Marshall Islands, part of the sprawling Pacific state of Micronesia. On June 27 2008 – or around the time that Halyk Bank was cutting its credit lines and BTA under Ablyazov was entering true Ponzi territory – funds worth $41.1 million were transferred from Drey to FM Company via Devesta – the latter a company that, Mr Justice Teare specifically notes, "Mr Ablyazov at one stage admitted owning".
The Drey case also proved that, during 2008 and 2009, Ablyazov transferred $300 million-worth of triple-A-rated securities out of BTA, dividing them up between several offshore companies. In November 2013, a UK judge, Launcelot Henderson, ordered Ablyazov to repay the face value of the securities, rejecting his protestations of innocence as "false and worthless".
Other facets of the story are even stranger. In early 2010, Ablyazov’s point man at Eastbridge, Udovenko, simply disappeared from the scene: he remains missing. Lawyers connected to the case believe that after seeing which way the wind was blowing for his boss, Udovenko asked to have his name removed from all documents linked to Ablyazov’s offshore empire. He was replaced in September 2010 as director of Eastbridge by an unidentified figure called Ramil Burganov.
In his March 2013 judgment, Mr Justice Teare also noted that Udovenko from October 2008 was replaced by Syrym Shalabayev as the "nominee ‘beneficial owner’" of at least some of Ablyazov’s offshore companies, and was perceived by "at least one person familiar with the workings of Eastbridge as Mr Udovenko’s ‘successor’." Salim, the judge noted, was added as a nominee ultimate beneficial owner of "at least two companies". The younger Shalabayev was sentenced to 22 months in jail in absentia in November 2013 – mirroring Ablyazov’s punishment – for failing to comply with court orders.
Yet even the Shalabayevs, tied to Ablyazov by the bonds of marriage, appeared to harbour misgivings as the losses mounted. The process of tracking down names inked into several companies including the BVI-domiciled firm Bubris, led BTA’s own investigative team to the streets of Moscow. There, they found that Shalabayev had been ‘buying’ the identities of Russian society’s castoffs and unfortunates, much as Chichikov does in Gogol’s Dead Souls, before naming them as directors of offshore firms. "One of the directors was an alcoholic who has since died," says a member of the investigative team. "Another was a soldier who had fallen on hard times. We approached him and he had no idea that he was the beneficial owner of a holding company in the Caribbean."
For Ablyazov, a once powerful figure with a great future and seemingly limitless ambition, the options have been whittled away to nothing. Perhaps nothing sums up the man better than his appetite for flight. His hurried exit from Almaty at the height of the financial crisis in February 2009 was a mere prelude to his almost identical night-time escape three years later, hightailing it out of London in the early hours of Valentine’s Day.
His media team sought to portray this second getaway in heroic terms, depicting it as a flight from certain danger. A spokesman in France, Peter Sahlas, points to the existence of an Osman letter – a written indication of the existence of a death threat considered credible by a leading British authority, in this case London’s Metropolitan Police. This Osman letter, which stated that Ablyazov’s safety was "in danger", was delivered to his front door in Hampstead at 2.55am on January 29 2011.
Yet Ablyazov at first ignored the letter, only and very suddenly taking it seriously just over a year later. Mr Justice Teare’s draft findings suggested he was preparing to send their client to jail for 22 months on February 16 2012. Only now did Ablyazov take action, deeming the Osman letter to be not only a direct and imminent threat to his personal safety, but one, moreover, that emanated from former Chechen rebel and now head of the Chechen Republic Ramzan Kadyrov.
Another pair of letters, translated from Russian and unsigned, were later presented by Addleshaw Goddard as proof of their client’s supposed imminent personal peril – and thus his sudden need to flee. "You are finished, Mukha," one of the letters begins. "You have deceived the brothers and stolen our joint stash, and this means death, bro. For real". The other winds around erratically, threatening the impending laying-on of a piratical "black spot", before berating the former banker for having "taken care of the ‘luvvies’ from JPMorgan and Goldman Sachs".
Sources close to the case believe it might take 20 years to track down all the recoverable assets siphoned out of BTA. Many of these assets, notably unclaimed real estate in and around Moscow, are likely to be tussled over for years (indeed some already are), creating another windfall for lawyers and more headaches for BTA’s new leaders, only now clawing the embattled lender back into the black.
Beyond this lies one simple question that might follow Ablyazov from France to the eastern bloc (depending on the results of the extradition order) and perhaps beyond to the grave. This is a man who apparently rose from nothing to head Kazakhstan’s largest bank, one that was briefly the leading retail lender in Central Asia. He was lauded from Almaty to Moscow to London at the height of his and BTA’s powers. He could have been comfortable with a generous annual salary, a chunky bonus and a handy collection of awards and international adulation.
Yet after being incarcerated in 2002, he decided to take a path less travelled in life – the wrong one, becoming a very wealthy man by expropriating assets that weren’t his. He took a rising banking empire built on rock and replaced its foundations with sand, turning the region’s most credible private financial institution into a self-harming Ponzi scheme. Why do it?
Only Mukhtar Ablyazov knows.