In April 1999, Kulov sent an open letter to Akaev announcing his resignation. "I cannot work further under your leadership, because with your connivance things are taking place in Kyrgyzstan which are incompatible with democracy and the rule of law," Kulov wrote. In July 1999, Kulov founded the opposition Ar-Namys party, which proposed him as its candidate for the October 2000 presidential election. But Kulov was refused registration for that ballot after he declined to sit an examination to prove his fluency in the Kyrgyz language.
Kulov was first arrested on corruption charges in March 2000, even before his unsuccessful presidential bid, but was acquitted in August of that year. After the presidential election, he was again arrested, and sentenced in January 2001 to seven years imprisonment on charges of abuse of office while serving as national security minister. Kulov pleaded not guilty to those charges, which some observers believe were fabricated precisely because President Akaev had come to regard Kulov as a potential rival. In May 2002, Kulov was sentenced to a further 10 years' imprisonment, and barred from holding public office for a period of three years after the completion of his sentence. His request last year for parole was refused.