19 April 2005 (RFE/RL) -- Among the factors that brought down former Kyrgyz President Askar Akaev, popular dissatisfaction loomed large.
Arguably, nothing fueled that discontent so much as the perception that Akaev's rule had foundered in massive, near-total corruption.
Arkadii Dubnov, a journalist who follows Central Asian events closely for Russia's "Vremya novostei," provided a tidy summation in a 3 April discussion on Deutsche Welle: "One of the main problems in Kyrgyzstan, as in the rest of the post-Soviet world, is a fantastic level of corruption. In this respect, Kyrgyzstan stands out because corruption there meant that the Akaev family controlled all financial flows, all levers [of influence], all big business, as well as medium and small business. This was known not only in Kyrgyzstan, which was one of the reasons for the uprising, but also beyond its borders."
Difficult To Prove
The rumored holdings of the Akaev family include some of the best-known assets in Kyrgyzstan. "Argumenty i fakty" published an incomplete list on 13 April, citing "unofficial information" as the source: BiTel, the country's largest mobile-telephone operator; the Narodny supermarket chain; the Airek media holding; resorts on Lake Issyk-Kul; liquor producers; and even gas stations. But while such lists are easy enough to find in the Kyrgyz and Russian media, they fall short of accepted standards of legal proof. As Kanat Amankulov, the head of the legal department in the Prosecutor-General's Office, told Kyrgyzstan's "Delo No" on 14 April, the issue is not so much legal ownership but rather control, which is even more difficult to prove. Amankulov stressed that his office has no documented proof of ties between the various companies popularly linked to "the family" and actual members of the Akaev clan.
Amankulov went on to enumerate a number of businesses currently under investigation. They include the above-noted Airek and BiTel, both allegedly controlled by Aydar Akaev, the former president's son; as well as Aalam Service Ltd. and Manas International Service, which sell jet fuel to the U.S. air base in Kyrgyzstan and were reported by the "Financial Times" on 22 July 2002 to be controlled by presidential son-in-law Adil Toigonbaev. Amankulov said that future investigations will target the Narodny supermarket chain and Meerim, the charitable foundation run by the former president's wife. He also noted that the investigations are a tough proposition, stressing that an audit of BiTel's financial transactions is making slow progress. Deputy Prime Minister Daniyar Usenov had suggested as much on 7 April, saying, "Certain problems have come up in the audit of BiTel," Kabar reported. Still, Amankulov suggested that preliminary checks have turned up evidence of financial chicanery. He told "Delo No," "We know that Aalam Service's monthly revenues from selling jet fuel were $20 million-$30 million, but the company's profit for the last fiscal year was $1,000. What does that tell you?"
'The Family Piggybank'
In the wake of the upheaval on 24 March that felled Akaev, there is considerable impetus for just this sort of rapt attention to his family's holdings. Deputy Prime Minister Daniyar Usenov said, "The people demand that we check the property holdings of President Akaev, and the government must carry out this demand," Russia's "Nezavisimaya gazeta" reported on 5 April. Almaz Atambaev, the head of the Social Democracy Party and a declared candidate for president, was more categorical, announcing on 7 April: "Only the property that [Akaev] has declared will be retained. As I understand it, the declaration indicates an old Mercedes and an apartment. Let them keep that," akipress.org reported. Rina Prizhivoit, a longtime foe of the ousted president, expressed widespread sentiments in an 8 April article in MSN when she wrote: "If one compares the financial flows that streamed for several years into the family piggybank from the alcohol and sugar industries, the Kant Cement and Slate Plant, from jet fuel shipments, from BiTel, [the newspaper] 'Vechernii Bishkek' and the ad agency Airek, casinos, restaurants, etc., with the taxes that trickled in to the state, the one gets a sense of the extreme greed and omnivorous appetite of the 'holy family.'" Acting Finance Minister Akylbek Japarov even put a number on the supposed influx to the "family piggybank" at a news conference on 8 April (although he did not explain how he arrived at it), saying that the Akaevs received $1.2 million-$2 million every 40 days to two months from their various holdings, Kabar reported.
But as Amankulov's comments about ownership and control suggest, the groundwork involved in a thoroughgoing investigation of the Akaev family's assets will be considerable. It will also require strong political will. Some suspected that the will was already flagging when acting President Kurmanbek Bakiev recently remarked that he saw no obstacles to Adil Toigonbaev's return to Kyrgyzstan, Kabar reported on 14 April.
A complex blend of regional and ethnic factors is also at play on this particular front -- Toigonbaev hails from Kazakhstan, a potential source of much-needed investment in Kyrgyzstan. National Bank head Ulan Sarbanov announced on 14 April that the bank will soon be examining the role of "Kazakh capital" in the Akaev family's dealings, Kabar reported. But at a meeting with Kazakh Energy Minister Vladimir Shkolnikov on 18 April, Kyrgyz Deputy Prime Minister Usenov stressed that Kyrgyzstan welcomes Kazakh investment and will not re-privatize any enterprises in which Kazakh businesses own a stake, akipress.org reported. In another comment the same day, Usenov alluded to the issue of the Kazakh son-in-law: "The Kyrgyz side has no objections to the honest Kazakh firm Asia-Cement, which bought 67 percent of the Kant Cement and Slate Plant. The question of how the rest of the factory's shares ended up in the hands of the Kyrgyz people's son-in-law, Adil Toigonbaev, is for law-enforcement agencies to resolve."
Crossed Signals
Whatever the results of future probes, an unexpected conflict between one of Russia's industrial heavyweights and a group of Kazakh investors has already shed some light on one of the alleged Akaev family assets: the mobile-phone operator BiTel.
With 330,000 subscribers, BiTel controls around 90 percent of Kyrgyzstan's cellular-phone market and notched earnings of $32 million in 2004, "Vedomosti" and gazeta.ru reported. Numerous reports -- Russia's CNews on 14 April and gazeta.ru on 18 April, for example -- have identified Askar Akaev's elder son, Aydar Akaev, as one of the owners of BiTel.
The current dispute over BiTel involves Russia's Alfa Group and Kazakhstan's Seimar Investment Group. In 2004, Alfa Group, which owns blocking stakes in two of Russia's top three mobile-phone operators, in 2004 acquired Kazakhstan's Fellowes, which held an option to buy 100 percent of BiTel, "Kommersant-Daily" reported on 14 April. The Russian newspaper estimated the option deal at $150 million. When Alfa learned that plans were afoot to sell BiTel, it filed suit through Fellowes to block the deal. In late March, a Bishkek court ruled in Alfa's favor, freezing BiTel's assets, akipress.org reported. But on 13 April, Kazakhstan's Seimar Investment Group announced that it had acquired 100 percent of BiTel, RFE/RL's Kyrgyz Service reported. Seimar circumvented the freeze by buying not BiTel itself but the three offshore companies registered on the British Isle of Mann that held all of BiTel's shares, CNews reported -- Kyrgyz Mobil Tel Limited, Flaxendale Holdings Limited, and George Resources Limited.
Even as Kyrgyzstan's Prosecutor-General's Office warned that BiTel's previous owners -- whoever they might be -- might have sold off the company in order to conceal various financial machinations, a source at Fellowes told CNews that the Alfa affiliate would file suit on the Isle of Man and in other jurisdictions to try to block the deal. Moreover, "Vedomosti" reported that it had obtained a copy of a request, signed by Kanat Amankulov, head of the legal department at the Kyrgyz Prosecutor-General's Office, asking Capco Trust, the Man-registered offshore that is the trustee for BiTel's shareholders, to provide full information on BiTel's owners and refrain from "any actions that could lead to the alienation of assets."
BiTel hit back in a 15 April press release on the company's website (http://www.bitel.kg), asserting that Alfa Group has no legal claim to BiTel. The press release quoted Kanat Asylov, a partner with the law firm of Steiner and Zingermann, as saying, "The option [that Alfa acquired when it bought Fellowes] expired on 1 December 2003." The statement added that corporate raiders were trying to take advantage of the "temporary chaos" in Kyrgyzstan to pick up Kyrgyz companies on the cheap, and it promised that BiTel would "not be one of them."
The story has continued to develop. The option to acquire BiTel had originally belonged to the Bermuda-registered IPOC International Growth Fund, which subsequently sold it to Fellowes. (In an odd coincidence, IPOC is a player in another dispute involving Alfa Group -- over Alfa's disputed 2003 purchase of a blocking stake in the Russian cellular operator MegaFon; see "RFE/RL Business Watch," 23 September 2003.) On 18 April, "Vedomosti" quoted an IPOC representative as saying, "The former owners of BiTel received money from IPOC and Fellowes, but they did not transfer the shares." While noting that by the time Alfa bought Fellowes, it was "clear that the sellers [BiTel shareholders] did not want to carry out their part of the deal," the IPOC representative said that "we reached an agreement with Fellowes to help them get the shares." Still, IPOC did not say how much money was paid toward the option, and admitted that the option eventually expired. Experts queried by "Vedomosti" and "Gazeta.ru" agreed that Alfa's chances of acquiring BiTel are slim, especially since it will have to spar with its opponents in a Kyrgyz court (where analysts suggested it may find itself outmaneuvered by local players).
Whatever the outcome of the dispute between Alfa Group and Seimar Investment Group, it has already occasioned a rash of publications in Russia's business press. And the Kyrgyz Prosecutor-General's Office is pressing on with its investigation. While there are no guarantees that either will answer the questions about the Akaev family's suspected involvement in BiTel -- let alone their other alleged assets -- they at least increase the chances, even as they underscore the complexity of the task.
For more on events in Kyrgyzstan and the entire region, see RFE/RL's dedicated Central Asia in Focus webpage.]
Arguably, nothing fueled that discontent so much as the perception that Akaev's rule had foundered in massive, near-total corruption.
Arkadii Dubnov, a journalist who follows Central Asian events closely for Russia's "Vremya novostei," provided a tidy summation in a 3 April discussion on Deutsche Welle: "One of the main problems in Kyrgyzstan, as in the rest of the post-Soviet world, is a fantastic level of corruption. In this respect, Kyrgyzstan stands out because corruption there meant that the Akaev family controlled all financial flows, all levers [of influence], all big business, as well as medium and small business. This was known not only in Kyrgyzstan, which was one of the reasons for the uprising, but also beyond its borders."
Difficult To Prove
The rumored holdings of the Akaev family include some of the best-known assets in Kyrgyzstan. "Argumenty i fakty" published an incomplete list on 13 April, citing "unofficial information" as the source: BiTel, the country's largest mobile-telephone operator; the Narodny supermarket chain; the Airek media holding; resorts on Lake Issyk-Kul; liquor producers; and even gas stations. But while such lists are easy enough to find in the Kyrgyz and Russian media, they fall short of accepted standards of legal proof. As Kanat Amankulov, the head of the legal department in the Prosecutor-General's Office, told Kyrgyzstan's "Delo No" on 14 April, the issue is not so much legal ownership but rather control, which is even more difficult to prove. Amankulov stressed that his office has no documented proof of ties between the various companies popularly linked to "the family" and actual members of the Akaev clan.
Amankulov went on to enumerate a number of businesses currently under investigation. They include the above-noted Airek and BiTel, both allegedly controlled by Aydar Akaev, the former president's son; as well as Aalam Service Ltd. and Manas International Service, which sell jet fuel to the U.S. air base in Kyrgyzstan and were reported by the "Financial Times" on 22 July 2002 to be controlled by presidential son-in-law Adil Toigonbaev. Amankulov said that future investigations will target the Narodny supermarket chain and Meerim, the charitable foundation run by the former president's wife. He also noted that the investigations are a tough proposition, stressing that an audit of BiTel's financial transactions is making slow progress. Deputy Prime Minister Daniyar Usenov had suggested as much on 7 April, saying, "Certain problems have come up in the audit of BiTel," Kabar reported. Still, Amankulov suggested that preliminary checks have turned up evidence of financial chicanery. He told "Delo No," "We know that Aalam Service's monthly revenues from selling jet fuel were $20 million-$30 million, but the company's profit for the last fiscal year was $1,000. What does that tell you?"
'The Family Piggybank'
In the wake of the upheaval on 24 March that felled Akaev, there is considerable impetus for just this sort of rapt attention to his family's holdings. Deputy Prime Minister Daniyar Usenov said, "The people demand that we check the property holdings of President Akaev, and the government must carry out this demand," Russia's "Nezavisimaya gazeta" reported on 5 April. Almaz Atambaev, the head of the Social Democracy Party and a declared candidate for president, was more categorical, announcing on 7 April: "Only the property that [Akaev] has declared will be retained. As I understand it, the declaration indicates an old Mercedes and an apartment. Let them keep that," akipress.org reported. Rina Prizhivoit, a longtime foe of the ousted president, expressed widespread sentiments in an 8 April article in MSN when she wrote: "If one compares the financial flows that streamed for several years into the family piggybank from the alcohol and sugar industries, the Kant Cement and Slate Plant, from jet fuel shipments, from BiTel, [the newspaper] 'Vechernii Bishkek' and the ad agency Airek, casinos, restaurants, etc., with the taxes that trickled in to the state, the one gets a sense of the extreme greed and omnivorous appetite of the 'holy family.'" Acting Finance Minister Akylbek Japarov even put a number on the supposed influx to the "family piggybank" at a news conference on 8 April (although he did not explain how he arrived at it), saying that the Akaevs received $1.2 million-$2 million every 40 days to two months from their various holdings, Kabar reported.
But as Amankulov's comments about ownership and control suggest, the groundwork involved in a thoroughgoing investigation of the Akaev family's assets will be considerable. It will also require strong political will. Some suspected that the will was already flagging when acting President Kurmanbek Bakiev recently remarked that he saw no obstacles to Adil Toigonbaev's return to Kyrgyzstan, Kabar reported on 14 April.
A complex blend of regional and ethnic factors is also at play on this particular front -- Toigonbaev hails from Kazakhstan, a potential source of much-needed investment in Kyrgyzstan. National Bank head Ulan Sarbanov announced on 14 April that the bank will soon be examining the role of "Kazakh capital" in the Akaev family's dealings, Kabar reported. But at a meeting with Kazakh Energy Minister Vladimir Shkolnikov on 18 April, Kyrgyz Deputy Prime Minister Usenov stressed that Kyrgyzstan welcomes Kazakh investment and will not re-privatize any enterprises in which Kazakh businesses own a stake, akipress.org reported. In another comment the same day, Usenov alluded to the issue of the Kazakh son-in-law: "The Kyrgyz side has no objections to the honest Kazakh firm Asia-Cement, which bought 67 percent of the Kant Cement and Slate Plant. The question of how the rest of the factory's shares ended up in the hands of the Kyrgyz people's son-in-law, Adil Toigonbaev, is for law-enforcement agencies to resolve."
Crossed Signals
Whatever the results of future probes, an unexpected conflict between one of Russia's industrial heavyweights and a group of Kazakh investors has already shed some light on one of the alleged Akaev family assets: the mobile-phone operator BiTel.
With 330,000 subscribers, BiTel controls around 90 percent of Kyrgyzstan's cellular-phone market and notched earnings of $32 million in 2004, "Vedomosti" and gazeta.ru reported. Numerous reports -- Russia's CNews on 14 April and gazeta.ru on 18 April, for example -- have identified Askar Akaev's elder son, Aydar Akaev, as one of the owners of BiTel.
The current dispute over BiTel involves Russia's Alfa Group and Kazakhstan's Seimar Investment Group. In 2004, Alfa Group, which owns blocking stakes in two of Russia's top three mobile-phone operators, in 2004 acquired Kazakhstan's Fellowes, which held an option to buy 100 percent of BiTel, "Kommersant-Daily" reported on 14 April. The Russian newspaper estimated the option deal at $150 million. When Alfa learned that plans were afoot to sell BiTel, it filed suit through Fellowes to block the deal. In late March, a Bishkek court ruled in Alfa's favor, freezing BiTel's assets, akipress.org reported. But on 13 April, Kazakhstan's Seimar Investment Group announced that it had acquired 100 percent of BiTel, RFE/RL's Kyrgyz Service reported. Seimar circumvented the freeze by buying not BiTel itself but the three offshore companies registered on the British Isle of Mann that held all of BiTel's shares, CNews reported -- Kyrgyz Mobil Tel Limited, Flaxendale Holdings Limited, and George Resources Limited.
Even as Kyrgyzstan's Prosecutor-General's Office warned that BiTel's previous owners -- whoever they might be -- might have sold off the company in order to conceal various financial machinations, a source at Fellowes told CNews that the Alfa affiliate would file suit on the Isle of Man and in other jurisdictions to try to block the deal. Moreover, "Vedomosti" reported that it had obtained a copy of a request, signed by Kanat Amankulov, head of the legal department at the Kyrgyz Prosecutor-General's Office, asking Capco Trust, the Man-registered offshore that is the trustee for BiTel's shareholders, to provide full information on BiTel's owners and refrain from "any actions that could lead to the alienation of assets."
BiTel hit back in a 15 April press release on the company's website (http://www.bitel.kg), asserting that Alfa Group has no legal claim to BiTel. The press release quoted Kanat Asylov, a partner with the law firm of Steiner and Zingermann, as saying, "The option [that Alfa acquired when it bought Fellowes] expired on 1 December 2003." The statement added that corporate raiders were trying to take advantage of the "temporary chaos" in Kyrgyzstan to pick up Kyrgyz companies on the cheap, and it promised that BiTel would "not be one of them."
The story has continued to develop. The option to acquire BiTel had originally belonged to the Bermuda-registered IPOC International Growth Fund, which subsequently sold it to Fellowes. (In an odd coincidence, IPOC is a player in another dispute involving Alfa Group -- over Alfa's disputed 2003 purchase of a blocking stake in the Russian cellular operator MegaFon; see "RFE/RL Business Watch," 23 September 2003.) On 18 April, "Vedomosti" quoted an IPOC representative as saying, "The former owners of BiTel received money from IPOC and Fellowes, but they did not transfer the shares." While noting that by the time Alfa bought Fellowes, it was "clear that the sellers [BiTel shareholders] did not want to carry out their part of the deal," the IPOC representative said that "we reached an agreement with Fellowes to help them get the shares." Still, IPOC did not say how much money was paid toward the option, and admitted that the option eventually expired. Experts queried by "Vedomosti" and "Gazeta.ru" agreed that Alfa's chances of acquiring BiTel are slim, especially since it will have to spar with its opponents in a Kyrgyz court (where analysts suggested it may find itself outmaneuvered by local players).
Whatever the outcome of the dispute between Alfa Group and Seimar Investment Group, it has already occasioned a rash of publications in Russia's business press. And the Kyrgyz Prosecutor-General's Office is pressing on with its investigation. While there are no guarantees that either will answer the questions about the Akaev family's suspected involvement in BiTel -- let alone their other alleged assets -- they at least increase the chances, even as they underscore the complexity of the task.
For more on events in Kyrgyzstan and the entire region, see RFE/RL's dedicated Central Asia in Focus webpage.]
