Hearings in a corruption case involving a U.S. businessman linked to Kazakh President Nursultan Nazarbayev are scheduled to begin today in the U.S. Federal Court in New York. A U.S. indictment alleges that between 1995 and 1999, James Giffen, a former banker and consultant to the Kazakh government, sent and laundered more than $78 million in unlawful payments to Nazarbayev and former Oil Minister Nurlan Balgimbayev. Neither of them has been formally summoned in the U.S. criminal investigation, but the case known as "Kazakhgate" may have far-reaching political consequences for the current government of Kazakhstan.
New York, 3 June 2004 (RFE/RL) -- The five-year-old case alleging major bribes by U.S. businessman James Giffen to Kazakhstan's president and former oil minister has an initial hearing today in a U.S. federal court.
The federal indictment traces the payments to the proceeds of six separate oil transactions in Kazakhstan in the 1990s and describes a complex web of hidden payments. If convicted on all charges, the 63-year-old Giffen could face up to 88 years in prison.
The U.S. attorneys prosecuting the case revealed in April that the two officials connected to the payments are Kazakh President Nursultan Nazarbayev and former Oil Minister Nurlan Balgimbayev. Prosecutors said Kazakh authorities asked Washington to drop the case.
At the heart of the investigation lies the violation of the Foreign Corrupt Practices Act, a serious criminal offense in the United States.
Donald Zarin is a legal counsel on international trade and the author of leading textbook on the Foreign Corrupt Practices Act. He tells RFE/RL the Giffen case ranks as one of the biggest ever prosecuted under the law.
"The money [alleged kickbacks] involved, from what I've read, appears to be very substantial so I would think it would be one of the larger cases involving money. Many of the cases are fairly substantial, but this would appear to be one of the biggest cases that I've seen," Zarin says.
Zarin says the purpose of the law is to prevent U.S. companies abroad from gaining an unfair advantage by bribing foreign officials.
"Fundamentally, it's a bribery law and it prohibits U.S. companies and U.S. citizens from paying or authorizing the payment of any monies or anything of value to foreign officials to obtain or retain business. It also says that U.S. companies cannot give any money to intermediaries -- like consultants -- if they have knowledge that the purpose or that consultant intends to pay foreign officials to obtain or retain business," Zarin says.
Zarin tells RFE/RL that although the U.S. Justice Department conducts on average between 60 to 70 investigations each year, so far only around 40 convictions have been obtained.
The law, over the years, has led to a growing international consensus that bribing foreign officials to get business advantages is bad for economic development worldwide.
"Actually there's been a sea change in the last five or 10 years in which there's been broad recognition of the problems of bribery [and] the impact it has, particularly on economic development," Zarin says.
In 1999, the Organization for Economic Cooperation and Development (OECD) adopted a "Convention Against Bribery of Foreign Public Officials in International Business Transactions." Kazakhstan is not a member of OECD.
The court proceedings for Giffen today will involve what are known as "pre-trial motions," during which either party to a dispute can use procedural mechanisms to learn about the other party's case.
Charles Both is a U.S. attorney who is familiar with Kazakh affairs. In the past, he has represented Akezhan Kazhegeldin, the exiled former Kazakh prime minister and considered Nazarbayev's main rival.
Both tells RFE/RL that in the pre-trial motions, Giffen plans to weaken the U.S. case.
"In this case, Giffen is attempting through his lawyers to do a couple of things. He [is trying] to sort of persuade the United States government that it's not in [the U.S.'s] interest to pursue the case against him. He makes in my view a foolish declaration -- that he was a CIA agent and was doing whatever he was doing at the behest of the United States government," Both says.
It has been widely reported that in the last four years Nazarbayev has tried to quash the "Kazakhgate" investigation and to receive assurances from the current U.S. administration that he will receive immunity from any related prosecution.
Attorneys retained in the U.S. to represent the Kazakh government have long been concerned that Nazarbayev would be named as a target of the grand jury investigation.
The offices of Reid Weingarten and Steven Cohen -- two of the attorneys representing Kazakhstan in connection with the case -- did not respond to RFE/RL's repeated requests for comment.
Roman Vassilenko, the press secretary of the Kazakh Embassy in Washington, declined to discuss the specifics of the case. He issued a statement saying the Kazakh government is hopeful that the Giffen case will not affect U.S.-Kazakh relations.
The statement said: "In light of current world events, it is now more important than ever that the Republic of Kazakhstan and the United States continue to work together within a mutually beneficial relationship."
The full trial is scheduled to begin on 4 October.
The federal indictment traces the payments to the proceeds of six separate oil transactions in Kazakhstan in the 1990s and describes a complex web of hidden payments. If convicted on all charges, the 63-year-old Giffen could face up to 88 years in prison.
"There's been a sea change in the last five or 10 years in which there's been broad recognition of the problems of bribery [and] the impact it has, particularly on economic development."
The U.S. attorneys prosecuting the case revealed in April that the two officials connected to the payments are Kazakh President Nursultan Nazarbayev and former Oil Minister Nurlan Balgimbayev. Prosecutors said Kazakh authorities asked Washington to drop the case.
At the heart of the investigation lies the violation of the Foreign Corrupt Practices Act, a serious criminal offense in the United States.
Donald Zarin is a legal counsel on international trade and the author of leading textbook on the Foreign Corrupt Practices Act. He tells RFE/RL the Giffen case ranks as one of the biggest ever prosecuted under the law.
"The money [alleged kickbacks] involved, from what I've read, appears to be very substantial so I would think it would be one of the larger cases involving money. Many of the cases are fairly substantial, but this would appear to be one of the biggest cases that I've seen," Zarin says.
Zarin says the purpose of the law is to prevent U.S. companies abroad from gaining an unfair advantage by bribing foreign officials.
"Fundamentally, it's a bribery law and it prohibits U.S. companies and U.S. citizens from paying or authorizing the payment of any monies or anything of value to foreign officials to obtain or retain business. It also says that U.S. companies cannot give any money to intermediaries -- like consultants -- if they have knowledge that the purpose or that consultant intends to pay foreign officials to obtain or retain business," Zarin says.
Zarin tells RFE/RL that although the U.S. Justice Department conducts on average between 60 to 70 investigations each year, so far only around 40 convictions have been obtained.
The law, over the years, has led to a growing international consensus that bribing foreign officials to get business advantages is bad for economic development worldwide.
"Actually there's been a sea change in the last five or 10 years in which there's been broad recognition of the problems of bribery [and] the impact it has, particularly on economic development," Zarin says.
In 1999, the Organization for Economic Cooperation and Development (OECD) adopted a "Convention Against Bribery of Foreign Public Officials in International Business Transactions." Kazakhstan is not a member of OECD.
The court proceedings for Giffen today will involve what are known as "pre-trial motions," during which either party to a dispute can use procedural mechanisms to learn about the other party's case.
Charles Both is a U.S. attorney who is familiar with Kazakh affairs. In the past, he has represented Akezhan Kazhegeldin, the exiled former Kazakh prime minister and considered Nazarbayev's main rival.
Both tells RFE/RL that in the pre-trial motions, Giffen plans to weaken the U.S. case.
"In this case, Giffen is attempting through his lawyers to do a couple of things. He [is trying] to sort of persuade the United States government that it's not in [the U.S.'s] interest to pursue the case against him. He makes in my view a foolish declaration -- that he was a CIA agent and was doing whatever he was doing at the behest of the United States government," Both says.
It has been widely reported that in the last four years Nazarbayev has tried to quash the "Kazakhgate" investigation and to receive assurances from the current U.S. administration that he will receive immunity from any related prosecution.
Attorneys retained in the U.S. to represent the Kazakh government have long been concerned that Nazarbayev would be named as a target of the grand jury investigation.
The offices of Reid Weingarten and Steven Cohen -- two of the attorneys representing Kazakhstan in connection with the case -- did not respond to RFE/RL's repeated requests for comment.
Roman Vassilenko, the press secretary of the Kazakh Embassy in Washington, declined to discuss the specifics of the case. He issued a statement saying the Kazakh government is hopeful that the Giffen case will not affect U.S.-Kazakh relations.
The statement said: "In light of current world events, it is now more important than ever that the Republic of Kazakhstan and the United States continue to work together within a mutually beneficial relationship."
The full trial is scheduled to begin on 4 October.