Kyrgyzstan: Tracing the Lost Funds

As the new Kyrgyz authorities continue investigating properties said to be owned by ex-president Askar Akaev’s family, they are finding it difficult to unravel the complex webs of ownership surrounding many of the commercial firms they are looking into.

A state commission set up on April 19 brought together police, officials, media and non-government organisations to check out what the acting prime minister Kurmanbek Bakiev described as property owned by “Akaev, members of his family, other relatives and his inner circle”.

The commission headed by by Deputy Prime Minister Daniyar Usenov drew up a list of 42 firms – later rising to 73 – which appeared to meet Bakiev’s definition. When the list was published in the press, it appeared to confirm the public’s worst fears, naming many of the country’s major economic assets, from broadcast and print media outlets to a chain of supermarkets and shopping centres, and from holiday resorts and restaurants to banks and industrial plants, not to mention an airport and a high-tech telecommunications firm.

In its latest move to gain more information, the commission sent a formal request to Interpol on April 27 concerning the bank accounts of the Akaev family. Similar requests were sent to embassies of several states, including the United States and Britain.

Speaking to journalists on April 27, commission head Usenov admitted that the investigation was proving complex.

“Problems have appeared with companies that are difficult to define as belonging to the Akaev family, their close relatives or their immediate entourage because they are well-known companies…. Naturally, not a single name on the list of founders familiar to us can be found in,” he said.

Explaining how this worked, Usenov said that in one case, the commission found that a particular Kyrgyz company was founded by three offshore companies registered on the Isle of Man; these in turn were set up by two companies that were registered in the Seychelles and originally established by two Liberian companies. According to Usenov, the latter were set up by senior associates of the Akaev family.

Transactions made on the accounts of the offshore companies involved in this one case totaled some 25 million US dollars in just the seven weeks preceding March 21 this year. “We are asking where this money went and where it came from,” said Usenov.

Other firms have been tracked back to shell companies in Cyprus, the Cayman Islands, Liechtenstein and Panama, as well as countries with tougher business regulation such as Germany and Turkey.

As well as direct ownership, the commission is also looking at the alleged transfer of state property to private ownership, at grants and subsidies made to companies under government guarantees, and at properties built with state funding for clearly private purposes.

The first lawsuits are already up and running. On April 20, it was announced that a criminal case had been launched against Akaev’s son-in-law, businessman Adil Toigonbaev.

Two days later, Prosecutor General Azimbek Beknazarov said “several dozen” criminal cases had started with regard to allegedly illegal privatisation deals by Akaev’s entourage.

“The heads of a number of these companies have already confessed and are saying these properties were registered in their names against their will, and that they will drop all claims to ownership,” Beknazarov told IWPR. He added that bringing these actions was complicated because the individuals concerned were “insisting on being given guarantees of personal safety before they reveal the entire mechanism that was employed”.

In a separate drive, the finance ministry is pursuing some of the commercial firms alleged to have links to the Akaev regime to get them to pay back taxes.

“We are inspecting 48 companies to get answers to the question of how much they should have paid in taxes,” said acting finance minister Akylbek Japarov. “There are companies that have not been checked by tax inspectors for two or three years. If taxpayers admit their guilt and pay the missing money, then they will not be held accountable by inspectors….. I urge close relatives and associates of the [former] president to take advantage of this legislation and pay all unpaid taxes.”

Akaev, who is currently in Moscow, has given numerous interviews to Russian media in which he denied that his family owned extensive properties.

The declaration he filled out when he was president listed a four-room apartment in Bishkek, an old Mercedes and a modest country house. By contrast, the commission is asking questions about a presidential mansion said to be worth one and a half million dollars.

Bermet Akaeva, the former president’s daughter and the wife of Toigonbaev, gave an interview on April 21 insisting, “My father was never involved in business and has nothing to do with the firms that are supposed to belong to us…. They can check as much as they want! Yes, my husband Adil Toigonbaev is involved in business, he has put a lot into Bishkek’s economy and he always obeyed the law.”

Few members of the public take such a lenient view. Tolekan Ismailova of the NGO Civil Society Against Corruption wants the government to go further, “Our human rights centre has proposed that… in addition to investigations within Kyrgyzstan, there should be an external commission seeking the return of Kyrgyz funds. The interim government should have an interest in returning these stolen funds…. now in foreign banks.”

Ombudsman Tursunbai Bakir uulu has said property found to have been acquired illegally should be given to the poorest people in Kyrgyzstan, “That would be the fairest decision, because they have lived in poverty for 14 and a half years. That’s why they took the extreme measures of starting a revolution. They deserve to get back what was stolen from them.”

As things stand, Usenov’s commission is not having an easy ride.

“The commission has of course come under pressure, and that is continuing,” said Usenov. “We well understand that you can’t avoid pressure.”

As an example, Usenov said that certain firms now under investigation, which had been involved in selling fuel at Manas International Airport, had tried to call in Russian government connections by threatening not to refuel Aeroflot planes.

“Such unfair pressure, including dragging in senior officials from other states, typifies the entire rottenness and high-level corruption of the system we are trying to dismantle,” he said.

Commission member Alexander Kim, who is chief editor of the MSN newspaper, commented that certain businessmen were “trying to blackmail the government and the commission in hope of avoiding legal action. It is a very sensitive situation here. One can’t tolerate such blackmail”.

Sultan Jumagulov is a BBC correspondent and Leila Saralaeva is an independent journalist in Bishkek.