Lately, the topics related to the agricultural complex have become quite popular in Kazakhstan. Not only the Ministry of Agriculture but the major entrepreneurs operating in this economic sector and even Head of the Senate of the Kazakh Parliament Dariga Nazarbayeva who seems to have devoted more time and attention to the matter than all her predecessors taken together have become concerned about these issues.

Amid all this, the silencing of the problem related to Ivolga by all the Speakers without exception looks particularly surprising.

To those who wish to learn more about this, we recommend searching the Internet starting with the article «Vasilliy Rozinov: A Quite Oligarch» published as far back as February 2013.

As for the current state of affairs, we can learn about it from the virtual debates of two lawyers, Kristina Karpova and Konstantin Geraschenko. The former articulated her position in the article «The Ivolga-Gate: Instead of Reviving the Company of Kazakhstan’s Largest Holding, They Went Bankrupt — a Lawyer’s Opinion» of January 20. The latter responded in the material called «The Ivolga-Gate: The Fraud Accusations of Ivolga-Holding’s Owner Are Unfounded, Says Lawyer Konstantin Geraschenko» released on January 28.

We are not going to participate in this virtual debate but will use the information provided in these materials.

Attorney Kristina Karpova believes that (text in bold hereinafter by kz.expert):

«The case of the once largest agricultural holding Ivolga (based in Kostanay) turned out to be one of the most high-profile scandals of last year when the holding’s owner Vasiliy Rozinov ended up on the defendant’s bench. He is accused of fraud that involves big financial loans (the case materials mention the multi-billion sums received from the Eurasian Development Bank and Halyk Bank). The investigators believe that the funds provided to the holding against the securities of grain warrants were not backed up with real grain».

In the course of the trial held at Court #2 of Kostanay, they have questioned over 240 witnesses whose testimonies differ from the investigators’ statements in a significant way. A number of the top executives said that the investigative authorities had been forcing them to give false testimonies during the interrogations. The defense is insisting that no evidence of premeditated embezzlement of big financial loans exists. The defense believes that the problem of the company and its owner has been caused by the poor state of economy, the national currency devaluation (the loans were provided in the US dollars) we well as the dry years that have led to a catastrophic crop failure. At the same time, the representatives of the injured party (the Eurasian Development Bank) are determined to secure a most severe verdict for Rosinov».

«Behind the scandalous developments of the criminal trial, the events around the enterprises included in the Ivolga-Holding have remained in the background of the public attention. There are 18 of them — the elevators and agricultural enterprises set on the basis of large rural settlements. Today, their fate is being determined by a series of civil proceedings.

Here is the backstory of the proceedings. In the fall of 2018, the list of creditors’ claims was formed, and a rehabilitation plan was created. The court approved it and allocated a five-year period for the work to be completed. In the course of this period, the company’s solvency was supposed to have been restored and its credit debt was supposed to have been paid.

At the proceedings, it was registered that Ivolga’s subsidiary liability to Halyk Bank constitutes about 160 bln tenge. Since 13 of Ivolga’s agricultural enterprises (with exception of the 5 elevators) are considered joint debtors, each has been requested to pay the total sum of 160 bln tenge. The end sum, therefore, has allowed Halyk Bank to obtain the position of priority (the status of the majority creditor)».

«And wat are we observing now? The fiduciary together with the bank-creditor make the decision to make the Ivolga group undergo the rehabilitation procedure. As early as March 2018, the bank addressed the court on this issue. In August, the court decision came into force, the rehabilitation manager was appointed. The right to manage the property (13 agricultural enterprises and 5 elevators), based on Halyk Bank’s insistence, was taken away from the owner’s representative (fiduciary) and given to the rehabilitation manager.

With that, the Olzha-Agro Holding continues to use Ivolga’s properties, conduct agricultural operations and, with the help of the newly created firms, receive profit. When the time comes to deal with it, Ivolga receives the very minimum (about one-fifths of the amount earned) while the bulk of it goes to Olzha. In other words, the forces and the means of the Ivolga-Holding Group are being used albeit not for the purpose of the company’s recovery and paying its debts».

«This development may result in the unpleasant consequences for Ivolga’s another creditor (the Eurasian Development Bank) as well. If they bankrupt the holding’s 18 companies, the creditor’s demands will remain unsatisfied since, as a result of the chosen rehabilitation scheme, the EDB is not considered the majority creditor.

Let me remind you that Halyk Bank has obtained the priority in the debt collection. It is Halyk Bank that has lodged its claims to Ivolga’s every enterprise having received the opportunity to manage the rehabilitation process while ignoring the interests of the budget and the other creditors, first of all, the EDB».

«One can’t but agree with this. The list of the company’s assets consists of hundreds of thousands of hectares of land, equipment, production goods. Apart from that, the case materials include the evaluation of Halyk Bank according to which the value of Ivolga’s arrested assets constitutes 80 bln tenge. In other words, the figures that the state prosecutors use at the criminal trial, are set 15 times too low. What can this result in? It may result in the fact that the new owners receive the entire company’s assets at a rock-bottom price, the debts hang in mid-air while Vasiliy Rozinov is held responsible for them since he gave his personal guarantees when the loans were provided».

In his turn, attorney Konstantin Geraschenko who is defending Vasiliy Rozinov said:

«The court has been examining the case against Rozinov for four months now. The entrepreneur has been indicted under Part 4 of Article 177 of the Kazakh Criminal Code (1997 edition) — serious fraud».

«The prosecution is trying to prove that Ivolga-Holding’s elevators contained no grain when the company gave the EDB the grain warranties as securities. The defense objects: no proof of that has been offered to the court. The documents on the movement of grain at the elevators and the grain reception centers go «unseen» by the investigators. According to Vasiliy Rozinov, the loans have turned non-performing as a result of the two unconquerable factors — the two national currency devaluations (the loans were provided in the US dollars) and several years of drought that caused the crop failure».

«In the course of the criminal trial held at Court #2 of Kostanay over 240 witnesses have been questioned (9 of them did not appear in court until the testimonies of the witnesses summoned by the defense — A. Kunakov (a specialist of the Ministry of Agriculture) and A. Kadralinov (an investigator of the Public Prosecution Office) — had been given). The crucial witnesses include the directors and accountants of the grain reception centers and the elevators. The defense has already informed the court on the pressure exerted on them by the investigators».

Our interest in this trial and its main figurant Vasiliy Rozinov lies in the fact that the latter is quite close to Chairman of the Management Board of the Samruk-Kazyna National Welfare Fund Akhmetzhan Esimov, a nephew of the First President. Rozinov is not simply close to him; de-facto, he used to serve as Esimov’s cover since it was Esimov who, from the very foundation of Ivolga, was its key co-owner. It’s an open secret in Kazakhstan.

Of course, the financial problems of Ivolga and Vasiliy Rozinov personally could have resulted in the fact that Akhmetzhan Esimov chose to «disappear in a fog» which is quite in lieu with the Kazakh practice when people in power participate in a business on an unofficial basis as long as this business is successful and problem-free. This is why we eagerly await the verdicts on both the criminal case against Vasiliy Rozinov and the civil proceeding against him and the Ivolga corporation.

If Rozinov is found not-guilty or gets a nominal sentence, it will mean that he is still Akhmetzhan Esimov’s business-partner or that the latter depends on him in some way.

If not, then not.

As for Ivolga’s business, it will probably end up under the control of Halyk Bank of Kazakhstan owned by Dinara and Timur Kulibayevs, Nursultan Nazarbayev’s daughter and son-in-law. In other words, the asset will not leave the sphere controlled by the country’s #1 family.

Still, it is a big question who will own it in the end. So far, we do not see any other candidate interested in agriculture and the agricultural industry complex among the First President’s relatives. But it does not mean that such candidate does not exist.

As for Akhmetzhan Esimov who, currently, chairs the Management Board of the Samruk-Kazyma NWF and, despite the negative forecasts and his age that exceeds the age of retirement, has great chances to keep this post, he’s got enough of other problems to deal with such as keeping ATF Bank afloat.