Who’s Responsible for the Crook Business?

The value of the assets bought by the Problem Loans Fund (PLF) from BTA Bank has turned out to have been set US $7 bln too high. Note that it was the taxpayers’ money that had been spent. The authorities have been trying to hide the shocking figure from the public, but the cat is now out of the bag. The question is who is responsible for this shady deal?

Kz.expert has on many occasion commented on the Kazakh authorities’ special op on Halyk Bank’s rescue carried out under the guise of solving BTA Bank’s and Kazkommertsbank’s problems. In 2017, as part of this op, the state spent 2.64 trillion of taxpayers’ money.

However, having solved one urgent problem, Akorda has created another. And this new problem may and, most likely, will strike an even harsher blow, and not only to the banking sector of the country but to the authoritarian political system as a whole. Not tomorrow perhaps, only when the “Leader of the Nation” will have passed away. But the fact that it will happen is, in our opinion, unavoidable.

To support out prediction, we will cite a document recently published on the official PLF website by the agency’s top-management.

We will recall that the Kazakh Government represented by the State Property and Privatization Committee is the Fund’s sole shareholder. Its goal lies in implementing the measures aimed to improve the quality of second-tier banks’ loan portfolios. The main types of the Fund’s activities are these – buying out second-tier banks’ distressed loans, managing the acquired assets, issuing debt securities for the purpose of financing the operations.

The document that is in fact the PLF’s consolidated financial reporting for the year that ended on December 31, 2017 can be found here. It is this document that we will be citing further when commenting on the discovered data.

The document starts with an independent auditor’s report performed by Russell Bedford A+Partners. Auditors Sholpanay Kudaybergenova, the company’s CEO, and her auditing partner Zarylbek Abduvaliyev had phrased their position rather delicately which, by the way, did not help the situation. Here are some key passages (text in bold by kz.expert).

“On July 1, 2017, based on the order given by the Ministry of Finance of the Republic of Kazakhstan on June 29, 2017, the transaction on purchasing BTA Bank’s distressed assets in the amount of 2,639,771,120 thousand tenge was completed”.

“The fair/market value of the purchased assets was determined by an independent valuation committee and, as of the moment of the appraisal, amounted to 267,739,715 thousand tenge (Footnote 10). The management rendered the conditions of the transaction non-market taking into account the difference between the appraised market value and the transaction charge.

The Transaction at hand is the key point of the audit due to its significance as well as the subjectivity of the underlying assumption for conducting the appraisal.

The results of the appraisal affect the Fund’s financial reporting in a significant way. The employment of different assumptions and judgements may lead to a drastically different appraisal of the purchased assets thus significantly affecting the Fund’s financial results. The judgements and assumptions may be related to the financial standing of BTA Bank borrowers whose loans had been transferred to the Fund, the previous discounting policy, the valuation of the claim-terms and the collaterals’ value as well as the other assumptions related to the appraisal”.  

As for the Fund’s management’s activities on presenting the BTA Bank deal in the financial reporting, we are going to devote an entire article to it later. But now, let us sum up the unfortunate results of Akorda’s shady deal committed under the guise of solving BTA Bank’s and Kazkommertsbank’s problems. And predict its future political consequences.

According to the external auditors, the fair (market) price of the assets purchased in 2017 by the PLF from BTA Bank on taxpayers’ money constituted only 268 bln tenge (as of December 31, 2017). 

With that, the amount paid for the assets constituted 2640 bln.

In other words, the price for the purchased assets was set 2372 bln tenge or about US 7.1 bln* too high.

*As of December 31, 2017, official exchange rate

We at kz.expert believe that this may be regarded as fraud and embezzlement of the state funds. What is more, this fraud is the biggest one in the Kazakh history in terms of size of the damage done to the country.

Of course, since this fraud had been authorized at the very top, it will never be regarded as such for as long as the President shall live. But Nursultan Nazarbayev’s successor, given that they themselves are not involved in the deal, will surely use it in order to, first, shift the blame for the socio-economic problems onto their predecessor and, second, to deal with the high-rank officials, big businessmen and the President’s relatives who, one way or another, had had their hand in this matter.

By the way, the members of the future organized criminal group can easily be determined based on open sources.

We may assume that, as Halyk Bank’s owners, the President’s daughter and son-in-law Dinara and Timur Kulibayevs will be the first on the list as well as will Kenes Rakishev who had played an important part in the chain of the transactions that ended with BTA Bank’s and Kazkommertsbank’s merger and divorcement and the subsequent sale of the latter to Halyk Bank.

Then, there is current Prime Minister of the Republic of Kazakhstan Bakytzhan Sagintayev and Chairman of the National Bank of the Republic of Kazakhstan Daniyar Akishev will all of his subordinates as well as former owners of Kazkommertsbank Nurzhan Subkhanberdin and Nina Zhusupova.

Such is quite a feasible scenario since Dinara and Timur Kulibayevs, Kenes Rakishev, Nurzhan Subkhanberdin and Nina Zhusupova had earned good money on the transaction that had cost the Kazakh taxpayers more than $7 bln.


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