During the first days of January, Kazakhstan’s Ministry of Justice had released information that the Kazakh authorities have now got an ally in the war against Moldovan investors Anatolie and Gabriel Stati. This ally is no other than the U.S. investment company Outrider Management. We have decided to learn more about the situation.
First, let is quote the press-release of Kazakhstan’s Ministry of Justice published in a number of mass-media.
«On December 31, 2020, the Outrider Management company joined the claim of the Republic of Kazakhstan against New York financier Daniel Chapman and the group of companies Argentem Creek (collectively called Chapman) owned and controlled by him. The claim is being reviewed by the New York court».
The Battle with the «Collective Chapman»
So, the «collective Chapman» (not to be confused with the spy of the same name famous for her «stylish» photo shoots) has become Kazakhstan’s new enemy having replaced the Statis in this role.
You will recall that the latter as the owners of Tolkynneftegaz and Kazpolmunai had been conducting their business in the West Kazakhstan but lost it as a result of the governmental hostile takeover, filed a claim against Kazakhstan and managed to win a 540 $ mln payout in the International Court of Arbitration. The Kazakh authorities had refused to pay. Because of this, the country’s foreign assets were arrested, this time, in the amount of billions. These assets included the equity stake in the «nation’s patrimony», namely, Kazakhstan’s share in the Kashagan oil project.
Daniel Chapman and Argentem Creek Partners had been funding Stati’ projects in Kazakhstan through securities issued by Tristan Oil Ltd and it was they that were to receive about 70% of the compensation amount awarded by the arbitration court. For a long time, Argentem Creek had remained at the backstage of this story, but now is has become the main force in the legal battle with the Kazakh Ministry of Justice.
In its turn, the Kazakh state agency has decided to solidify its position and open a «second front» having declared Outrider Management its ally.
«Declare» is the only word for it since all the public information about this company joining the claim of the Republic of Kazakhstan comes from the Kazakh Ministry of Justice. The company itself has made no announcement or issued no press-release on the subject. Its corporate website does not publish information on the matter; it operates exclusively as a portal for the clients of this firm. In other words, having researched the publicly accessible sources, we have found no proof that Outrider Management owns Tristan Oil Ldt’s securities.
Meanwhile, according to the information provided by our insiders, Outrider Management used to own a block of bonds and it had even participated in the committee meetings thus supporting the claims filed by the Stati family against the Kazakh government. Later, however, the company had sold its block of securities and exited the stage.
One can only guess why it has come back. What’s more, it’s come back supporting the former opponents. But the fact that the intentions of the U.S. investment company are being articulated by the Kazakh Minister of Justice is indicative in itself.
A Small Firm with Big Connections
The history of Outrider Management that is registered in an office centre not far from the San Francisco airport is actually quite suggestive.
The number of its employees is unknown. Stephen Hope who has been managing the company’s asset portfolio since 2003 often acts as its representative. Up until recently the company’s CFO Julia Ruthven had also been performing the role of the speaker but, in 2017, she left the firm. Now the names of Jennifer Collins and Scott Dakers appear in the reports on the company’s staff submitted to the U.S. Securities and Exchange Commission.
According to the same reports, the value of the assets under the management of the company’s funds amounts to a little more than US33 $ mln. Of course, this number is minuscule even by the standards of modest players of the investment market.
What’s curious is that the reduction of Outrider Management’s assets has been happening in a particularly accelerated fashion during the past years.
In 2014, the company owned the controlling stake in Jaguar Mining Inc, a Canadian company engaged in the development of the gold-fields in Brazil. But that’s in the past. Now Eric Sprott is the majority shareholder of the company.
One can say that Outrider Management’s equity participation in Madagascar Oil Limited, an oil company engaged in the development of bitumen oil fields on the territories belonging to this island state was not a big success. The company’s relationship with the Madagascar authorities was complicated — its licence was once revoked. Now the company is still operating, however, starting from 2016, its shares are not listed at the London Alternative Investment Market (AIM).
However, it is the ties with the Frontera Resources network of companies engaged in several projects on the territory of the former USSR that, for Outrider Management, has turned out to be the most scandalous relationship. Outrider Management had been funding these projects and now acts as their main co-owner.
The representatives of Frontera Resources Corporation are denying Outrider Management’s participation in the funding of the company’s projects. According to them, in 2011, Outrider's Cayman Islands based investment fund purchased a portion of Frontera's then privately held debt in a liquidation sale at a deep discount from a third-party debt holder. Frontera Resources Corporation says that, after this purchase, the fund’s representatives started using debt instruments to interfere with the company’s business in an attempt to create an advantage to achieve an inappropriate takeover and liquidation of the company. Currently, the company is settling the disputes with the fund in courts.
The company was founded in the 1990s by Bill White, an influential Democrat, who served as Deputy Secretary of Energy under the Clinton Administration and then was appointed the chairman of the Democratic Party in Texas.
The high point of White’s career was his appointment as the Mayor of Houston, the capital of the U.S. oil industry. He had served at this post from 2004 until 2010. It is in Houston that the Frontera Resources Corporation (the head structure of the entire Frontera network) main office is located.
In the 1990s, when the company was founded, her investors included influential representatives of the U.S. establishment. However, in the process of later transformations of the business, Steve Nikandros and Zaza Mamulaishvili became the main public representatives of the company.
An Unlikely Partnership
In this tandem, Steve Nikandros represented Houston and Zaza Mamulaishvili represented the former USSR. In 1989, the graduate of the Tbilisi University’s Medical School arrived in the U.S. where he intended to continue his medical career but ended up as an oil and metal trader. The Metex company that Mamulaishvili managed was engaged in exporting steel and non-ferrous metals while the MTA company was importing oil from Russia and Kazakhstan to the U.S. Simultaneously, the ties with Frontera were being established.
In one of the interviews to a Ukrainian media, Mamulaishvili stated that Bill White began working with him following the order of Bill Clinton whose Administration was trying to find ways to export the Caspian oil. As a result, Mamulaishvili (according to his own statement) was engaged in the negotiations with representatives of several countries at once — Azerbaijan, Georgia and Turkey. The negotiations resulted in constructing the two pipelines from Baku to Supsa.
One may treat this kind of statements light-heartedly but Mamulaishvili’s plans were quite big indeed. And, each time, they were lobbied through political channels. For instance, Frontera had managed to obtain the licence to operate 40% of the Moldovan territory for the purpose of developing oil and gas fields thanks to the support of Prime Minister Pavel Filip and oligarch Vladimir Plakhotnyuk, the then backstage leader of Moldova.
Steve Nikandros (on the left) next to Vladimir Plakhotnyuk in the U.S. Source: pdm.md
In May 2016, in Texas, Vladimir Plakhotnyuj, accompanied by Steve Nikandros, was talking about Moldova’s investment possibilities and then Zaza Mamulaishvili voiced his intentions to invest 500 $ mln to the country thus creating new jobs with decent salaries. But later, the project wears thin.
If you wish to learn more on how the Cayman millionaires had brought Frontera to Moldova, click here.
The events in Ukraine and in Georgia had unfolded according to the same scenario. In Georgia, Stephen Hope, the already mentioned top-executive of Outrider Management, was practically begging the Georgian authorities to hand over the oil field development licence to the fund; the licence once obtained by Frontera Resources Corporation that then went bankrupt.
Therefore, all the political assistance and even financial contributions on the part of the EBRD did not help the Tbilisi doctor despite all his connections. And now it is the Californian funds that have to find a way out, and these funds clearly have their own displeased clients/investors.
Despite the small size of the assets under management, the input threshold for Outrider Management’s investors constituted no less than US1 $ mln. Thus, the wronged contributing participants are basically millionaires. And it is not hard to assume that the Californian company is now trying to solve a number of problems simultaneously. And the Kazakh authorities may prove to be very useful in this undertaking.
Argentem Creek’s attorneys believe that it is the Kazakh government that is behind adding Outrider Management as a cliamant.
«Adding Outrider as a claimant is just another diversionary litigation tactic by Kazakhstan’s Ministry of Justice aimed at frustrating the payment of the ECT award — an award that was granted after a Swedish Arbitration panel ruled that Kazakhstan had illegally nationalised the assets related to Tristan Oil. The allegations by Outrider are entirely baseless, as are the allegations brought by Kazakhstan. The Svea Appeals Court and the Swedish Supreme Court’s decisions upholding the award remain final and non-appealable. The Ministry of Justice is still fighting a battle that they lost years ago», says Paul Butler, partner at Akin Gump Strauss Hauer & Feld LLP, representing Argentem Creek Partners.
No one knows the motives of the Ministry of Justice of the Republic of Kazakhstan. They either simply want to buy themselves some time or the head of the Ministry Marat Beketayev has got some secret methods that he intends to employ. So far, however, his strategy looks more like a “raid of the doomed”.