Kazakhstan report: When oligarchs and dictators came to London

Six months after ENRC quit the Stock Exchange, the bruises remain. Nick Kochan reports from Almaty, Kazakhstan

Kazakhstan

Six months ago this week, the Eurasian Natural Resources Company slunk away from the London Stock Exchange. Rarely has a City star so quickly dimmed.

Its exit was the culmination of a series of scandals that involved allegations of destruction of sensitive documents, corruption in Africa, boardroom leaks in London, backbiting between auditors, investigators and directors in the City and the humiliation of UK regulators.

Top City names such as the former head of the Government’s UK Financial Investments body Sir David Cooksey; Sir Paul Judge, who is now being sued by the company amid allegations, which he denies, of leaking documents; the City banker Mehmet Dalman; GlaxoSmithKline’s former chairman Sir Richard Sykes, and Ken Olisa, the owner of the boutique merchant bank Restoration Partners, have all come away damaged.

The Serious Fraud Office is now going through the entrails of ENRC although sources close to its former director Richard Alderman, who first had contact with the company, are pessimistic, saying the police will struggle to bring charges over corruption claims.  

Others close to the investigation have suggested ENRC was less than careful about preserving key evidence – an allegation ENRC denies. UK shareholders lost big time financially from ENRC. They bought in at 540p a share in an IPO that raised £1.4bn for the company, valuing it at £13bn. Five and a half years later, in August 2013, the entire business was valued at £3bn and the shares had slumped from peaks of £11 to just 220p.

In Kazakhstan, Nursultan Nazarbayev, the 73-year-old autocratic president, now faces a dilemma over dealing with the wounded company and his long-time friend Alexander Maskievitch. ENRC is a national champion, one of country’s biggest companies in the aluminium industry, and a major contributor to Kazakh GDP. But its antics in London have become a Borat-like embarrassment. Mr Maskievitch, an early supporter of Mr Nazarbayev, obtained a 20 per cent stake in the business in early 1990s. He was supported by a diplomat from Uzbekistan, Patokh Chodiev, and a tough businessman from Kyrgystan, Alijan Ibragimov. They each hold a 20 per cent stake  andcontinue to run the private business, known as Eurasian Resources Group, out of Luxembourg.

Kazakh government involvement in the UK machinations has led some observers in the central Asian state to speculate that the Nazarbayev family have equity interests in the company. One analyst said: “I would not be surprised if he or his family is shown to have control of the business when he dies.”

A reshuffle of the shareholdings in ENRC is now a possibility, with Mr Maskievitch possibly being a loser. One source said: “[Mr] Nazarbayev will always be the diplomat as he will not wish to hurt his friend. But [Mr] Maskievitch’s position is a lot less secure than it was.” Others speculate he has been relegated from the President’s magic circle of supporters.

ENRC’s future is also in doubt. Almaty is rife with talk that Glencore has put its slide rule over the assets and may be about to bid for all or some. Former Kazakh prime minister Oraz Jandosov says: “Glencore have been over here. They are valuing the assets. They are talking to the relevant parties.”

A London firm of investigators is also thought to have been hired to carry out due diligence on a number of African assets belonging to ENRC. The President is thought to be undecided about handing over a strategic interest to an external concern. Sources close to the company confirmed that the owners are seeking to dispose of its valuable assets.

Speculation is rife of a potential sale of its mining properties in the Democratic Republic of Congo, bought between September 2009 and July 2011 using the controversial Israeli investor Dan Gertler. He bought the storied Kolwezi copper installations from the DRC government in 2009 and “flipped” them to ENRC. British-based board members, in particular Sir Paul, expressed City doubts about the deals to fellow board members and voted against it, but were slapped down.

The use of myriad offshore companies in the African deals, as well as the contractual arrangements with previous owners, Canada’s First Quantum, were investigated by the anti-corruption NGO Global Witness. More damaging was litigation from First Quantum, which challenged the deal in court, winning a $1.25bn (£744bn) settlement.

When whistleblowers sent allegations of corruption in Kazakhstan, the board had them thoroughly investigated. But the investigation, by Neil Gerrard, a corporate lawyer at DLA Piper (who later moved to rival law firm Dechert) “got out of hand” says one investigator. “The cost and time far outweighed the seriousness of the allegation,” he says. When the law firm was sacked in April 2013, a letter from the firm to the board was leaked.

The letter referred to the company’s claim that the law firm had “negligently and improperly handled many significant aspects of the sensitive engagements”. But, in the leaked reply, Mr Gerrard wrote, “there is no basis for this false allegation”. Mr Gerrard claims that the firm’s investigators were provided with false documents and saw evidence of document destruction. Meanwhile, K2, the investigative firm, was hired to pursue the leaks.

ENRC has always said it is committed to a full and transparent investigation of its procedures and conduct, and is co-operating fully with the SFO.

The company insists it is retaining its physical presence in the UK and has no intention of leaving. But sources told The Independent that moves are afoot for ENRC’s total disappearance from London by the end of the year. For the many whose reputations have been irreparably damaged by its arrival, that time cannot come soon enough.

Tomorrow: Nick Kochan reports on Almaty’s  dangerous mixture of politics and business

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future