Exclusive: UK regulators ‘failed’ to fully investigate firm before float


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The Independent Online

Almost six months since the delisting from the London Stock Exchange of the scandal-struck Kazakh mining giant ENRC, City regulators have been accused of failing again to investigate fully a Kazakhstan-based company before allowing it to float here.

Kazakhstan Kagazy is a packaging company based in Almaty, the country’s major commercial and cultural centre, which staged a $273m (£162m) flotation in London in 2007 by the investment bank ING.

However, the company defaulted on its debt two years later and its stock has performed dismally, crashing from $5 when it floated to just 10 US cents now.

New chief executive and now 30 per cent shareholder, Tomas Werner, has claimed it was the victim of a massive fraud by its previous bosses and shareholders Maksat Arip and Baglan Zhunus. The pair strenuously deny the allegations made by the company that they defrauded it out of about $135m. Mr Werner, who is British, has repeatedly attempted to get the UK regulators to investigate what went on at the company and this week has written again to the London Stock Exchange, the Serious Fraud Office, the Financial Conduct Authority and the City of London Police, urging them to investigate. None comment on their investigations as a matter of policy.

KK has filed a legal claim against the two former directors in London’s High Court, which is not expected to be heard until next year.

KK first wrote to regulators and police asking them to investigate last August when it obtained a worldwide interim freezing injunction against the ex-directors.

In a statement,  KK told The Independent: “To date, no action has been taken by any of these regulators and agencies. Earlier this month, the Court of Appeal refused to lift the injunction.”

It added: “The City of London is the world’s leading financial centre. Its integrity has been challenged by the actions of Mr Arip and Mr Zhunus, who we say used the listing process to further their fraud. This requires full investigation if the City is not to suffer a serious blow to its reputation.”

Mr Arip and Mr Zhunus deny the claims that they made KK overpay for work carried out by local companies in Kazakhstan which went on to circulate the money back to companies the pair controlled.

After his recent failed attempt to get the Court of Appeal to overturn the freezing order on his assets, Mr Arip said: “The claims that have been brought against me are patently false, and represent an attempt of the current Kagazy management team to deflect blame away from their own gross mismanagement of the business over the past few years, for which the Kazakh employees and creditors of the business have paid a heavy price.

“I look forward to demonstrating that these claims are without foundation.”

Mr Werner became chief executive last April, having been a director since 2009. His CV claims he held senior positions at Deutsche Bank, Merrill Lynch and HSBC in New York, Zurich, Frankfurt, London.

He built up his current stake in KK during a restructuring of the company after its default.