In light of Karim Massimov receiving the new rank of General Lieutenant, we publish information on his involvement as a hidden investor in a variety of lucrative Kazakh telecoms companies, using his friend Aigul Nuriyeva as the proxy shareholder. Through this business Nuriyeva amassed a fortune of hundreds of millions of dollars, though this research highlights evidence to suggest that she was not the true shareholder, and that the ultimate beneficial owner was Massimov and other members of the Kazakh political elite.
This feature forms the basis of continuing research on the topic by a group of independent researchers and academics including researchers who worked on previous investigation regarding Swiss repatriation of laundered money from Kazakhstan whose final report will be published in due course.
KEY FINDINGS
Telia has been active in Kazakhstan since the late 1990s. In order to retain its privileged position in the Kazakh market Telia has engaged in corrupt activities with senior political figures, namely Timur Kulibayev and later Karim Massimov.
The first seemingly corrupt deals were conducted in the mid-2000s taking two different forms. Within Kazakhstan Telia acquired dormant companies such as AR-Telecom and KT-Telecom for $25 million. Additionally Telia acquired telecommunication assets owned by Kulibayev’s Visor Group in Nepal and Cambodia for $484 million. The real value of those assets was significantly lower. One such example was Applifone, a Cambodian telecommunications company, on which Telia wrote off $100 million shortly of its acquisition.
In 2012 Telia bought a 49% in GSM Kazakhstan from Kazakh Telecom for $1.5 billion. The price was vastly inflated. Massimov and Kulibayev were recipients through Deran and Bodam, respectively, of a large portion of Telia’s fee.
In 2013 and in Telia’s last large corrupt payment in Kazakhstan it acquired WiMax licences for $175 million from entities ultimately owned Aigul Nuryieva and Alexander Klebanov, two of Massimov’s proxies. The companies involved were Lavita Holdings BV and Mymari Holding BV. The $175 million fee was largest settlement that Veysal Aral, CEO of KCell and allegedly the principal facilitator of Telia’s corrupt payments to Massimov, could pass through Telia’s board in Stockholm. Veysal Aral was dismissed amid allegations of corruption in 2014.
In addition to the big ticket items above Telia and KCell channelled regular bribes to Massimov through engineering contracts via three Kazakh companies: Micro Engineering LLP; GSM Tech Management LLP and Micro Wireless LLP. These payments were concealed as service contracts for antennas in KCell’s network which were invoice at $2000 per visit; approximately 10 times the market rate. To cover this scheme in February
2015 KCell petitioned the General Prosecutor’s Website link Office in Kazakhstan to initiate a criminal probe into its own executives.
Some of the illicit monies paid by Telia to Massimov were used to acquire a 50% stake in the Altynalmas gold mine from Canada-listed Turquoise Hill Resources. In particular Massimov put up $51 million through Lavita Holding in the deal. In 2014 the mine was sold to Polymetal in the region of $1 billion.
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TELIASONERA AND KARIM MASSIMOV
BACKGROUND
window.tgpQueue.add('tgpli-64a807b147152')Karim Massimov. Kazakhstani Prime minister at 2010
TeliaSonera’s (“Telia”) engagement in Kazakhstan dates back to the late 1990s when the company, together with Turkcell, acquired a 51% position in GSM Kazakhstan, a mobile network operator, in which Kazakhtelecom owned the remaining 49%. In 2012, however, Kazakhtelecom extracted itself from GSM Kazakhstan’s share capital by selling its stake to Telia, for $1.5 billion.
In 2007, 2008 and 2013 Telia, separately from Turkcell, acquired WiMAX businesses from Kazakhstan-registered companies. In 2007 and 2008 Telia paid circa $25 million for WiMAX licences acquired from AR-Telecom LLP and KT-Telecom LLP. In 2013 Telia acquired WiMAX licences from Midas Telecom LLP (“Midas”) for $170 million.
The same year the company bought a 20% stake in KazTransCom (“KTC”) for a consideration approximately $22.5 million. The corporate disclosures pertaining to the two transactions indicate that the ultimate beneficiaries of the proceedings from the WiMAX business were Aigul Nuriyeva (“Nuriyeva”) and Aleksandr Klebanov (“Klebanov”), individuals considered by sources to be fronts for Prime Minister Karim Massimov (“Massimov”); and Raushan Sagdiyeva (“Sagdiyeva”), a person understood to have links to both Massimov and Timur Kulibayev (“Kulibayev”). Sagdiyeva was the formal recipient of the $22.5 million payment. These transactions are described in greater detail below.
ORIGINS OF THE RELATIONSHIP
A former official in the Kazakh Agency of Information and Communications indicated that the existence of a relationship between Telia and the Kazakh political establishment became apparent in approximately the mid-2000s. In that period Kulibayev was engaged with Telia in South Asia whilst Massimov acquired a proportion of Kazakhtelecom, then Telia’s partner in GSM Kazakhstan (later renamed KCell).
Telia and the Visor Group
Documentary evidence of a relationship between Telia and Kulibayev’s Visor Group can be traced back to 2008. Between 2008 and 2012, Telia, via several subsidiaries, had channelled significant amounts of cash to Visor, which took the form of acquisitions of the latter’s telecoms assets in Nepal and Cambodia and loans.
Visor Group entered the South Asian telecoms market in the mid-2000s. In 2005 Visor Group entered into an agreement with a consortium of investors led by Upendra Mahato (“Upendra”), a Nepalese businessman, to establish Spice Nepal, a local mobile provider.
Upendra became acquainted with members of the Kazakh political establishment in the early 2000s. He has had commercial interests in the post-Soviet space since the 1990s, when he stroke a partnership with Aleksandr Milyavsky (“Milyavsky”), a Russian businessman turned politician. Milyavsky and Upendra reportedly privatised the Rubin factory in Moscow, on the basis of which they developed the famous Gorbushkin Dvor commercial centre. In addition to Russia, Upendra had reportedly owned businesses in Belarus.
Upendra initially met Visor representatives through mutual acquaintances. At that meeting Upendra is said to have offered Visor a partnership in Nepal, where he was in the processing of registering Spice Nepal. Visor reportedly provided investment in exchange for a 60% stake in the company. In subsequent years it increased its stake in Spice Nepal and had also entered the Cambodian market, where it acquired mobile provider Applifone (see below).
Telia’s Acquisition of Visor’s Assets
In 2008 Telia acquired part of Visor’s South Asian telecoms assets. According to TeliaSonera’s annual report, in 2008 its subsidiary UTA Holding BV (“UTA Holding”) acquired 51% of the shares in TeliaSonera Asia Holding BV (“Asia Holding BV”), through which Visor owned 80% of Spice Cell and 100% of Applifone. This gave Telia control of approximately 40% of Spice Cell and a controlling stake in Applifone. The Dutch corporate registry stated that the total consideration paid by UTA Holding to Visor Group was approximately $484 million. Visor Group retained a 49% shareholding in Asia Holding BV. In addition to the acquisition, UTA Holding’s annual report stated that in 2008 the company had provided a loan of $26.5 million to an undisclosed company, which was identified in an independent investigation published online as an unnamed Visor Group entity.
According to Dutch corporate records, on 8th December 2010 UTA Holding increased its ownership in Asia Holding BV from 51% to 75.45%, by paying Visor another $160 million. The same year Spice Nepal was rebranded into NCell. In December 2015 Telia and Visor sold their 75.45% and 24.55% stakes respectively in NCell for $1.03 billion.
The buyer was Cambodian telecoms conglomerate Axiata Group.
TeliaSonera: 2013 annual report, p.27.
Exit from Cambodia
In December 2010 Telia and Upendra agreed to merge their Cambodian businesses, respectively Applifone and Latezl. Telia received a 25% stake in the new venture. In December 2012 Telia divested the investment by selling to Axiata Group. The price paid for 100% of Latezl was in the region of $155 million. Telia had written off approximately $100 million in goodwill on Applifone.
Nepal Satellite
During the course of 2011 and 2012 Telia acquired Nepal Satellite, described in industry reports as a small telecom company with a market share of less than one percent. In 2011 Telia and Visor, via Asia Holding BV, paid $30 million for a stake in Nepal Satellite. In Asia Holding BV’s annual accounts it is stated that the $30 million was paid for a 51% stake in Airbell Services Ltd (“Airbell”), the Cypriot company owning Nepal Satellite. According to historical records held by the Cypriot registry, the selling party was BVI-registered vehicle Zhodar Investments Ltd (“Zhodar Investments”).
Asia Holding BV’s annual report stated that in 2012 the company “sold and transferred” its investment in Airbell. Cypriot records state that the transfer was done to TeliaSonera Norway Nepal Holding AS, another Telia subsidiary. According to Telia’s annual report, on 26th April 2012 Telia bought the remaining 49% in Airbell, which brought Telia’s stake in Nepal Satellite from 50% to 75%. Telia booked a good will of SEK 1.2 billion ($157 million). In September 2013, Telia divested Airbell by selling its stake back to an entity named Zhodar Investments at a declared loss of SEK 389 million ($60 million).2 Telia explained its decision to sell the business by quoting “regulatory uncertainty”. The beneficial ownership of Zhodar Investments was not established and research did not find any other links that would directly lead to Kulibayev or Massimov.
Archives of the Cypriot corporate registry indicated that local company Anu Oil Ltd (“Anu Oil”) was in 2008 the sole shareholder of Airbell. Sources said that Anu Oil was Samata Prasad (“Prasad”), an Indian businessman. Prasad is a longstanding partner of Upendra and Milyavsky.
Dutch corporate records do not disclose the current ownership structure of Asia Holding BV, the holding company for Telia and Visor’s assets in Asia. From 1st September 2008 until 1st October 2008 the company’s sole shareholder was Netherlands-registered entity SEA Telecom Investments BV (“SEA Telecom”), a vehicle incorporated on 30th July 2008 whose sole shareholder is Panorpa Holding BV (“Panorpa Holding”). Panorpa Holding is wholly owned by Visor Growth Fund BV.
Between 30th July 2008 and 8th July 2011 SEA Telecom was owned by Alkatento Trading Ltd (“Alkatento”), a company registered in Cyprus on 5th June 2008 and dissolved on 21st October 2015. Alkatento’s shareholder at liquidation was BVI-registered ASIA Telecom Grouping Ltd and its director was Kazakh national Shyngys Utepov. The company’s past shareholders included Meridian CIS Ltd. The latter company appears to be affiliated with Meridian Capital Ltd, the investment fund widely acknowledged to have been previously controlled by Kulibayev and Kazakh businessman Nurzhan Sukhanberdin.
KEY FIGURES
window.tgpQueue.add('tgpli-64a807b147160')Goga Ashkenazi with Timur Kulibayev
The relationship between Telia and the Kazakh government has been initially channelled through Kulibayev. In approximately 2011–2012, however, Massimov took charge. A source in the Presidential Administration of Kazakhstan said that this was due to Kulibayev’s fallout with Nazarbayev over the issue of Kulibayev’s lover in London. The source considered that Kulibayev simply did not have the time and administrative reach to continue his engagement with Telia at that level.
According to two former Telia executives, throughout the years Kulibayev, and later Massimov, ensured — via bureaucratic mechanisms — that no major competitors arose for Telia. KCell, Telia’s local subsidiary, had enjoyed a market share of circa 50% for a long time and the revenues were constantly on the rise. In 2013 KCell declared total revenue of $1.02 billion. In return for this support as agreed with Kulibayev, Telia have been paying kickbacks.
The majority of kickbacks took the form of regular payments – masked as marketing and servicing contracts to companies close to the Kazakh political establishment as well as KCell management. The bigger kickbacks, which were directed personally to Massimov and Kulibayev, were done via acquiring overinflated assets. The principal Telia senior executive coordinating the relationship between Kulibayev, Massimov and the Board of Directors in Stockholm was Veysal Aral (“Aral”), KCell’s CEO and a former Ericsson executive, who sources understood to enjoy a cordial relationship with Kulibayev. A Telia source said that, the way the relationship functioned was that Aral first reached an agreement with the Kazakh politicians and then would convince Telia’s Board in Stockholm to approve the different deals. Telia’s Board of Directors was aware of the way things were done by Aral in Kazakhstan and did not oppose to this as long as KCell’s revenues would continue to increase.
From 1992 until 2007 Aral worked at Ericsson in Turkey, where he rose through the ranks to the role of Vice President. In 2007 he was named CEO of GSM Kazakhstan, later renamed KCell. He retained his position at KCell until 2013, when the Board in Stockholm promoted him to the role of Head of Business Area Eurasia. In 2014 he was dismissed from this position.
Initial Contact with Massimov
According to the former official in the Kazakh Agency of Information and Communications, since 2008 Massimov held a number of meetings with Telia’s then CEO Lars Nyberg (“Nyberg”) and Tero Kivisaari, Head of TeliaSonera Eurasia. Preliminary intelligence suggests that the initial contact between Massimov and Telia has been facilitated by Kulibayev, who is also understood to be a beneficiary of Kazakhtelecom and who was already engaged in different deals with Telia in South Asia.
The first documented instance in which Massimov had acted on behalf of Telia was in 2009, when he coordinated the necessary legal arrangements for GSM Kazakhstan to receive a 3G licence. Primarily, a source in the Kazakh government advised that Massimov requested the relevant state agencies to make available the 3G frequency band which the company necessitated. In the second phase of this process, Massimov, in his capacity as the Prime Minister, order the existing legislation on telecoms licences to be amended. Specifically, he has reduced the annual payments required by holders of 3G licences from KZT 2.8 billion (approximately $8.2 million) to KZT 500 million ($1.4 million).
In November 2010 these amendments were signed into law by President Nursultan Nazarbayev (“Nazarbayev”) and in November 2011 GSM Kazakhstan received the 3G licence. A source in the Presidential Administration stated that without Massimov’s support Telia could have not obtained the desired amendments in such a timely manner.
TRANSACTIONS WITH DORMANT ENTITIES
AR-Telecom and KT-Telecom
The first questionable transactions of considerable proportion in which Telia has been involved in Kazakhstan date back to 2007 and 2008, when the company acquired two dormant companies for a total consideration of circa