The Khrapunov case’s Swiss laundering allegation challenge: where did the cash come from?

Both on the Interpol wanted list on behalf of the authorities of Kazakhstan, with a formal request for extradition from their hide-out in Switzerland, the former mayor of Almaty Viktor Khrapunov and his spouse Leyla are now also the subject of a judicial investigation in their hideout in Switzerland for alleged money-laundering. The burden of proof, however, lies by and large on the side of Kazakh prosecutors and their investigators. While the money has been transferred to Switzerland in a regular-looking manner and invested into objects not of criminal or otherwise illegal origin, it is now up to the Kazakh side to supply sufficient proof that the money has indeed been obtained by illicit means, not just to Kazakh but also to Swiss legal standards. Only in this way Swiss authorities can proceed with money laundering charges, which could make the couple end up in a Swiss prison for a maximum period of five years.

BY CHARLES VAN DER LEEUW, WRITER, ANALYST

Kazakhstan News

In (American) legal jargon, what Khrapunov has on his record in Kazakhstan could best be defined as a so-called scam. “A scam is a deceptive or fraudulent business scheme, related to swindles, cons, fraud and the like,” – according to a global legal NGO called Global Legal Resources (HG.org) which serves as a communication link for lawyers around the world, The most common intent of the scam artist or con artist is to obtain money, property and/or goods through illegal or deceitful means.” In the case of Khrapunov, the main tool to accomplish the scam has been abuse of public authority – leading to plots of land with high speculative value at undervalued prices, to be sold later through “connected” corporate chains at market value, with the revenue to be funneled to Swiss bank accounts with the cooperation of Khrapunov’s spouse and two children. Since 2007, the entire family lives in Switzerland where they have applied for political asylum while pouring hundreds of millions in Swiss francs into real estate and project development assets. The Swiss authorities have opened an investigation into the origin of all that money – but the burden of proof remains on the shoulders of Kazakh prosecutors, currently engaged in gathering proof enough to make a case of money laundering in the Helvetian Confederation.

Exemplary schemes include a nursery centre on the upside of Almaty’s Furmanova Street, located in the uppity business neighbourhood under development. On December 26, 2001 – more than four years after Viktor Khrapunov entered Almaty’s City Hall, a tender written out on his instruction was won by a firm called KazRealIncome, which obtained the site for the price of 52 million Kazakh tenge, with the commitment to reconstruct, refurbish and expand the centre at the cost of 464 million tenge (at the time, the tenge stood at around 120 to the US dollar). Nothing happened afterwards, until on September 26 2003 the site appeared on KRI’s list of “fixed assets”. Not that fixed, though, as it would appear – for on 1 October KRI sold the property for 52 million tenge to another private enterprise called Karasha Plus, which in turn the same day resold the plot for the same sum to a third firm called Building Service Company. According to documentation provided by the Almaty prosecutor’s office, there was little more and little less than the mayor’s spouse, Leyla Khrapunova, behind the three firms involved. On October 16, Madam Leyla finally sold the BSC, including all its property, to an outside party, apparently of good faith, called Stroytekh, for the total sum of 2.079 billion tenge.

The money was to be transferred by Stroytekh in chunks to a number of accounts at the Eurasian Development Bank, which is the property of three Kazakh tycoons, Patokh Chodiyev, Alizhan Ibrahimov and Alexander Mashkevich (the two former are of ethnic Uzbek origin while the latter comes from a Russian Jewish family), who also control one of Kazakhstan’s largest mining and metal enterprises Eurasian Natural Resources Corporation, which is listed on the London Stock Exchange. From there, the cash was transferred to bank accounts in Switzerland on the name of Elvira Kudryashova, Viktor Khrapunov’s daughter from his first marriage.

The nursery centre was by no means the only asset that determined the sales value of the Building Service Company by Almaty’s first lady. On August 25 2003, also on Viktor Khrapunov’s order, though apparently with the complicity of a number of City Hall officials, a small but blue-chip site with a glossy plaza building under construction, was confiscated “for public interest” – apparently with the project developer, whose name has not appeared in the public domain, having run into trouble which is nothing unusual in Almaty, or anywhere else in the world for all it matters. On September 25, the plot was sold on behalf of the municipality for 15.6 million tenge to Karasha Plus, which in turn sold it to Building Service Company, thereby adding an estimated half billion tenge to its asset value.

The list in the latest package of I nformation from the authorities is far from complete. Downtown Almaty, at least 16 prime sites have been allocated in closed procedures circumventing all open bidding requirements through corporate stock swaps, facilitated by municipal authorities on Khrapunov’s order and carried out by companies under control of the mayor, in most cases through his spouse and relatives. Some of these larger objects appropriated by the Khrapunovs included a plaza on the corner of Gogolya and Panfilova Streets, apartment and shopping space blocks on Furmanova Street Dostyk Avenue, both on the edges of the uppity business neighbourhood of Samal-2. Further uphill, property, comprising parts of protected natural zones, included a forest site named Wood Fairy Tale and another one known as Oak Grove were purchased by a company called Gulmira Ltd., run by one of the Krapunov pair’s associates by the name of Shebityevov and believed to be closely affiliated to VILED the Khrapunovs’ longstanding key instrumental property enterprise, for the negligible amounts of 1.8 and 2.1 million tenge respectively. Public property has also been sold illegally to another one among Khrapunov’s shell firms called Phoenix Unlimited, run by a certain G. Mukashev, who in particular obtained blue-chip locations with permission to demolish the kindergardens, pensioners’ homes and other social facilities located on them, with the aim to build commercial glamour objects on them.

Over summer 2003, Viktor Khrapunov started to look a bit further beyond the outskirts of Almaty, towards the Tien Shan mountain range where a number of rivers and lakes are located which provice the city with the bulk of its drinking water. All zones concerned are public property and their sale is strictly forbidden by law. Yet, in the second half of 2003 Viktor Khrapunov and his team of associates managed to sell on the municipality’s behalf a number of sites located within the area totalling 8.7331 hectare, to a company (either KazRealIncome, Karasha Plus or yet another unnamed firm) in which Leyla Khrapunova initially had a stake of 51 per cent and later of 100 per cent, which subsequently sold most of the plots of land for the total sum of 1.18 billion tenge to BSC, while the remainder was bought by a company called Asian Development Holding for 111 million tenge. It is not clear whether the assets resulting from the deal came to BSC before or after Leyla Khrapunova sold the enterprise. What has become clear is that the Asian Development Holding was under control of Ilyas Khrapunov, then already residing in Switzerland with his half-sister, and that little later he sold the enterprise to Elias Import Export, a firm based on the British Virgin Islands and also believed to be owned by Ilyas. The revenue of that sale is supposed to have stood at 7.57 million US dollar, $5.32 million of which was wired to Ilyas’ Swiss bank account and $2.2 million ton Elvira’s.

According to the latest information made available by Kazakh authorities, the last known property scam took place in 2004, not long before Viktor Khrapunov left the City Hall of Almaty to obtain the post of minister of emergencies in the Kazakh cabinet. In early spring, he singed a decree for the sale of 2.6321 hectare of land, consisting of two plots, also located in freshwater resource-holding zones. In late 2005, both sites were sold to a certain A. Khachaturian for the sum of 1.223 billion tenge. This time, the trail of corporate tools apparently having been liquidated, the money was directly transferred to Leyla’s personal accounts, from where it found its way to Switzerland. In all, between 2003 and 2007, Elvira Kudryashova alone appears to have received 40.873 million US dollar and 7.769 million euro on her accounts at Banque Schroeder & Co and Crédit Suisse.

The overall aim in revealing the abuses the Khrapunovs are being charged with can be seen as threefold: 1/ to bring the culprits to justice, 2/ to get the stolen property and cash back and 3/ to discourage others from following the culprits’ example. The task is global, and enormous it is, encompassing a kaleidoscope of issues including sense, behavior, strategy and harmonization. Worldwide, economic crime, better known as white-collar crime as opposed to traditional cloak-and-dagger crime, has existed since the dawning of civilization, mainly in the form of swindle in trade, market orchestration and administrative extortion and kickbacks on various levels. Today, geopolitical protectionism, often accompanied by economic protectionism, is being abused by crime which is becoming better and better organised with the often successful aim to outmatch law enforcement. Sacrificing nations’ territorial integrity for the latter’s sake is out of the question – since the harm in terms of loss of control by populations over their authorities would exceed the benefit of limitless law enforcement globalisation by far – most of all because there is no such thing as global law in the legal sense of the term.

Finding a formula, therefore, that leaves the principle of territorial integrity intact while facilitating the race against those who mean to abuse it to protect ill-gotten gains, is a task which politicians with clout in the world so far have failed to meet. Harmonising legislations could be a first step – meaning bringing excessive penalties in some countries back to more humane levels and closing gaps and loopholes in some other jurisdictions – especially tax havens where bounties can easily be kept out of reach. Furthermore, globalizing jurisdiction is a measure that should be taken with extreme caution and with plenty of safeguards against political abuses and only to be applied in well-defined cases. Academic institutes, other think-tanks and individuals could help to formulate rules and conditions needed for such an operational structure – even though they should realise from the very beginning that the last word is to the people and people’s “organic motivation” to create a society where opportunities are available with realistic limits to opportunism and subsequent abuse.

In this regard, the Swiss Criminal Code in its prohibition and penalization of money laundering (see below) stretches pretty far – even further than in many a country having a better reputation for its measures against corruption and other forms of financial and economic crime. In Britain, where two Kazakh banks, Alliance and BTA, who have been victimised by multi-billion-dollar embezzlements committed by their former managements and controlling shareholders (for all it matters, it should be recalled that Ilyas Khrapunov is married to the daughter of former BTA president and controlling shareholder Mukhtar Ablyazov, now on the run from Kazakh, Russian, Ukrainian and English justice alike, and some observers tend to suspect “synergies in crime” between the two families), the location of the crime is closely connected with jurisdiction over it – leading to legal battles between accused and their victims with no end in sight. In Switzerland, however, the location of the money laundering operation (these days, the cyberspace could be considered the location where money changes hands and colour) does not belong to criteria of jurisdiction – which should give the Kazakh side in the causa Khrapunova some hope for justice to be carried out.

Art. 305bis Swiss Criminal Code

1. Whoever carries out an act that is aimed at frustrating the identification of the origin, the tracing or the confiscation of assets which he knows or must assume originate from a felony, is liable to a custodial sentence of up to three years or to a monetary penalty.

2. In serious cases, the penalty is a custodial sentence of up to five years or a monetary penalty. A custodial sentence shall be combined with a monetary penalty of up to 500 daily penalty units. A serious case is constituted, in particular, when the offender:

a. acts as a member of a criminal organization;
b.
c. acts as a member of a group that has been formed for the purpose of the continued conduct of money laundering activities; or
d.
e. achieves a large turnover or substantial profit through commercial money laundering.
f.
3. The offender shall also be liable to the foregoing penalties where the principal offense was committed abroad within a jurisdiction provided such an act is also an offense at the place of commission.

 source:- http://kazworld.info/?p=27047

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