Kazakhstan Corruption: Exile Alleges New Details

A former member of the first family of oil-rich Kazakhstan is accusing its authoritarian ruler of extensive corruption, potentially complicating U.S. efforts to improve relations with the strategically important Central Asian state.

From a hiding place in Europe, the former son-in-law of Kazakh President Nursultan Nazarbayev asserted in interviews with The Wall Street Journal that Mr. Nazarbayev has diverted billions of dollars in state assets and long taken commissions from companies doing business in his mineral-rich land.

The ex-son-in-law, Rakhat Aliyev, who has had a bitter falling out with Mr. Nazarbayev, also said the regime has conducted an operation in the U.S. designed to investigate its critics, burnish its image and resolve legal problems. The operation brought the family confidential U.S. phone records and customs data, said Mr. Aliyev, who was once vice chairman of Kazakhstan's intelligence services.

While by no means making the first claims of corruption in Kazakhstan, Mr. Aliyev alleged that its president personally profits from his country's economic riches to a much greater extent than previously documented. He painted a picture of a Kazakh economy in which the president not only routinely takes illicit commissions but also holds hidden stakes in the copper, uranium and hydrocarbon industries, and maintains a network of offshore bank accounts.

Although it wasn't possible to corroborate all of his assertions, Mr. Aliyev backed up some of them with bank statements from Lebanon and copies of checks drawn on banks in Indonesia and Liechtenstein. Documents made available by others with knowledge of the ruling family's finances support some of Mr. Aliyev's claims about the existence of a banking network and about monitoring critics.

Mr. Aliyev identified a Washington consultant named Alexander Mirtchev as the point man for President Nazarbayev, not only in seeking to resolve his legal problems but in helping to manage some of the fortune he has accumulated in 19 years in power.

The Federal Bureau of Investigation and the Manhattan district attorney are looking into Mr. Mirtchev's banking activities, according to lawyers and businessmen who have had contacts with investigators. The inquiries are said to be at an early stage. Representatives for the Justice Department and the district attorney's office had no comment.

The Kazakhstan government didn't respond to requests for comment. A lawyer who represents it in a long-running U.S. investigation of suspected oil-company bribery of Kazakh officials, Reid Weingarten, referred questions to the Kazakh government.

Mr. Aliyev last year lost a power struggle in Kazakhstan, a sprawling land of windy steppes whose oil boom has spawned luxury hotels and a casino zone. He wound up accused of kidnapping and other crimes. He took refuge in Austria, where he had been the ambassador.

Mr. Aliyev said he has firsthand knowledge of how the regime works because he took part in many of its operations. "I never said that I am an angel or that I didn't know what the regime was doing," he said. A Kazak court convicted him in absentia of racketeering, kidnapping and trying to overthrow the government, sentencing him to a long prison term. A court dissolved his marriage. Mr. Aliyev said his former father-in-law has adopted his two youngest children.

A squat and boyish 46-year-old with jet-black hair, Mr. Aliyev gave a detailed and sometimes self-serving account of his troubles, watched over by impassive bodyguards chain-smoking nearby. He described himself as a would-be reformer who grew disillusioned with Mr. Nazarbayev's autocratic rule. Other exiled Kazakhs say Mr. Aliyev is an ambitious tycoon who profited mightily from his family and official positions but ultimately overreached.

Mr. Aliyev claimed he was speaking out in hopes of striking a blow against the Nazarbayev regime. But his security would also be enhanced should he manage to obtain official protection from U.S.

Washington wants good relations with Mr. Nazarbayev because of his country's strategic location between Russia and China and its mineral riches, which include uranium, copper and iron ore as well as oil. But maintaining cordial ties has been difficult because of the regime's authoritarian rule and poor human-rights record. The new allegations, coming from someone recently so well connected, may make the balancing act even harder.

Mr. Aliyev asserted that Mr. Nazarbayev and his advisers routinely collect money when state industries are privatized and garner commissions from virtually anyone wanting to do large-scale business in the country. "Part of this money came from the United States, some came from other companies and countries," he said.

He said Mr. Nazarbayev has used some of his money to advance the regime's interests in Washington, using crisis-management consultants. Lobbying by foreign governments, of course, isn't necessarily illegal. But Mr. Aliyev produced what he said were consultants' extensive reports to the Nazarbayev family, telling how they had covertly enlisted think tanks and former U.S. officials to improve Mr. Nazarbayev's reputation and influence the bribery probe.

Consultants tracked Mr. Nazarbayev's critics when they were in the U.S., documents in Mr. Aliyev's possession appear to show. One is the text of an email that Mr. Aliyev said a London consulting firm called Krull Corp. (UK) Ltd. provided to the Nazarbayevs.

It described the passage of a Kazakh politician and potential Nazarbayev rival through Customs at New York's JFK airport. The email included the man's flight number, type of visa and U.S. hotel. Federal border-control agents collect such information but keep it in a restricted database.

The original shareholder of Krull UK after its founding in 1996 was Mr. Mirtchev -- the man Mr. Aliyev describes as Mr. Nazarbayev's point man -- according to U.K. records. (Krull isn't related to Kroll, the large consulting and investigative firm that is a unit of Marsh & McLennan Cos.)

Mr. Aliyev also displayed what appeared to be a report analyzing the cellphone records of a Washington lobbyist for the Kazakh political opposition. Mr. Aliyev said that Mr. Mirtchev provided President Nazarbayev with this report. Mr. Nazarbayev "was very much impressed when Mr. Mirtchev brought the copies of mobile and office phone" records, Mr. Aliyev said in the interviews. U.S. law prohibits unauthorized disclosure of phone records.

Mr. Mirtchev isn't just a political adviser to the Nazarbayev family but one of its key financial managers, according to Mr. Aliyev and others with knowledge of the family's affairs. The Nazarbayev family has at least hundreds of millions of dollars in assets in banks around the world, according to Mr. Aliyev, an assertion that is seconded by current and former U.S. foreign policy officials. Last year, the Kazakh government named Mr. Mirtchev an adviser to the country's sovereign-wealth fund.

Brian Shaughnessy, a lawyer for Mr. Mirtchev, said in a letter that Mr. Aliyev's claims "are false and have clearly been manufactured as part of a public smear campaign secretly mounted by your source, a convicted criminal and a fugitive from justice . . . in an attempt to regain political power."

Later, Mr. Shaughnessy added: "Mr. Mirtchev has never contacted anyone in any branch of the U.S. government, U.S. public opinion, policy, and laws, or political parties or conducted 'investigations' on behalf of the Republic of Kazakhstan or senior officials of Kazakhstan." In addition, Mr. Shaughnessy said that Mr. Mirtchev "has never moved any money to any accounts on behalf of the government or senior officials of Kazakhstan."

Mr. Aliyev made available bank records showing funds moving from a Nazarbayev family member to Krull UK. The records show two 2004 transfers totaling $4 million from World Media Corp. SAL of Beirut. That firm is controlled by Mr. Nazarbayev's daughter Dariga Nazarbayeva -- Mr. Aliyev's ex-wife -- lawyers for the consultants have acknowledged.

Records made available by Mr. Aliyev also show other transfers totaling $3 million to Krull UK from another Beirut firm that, according to Mr. Aliyev, is also controlled by Ms. Nazarbayeva. The wire transfers were confirmed by people who have access to international bank-transfer data.

According to these people, Krull UK has conducted large financial transactions through an affiliated Gibraltar firm called Brookrange Ltd. People with knowledge of the Nazarbayev family finances say they believe Brookrange has been used to manage the Kazakh first family's assets.

In recent years, Brookrange has made large wire transfers -- ranging from a few million dollars to over $100 million -- to obscure companies around the world, according to people who have seen records of the transfers.

Corporate statements filed with British regulators state that Brookrange was the owner of Krull UK from 1998 to 2004. A lawyer for Brookrange didn't respond to a request for comment.

According to U.K. corporate records, one financial backer of Krull UK is a Kazakh banker who sits on the board of the Kazakh telephone company. That banker, Aigul Nurieva, is also an investor with the Kazakh prime minister in a company in Singapore, records show. Ms. Nurieva helps Mr. Mirtchev manage offshore assets of the Nazarbayev clan, according to Mr. Aliyev and to others with knowledge of Nazarbayev family finances.

A spokesman for Ms. Nurieva denied that she manages money for the Nazarbayevs.

As for Mr. Aliyev's claims of money being paid for the right to do business in Kazakhstan, a recent civil settlement bears on the issue. Last year, settling with the Justice Department and the Swiss government, the Kazakh government agreed it would no longer contest U.S. allegations that Mr. Nazarbayev and other top officials had received tens of millions of dollars in payments from U.S. oil companies a decade ago.

The settlement freed up, for use in Kazakh social programs, a portion of $1 billion in suspected bribe money long frozen in Swiss bank accounts.

Some of that money allegedly came via a middleman named James Giffen, who has been under U.S. indictment since 2003. His case is mired in a dispute over his claim that he was working for U.S. intelligence. Both Mr. Giffen and the oil companies deny involvement in bribery.

Filings by the Justice Department in U.S. courts and in Europe, as well as bank statements and other documents, lend further support to Mr. Aliyev's claims about payments for the right to do business in Kazakhstan. One such document states that in the mid-1990s, South Korea's Samsung Group, while seeking the right to mine copper ore in Kazakhstan, paid $1 million into a Swiss bank account controlled by Orel Capital Ltd. Orel was owned by Mr. Nazarbayev, the Justice Department said in a New York federal court filing.

A Samsung spokesman requested more details about the matter but didn't reply after receiving them. The record showing the payment was an analysis prepared for the Kazakh government by outside consultants.

In his interviews, Mr. Aliyev also said the Nazarbayev family secretly holds a stake in or financially benefits from two Indonesia-based companies that have extensive operations in Kazakhstan. Kazakh opposition figures have made a similar allegation, except they added that Mr. Aliyev himself was among those benefiting. He denied that. Efforts to reach the Indonesian companies were unsuccessful.

Mr. Aliyev also said President Nazarbayev had an interest in a 2005 uranium-mining deal with a Canadian businessman named Frank Giustra. It was signed in the days following a meeting the Kazakh president had with Mr. Giustra. The uranium deal was with the Kazakh national nuclear-energy company, called Kazatomprom.

Mr. Nazarbayev himself owns that company, through offshore entities, Mr. Aliyev asserted.