U.S. Investigating Businessman in Kazakh Bribes

U.S. Investigating Businessman in Kazakh Bribes

Reuters
September 25, 2000

WASHINGTON - The Justice Department believes that U.S. businessman James Giffen allegedly orchestrated the transfer of more than $30 million in oil commissions to Kazakhstan President Nursultan Nazarbayev and other Kazakh leaders, the Washington Post reported Monday.

The newspaper said it obtained documents from a Justice Department probe into allegations that Giffen violated a federal law that prohibits bribing foreign officials.

It said the documents charge that Giffen handled the money transfers through an intricate network of shell companies registered in the British Virgin Islands and through Liechtenstein-based foundations.

The Post said Giffen offered Akezhan Kazhegeldin, a former Kazakh prime minister who was under investigation for disappearing oil payments, a deal last August, urging him to end his outspoken opposition to Nazarbayev and put a lid on the corruption allegations in exchange for protection from prosecution and a high-ranking job.

Giffen, a 60-year-old oil consultant based in New York, has done a wide variety of services for Nazarbayev, arranging presidential trips to the United States, sealing multibillion dollar oil deals and becoming an intermediary for U.S. companies seeking to do business with the Kazakh government.

The investigation of Giffen was first reported in July after the leak of a Justice Department memorandum formally requesting Swiss government assistance.

In an interview earlier this month, Kazakh Foreign Minister Erlan Idrissov told the Post that Giffen retained the "full confidence'' of the Kazakh government and "Everything was done in an absolutely transparent, lawful and acceptable manner.''

The Justice Department has been reviewing cartons of documents supplied by oil companies linked to the suspicious transactions: BP Amoco (quote from Yahoo! UK & Ireland: BP.L), Exxon Mobil Corp (NYSE:XOM - news); and Phillips Petroleum Co (NYSE:P - news). An Exxon Mobil spokesman said the company was cooperating with the U.S. attorney's office in Washington on "an ongoing grand jury investigation.'' Spokesmen for all three oil companies denied wrongdoing, the Post said.

Giffen's Washington law firm, Akin, Gump, Strauss, Hauer & Feld, described allegations of misconduct against their client as "without substance'' and said Giffen had been operating under the direction of the Kazakh government.

Sources close to Kazhegeldin said he rejected the offer, but Giffen sources said that statement was "not correct'' although they gave no further details, according to the Post.

It said an Aug. 17 letter from the Justice Department to the Swiss police, which identifies "Giffen and others'' as subjects of the investigation, singled out as "highly suspicious'' three big oil deals involving payments from Amoco, Phillips Petroleum and a consortium of oil companies that included Mobil between May 1997 and September 1998.

In each case, the money was allegedly channelled through a pyramid of escrow accounts and shell companies to the Liechtenstein-based foundations of Kazakh officials and their families.

All three oil deals being investigated by the Justice Department involved payment of large sums -- up to $12 million -- to the account of Orel Capital Ltd., identified by the Justice Department as a shell company ultimately benefiting Nazarbayev, the Post reported.

The Orel Capital account grew to around $84 million by August 1999, the Post said. After Swiss magistrates launched a money laundering investigation, nearly this entire amount was then transferred to an official Kazakh government account.

According to the Justice Department letter, there was a single payment of $6 million to an account benefiting the family of former prime minister Kazhegeldin in August 1997.

Kazhegeldin's Washington lawyer, Charles Both, described the payment as an attempt to "compromise'' his client and "implicate him'' in the corruption.

The Justice Department letter says Giffen "ultimately transferred'' tens of millions of dollars to the accounts of shell companies registered in the British Virgin Islands, but does not say whether he acted by himself or through an intermediary, according to the Post report.

Even if prosecutors can prove that large amounts of oil money ended up in accounts benefiting senior Kazakh officials, it may be difficult to show whether the companies knew the payments would end up in the hands of shell companies rather than official Kazakh government accounts.

Spokesmen for all three U.S. oil firms insist the companies acted under the instructions of the Kazakh government.

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