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Kazakhstan: American Arrested For Possible Involvement In Oil Scandal

  • Bruce Pannier

The arrest of an American businessman in New York this week may come as unwelcome news for the Kazakh president. The businessman, James Giffen, is believed to be a major figure in the illegal transfer of millions of dollars into Swiss bank accounts owned by Kazakh officials. Even as Giffen's case comes to a court in the United States, Kazakh officials are practicing damage control and downplaying Giffen's involvement in oil deals of the 1990s.

Prague, 3 April 2003 (RFE/RL) -- The arrest of an American businessman in New York this week has brought back an issue that several people in oil-rich Kazakhstan would rather was forgotten.

On 30 March, prominent oil consultant James Giffen was detained while trying to board a flight from a New York. He was arraigned in U.S. district court the next day.

Giffen faces charges of conspiracy to violate a U.S. law that forbids corrupt practices. The charges are based on a U.S. complaint that Giffen arranged payment of millions of dollars into Swiss bank accounts belonging to Kazakh government officials, including possibly President Nursultan Nazarbaev.

Professor Steve Sabol, an expert in Kazakh affairs at the University of North Carolina, told RFE/RL who may be uncomfortable with news of Giffen's arrest: "There are allegations that [Giffen] had strong relations with the administration, with President Nazarbaev's administration -- members of parliament, high-ranking members of parliament. But the specific allegation that concerns most people is his relationship with the president of Kazakhstan."

Giffen, the head a merchant bank with offices in New York and Kazakhstan, was a consultant to Nazarbaev in the 1990s, after Kazakhstan became independent and foreign oil companies started courting the Kazakh government. By some accounts Giffen grew so powerful that any company wishing an oil concession had to deal with Giffen before they dealt with Kazakh officials.

In 1999, Switzerland froze some 10 or more bank accounts with millions of dollars in them. Those accounts, according to Swiss officials, belonged to President Nazarbaev and other Kazakh nationals.

The U.S. Justice Department launched its own investigation and confirmed in 2000 that Giffen was under investigation for laundering money to Switzerland.

News of the investigation was given very little coverage in the official Kazakh press, but independent media and the political opposition have used the information to criticize Nazarbaev. In the process, some of the president's most vocal critics have suddenly faced criminal charges unrelated to the scandal.

Since the Justice Department launched its investigation, Kazakhstan has taken steps to lessen the impact of any scandal.

In June 2001, Kazakhstan implemented a one-month amnesty for anyone who might have taken money out of the country illegally. All money could be brought back and deposited in Kazakhstan's banks, no questions asked.

Kazakhstan's tax records dating from 1995 until the time of the amnesty were ordered destroyed.

In April 2002, Nazarbaev announced through his prime minister that he did indeed have a Swiss bank account holding $1 billion. He said he was holding the money as a reserve fund to be used in any national emergency.

The Kazakh president's press office has downplayed Giffen's role in advising the Kazakh government. Yerlan Baizhanov of the president's press office said Giffen held no particular post. "He used to work here [in Kazakhstan] as an oil adviser, but he was not a government employee or anything," Baizhanov said.

Press secretary Zhanai Omarov said he did know much about Giffen or any alleged scandal. "I hadn't heard about it. I saw something about it on the Internet. I have no official paper that says anything, but I have been at this job for only a little more than one year," Omarov told RFE/RL.

The deputy head of the Republican People's Party, Amangeldy Kerimtaev, said, however, that he does know of Giffen's name. "He was an adviser to the president since independence. Using his position in the oil business, he became rich. Not just he himself, but he made some of our [Kazakh] guys rich too," he said.

Nazarbaev is not named in the U.S. investigation.

According to "The Wall Street Journal" this week, Reid Weingarten, a Washington lawyer who has represented Kazakhstan, wrote a letter to the Justice Department last September saying he was concerned about relations between the U.S. and Kazakhstan if prosecutors "continue to aggressively investigate Kazakh government officials." He reportedly asked for a promise that Nazarbaev would not be indicted.

Nazarbaev may have avoided problems in Switzerland and the U.S., countries he has visited in the last year and a half, but Giffen's trial will be closely watched by opposition parties and independent media in Kazakhstan. If Giffen is found guilty in a U.S. court, it could put Nazarbaev in a bad situation at home and abroad.

(Edige Magauin of RFE/RL's Kazakh Service contributed to this report.)

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