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Kyrgyzstan: Follow The Money -- The Akaev Investigation

High-level corruption within the government was one reason protesters wanted President Akaev to leave office Back in the 1970s, two young American journalists got a bit of simple advice from an inside source in the administration of President Richard Nixon: "Follow the money." They did, and the resulting scandal toppled the president. Thirty years later and a world away, Kyrgyz President Askar Akaev fled as a throng of enraged demonstrators ransacked his office. Now, the resulting scandal is throwing light on some of the financial dealings that contributed to the protestors' rage. But even as the postrevolutionary furor in Kyrgyzstan proves that nowhere is the dictum "follow the money" more relevant than in post-Communist kleptocracies, it is also highlighting the immense difficulties that beset the would-be cleansers of corruption's Aegean stables.

Since former Kyrgyz President Akaev deserted his post on 24 March, the bulk of attention has focused on the sprawling business interests allegedly controlled by Akaev, his family, and their associates. In mid-April, acting President Kurmanbek Bakiev created a commission to investigate these alleged assets, RFE/RL's Kyrgyz Service reported on 19 April. Headed by Deputy Prime Minister Daniyar Usenov, the commission soon announced a "tentative" list of 42 businesses to be checked for ties to the Akaev clan, reported. Usenov said, "The commission will also investigate money transfer schemes through offshore zones, schemes for skimming from the budget, and from such enterprises as Kumtor [gold mine]," Interfax reported.

But the commission quickly discovered that its work would be tough going. At a 27 April press conference to discuss the commission's initial efforts, Usenov stressed that it was difficult to determine just who controlled many of the companies on the list, reported. Citing the examples of the Kant Cement and Slate Factory and Kumtor Gold Mine, Usenov noted that the companies' founding documents did not contain any telltale names. At the same time, the list was growing. Usenov told journalists that the commission had added 31 companies to the original list of 42 businesses. He also said that "around 20 criminal cases" had been opened, reported.

Meanwhile, the owners of some businesses on the list began to push back. Vladimir Shtainart, the owner of the Interglass factory, told a meeting of the International Business Council in Bishkek on 26 April that the inclusion of his business in the inventory of firms with suspected Akaev links was a mistake, Kabar reported. Usenov agreed, saying, "[an] investigation showed that the factory was not part of the former president's family business."

Other businesses responded more aggressively. Valerii Polyakov, the director of Manas International Service, an aircraft fuel supplier included on the list and allegedly linked to presidential son Aydar Akaev, told a press conference on 28 April that the investigation into the company could imperil fuel shipments to airlines and the U.S. air base in Kyrgyzstan, reported. Insisting that the company had no links to the Akaev family, Polyakov complained that the investigation, which froze Manas International Service's accounts, had paralyzed the company. Polyakov warned that fuel for outgoing flights would last only until the end of May.

For his part, Usenov accused Manas International Service and Aalam Service, another fuel supplier on the list, of sabotage. He told Interfax on 28 April, "As far as I am aware, these two companies, which hold a monopoly, have 8,000 tons of fuel at present. But these structures are telling the embassies of Russia and the United States that they won't refuel Aeroflot planes and the [U.S.] military base because of the investigations into their activities."

Usenov charged that a controlling stake in Manas International Service belonged to Aydar Akaev, the son of the former president, while Adil Toigonbaev, the ousted president's son-in-law, owned a controlling stake in Aalam Service. Usenov also suggested that Manas International Service was evading taxes, posting sales of $30 million a year and profits of "only a few thousand dollars."

On another front, one of the most significant assets on the original list of 42 businesses with suspected Akaev ties is currently embroiled in a dispute that pits a group of Kazakh investors against one of Russia's largest financial-industrial groups. BiTel is Kyrgyzstan's largest cellular operator, worth approximately $250 million, according to the Russian business daily "Vedomosti." At a 27 April news conference, Usenov detailed its formidably complex ownership structure, reported. He explained to journalists: "The founders of the Kyrgyz company BiTel were three offshore companies registered on the Isle of Man. The founders of those companies are two companies registered in the Seychelles. The founders of those companies are two Liberian companies. According to our information, the founders of those companies are, in turn, the Akaev family on the one hand, and [BiTel's] management headed by Mr. Turdukulov on the other."

As "RFE/RL Central Asia Report" detailed on 19 April, Kazakhstan's Seimar Investment Group announced its acquisition of BiTel on 13 April even as Russia's Alfa Group claimed to hold an option to buy BiTel. But Alfa soon seized the upper hand, announcing in a 28 April press release that a Bishkek court had ruled on 15 April to turn over 100 percent of BiTel to the Kazakh company Fellowes, which is owned by Alfa Group. Alliance Capital, a Kazakh investment group affiliated with Seimar Investment Group, issued its own press release on 28 April, blasting the court decision and threatening to pursue its case with the London Court of International Arbitration.

As events continue to unfold, we are likely to learn more about the financial underbelly of Akaev's Kyrgyzstan. In the course of its investigations, Usenov's commission has sent requests to Interpol and the U.S. and British embassies for help in locating Akaev's accounts, reported. But many top figures in the current leadership were also prominent members of the country's elite under Akaev, often as high-ranking officials. A no-holds-barred investigation could have unpredictable consequences, and some are likely to prefer predictable consequences.

In a 27 April interview in "Delo No," Daniyar Usenov touched on the perils of an overzealous inquiry into corruption, at the same time underscoring the core conundrum his commission will face as it proceeds with its investigations. As Usenov outlined the various tax-evasion schemes businessmen used under Akaev, he stressed that the focus should be on future compliance rather than past wrongdoing. He said, "We're not asking about what happened yesterday. Otherwise, we'll have to put half the country in jail." While this may be true for the lower-level corruption that plagues the country, if the commission's probe into high-level rot is to have any hope of ensuring a better tomorrow for Kyrgyzstan, it has no choice but to dig deeper into "what happened yesterday."