Dinara Kulibayeva Ready to Give KBTU Building to State, Was Initial Sale Legal?

Last autumn, the Kazakh-British Technical University trial began in Almaty. The Almaty Prosecutor's Office initiated the litigation. According to its version, the Nursultan Nazarbayev Education Fund, which owns the university, illegally acquired it in 2018 from KazMunayGas. The foundation, headed by Dinara Kulibayeva, claims the contrary. At the end of January, the court suspended the process for mediation. While the case is in limbo, Orda.kz has looked into the matter.

Undersold?

The Kazakh-British Technical University, established in 2000 on the initiative of Nursultan Nazarbayev, became a KazMunayGas asset in 2003. The national company owned it for the next 15 years. In 2018, it was sold for 11.37 billion tenge to the Nursultan Nazarbayev Education Fund (NNEF). The Almaty Prosecutor's Office would become skeptical, however. 

The cost for which the university was sold caught the supervisor authority's attention. The Prosecutor's Office believes that it was greatly underestimated. An incorrect assessment conducted by the investment brokerage company Baker Tilli Kazakhstan Advisory facilitated this, according to The Prosecutor's Office.

According to the audit of the consolidated financial statements for 2017 (the year before privatization), the assets of the KBTU group of companies amounted to 17.1 billion tenge, and for KBTU alone — 14.5 billion tenge,The Prosecutor's Office said in a statement.

They are confident that the company's cost should have included sponsorship from Tengizchevroil allocated for the creation of the Kazakhstan Maritime Academy. This was supposed to amount to $25 million. The assets of IIT KBTU are also considered to be severely underestimated.

The Nursultan Nazarbayev Education Fund does not agree with the prosecutor's office's position. In the NNEF's objection, which has been provided to Orda.kz, their position is as follows: 

Referring to the "audit of consolidated financial statements," the litigant provides various absolute figures, to which they give their arbitrary explanation.

Meanwhile, according to the foundation, the university was bought for even more than the market value indicated by the appraiser. 

The market price of 100% of the shares of KBTU JSC was determined in the amount of 11.36 billion tenge on the basis of an assessment report prepared by Baker Tilly Kazakhstan Advisory LLP, which is a member of the Almaty Regional Chamber of Appraisers. The final trading price exceeded the market price according to the assessment report and amounted to 11.37 billion tenge. In fact, the fund paid more than 12 billion tenge under the terms of the agreement, taking into account interest for installment payments established by the terms of the agreement,  NNEF representatives claim.

Incidentally, the fund also has claims against the appraisers The Prosecutor's Office employed, i.e. Business Audit LLP and Dalel Consulting. According to NNEF, their employees are not appraisers and therefore had no right to evaluate KBTU's assets. However, Ekaterina Trubacheva, who conducted the assessment, and whom the foundation mentions in its objection, is listed in the register of the "Metropolitan Chamber of Appraisers". 

The appraisers' qualifications will be assessed by the court if the process does resume. 

Fly-by-nighters? 

The six-year-old deal, i.e. the competition process won by NNEF, also caught the attention of The Prosecutor's Office. The Prosecutor's Office believes that regulations were formally observed, and two of the three participants — the Yug Management Company and AGDS Group — appear to have qualities of Fly-by-night firms. The third participant was NNEF. 

The Prosecutor's Office has also drawn attention to one overarching factor connecting the dots between these firms: Gulzana Serikova. In March 2018, she bought the Kazakh Academy of Transport and Communications named after Tynyshpaeva, currently the Academy of Logistics and Transport. 

The Prosecutor's Office believes that the transactions carried out by these companies were artificial because they all belonged to Gulzana Serikova. The litigation states that contracts were concluded with them for the supply of equipment, as a result, the funds were returned due to lack of supplies.

The NNEF believes that the competition was not formal, and all the requirements for it were met "regardless of the credibility of the litigating party's arguments." They also do not consider the other two bidders fly-by-nighters. Only AGDS Group is mentioned in the fund's objection.

Main Asset

The Nursultan Nazarbayev Education Fund is confident that the litigation could not have been started in principle, as the statute of limitations has run its course. The fund refers to the Law of the Republic of Kazakhstan "On State Property". Paragraph 3 of article 112: 

The limitation period for disputes related to the invalidation of the contract of sale is six months from the date of its signing, if litigation is brought by a party to the contract. If litigation is filed by other interested persons or by the prosecutor, the limitation period for disputes is six months from the day when the litigating party learned or should have learned about the circumstances that are the basis for invalidating the contract, but no later than three years from the date of signing the contract.

The NNEF also believes that there can be no mediation in such a process because The Prosecutor's Office is involved: median agreements are not concluded with it. 

At the same time, the fund declares that it is ready to transfer to the state its main asset from the KBTU group — the building at Tole bi, 59. This is the address at the former Government House on the Old Square of Almaty. 

Taking into account the cultural value of the building, in which historical decisions of the state were made, in particular, the Declaration of Independence was signed, the shareholder is considering the possibility of voluntarily transferring the building to the state ownership at no cost. At the same time, the university needs temporary accommodation in this building on the terms of trust management to preserve the educational license and the educational process. In this regard, the Foundation is ready to transfer 5% of shares to the state ownership at no cost to comply with the qualification requirements for universities when providing buildings from state ownership to trust management, NNEF stated.

However, the Almaty Akimat has not received anything about NNEF's plans to transfer the building.

There have been no appeals from the Nursultan Nazarbayev Education Fund to the Office of State Assets of Almaty about the readiness to transfer the KBTU building located at 59 Tole bi Street. According to the rules for the acquisition of property rights by the state under a donation agreement, the owner applies to the Akimat of Almaty with an application for the gratuitous transfer of property with the necessary documents attached. After that, in case of economic expediency, the Akimat of Almaty city makes a decision on taking ownership of the property, the told Orda.kz.

But will the Akimat decide that it is advisable to accept the KBTU building? Everything will depend on the court's decision and perhaps there will be nothing to give.

"Nursultan Nazarbayev Education Foundation" commented

Nursultan Nazarbayev Education Foundation elaborated on its position. Orda.kz publishes the fund's unedited response without comments. 

Regarding the acquisition of KBTU:

The NNEF Fund acquired shares of the Kazakh-British Technical University from JSC NC KazMunayGas on legal grounds, namely through electronic auctions for their sale. The Prosecutor's Office does not dispute the electronic bidding, does not impose requirements on the competition commission, by whose decision the Fund was recognized as the winner. The litigating party believes that the value of the shares was undervalued. Specialist Trubacheva E.V., who gave an assessment on the undervaluation, does not have the qualification of an "expert" and is not a member of the expert council of the Metropolitan Chamber of Appraisers.

The Foundation does not agree with the prosecutors' litigation and has filed several applications, petitions and objections addressed to the judge. For example: The market price of 100% of the shares of KBTU JSC was determined in the amount of 11.36 billion tenge on the basis of an assessment report prepared by Baker Tilly Kazakhstan Advisory LLP, which is a member of the Almaty Regional Chamber of Appraisers. The final trading price exceeded the market price according to the assessment report and amounted to 11.37 billion tenge. In fact, the Fund paid more than 12 billion tenge under the terms of the agreement, including interest on installment payments established by the terms of the agreement. Thus, this asset has become one of the most expensive lots sold at public auctions of all time, as reported by the State Property and Privatization Committee of the Ministry of Finance of the Republic of Kazakhstan in January 2024. 

It is worth noting that since the purchase, shareholders have invested an additional two billion tenge in the repair of the main educational building of KBTU. The total amount of investments exceeds 3.6 billion tenge.

Regarding "fly-by-night firms"

The consideration of this litigation in court directly violates the rights of the competition commission, since it is not involved in the process and is deprived of the right to present its objections. The article contains excerpts from the litigation that YUG Management Company LLP and AGDS Group LLP participated in the competition only to create "formal competition", these partnerships have the characteristics of "fly-by-night firms". In the absence of relevant court decisions confirming the charges against other contestants, the prosecutor's office made this the basis for litigation against the Foundation.

From the bank statements of Bank CenterCredit JSC and Forte Bank JSC examined by the court, it follows that the turnover of YUG Management Company LLP for the period from August 22, 2018 to June 03, 2019, i.e. in less than one year, amounted to 1,022,761,500 tenge, and the turnover of LLPAGDS Group" for the period from November 02, 2017 to May 29, 2020 amounted to 144,489,750 tenge. Under these conditions, it is impossible to talk about the absence of financial and economic activities of these partnerships for the specified periods. The prosecutor's office has not proven the absence of the payroll fund, and tax liabilities from YUG Management Company LLP and AGDS Group LLP.

According to paragraph 3 of Article 100 of the Law of the Republic of Kazakhstan "On State Property" auctions in which only one participant participated are recognized as valid if the participant confirmed the starting or announced price. It follows from paragraph 3 of Protocol No. 101747 that the starting price of the object of sale — 100% of the shares of KBTU JSC was 11,364,544,000 tenge. The sale price was 11,370,000,000 tenge. Thus, the block of shares was sold to the Fund at a price exceeding the starting price, therefore, regardless of the participation of other participants in the auction, these biddings (auctions) are valid.

Regarding the expert

The conclusions of Trubacheva E.V. were given from two audit companies, in one of which — DALEL CONSULTING GROUP LLP — she is the director. Information about the qualifications of Trubacheva E.V. as an appraiser was first announced only in the article of Orda.kz. For some reason, the prosecutor's office has been silent about this all the time since the beginning of the trial, despite the Fund's repeated instructions on the lack of this qualification. But this does not change the essence of the Fund's objections to her authority, since in accordance with the legislation of the Republic of Kazakhstan, in order to give a negative opinion on an assessment report, it is necessary to have the status of an "expert" and be a member of the expert council of the Chamber of Appraisers.

Regarding the building on Tole bi

The NNEF Educational Foundation, as the main founder of the Kazakh-British Technical University, decided to voluntarily transfer to the state the historical building of the former Government House, where KBTU students are currently studying. 

"The main material asset of the university is a historical building at 59 Tole bi Street, listed in the republican register of monuments of architecture and urban planning. Taking into account the cultural value of the building, in which historical decisions of the state were made, in particular, the Declaration of Independence was signed, the shareholder is considering the possibility of voluntarily transferring the building to the state ownership at no cost," OF NNEF reported.

At the same time, the university needs temporary accommodation in this building on the terms of trust management in order to preserve the educational license and the educational process. In this regard, the Foundation is ready to transfer five percent of shares to the state ownership at no cost to comply with the qualification requirements for universities when providing buildings from state ownership to trust management. The negotiation process took place at the level of the Ministry of Science and Higher Education of the Republic of Kazakhstan, in connection with which the relevant decisions were made by the management bodies of the Foundation and KBTU. It is worth noting that the founder of the NNEF Foundation is Dinara Kulibayeva

As you know, the former Government House building has great historical value for every citizen of Kazakhstan, since it was there that the "Declaration of Independence of the Republic of Kazakhstan" was adopted 32 years ago, the first Constitution of the country was signed, and many other historically important decisions were made. The building is included in the State List of Historical and Cultural Monuments of National importance. However, in 2001, by the time of transfer to the authorized capital of KBTU, despite the status of a state monument, the building was in a deplorable condition. Since 2018 alone, the NNEF Fund has invested more than two billion tenge in reconstruction. In the process, the university not only updated communications, cladding and engineering systems, while retaining the original parquet and panels, but also restored the system of Soviet fountains around the building. With the transfer of the building to the balance sheet of the state, the maintenance of such a building may result in a burden for taxpayers.

The material was prepared by the NNEF Foundation.

DISCLAIMER: This is a translated piece. The text has been modified except for the part titled "Nursultan Nazarbayev Education Foundation" commented" prepared by NNEF. The content is the same. The article is two separate articles combined please refer to them for accuracy. Article 1, Article 2.