Office Rent: How Former QazaqGaz Personnel Stole Billions

The company TOO Asia Gas Chundzha, which belonged to Kairat Boranbayev, will officially be transferred to the state asset balance sheet. This became known last week. The trial took place more than a year ago. Along with Boranbayev, the deputy of JSC NC QazaqGaz Taiyr Zhanuzak was convicted then. Antikor's investigation revealed embezzlement of 14 billion tenge. Where are the remaining hundreds of billions? Immediately after Qantar, the national company's new management stated that there were violations in the gas industry amounting to almost a trillion tenge. Orda.kz tried to figure out what other financial fraud could have occurred in the gas industry, headed at that time by Dariga Nazarbayeva's husband, Kairat Sharipbayev.

In the judicial office, we familiarized ourselves with the verdict of that very case. It reveals in detail the fraud concerning not only the process itself. From the testimony of witness A. D. Kulsartov, who worked as deputy chief accountant of the national company, it became clear that in 2022, the company's new management conducted an internal audit and discovered as many as 40 companies affiliated with the previous management. All companies were awarded contracts with inflated prices.

We were interested in Timur Kuttukov, a witness. As we discovered, the company he manages, Bolashak Property LLP, is directly affiliated with Kairat Sharipbayev. He headed QazaqGaz NC JSC before Qantar. The founder of this enterprise is another LLP, Invest Bolashak. It, in turn, has Danco Commerce LLP, the owner of which is a company registered in the UAE, Danco investment group FZE. Askar Abenov currently manages Danco Commerce. Before him, Kairat Sharipbayev's first wife, Zhanar Seidvalieva, was the LLP's general director.
 

Bolashak Property owned the Bolashak business center located in Astana on 12 Alikhan Bokeikhan Street. The building currently belongs to the national company QazaqGaz and is listed on QazaqGaz Onimderi LLP's balance sheet. However, until 2022, all gas industry quasi-state enterprises paid the building owner for office rent far from the market rate.

In an official request addressed to JSC NC QazaqGaz, we inquired about the amounts paid by the national company and its subsidiaries for office rent from 2014 to 2022. We did not receive any figures in response. QazaqGaz's management informed us that the case materials are in the Prosecutor General's Office and, therefore, "belong to the category of limited access."

In theory, the national company could provide the amount of rental payments without referring to the materials held by the prosecutor's office. However, the current management of JSC  " NK "QazaqGaz" may not be ready to make the actual embezzlement amounts public. 

Unfortunately, the Samruk-Kazyna procurement website provides information on procurements made only starting from 2018. We could only see how much the national company and its subsidiaries spent on office space rental over the past five years. This information is still reasonably sufficient to estimate the amount of money the previous management took from the budget of JSC NC QazaqGaz and its subsidiaries under the guise of office space rental.

All these purchases were carried out from one source, that is, without an open tender and a competitive environment that could provide alternative proposals from market participants. In capable hands, a loophole in the procurement regulations approved by Samruk-Kazyna turned out to be a "black hole" where tens of billions of public money disappeared during almost 10 years of Kairat Sharipbayev's gas industry leadership.

The rental price for the market can be seen from the single-source procurement decisions on the zakup.sk.kz website. The lessees intended to spend tens of billions of tenge on rental services for 2021–2023 alone. The services were from a company owned by their boss.

QazaqGaz's decision No. 488836, dated October 7, 2020, states that the company planned to spend almost 600 million tenge in 2021, 618 million tenge in 2022, and 637 million tenge in 2023.

According to decision No. 488968 dated October 7, 2020, Intergas Central Asia JSC planned to pay about three billion tenge for office rent from 2021 to 2023 - almost a billion annually. 

By decision No. 488785 of October 6, 2020, Amangeldy Gas LLP intended to pay Sharipbaev’s company about a billion tenge over three years.

According to our sources, the most currency-rich QazaqGaz subsidiary, JSC Intergas Central Asia (ICA), shortly before renting premises in Bolashak in 2015, sold its offices in the KazMunayGas building in Astana on Round Square at 19 Kabanbay Batyr Street. The sale was made at a market price of seven billion tenge. With the proceeds, the management could have purchased a proper office building. After the 2015 devaluation, office space prices fell by 20 percent in six months.

At that time, the most expensive office in the capital's center could have been rented for no more than 9,000 tenge per square meter per month, including cleaning and security. On average, in the first quarter of 2015, the rental rate for office space was $23.7/sq. m (4,368 tenge/sq. m) (data from the website kn.kz). 

At that time, the Samruk-Kazyna Fund offered companies in the holding to rent offices in buildings on Qonayev Street, near the government and opposite Aqorda, for less than 9,000 tenge/sq. m, also with security and cleaning of the premises.

According to insider information, the same Intergaz Central Asia, under the lease agreement for office premises from IP Kogay F.V. (the business center, which belonged to Bolashak Property LLP, was leased by this IP), was supposed to pay the owner of the property seven billion tenge in just three years from 2016 (the amount received from the sale of premises in one of the most prestigious buildings in the capital).

In April 2022, Bolashak Property LLP suddenly requested the state accept this office building as a gift.

Based on the appeals of Bolashak Property LLP dated April 26, 2022 No. 17/20 and May 25, 2022 No. 18/25, per the Rules for the acquisition by the state of property rights under a gift agreement, approved by the Decree of the Government of the Republic of Kazakhstan dated September 28, 2011 No. 1103, by order of the committee, the building of the Bolashak business center was accepted into republican state ownership, This is stated in the response of the State Property and Privatization Committee to our question about who owns the business center.

The building would be transferred to Samruk-Kazyna, from where it was transferred to QazaqGaz. The national company has already assigned it to the balance sheet of its subsidiary, QazaqGaz Onimderi LLP.

In the same letter, the committee reports that the Independent Valuation and Legal Center valued the business center at 16,915,397,000 tenge at the time of its transfer as payment for the fund's shares. The administrative building was transferred as payment for shares worth 16 billion tenge. Unfortunately, we do not know how appropriate the estimated value was to the market. 

After Sharipbayev gave the state the generous gift, gas companies significantly reduced the amounts for renting administrative premises. On the Samruk-Kazyna procurement website, we found out how much the prices had been inflated before: from three and a half times (QazaqGaz) to five to six times (Intergaz Central Asia JSC and Amangeldy Gas LLP).

Decision No. 721494 dated May 24, 2022, indicates that the national company rents the same premises two years later for three and a half times less.

Decision No. 721524 of May 24, 2022 shows that the premises for which Intergas Central Asia JSC was going to pay a billion per year can, it turns out, be rented for 180 million, that is, six times cheaper.

Amangeldy Gas LLP, by decision No. 720770 dated May 23, 2022, rents offices in the same business center two years later for 40 million tenge instead of the original planned price of 240 million tenge. That is, almost six times cheaper. 

We are interested in what will happen to the excess rent payment. The commission for the return of illegally withdrawn assets is not involved in this matter. Could the building gifted by the previous management of the national company be an attempt to avoid criminal prosecution for embezzlement?

We understand that the business center's previous owner had no choice but to shed the problematic asset in the current circumstances. If the case had gone to court, as with Kairat Boranbayev, the building could have been confiscated in favor of the state for the crimes committed. Or did the Prosecutor General's Office decide to limit itself to one Kairat and not hold Elbasy's son-in-law accountable, content with the donated building?

The scale of the embezzlement becomes evident if we consider the amounts paid by the national company's subsidiaries renting premises in the business center. The scheme of profit withdrawal through rent was probably not the only way for individuals to enrich themselves via the company's resources. The national company's expenses include rent and other budget items, such as information services and construction work.

Some service providers are connected to specific individuals. Being confident in their security, many of them were even located in the same building. We will discuss this in the following article.

The position of QazaqGaz's new management, the affected party, is surprising. They show no initiative in inspecting all the revealed theft facts and compensating for the damage caused. If it was possible to recover the damage in the case of natural gas supplies, why are there still no court proceedings on other events?

With this approach to cost management, the company's management can no longer justify its losses with low service rates. Next year, QazaqGaz plans to go public. The company must first put its affairs in order and return previously siphoned funds, including rent costs and other embezzlement.

Original Author: Editorial

DISCLAIMER: This is a translated piece. The text has been changed, the content is the same. For accuracy, please refer to the original piece in Russian published on 21/08/24.