Pillars of Corruption: How Members of The Nazarbayev Family Had a Hand in The Bankruptcy of Astana Bank and LRT

Information recently surfaced that the "long-suffering" Astana LRT project will be completed. 50 billion KZT was allocated from the budget for this. Despite the statements of the Accounts Committee about the project's lack of fiscal feasibility, the government continues to invest, turning a blind eye to the millions that have disappeared.

The story of Astana LRT is familiar to every Kazakhstani to the gnashing of teeth. The monument of corruption still serves as an eyesore for Astana residents passing through Kabanbay Batyr.

Construction of the LRT began in 2011 but was never completed. In his January address to the people of Kazakhstan, President Qasym-Jomart Toqayev said that "LRT has turned into a serious problem that harms the country's reputation. The project was initially flawed and smelled of corruption."

In May 2021, the court handed down a verdict in the Astana LRT case. Seven defendants were given from seven to ten years in prison. Then the city court overturned the verdict. The case was returned to the prosecutor to eliminate significant violations that prevent the appointment of the main trial.

There are nine people in the dock in the LRT case: five appear in court from the pre-trial detention centre: Rashid Amanzhulov, ex-head of the Department of Passenger Transport and Highways of Astana, Zhanat Nurpeisov, ex-secretary of the Maslikhat of Astana, Ulugbek Achilov, former head of Nur-Trade, Ulugbek Achilov, ex-director of the subcontracting organization of Geobur LLP, Timur Kasabayev, ex-head of Rimteks LLP, Dulat Musenov.

Former Chairman of the Board of Astana Innovations JSC, Talgat Ashim, and ex-owner of Arkan Pro company, Dauren Abdykhamitov, are under house arrest, and the head of LRT LLP, Talgat Ardan, and ex-deputy mayor of the capital, Kanat Sultanbekov, have been put on the international wanted list.

According to the latest data, Ardan is hiding in Türkiye, while Sultanbekov is in the United States. Investigators say that 5.8 billion KZT was stolen during the construction of the LRT.

They are accused of having agreed in advance to steal money from the construction of light rail transport (LRT), high-speed bus transport (BRT) and intelligent transport system (ITS).

According to the investigation, they had to involve foreign companies in the implementation of the project, persuade them to participate in the embezzlement, and later, through foreign companies, as indicated in the indictment, they received money for unperformed work. The defendants also claim that all the work was done, the cost of the project was not overstated, and the idea to bring in foreign specialists was the government's, not the employees' of the akimat. And the embezzlement, in their opinion, was not committed at this stage.

The defendants are sure that the money was stolen later when the project was supervised by Adilbek Dzhaksybekov and Nurali Aliyev, who made a Chinese company the general contractor. The amount embezzled is several dozen times higher than the 5.8 billion KZT ($257 million).

A Dive into History

The history of the project dates back to 2008 when ex-President Nursultan Nazarbayev decided to build a transport infrastructure that would meet international standards. In order to implement the LRT, they wanted to raise budgetary funds, but the financial possibilities allegedly turned out to be insufficient. From 2011 to 2013, companies from France and the Philippines considered the possibility of financing. However, Astana's insufficient population served as a reason for not beginning the project's implementation.

In 2013, Nazarbayev instructed the government and the akimat of Astana to suspend the implementation of the LRT project and give preference to a cheaper project – "High-speed Bus Transportation" (BRT).

By the end of 2014, the Akimat of Astana and Astana LRT LLP began to implement the BRT project and even started its construction. The construction of the first line was to be completed in 2016. However, in 2015, an audit was conducted and financial violations (9 billion KZT) were revealed. The new akim of the capital, Adilbek Dzhaksybekov, then abandoned the high-speed bus project. The 9 billion KZT were recovered with transfers from the state budget. The grandson of the ex-president, Nurali Aliyev, became deputy akim of Dzhaksybekov on the backdrop of all this.

According to the defendants in the LRT case, the former mayor of Astana Adilbek Dzhaksybekov and his deputy Nurali Aliyev come into play as the main persons in the embezzlement. The defendant and ex-deputy, Akim Sultanbekov, says that it was they, together with Karim Massimov, the then-acting Prime Minister of the Republic of Kazakhstan, who convinced Nazarbayev to acquire an international loan from the Chinese Development Bank. This money was later stolen through the Bank of Astana JSC.

Chinese Partners

On March 18, 2015, Nurali Aliyev signed a letter confirming his participation from the akim's Office of Astana, Talgat Ardan's participation from Astana LRT LLP in a meeting with a consortium consisting of China Railway No. 2 Engineering Group Co., Ltd, Beijing State-Owned Assets Management Co., Ltd and China Railway Asia Europe Construction Investment Co., Ltd. on March 25-27, 2015 in Beijing.

In March, the LRT project was officially included in the list of projects with a high degree of elaboration. During Massimov's trip to the capital of China, a memorandum of cooperation with the consortium was signed.

In April, Dzhaksybekov asked Bakytzhan Sagintayev, the first Deputy Prime Minister, to hold a meeting with the Chinese side that arrived in Astana to discuss the implementation of the LRT's 1st stage.

Already in May 2015, a framework agreement was signed between the Akimat and the Chinese consortium, which would allow the Bank of China to begin procedures for allocating LRT financing and mobilizing Chinese labour resources.

On June 10, Massimov submitted to Nazarbayev the LRT project instead of the BRT one. He wrote that the Chinese consortium had received a proposal for the implementation of the LRT's 1st stage with a preliminary cost of $1.3-1.8 billion due to long–term financing from the State Development Bank of China.

Massimov noted that, taking into account the fiscal infeasibility of the project, the maintenance and repayment of the loan as well as part of the operating costs will be carried out at the expense of the republican budget. The Prime Minister also pointed out that the akim's office of the capital proposed to utilise the unused 16.3 billion KZT from the BRT project to start the implementation of the LRT.

On June 24, Bakytzhan Sagintayev signed a protocol on the approval of the roadmap "LRT 1st stage". Within the framework of the roadmap, the akimat and the Ministry of Industry were instructed to obtain financing conditions from the State Development Bank of China. After that, in a letter to Karim Massimov, he claimed that the most acceptable option was to take a government loan instead of providing a state guarantee, arguing the need for an urgent start of the implementation of the LRT and a tight deadline for completion.

On July 9, Nurali Aliyev asked Deputy Foreign Minister Askar Musinov to assist in speeding up the procedure for processing and obtaining visas for employees of the Chinese consortium. In another letter, he asked the Ministry of Investment and Development to submit to the Republican Budget Commission the issue of replacing the BRT and ITS project with LRT and ITS.

On July 11, Karim Massimov asked Nursultan Nazarbayev to allocate 19 billion KZT to pay 20% of the advance to the consortium, justifying this with the tight deadlines for the implementation of the project and the need to start designing.

On November 23, Dzhaksybekov instructed his deputy Nurali Aliyev, Astana LRT LLP and the Entrepreneurship Department to make the provisions for the placement of LRT work projects.

Delaying Construction

In March 2016, Nurali Aliyev left the post of deputy akim, with the words "… I will do my favourite occupation in the business environment …". This happened just before the publication of the "Panama Papers", where the 31-year-old grandson of the president was found to have an expensive yacht and offshore accounts in Cyprus.

Dzhaksybekov held the post of akim only until June 2016. Before his departure on June 20, Dzhaksybekov asked Karim Massimov to allocate funds from the government reserve to finance LRT in 2016.

In February 2017, the next akim of the capital, Asset Issekeshev, announced the opening of a new enterprise to control the construction of LRT, LRT Construction LLP, which announced new contract terms. The Chinese side did not appreciate this. In response, they wrote a letter of complaint addressed to Nazarbayev.

On August 15, 2017, Issekeshev asked Adilbek Dzhaksybekov, already the head of the Presidential Administration, to submit for the president's consideration the issue of extending the construction of the 1st stage of the LRT until the end of 2019 instead of July 2018. He explained this delay by the fact that "the preparation of the construction site required additional time due to the heating season and the EXPO exhibition."

On August 25, 2018, Bakytzhan Sagintayev, already represented by the Prime Minister, approved the minutes of the meeting, at which it was decided to reduce the cost of LRT in connection with the freezing of borrowed funds of the next tranche placed in Bank of Astana JSC.

Millions Missing without a Trace

In September 2016, the management of Astana LRT LLP applied for the next tranche of an external loan in the amount of $257.6 million. According to the ex-deputy akim of the capital, Kanat Sultanbekov, the Astana LRT company had no reason to use borrowed money for the construction of the light rail line. He is convinced that the company had neither an approved project construction schedule nor a work plan. Therefore, the request is likely the beginning of the embezzlement.

The tranche to the account of JSC "Bank of Astana" was received in December 2016. The money entrusted to the bank disappeared without a trace, while the "Bank of Astana" itself was liquidated in 2018.

In April 2018, ex-President Nazarbayev, speaking at a meeting on the results of the activities of the National Bank, unexpectedly announced to the whole country that three banks: Eximbank, Qazaq Banki and Bank of Astana had terrible indicators and their shareholders performed poorly.

"The shareholders of the banks have mismanaged, are in debt and cannot respond to depositors with their own funds. How can they work? And all this should be saddled on the state. If they want to keep these banks, let the shareholders invest and return the money that they pulled out in the most wrong way. They emptied the banks where the money was invested, both the quasi–public sector and the population – let them return and work,"

Nazarbayev said.

In August of the same year, the National Bank revoked the licenses of Qazaq Banki and Eximbank. And a month later, the "Bank of Astana".

The "Bank of Astana" later transferred its debt in the amount of $257.6 million to the Astana LRT company to the Problem Loans Fund. The Fund's new debtors were eventually transferred to Astana LRT LLP altogether.

These decisions were made by the new Prime Minister, Alikhan Smailov. According to Sultanbekov, the main shareholder of Bank of Astana, Olzhas Tokhtarov, promised that if the debtors did not compensate for the damage to Astana LRT by August 2021, he would return the money himself.

"What prevents the investigative body or the akim of Astana from starting the procedure of claiming it from Tokhtarov?"

Sultanbekov wrote in one of his Facebook posts.

At the moment, Kazakhstan has already returned $257 million to the Chinese bank from taxpayers' money, and the government is thinking about how to complete the project. Meanwhile, no one seems to care about the issue of returning the money lost together with the Bank of Astana.

The Boss Wants to See Ya…

The very fact of choosing "Bank of Astana" as a financial institution for the placement of such a large sum caused concern even among Astana LRT employees. Zhanna Akzhanova joined the company in May 2016. She was instructed to conduct an audit of the company and give her opinion.

"I was interested in the current statuses on all construction issues. The first is the money placed in the "Bank of Astana". We found a violation in the fact that there was no provision for asset management of the company. The very fact of placing borrowed money for the construction of the LRT in the "Bank of Astana" is a violation. After all, when placing funds, it was necessary to choose financial instruments and institutions with minimal risk,"

Akzhanova said in court.

Former deputy mayor of the capital, Kanat Sultanbekov, said that Dariga Nazarbayeva could be behind the interests of Bank of Astana JSC.

In the above-mentioned speech from 2018 on the results of the activities of the National Bank, Nazarbayev reproached not only the shareholders of the three outsider banks but also members of Parliament.

"Stop the pressure on the National Bank by involving members of Parliament. What it is in general, I do not understand. Recently, every chairman of the National Bank, who is directly subordinate to the president, there is (such a - Ed.) law, and every minister, deputies began to invite and put on the carpet (phrase that means to get an answer out of someone or rebuke someone - Ed). It shouldn't be like this, we've never worked like this."

According to Sultanbekov, Dariga Nazarbayeva at that time was the only member of parliament who could summon the chairman of the National Bank with impunity and demand money for a commercial bank.

It follows from the audit report that the day after the speech of the former president, Astana LRT LLP sent application No. 823 to the Bank of Astana for the transfer of $86 million to pay a Chinese contractor for the already built LRT pillars.

However, the transfer had not been carried out due to the default of "Bank of Astana". Thus, according to Sultanbekov, it can be easily understood that 257.6 million LRT dollars before Nazarbayev's speech had already been pulled out of the "Bank of Astana" in "the most incorrect way".

"No one was held responsible for the problem with the LRT project at that time, as the close elite, the grandson, and the daughter of the first president were involved (according to the affidavit given under oath by a witness from the defence). All this was the reason for stopping the LRT in 2019, five years after my dismissal from the akimat of the city,"

Kanat Sultanbekov told reporters.

The Bank of Astana is the only sunken bank whose management and shareholders were not persecuted and their activities were not investigated, unlike RBK and Tengribank.

Construction Work Ahead

In 2019, after the suspension of the construction of the LRT, President Qasym-Jomart Toqayev criticized the project, noting the high cost and inefficient budget planning:

"The LRT project clearly demonstrates the problems of quality planning. Instead of creating a convenient, understandable, practical type of transport for the population, an expensive one is proposed. The opinions of experts, the architectural society, as I understand it, were not taken into account. There is a risk that an (fiscally - Ed.) unfeasible project will entail permanent subsidies and will put a burden on the government. Incidentally, we all know, 100 billion tenge, part of the Chinese loan in the Bank of Astana, have all already disappeared."

From year to year, the state has announced the allocation of tens of billions of tenge of budget money for the implementation of the LRT project. The Accounts Committee for Control over the execution of the republican budget in 2020 published an opinion on the state audit of the financial and economic activities of the Astana LRT company. The conclusion drew attention to the non-sustainability of the project and significant budget expenditures in case of continuation of its implementation.

However, this year Toqayev repeated at a meeting on the development of Astana that he considers the project "erroneous, but we have no other choice."

"We have to implement this project. If we stop the construction of the LRT, the losses will be even greater."

The akim of the capital, Zhenis Kassymbek, has, therefore, recently promised to finish the construction of the LRT by the end of next year.

It is unclear how much more taxpayers' budget funds will be spent on the infamously dubious project and whether it will be completed in the promised time.

Original Author: Silam Akbota

DISCLAIMER: This is a translated piece, the text has been modified, the content is the same. Please refer to the original article in Russian for accuracy.