Search

Editors

Harry Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Richard L. Cassin Editor at Large

Elizabeth K. Spahn Editor Emeritus 

Cody Worthington Contributing Editor

Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Richard Bistrong Contributing Editor 

Eric Carlson Contributing Editor

Bill Steinman Contributing Editor

Aarti Maharaj Contributing Editor


FCPA Blog Daily News

« Injecting integrity into corporate DNA: A strategic blueprint (Part Two, concl.)  | Main | Bombardier investigated for ‘secret’ South Africa payment »
Tuesday
Apr072015

The BOTA Foundation explained (Part Two): Where did BOTA get its money?

The story of BOTA's capital and creation starts with politics and oil in Kazakhstan, the last of the ex-Soviet republics to gain its independence in 1991. As well chronicled in Steve LeVine's definitive account of the era, The Oil and the Glory, during the 90s there was a scramble amongst Western interests to secure oil drilling rights in the Caspian Sea, which had some of the largest untapped reserves in the world.

A U.S. citizen, James Giffen, was the main intermediary between Mobil and other companies  and President Nursultan Nazarbayev and his underlings. While it was never proven in court, a federal indictment alleged that payouts of millions of dollars were made through Giffen to Kazakhstan's political elite. From 1996 to 1998, four U.S. companies working with Giffen's Mercator Corporation landed deals -- Mobil, Amoco, Texaco and Phillips Petroleum.

While the race for oil contracts was taking place, Kazakhstan was in the midst of its economic and political transition from a Soviet state to one based on (at least in theory) free elections and market economy principles. At that time there was real political debate, opposition candidates and alternative media outlets. This is likely why, in the run-up to Kazakhstan's second presidential election held in 1999, Nazerbayev was looking for ways to discredit his main political challenger, a former prime minister named Akezhan Kazhegeld. 

Nazerbayev pressed Swiss authorities to investigate bank accounts that could have been tied to his rival, but this investigation ended up implicating the president himself in the utilization of a Swiss account in the Pictet and Cie Bank for money laundering. At the time, Nazarbayev publicly stated that he maintained no foreign bank accounts, a position that later shifted once the account's existence was in the public spotlight.

James Giffen was a trustee on that Swiss account, which held $84 million (Giffen's arrest in 2003 and the failed prosecution against him will be discussed more in the next post). In 2007, the U.S. Justice Department   brought a civil forfeiture action against this account in federal court in Manhattan. The civil complaint alleged that the funds were traceable to unlawful payments to senior Kazakh officials in connection with oil and gas transactions arranged by Giffen's firm, Mercator.

This was the first FCPA related action which resulted in setting up a foundation to effectively and transparently use money associated with corruption to assist its victims, the poor. BOTA's money came from the $84 million in the Swiss Pictet and Cie account, plus $31 million in interest that had accrued, for a total of $115 million.

In BOTA's case, it was agreed that the target group would be the most vulnerable victims of Giffen's alleged bribery: Kazakhstan's poor children, youth and their families. 

As I'll discuss, from 2009 to 2014, two hundred thousand such individuals were directly assisted through BOTA's three programs.

Part One of this series is here.

_______

Aaron Bornstein was the Executive Director of BOTA Foundation, employed by a Washington, D.C. based NGO called IREX, from 2011 until its close in 2014. He is a foundation and international development professional who has worked in 8 different countries on a variety of civil society strengthening, poverty alleviation, and other projects. Aaron is interested in receiving institutional support for the more extensive documentation of the BOTA experience that he is working on. Please send your suggestions, along with your feedback on the BOTA series, to abornstein19@gmail.com.