Signs of “criminality”: “KazAgro” executives and their inspirers from the Ministry of Agriculture must answer before the law

The activities of the previous management of the “KazAgro” NMH continue to outrage all citizens of Kazakhstan – from ordinary farmers to the country’s president Kassym-Zhomart Tokaev.  The Accounts Committee has completed an audit of the activities of a quasi-state company over the past three years and has published the facts of various financial irregularities.  Now the word is for law enforcement.  The company is awaiting a legal assessment of the activities and criminal punishment of those who made decisions that caused the holding’s astronomical losses. And of course, we should not forget about the role in the creation of this whole construction, Asylzhan Mamytbekov, who first headed the holding (from 2008 to 2011), and then influenced his policy as Minister of Agriculture of the country (2011 – 2016) and executive secretary of the Ministry of Agriculture of the Republic of Kazakhstan  (2018-2019).

As recently as July 22, the indignation of the head of state by “absolutely inept leadership” was supported by the current chairman of the board of the holding, Yerbol Karashukeyev.  He was appointed to this post in April of this year and immediately requested an independent audit of what his predecessors had done.  The results are terrifying.

“The head of state quite rightly voiced criticism of KazAgro, focusing on the need for its drastic reform.  The accumulated loss of the Holding, confirmed by the audit company Ernst & Young, at the beginning of 2019 amounted to 399.1 billion tenge. Half of this amount of losses are losses from devaluation, half are losses in default second-tier banks.  This is the result of decisions made by the previous management of KazAgro for the period 2013-2018.  For example, only in 2018 the parent Holding itself received a loss of 148.3 billion tenge,” the press service of the holding said Erbol Karashukeyev.

However, there is a risk that the results of the work of the auditors of both the Accounts Committee and Ernst & Young will remain on paper, without taking harsh measures for those who squander state money (the country’s budget), as well as national (UAPF AND GFSS).  In order not to allow the deliberate criminal acts of the responsible persons to be hidden both in KazAgro itself and their “inspirers” in the Ministry of Agriculture of the Republic of Kazakhstan, we asked a professional lawyer with great experience to read the auditors’ reports on the audit of the KazAgro holding and its “daughter” of JSC “Food Corporation” and give your assessment.

“First of all, I want to say that such quasi-state companies are always a feeder for officials,” said the lawyer.  “Since civil servants are not allowed to conduct commercial activities under the law, and they don’t want to buy bread for their salaries, they are looking for opportunities to earn caviar through holdings like KazAgro.  Everything is used – non-repayable loans, deposits in second-tier banks, contracts for affiliated companies and so on.”

A simple example from the audit report of the Food Corporation: a shortage of 1000 tons of “Gala” potatoes was revealed.  Namely, allegedly, JSC on December 13, 2017, buys potatoes in the amount of 1000 tons from “AstanaAgroSauda” LLP in the amount of 90 million tenge.  The potato was allegedly stored in the warehouses of “KX Kenes Agro” LLP (Pavlodar, Torgovaya St. 11).  When inspecting the warehouses on April 20, 2018, the total volume of potatoes was not found, the director of “KH Kenes Agro” LLP refused to participate in the inspection and refused to sign, correspondent reports.

“The crime is perceived as the theft of entrusted property on an especially large scale,” the lawyer comments.  “The crime is over, lawsuits here do not matter.  There is a clear connection between all parties to the transaction with officials of Food Corporation or the Ministry of Agriculture of the Republic of Kazakhstan.  This crime should be investigated under article 189, part 4, paragraph 2 of the Criminal Code of the Republic of Kazakhstan.  And based on my experience, I will tell you that initially there was probably no potato in reality – everything happened only on paper.  The goal was one – to steal those same 90 million tenge.  Someone from the Ministry of Agriculture called the Food Corporation, gave the task to complete the deal.  And all of its participants then shared the jackpot.  Any operative of the Ministry of Internal Affairs or the financial floor will split this scheme at a time.”

Other examples of Food Corporation activities from the auditors’ report also reveal the picture of how officials of KazAgro and the Ministry of Agriculture of the Republic of Kazakhstan fed from the budget feeder.  For example, we pay attention to the act of verification: in violation of the decision of the Government of the Republic of Kazakhstan dated 12/27/2017  No. 885, Food Corporation, JSC purchased grain at inflated prices in the amount of 47,664 tons at a price of 54 thousand tenge per ton.  This despite the fact that the official purchase price was set at 42 thousand tenge.

It turns out that for each ton the “profit” of the attackers amounted to 12 thousand tenge.  And the total damage to the state is almost 572 million tenge!

“Anyone here understands that the company from which grain was purchased at an inflated price is very “close” to someone from the management,” said the lawyer. “And half a billion tenge went into the pockets not of the grain producer, but of his “patrons” who secured this contract.  There is evidence of a crime in the form of abuse of official position and theft by officials of Food Corporation or the Ministry of Agriculture of the Republic of Kazakhstan (Article 361 of the Criminal Code of the Republic of Kazakhstan and Article 189 of Part 4 of Clause 2 of the Criminal Code of the Republic of Kazakhstan).

And a few more episodes from the activities of Food Corporation, which led to damage to the state by hundreds of millions of tenge:

 For example, 05/04/2017.  by the decision of the Board of Directors of Food Corporation four departments and one full-time unit of the Deputy Chairman of the Management Board were established.  But on October 22, 2018, all these innovations were canceled due to inappropriate.  At the same time, the joint venture spent in the amount of 170 million 112 thousand tenge!  Violated Article 4 of the Budget Code.  The actions of the relevant officials of the JSC or the Ministry of Agriculture of the Republic of Kazakhstan formally see the elements of a crime in the form of negligence (Article 371 of the Criminal Code of the Republic of Kazakhstan).

 And here is an example from working with banks: despite the low credit rating of Eximbank Kazakhstan JSC and KazIvestBank JSC, Prodcorporation JSC placed $ 10 million and 5.5 billion tenge, respectively, on these accounts in these banks.  It is clear that this money was not sent to banks “for thanks”.  These banks, subsequently, were deprived of a license.  The actions of the officials of the joint-stock company and the Ministry of Agriculture, which authorized decisions on the allocation of funds, formally see the offense in the form of negligence or abuse of official position (Article 361 of the Criminal Code of the Republic of Kazakhstan and Article 371 of the Criminal Code of the Republic of Kazakhstan).

 As for the head office of the holding, then no matter what the decision is, then a reason for a criminal investigation.  But the most impudent, and even cynical, look that, against the backdrop of losses of 120 billion tenge in 2017 and 2018, the management did not forget to write bonuses for themselves and their employees.

“Despite the signs of default and loss-making activities of KazAgro, in 2016-18.  Prizes were awarded in honor of public holidays, according to the results of the reporting period (quarterly, annual) totaling 319 million 014 thousand tenge,” the lawyer noted.  And he reminded that in the practice of investigating the dubious activity of state bodies, Kazakhstan already had examples when the exorbitant love of officials for prizes led to an investigation.  The time has come and the former leaders of “KazAgro” to answer according to the law.

Myrzabek Smagulov

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