Starting in 2006 (or earlier), Moldovan oligarch Anatolie Stati and his son Gabriel embarked on a fraudulent scheme that defrauded international investors of their money, falsified financial statements, and recruited the victims of the fraud to pursue international arbitration against the Republic of Kazakhstan to recoup from the state the monies the Statis had stolen themselves.
The Statis’ background and initial investment in Kazakhstan
Anatolie Stati (born in 1952) is a Moldovan oligarch who made his fortune through questionable transactions and projects in the oil and gas industry. In 1994, he founded Ascom Group SA (Ascom). In 1995, Ascom signed two service contracts with the Ministry of Oil and Gas of Turkmenistan, taking its first step into the oil industry. The service contracts were to expire by 2000, and no new contracts were secured to continue work in Turkmenistan.
In 1999, Anatolie Stati and his son Gabriel Stati entered the oil and gas sector in Kazakhstan. Ascom purchased shares in the local Kazakhstani company Kazpolmunay LLP (KPM), while another Stati company, Gheso SA, bought shares in Tolkynneftegaz LLP (TNG). Later, Gheso SA transferred its holding in TNG to Terra Raf Trans Traiding Ltd, a Stati company registered in Gibraltar. At the time of the acquisition by the Statis, KPM and TNG had contracts with Kazakhstan for exploration and extraction of hydrocarbons in the Borankol field, the Tolkyn field, and the Tabyl block located in the Mangistau region of Kazakhstan.
Initially, the Statis financed their business operations in Kazakhstan with loans obtained from Kazakhstani banks Kazkommertsbank and Halyk Bank. The Statis were given loans over $120 million for 7 years at an interest rate of 11% per annum. As customary business practice, the lender banks retained certain means of control and supervision of the manner in which the lent funds were spent. However, the Statis sought to avoid such supervision.
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A turning tide: more evidence of the fraud emerges as the Statis are losing battles in courts
After some early successes, the Statis started to suffer repeated setbacks as more and more evidence of the fraud emerged and awareness of it grew. The first major blow to the Statis came in June 2017 when Mr. Justice Knowles of the Commercial Division of the High Court in London ruled that there was sufficient prima facie evidence to conclude that the arbitral award was obtained by fraud. Justifying his decision, Mr. Justice Knowles said:
“It will do nothing for the integrity of arbitration as a process or its supervision by the Courts, or the New York Convention, or for the enforcement of arbitration awards in various countries, if the fraud allegations in the present case are not examined at a trial and decided on their merits, including the question of the effect of the fraud where found. The interests of justice require that examination.”
Mr. Justice Knowles offered the Statis the opportunity to rebut his findings, but instead of doing so, the Statis withdrew their enforcement application in England in an attempt to prevent the judge from considering the matter further, a move which cost the Statis over £1.3 million in legal costs. The Statis notably pretended that they lacked sufficient funds to continue proceedings in England, despite continuing their campaign of litigation across multiple other jurisdictions.
Adding to the mounting evidence against the Statis, in 2019 KPMG took the rare step of withdrawing its audit reports which had been used by the Statis in the various lawsuits, on the basis that these were based on false representations. In total, KPMG Audit withdrew 18 audit reports covering three years of financial statements issued by companies controlled by the Statis between 2007 and 2009.
The Statis and their co-conspirators subsequently also suffered additional blows in Sweden, Belgium, Gibraltar, the Netherlands and Luxembourg. In the latter, an initial enforcement order was overturned on appeal on the basis that the lower court did not deal appropriately with the fraud allegations and the evidence presented by Kazakhstan.
Moreover, Kazakhstan’s fraud allegations against the Statis are now supported by independent opinions issued by leading experts in the field: Professor George Bermann, Professor Catherine Rogers, Professor Christoph Schreuer, Dr. Patrik Schöldström (now a judge on the Swedish Court of Appeal), Mr. Alex Layton QC (a respected English barrister), Mr. Stefan D. Cassella (a leading expert in money laundering and former federal prosecutor at the US Department of Justice), and top international accounting firm PriceWaterhouseCoopers.
Finally, the Statis’ main co-conspirator is now also in the crosshairs of American justice. Daniel Chapman and his company, Argentem Creek, are subject to a lawsuit before a New York Court for their role in conspiring with the Statis to perpetrate and conceal the fraud against Kazakhstan. Mr. Chapman is being sued not only by Kazakhstan but also by an investor in the Statis’ companies who was damaged by the fraud.
As the Statis and their co-conspirators face setback after setback, they have now embarked on a desperate strategy which aims to pursue enforcement actions only in jurisdictions where they hope the evidence of fraud will not be considered. In parallel, the Statis have launched a massive black PR campaign to spread disinformation about the case and damage Kazakhstan’s international reputation in the hope of bringing the country toward a settlement.