Documents in an ongoing insider trading prosecution in the US appear to allege that Maxim Bakiyev, the son of the former president of Kyrgyzstan who now resides in the United Kingdom, has been using a US$45 million Latvian bank account for insider trading deals on the stock exchanges of the US, the UK and elsewhere. This, along with the recent arrest of Maxim Bakiyev in London in relation to this case, raises concerns regarding his activities in the United Kingdom.
A US court document obtained by Global Witness does not identify Maxim Bakiyev by name but alleges that a person dubbed “CC-1” has been involved in insider trading using a bank account held at Baltic International Bank, the majority of which is owned by Valeri Belokon, a former business partner of Maxim Bakiyev. Biographical details contained in the document make it clear that “CC-1” is Maxim Bakiyev . According to research by Global Witness, around 2008 Belokon and Bakiyev invested approximately £2 million in Blackpool Football Club, which is co-owned by Belokon.
“The fact that Maxim Bakiyev has been indicted in Kyrgyzstan on charges of state looting and other financial crimes raises the possibility that he may have tried to make money illegally with ill-gotten funds.” commented Patrick Alley, a director of Global Witness.
Another key figure during the Bakiyev presidency, Eugene Gourevitch, whose financial services company managed Kyrgyz state funds, appears to be identified in the document as “CS” , an individual who has admitted aiding this alleged insider trading and has agreed to help the US authorities in their investigation. Gourevitch was reported on 23 October to be in Italy where he is giving evidence regarding his alleged involvement in an Italian telecoms fraud case .
The document states that “CS” engaged in insider trading on behalf of “CC-1” with securitieslisted on stock markets in the US, the UK, Spain and Italy, although the US case appears to focus just on the American companies involved. The UK, which according to the former president of Kyrgyzstan Roza Otunbayeva has done little so far to help in bringing Maxim tojustice in Kyrgyzstan  where he has been indicted on various charges, should launch an officialinvestigation into these allegations.
A law firm representing Maxim Bakiyev gave no comment to Global Witness. Valeri Belokonsaid in response to Global Witness enquiries that he could not comment on this case due to Latvian banking confidentiality.
The document alleges that “CC-1” did not hold this account in his own name, but in the name a New Zealand “shell company” – an entity that is little more than a name on a piece of paper andwhich is designed to hide the name of its real owner often through the use of ‘proxy’ or nominee directors and shareholders. This company is identified in a related court document as Ergoport Experts Limited .
In July 2012, Global Witness published a report entitled Grave Secrecy that highlighted othershell companies registered in New Zealand and the United Kingdom that were involved insuspicious activity in Kyrgyzstan’s then-largest bank in the months before the Kyrgyz revolution of April 2010 . A lawyer representing Ergoport Experts told Global Witness that his client was aware of “no credible evidence” supporting the allegation of insider trading, adding that theclaims were “politically motivated and have only been made since President Bakiyev left office.”
However, the lawyer also said there was “no credible evidence supporting the notion that Ergoport Experts knowingly represented Maxim Bakiyev” and that it was “sheer speculation tolink Gourevitch to Ergoport,” which is strange, seeing that the company should be in a positionto confirm or deny their alleged involvement.
Alexey Ruzanov, named as a representative of Ergoport in related court filings , told Global Witness that he did not control Ergoport’s activities or bank accounts and did not know who the beneficial owner was. He said that he had no knowledge either of Ergoport’s bank accounts being used illegally or of Maxim Bakiyev being the alleged ultimate owner. This once again highlights the problem of a system that allows company representatives to take responsibilityfor a company while knowing nothing about what the company is actually doing.
“Company representatives should be held responsible for their companies’ actions, irrespective of whether they knew what the company was doing or not,” said Alley. “The fact that it is soeasy to set up a company with hidden ownership in the UK, New Zealand and elsewhere means that suspicious activity flourishes,” said Alley. “This case – yet another featuring a shell company with hidden ownership apparently involved in dubious business – confirms that this is a massive problem. The UK, US and other jurisdictions should create publicly available databases of the real owners of all registered companies in order to make it more difficult for dictators and their families to loot their country’s wealth.”
Contact: Patrick Alley, Robert Palmer +44 (0) 20 7492 5820.
1 The document says that CC-1 was a “high-level government official” of a “Central Asian country, which government was overthrown in a coup in April 2010. As a result of the coup, CC-1 fled to England … the new government ofthe Central Asian Country charged CC-1 […] with, among other things, the theft of state assets, laundering stolen funds andother crimes arising from alleged corruption in the deposed regime.” Maxim Bakiyev was head of Kyrgyz state agency TSARII, until an armed uprising removed his father from power in Kyrgyzstan in April 2010. He is then known to have claimed asylum in the UK. According to the Kyrgyz prosecutor’s website, he has been indicted for such alleged crimes.
2 Company documents obtained by Global Witness show that in 2008 VB Football Assets, a company owned by Valeri Belokon that holds shares in Blackpool FC, received 1.8m Latvian lats (£2 million) from a Latvian company called Maval Aktiviwhich was co-owned by Belokon and Bakiyev, according to its company filing. The VB Football Assets document shows that it then transferred the same amount to Segesta Ltd. Segesta Ltd owns 76% of Blackpool FC, has a company address that is the same as Blackpool FC’s football ground and has directors who are the same as Blackpool FC’s chairman and director.We assume from all this evidence that the £2 million was invested in Blackpool FC.
3 The document says that CS is a United States citizen who “was the chief executive officer of a financial advisory and consulting firm based in New York, New York and in a country located in central Asia.” CS has also been charged with the same crimes as CC-1 in the Central Asian country, according to the document. It adds: “CS also currently faces money laundering charges in Italy arising from a large and complex tax fraud scheme, which charges were filed in or about February 2010.” Gourevitch founded the MGN Group which had units in New York and in Bishkek, has been indicted in Kyrgyzstan and was wanted for questioning in Italy regarding an alleged telecoms fraud, according to an Italian court document that was reported in March 2010.
4 Eugene’s presence in Italy was reported on http://www.borsaitaliana.it (article no longer available). Gourevitch’s lawyer told the Wall Street Journal that Gourevitch “has a pending legal investigation in New York and in Rome, Italy. He will have to address both in time, starting with the matter in Rome.” http://online.wsj.com/article/SB1000087239639044459270457806250141011445...
5 http://www.trust.org/trustlaw/news/kyrgyz-president-cries-double-standar... and Rosa Otunbayeva (on-the-record) speech at Chatham House, 16 May 2012, http://www.chathamhouse.org/sites/default/files/public/Research/Russia%2...
6 US Securities and Exchange Commission against One or more Unknown Purchasers of Securities of Global Industries Ltd., United States District Court Southern District of New York, 11 Civ. 6500
8 The document referenced in footnote 6, in a section stating “all names by which the defendant is known” gives the following: “Ergoport Experts Limited. Attn: Alexy Ruzanov.” In response to Global Witness, Ruzanov described himself as a “representative” of Ergoport. As far as Global Witness is aware, Mr Ruzanov is not the target of any civil or criminal probe.