Top Oil Consultant Indicted in New York in Case With Implications for Kazakhstan

After an extensive grand jury investigation, prominent oil consultant James Giffen was arraigned March 31 in New York on two counts of violating the Foreign Corrupt Practices Act (FCPA). The case may have profound implications for Kazakhstan. According to published reports, Giffen is alleged to have funneled millions of dollars to bank accounts controlled by top Kazakhstani government officials.

According to a source familiar with the case, authorities took Giffen into custody at John F. Kennedy International Airport in New York on March 30. Giffen, chairman of Mercator Corp., was arraigned at the US District Court Southern District of New York, a court clerk told EurasiaNet. The two counts against Giffen include conspiracy to violate the FCPA and an actual violation of FCPA. US District Court Magistrate Judge Douglas F. Eaton set bail at $10 million. Giffen's legal counsel has insisted his client is innocent of any wrongdoing.

A federal complaint unsealed March 31 does not identify any of Giffen's alleged co-conspirators by name, the informed source said. However, the US government's case focuses on payments made by Mercator Corp. to a foundation that is controlled by top Kazakhstani government officials.

Specifically, the complaint alleges that a $20.5 million payment was transferred in 1997 to a Swiss bank account controlled by a company called Orel Capital Limited. The complaint linked Orel to the Lichtenstein-based Semrek Foundation, which bank records show as being under the direct control of senior Kazakhstani government officials.

"Prosecutors must be very confident of the evidence because, dealing with the corporate community, they must be very diligent," said Joseph LaPalombara, a professor emeritus at Yale University who tracks multinational corporate behavior in developing countries. "Typically what prosecutors and investigators do is try to choose companies and alleged misbehavior of which, if they are successful, they can make an example."

A federal grand jury in New York examined evidence in connection with the Giffen case for over two years. [For background see the Eurasia Insight archives].

A corruption scandal in Kazakhstan, dubbed Kazakhgate, has emerged as a major source of political tension over the past year. Opposition leaders have sought to publicize official misdeeds in order to undermine President Nursultan Nazarbayev's administration. [For background see the Eurasia Insight archives].

Authorities responded by cracking down on opposition activity, both in the political sphere and in mass media. Perhaps the most notorious case in the crackdown so far has involved journalist Sergei Duvanov, who was sentenced to a 3 ½-year prison term on a rape charge that he maintains was politically motivated. [For additional information see the Eurasia Insight archive]. Duvanov has said the government jailed him in retribution for writing articles that implicated Nazarbayev in taking illicit payments.