What were the motivations of the key actors responsible for the creation of BOTA Foundation — the governments of the United States, Switzerland, and Kazakhstan? And what role did the World Bank play, as well as opposition politicians and civil society activists in Kazakhstan? Let’s start where Giffen did business: Kazakhstan.
The DOJ’s 72-page indictment of Giffen revealed the direct ties between Giffen and Kazakhstan’s political elite. The Kazakhstani president, along with a former prime minister, featured prominently in the 2004 indictment. These politicians were not named directly, but referred to as “KO-2” (commonly understood to be President Nursultan Nazarbayev) and “KO-1” (aka former Prime Minister Nurlan Balgimbayev).
The indictment alleges that “more than $78 million” was paid in bribes to these individuals. While the bulk was allegedly transferred by Giffen through shell corporations to bank accounts controlled by Balgimbayev and Nazerbayev, the indictment also describes other conspicuous payments. These included tuition for the president’s daughter to attend an exclusive Swiss high school, luxury vacations for the ex-prime minister, and hundreds of thousands of dollars of expensive jewelry.
The indictment posed a huge threat to Nazerbayev. Not that there was a big risk that he’d end up in a U.S. or Kazakhstani jail. The threat was primarily reputational. In Kazakhstan, Giffen’s U.S. indictment led to a political crisis known as “Kazakhgate”, which started percolating in 1999, shortly after Swiss authorities froze an account in the Pictet and Cie bank connected to Giffen and the president.
As mentioned in an earlier post, in that period there was an active opposition movement and media outlets that took every opportunity to make allegations of corruption against the ruling elite. (Since that time, the opposition has basically been silenced, through arrests, self-exile, and deconstruction of almost all media outlets which do not tow the party line. President Nazerbayev is also “president for life” and has permanent legal immunity in Kazakhstan).
Beyond the problems associated with the domestic fallout of the Giffen case, Nazerbayev was concerned about his international reputation — as well as the potential to diminish foreign direct investment. The Kazakh president was proud of his strong ties to the Bush administration. He wanted the world to acknowledge the strategic importance Kazakhstan played in the Afghanistan war as well as be recognized as a leader in nuclear non-proliferation (Kazakhstan gave up all of its nuclear weapons in 1994).
What would happen if Giffen’s U.S. trial went forward and “KO-2” lost his legitimacy? What would potential foreign investors think about risking their capital if it was proven that corruption starts at the top?
In short, the $84 million, plus interest, in the Swiss Pictet and Cie Bank account was an embarrassment — a political liability domestically and internationally — with the potential to derail future foreign investment.
BOTA became Nazerbayev’s face-saving solution.
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 [email protected].