BOTA was the first foundation ever established as a result of an FCPA case, and the question explored in this post is how it was set up.
There are two important facts to keep in mind as background: Kazakhstan was in a disadvantaged position in the negotiations (it needed BOTA to solve a political problem discussed in Part Three); and, the U.S. DOJ, Switzerland and the World Bank were all extremely cautious in their position on how the $84 million plus interest in the Swiss Pictet and Cie Bank account associated with James Giffen, and Kazakhstani President Nazerbayev, could be spent.
This mix resulted in a Memorandum of Understanding agreed in 2007 among the three governments. The MOU that had the following key requirements:
1. “The BOTA Foundation shall be independent of the Government of the Republic of Kazakhstan, its officials, and their personal or business associates. The BOTA Program shall be subject to the monitoring of the Governments of the United States of America and the Swiss Confederation. The administration, management, and expenditures of the BOTA Foundation shall be conducted by a reputable international non-governmental organization serving as the BOTA Program Manager. The World Bank shall supervise and monitor the BOTA Program and the administration and expenditures of the Funds.”
2. “Independence” from the government of Kazakhstan was a constant factor throughout the life of BOTA. The concern of the U.S. and Swiss is that somehow the BOTA funds would wind up in the hands of Kazakh officials again, either directly, or that Kazakhstan would somehow dictate how the funds would be used. BOTA was to be an independent foundation, but one set up and managed by an international NGO chosen through a competitive tender, and watched carefully, on behalf of the governments, by the World Bank.
3. The government of Kazakhstan’s disadvantaged position in regard to BOTA is evidenced by two other “conditionalities” found in the MOU. First, Kazakhstan had to agree to participate in the “Public Finance Management Review (PFMR) Program” meant to improve planning and accountability related to the government’s budget. Second, in a similar vein, Kazakhstan had to make revenues it received from its oil and gas industry more transparent by becoming an active participant in the “Extractive Industries Transparency Initiative (EITI) Program.”
The World Bank agreed to support and monitor Kazakhstan’s adherence to these programs. The MOU between the three governments mandated that BOTA’s funds could be cut at any time if the World Bank did not certify that Kazakhstan was making progress on PFMR and the EITI programs.
To keep close tabs on BOTA’s money, the Foundation was funded every six months, based on progress reports, according to a budget and work plan approved by BOTA’s Board, the World Bank, and the three governments.
The U.S. and Switzerland (not Kazakhstan) had seats on BOTA’s seven-person board. The five local members were representatives of civil society groups. BOTA’s Charter stipulated that the two representatives of the U.S. and Swiss governments had the option of removing local board members if they chose (which didn’t happen), and that all important decisions approved by the board had to be further approved by the three governments.
The multi-layered bureaucratic structure was anything but ideal for BOTA’s management.
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].