The accusation that Mark Seidenfeld stole $40,000 in Tenge from OAO “Arna” in December 2002 is false. This accusation, which served as the sole basis for Mark Seidenfeld’s arrest in Russia and extradition to Kazakhstan, has been dropped since the evidence in support of the accusation has been shown in the ongoing pre-trial investigation to be falsified.
Further, the accusation was known to be false when OAO “Arna” first brought the accusation in bad faith against Mark Seidenfeld in June 2004. As discussed elsewhere on this blog site, the Decree ordering the commencement of a criminal investigation against Mark Seidenfeld is dated June 1, 2004 and recites the accusation that he had stolen 5,457,500 Tenge from the company (approximately $40,000) (the “June 1 Decree”). That accusation is signed by Mr. Ilyakov, M.A., a Senior Investigator and Senior Lieutenant of the Kazakhstan Financial Police.
The accusation was known to be false on June 1, 2004 because, in February 2004, a major international accounting firm issued a lengthy and detailed report to the Board of Directors of OAO “Arna” establishing that the cash in question that had been requisitioned by Mark Seidenfeld in December 2002 was used to acquire certain pieces of equipment that the audit company was able to physically observe installed and in use in the offices of OAO “Arna”. The report of the accounting firm is based on OAO “Arna’s” official cash book.
However, it turns out that the then minority shareholder in OAO “Arna”, Mr. Murat Zhunussov, had control of a second cash book for the company which is referred to in the report of the audit company. Certain transactions were recorded differently in the second cash book controlled by Mr. Zhunussov than in the company’s official cash book. The accounting firm noted the differences and was still able to reconcile cash transactions shown in the second, unofficial, cash book with the company’s official cash book, and with the corresponding bank accounts.
As discussed elsewhere on this site, the accounting firm made the foregoing report to the Board of Directors because the Board requested such an analysis and report in response to a written denunciation of Mark Seidenfeld delivered to the Board of Directors of “Arna” on December 10, 2003. The written accusations from the company cashier, Ms. Dzhasibayeva, are referred to in the official request for Mark Seidenfeld’s extradition, dated December 3, 2005.
Notably, none of the official documents calling for Mark Seidenfeld’s arrest and extradition refer to the report of the international accounting firm of February 2004 which had exonerated Mark Seidenfeld from the accusations made by Ms. Dzhasibayeva.
It defies belief that the OAO “Arna” company cashier, Ms. Dzhasibayeva, made such accusations against Mark Seidenfeld on her own initiative, and it also defies belief that in May and June 2004, the management of OAO “Arna” did not know that Ms. Dzhasibayeva’s accusations had been disproven by the audit company in February 2004.
It is a well known axiom that, when the reasons behind events are unclear, look to see whose interests are advanced by developments. In the fall of 2003, Mr. Zhunussov was one of several bidders to acquire the EBRD’s 49.9% stake in OAO “Arna” – and Mark Seidenfeld was advancing a competing bid which was causing Mr. Zhunussov to increase his bid for the EBRD shares by several millions of dollars. The accusations against Mark Seidenfeld in December 2003 were timed to discredit him during this time of competing bids.
Mr. Zhunussov acquired the EBRD shares in a transaction which closed on March 12, 2004, and Mark Seidenfeld was immediately fired as CEO. For coverage of the change in management, see several published articles, including: http://www.nomad.su/?a=19-20
0404230017 and http://www.professional.kz/?mod=text&tx=005921.
One would suppose that with the acquisition of the EBRD’s shares in OAO “Arna” in March 2004, and Mark Seidenfeld fired as CEO of OAO “Arna” in March 2004, Mr. Zhunussov would have had no more incentive to make any accusations against Mark Seidenfeld. What was gained, and by whom, by the commencement of criminal proceedings on June 1, 2004 on the basis of accusations that were known to Mr. Zhunussov to have been disproven by the audit company in February 2004?
There are two key actors in the accusations against Mark Seidenfeld, the company cashier, Ms. Dzhasibayeva, and the Company Chairman of the Board as of March 2004, Mr. Zhunussov. The two have something in common. They were both fired from OAO “Arna” by Mark Seidenfeld while he was CEO.
Mr. Zhunussov was terminated from OAO “Arna” as of December 31, 2002, on directions from the Board of Directors, for lack of performance and excessive expenditures.
Ms. Dzhasibayeva was fired from OAO “Arna” on April 23, 2003. The story behind her firing appears to be that, in the fourth quarter of 2002, OAO “Arna” was in the process of installing a new billing system CBOSS and new financial software (Navision). The company was spending $50,000 per day on capex and building new products and services for 2003. Ms. Dzhasibayeva was the sole cashier, and was regarded by management as uncontrollable. According to the Chief Financial Officer (“CFO”) of OAO “Arna” at the time, David Wolfe, from what the then management of OAO “Arna” saw, the second purported Cash Book “held by the minority shareholder” Mr. Zhunussov, bore signatures of only the cashier, Ms. Dzhasibayeva on the front page and had what clearly appeared to be forged signatures on the back pages. Secondly, these fabricated papers which make up this second purported Cash Book could be prepared by anyone with 1С software on their computer.
Mark Seidenfeld had hired David Wolfe, as CFO in September 2002. Ducat then had a very weak financial department and poor internal controls. Mark Seidenfeld’s first priority was to implement a new billing system called CBOSS. His second priority was to implement a new financial system called Navision. Both initiatives were intended to make the company transparent and more efficient, and both systems were successfully launched in January 2003.
One of the main reasons why Ms. Dzhasibayeva was fired was that it was apparent to the then CFO that she was sabotaging the implementation of Navision. When new cashiers were hired in April, 2003, all bank and cash entries from January had to be redone and a Systems Integrator from Moscow was hired to do the work. During this work, it was shown that Ms. Dzhasibayeva on many occasions tried unsuccessfully to change cash entries in Navision, proving that she was quite experienced at making unilateral changes at any time with the old 1С system. Ms. Dzhasibayeva knew better than anyone how to manipulate the cash books. The one person to lose the most with the implementation of the transparent and highly secure accounting system, Microsoft Navision, was the cashier Ms. Dzhasibayeva herself.
It was apparent to the then CFO that the cashier, Ms. Dzhasibayeva, was a close collaborator of the minority shareholder, Mr. Zhunussov. When they learned of its existence, management perceived that Ms. Dzhasibayeva created the second purported Cash Book “held by the minority shareholder” Mr. Zhunussov by herself with the support of Mr. Zhunussov so that he could disrupt the sale of the company to the higher bidder that Mr. Seidenfeld had located. Mr. Zhunussov was also perceived as afraid that, if the EBRD’s majority interest in Ducat were sold to a local financial investor other than of his own choice, the value of his minority interest in the company would subsequently be diluted to nothing. Minority shareholders had few enforceable rights at the time in Kazakhstan.
And still the question remains, what more was to be gained, and by whom, after Mr. Zhunussov had successfully acquired the EBRD shares and fired both Mr. Seidenfeld and Mr. Wolfe in March 2004?
Prior management understands that Mr. Zhunussov, when buying the EBRD’s shares in OAO “Arna” paid 50% up front and gave the EBRD a letter of credit guaranteeing the balance within a year. When the 50% balance was coming due, Mr. Zhunussov started correspondence with the EBRD saying that he had been “tricked” into agreeing to pay too high a price and posturing that he would not pay all of the balance due. He tried at the same time to convince the bank which had issued the letter of credit that financial discrepancies within OAO “Arna” annulled the terms of the letter of credit. To create some type of evidence to show that he had been deceived, Mr. Zhunussov reportedly procured that the criminal case against Mark Seidenfeld be commenced as “proof” that there had been criminal misconduct at OAO “Arna” which had led to Mr. Zhunussov to agree to pay too high a price to acquire control of the company.
The creation of the criminal accusations against Mark Seidenfeld for these apparent business purposes, and also, apparently, for the personal satisfaction to be derived by Mr. Zhunussov from causing a great deal of pain and suffering for Mark Seidenfeld, has created a more complex and long-lasting problem for everyone concerned than was, perhaps, intended. The question today becomes how can all concerned now find an exit from this situation which has likely gotten somewhat out of control?
