almaty-prosecutors-decision-to-re-open-investigation-july-27-2007.doc
financial-police-decision-to-close-investigation-februay-13-2007.doc
The Almaty Prosecutor’s Office is investigating a new case against Mark Seidenfeld on patently false charges.
The new case is a claim that, while he was General Director of OAO “Arna”, Mark Seidenfeld concealed a debt owed by OAO “Arna” to Kazakhtelecom arising from interconnecting phone calls between the two companies.
This debt was disclosed in the audited financial statements of OAO “Arna” that were prepared by PriceWaterhouseCoopers (PWC) for the year ended December 31, 2002.
This debt of OAO “Arna” to Kazakhtelecom was also repeatedly discussed at meetings of the Board of Directors of OAO “Arna”.
The accusation that Mark Seidenfeld was responsible for non-disclosure of “OAO Arna’s” debt to Kazakhtelecom was previously investigated and dropped by the Kazakhstan Financial Police. See the attached Decision of the Financial Police, dated February 13, 2007, to drop this charge.
The Financial Police Decision provides in its last two paragraphs that “In the course of investigation of the criminal case [against Mark Seidenfeld] minutes of meetings of the Board of Directors of the company were included in the case materials. A study of these minutes showed that Mark Seidenfeld repeatedly put on the agenda for discussion by the shareholders the existence of a debt of “OAO Arna” to Kazakhtelecom in an amount between $1 million and $2 million US Dollars. In these circumstances, it is not possible to prove that Mark Seidenfeld had any intention to acquire any assets by means of any fraudulent acts, and all possibilities for collecting additional evidence [about such potential charges] have been exhausted… [Accordingly] the criminal investigation… of Mark Seidenfeld [in this connection] is closed due to the absence of evidence.” The Decision is signed by Senior Detective of the Financial Police of the City of Almaty, M. Ulyakov.
Notwithstanding the Decision of the Financial Police to drop any further investigation of accusations made by OAO “Arna” that Mark Seidenfeld had not disclosed a debt owing to Kazakhtelecom, it has just come to light that, in a document dated as of July 27, 2007, the First Deputy Prosecutor of the City of Almaty has now reopened this investigation. Formally, the Prosecutor’s Decision cancels the decision of the Financial Police dated February 13, 2007 to drop the earlier investigation.
The Prosecutor’s Decision is dated as of a date that is two weeks after Mark Seidenfeld was acquitted of all the false criminal allegations earlier brought against him as of July 11. The Almaty Prosecutor now wants to question representatives of the European Bank for Reconstruction and Development (the EBRD), and the Belgian investment company GIMV, and the investment fund Eagle Kazakhstan Fund.
The new Decision of the Prosecutor’s Office presents that OAO “Arna” is now alleging that shares of stock in the company were sold at an artificially high price to legal entities controlled by Murat Zhunussov, the current Chairman of the Board of Directors of OAO Arna, who acquired those shares from EBRD and GIMV.
Accordingly, OAO “Arna” and the Almaty Prosecutor’s office are now intending to draw the EBRD, GIMV and PWC directly into their false criminal accusations against Mark Seidenfeld.
One is left to wonder what is really driving all of this?
Did Murat Zhunussov not conduct any due diligence investigation of OAO “Arna” before he bought control of OAO “Arna” from the EBRD and GIMV?
It is a routine practice in mergers and acquisitions for an acquirer to acquire copies of Board of Director minutes and of financial statements of a company it is seeking to acquire. Murat Zhunussov ought to have become fully informed of the debt owed by OAO “Arna” to Kazakhtelecom before he bought control of OAO “Arna”. If he did not, then that is his own responsibility as a businessman. In any case, there can clearly be no criminal liability of a company manager toward an acquiring shareholder for debts owed by the company in its normal course of business that are fully disclosed in the company’s financial statements and disclosed and discussed repeatedly at Board of Directors meetings.
If Murat Zhunussov today has a claim at all, it is a very weak, losing, contract claim against the EBRD and GIMV who sold him their shares of stock in OAO “Arna”. Any such claim would not be against a member of management of the company, Mark Seidenfeld, who never owned any shares of stock in OAO “Arna” and who repeatedly discussed the company’s debt to Kazakhtelecom with the Board of Directors of OAO “Arna”.
One is also left to wonder what is the motivation of the Almaty Prosecutor’s Office to carry on investigating new patently false accusations against Mark Seidenfeld after he has been acquitted of all false charges brought earlier?
One takeaway is clear, beware anybody who plans to have any business dealings with OAO “Arna”. You may find out later the unexpected ways in which you are considered to be a criminal, and you might even find yourself in jail for over a year and a half facing false charges.
