Financial Transparency Coalition

Global Witness

LONDON – FTSE 100 mining firm Kazakhmys PLC is still refusing to provide full information as to the identity of its beneficial owners, nearly one year after anti-corruption watchdog Global Witness raised concerns over alleged links between the company’s management and Nursultan Nazarbayev, the autocratic president of Kazakhstan.

In a July 2010 report entitled Risky Business, Global Witness documented testimony from various Kazakh sources that alleged that President Nazarbayev has the ability to wield significant undisclosed influence over Kazakhmys PLC. With the price of copper and other metals on the rise, and other resource companies such as Glencore about to list on the London Stock Exchange, it is imperative that investors have full information on who controls them and how they operate. Global Witness requested proof of ownership of the company’s major shareholders at the company’s AGM which took place in London on Friday. The request was denied.

“Increasingly we are seeing companies that have originated in potentially corrupt jurisdictions list their shares in London. The information on these companies has to be full, comprehensive and properly verified,” said Tom Mayne, a campaigner at Global Witness. “Without this information, shareholders – UK pension-holders among them – are exposed to unknown levels of risk. London is seen as a ‘soft touch’ as a listing location; while it may bring more companies here, we should question whether this is viable in the long-term.”

According to Kazakhmys PLC, its Chairman Vladimir Kim owns 25.4% of the company’s shares through Cuprum Holding BV, which is ultimately controlled by a trust registered in Liechtenstein called the Folin Universal Trust. Kim owns a further 2.5% through other vehicles. Kazakhmys PLC CEO Oleg Novachuk owns 5.5% of Kazakhmys PLC shares through Harper Finance Limited which is registered in the British Virgin Islands. However, this information cannot be verified because these entities are located in jurisdictions which do not release information on trust beneficiaries or company shareholders.

In denying the proof of ownership request, members of the Kazakhmys PLC board commented that the company had undergone comprehensive due diligence procedures before the company listed in 2005 that proved “beyond reasonable doubt” that these men are the sole beneficial owners of these shares. “This response is inadequate: in the interests of transparency, shareholders and the wider general public should be able to see for themselves proof of ownership,” commented Tom Mayne. “It is important because huge sums of money are at stake: in 2010, Kazakhmys PLC paid out 22 cents to the share in dividends. This means that Vladimir Kim earned over US$32 million in dividends, nearly US$30 million of which would have gone through the trust in Liechtenstein.”

For eighteen months, Global Witness has been trying to ascertain what exactly the due diligence process entailed and whether documentary proof of these companies’ ownership was provided. A Freedom of Information of Act request on the due diligence performed on Kazakhmys PLC was refused by the Financial Services Authority, the body that regulates the Stock Exchange. JP Morgan Cazenove, Kazakhmys PLC’s financial sponsor for the listing and the entity responsible for the due diligence, did not reply to questions on this matter sent to it by Global Witness in February 2010.

The Kazakh government currently owns 26% of the company. Kazakhstan’s leader, Nursultan Nazarbayev, has been in power since 1991 and recently won a presidential election with a reported 95.5% of the vote. Kazakhstan has a dreadful record in fighting corruption and one scandal in particular, dubbed Kazakhgate, suggested that high-ranking Kazakh officials, including President Nazarbayev, may have been secretly profiting from the country’s oil deals in the late Nineties.

In light of this, it is imperative that companies with operations in Kazakhstan, such as Kazakhmys PLC, go the extra mile in being transparent. “There is no reason why the company should refuse to release such documentation given the risks of working in Kazakhstan. Doing so would take little time, improve investor confidence in the company and finally put an end to such questions,” commented Mayne.

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Contacts:

Tom Mayne
tmayne@globalwitness.org
+44 (0) 7939 460 357

Oliver Courtney
ocourtney@globalwitness.org
+44 (0) 7815 731 889

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The Task Force on Financial Integrity and Economic Development addresses inequalities in the global financial system that penalize billions of people, and advocates for improved transparency and accountability.

Global Witness is a coordinating committee and founding member of the Task Force on Financial Integrity & Economic Development .

For additional information please visit http://www.financialtransparency.org