Kazakh City Says Oligarch Swiped $300 Million

LOS ANGELES (CN) - The "corrupt former mayor" of Kazakhstan's largest city looted $300 million and hid the money in the United States, the City of Almaty claims in Federal Court.

The City of Almaty sued Viktor Khrapunov, his wife Leila, their children Iliyas and Elvira Khrapunov, and the children's spouses, Madina and Dmitri Kudryashov, on April 8.

Almaty, pop. 1.6 million, is in the foothills of southeastern Kazakhstan. Once the country's capital, Almaty is still an important cultural and commercial center.

(The country's president, Nursultan Nazarbayev, the only president Kazakhstan has had since the collapse of the Soviet Union, is believed to have swiped more than $1 billion from the country's oil exports, according to a 2006 United Nations report. Nazarbayev, sometimes called "the ultimate oligarch," also has been accused of the mass torture of political protesters.)

In the lawsuit, Almaty claims the Khrapunovs' scheme was twofold: "(a) to steal and loot money from Almaty; and (b) to transfer, launder, and hide that stolen money in the United States where they believed it would be out of reach of Kazakh and other governmental authorities."

The lawsuit adds: "From 1997 to 2004, Viktor, Leila, Iliyas, Elivra and their co-conspirators systematically stole and looted money from Almaty as a result of Viktor's corrupt use of his political power. In 2007, fearing discovery of their fraud, Viktor and Leila fled to Switzerland, where Iliyas and Elvira resided at the time, and attempted to launder and hide the stolen money in Switzerland."

With cooperation from Swiss authorities, Kazakh authorities brought "formal criminal charges" against the Khrapunovs in May 2011. In 2012, Switzerland investigated them for money laundering and began freezing their Swiss assets, according to the complaint.

So the Khrapunovs relocated their fraudulent enterprise to the United States, which they considered "the ideal location to launder the stolen proceeds because they believed it was out of reach of the Kazakh authorities," the complaint states. "The United States does not have a mutual legal assistance treaty or extradition treaty with Kazakhstan."

Almaty claims the Khrapunovs used sham companies to hide the source of their stolen millions from Kazakh, Swiss and U.S. authorities.

Viktor Khrapunov was mayor of Almaty from June 1997 until December 2004, when he was appointed governor of Pavlodar, Kazakhstan's northeastern province. In 2007 he retired to Switzerland, allegedly due to health reasons.

During his tenure as mayor, the city says, Khrapunov abused his authority by "plunder[ing] the city's wealth and industry to enrich himself, his family, and his co-conspirators, at the expense of Almaty and its people."

As mayor, Khrapunov could sell state-owned real estate at auctions and acquire private property for state use. But Almaty says he gamed the system by, among other things, disclosing confidential bid information to his wife so her entities could adjust their bids; using sham entities to acquire property at low cost and selling it for "tens of millions of dollars in illicit profits;" not paying for properties acquired at auction; and using government influence to increase the value of certain properties he obtained at auction.

Almaty claims the Khrapunovs laundered the dirty money through various offshore holding companies, including two Swiss companies owned by Leila, Iliyas and Elvira. Upon moving their enterprise to the United States, they used the laundered money to buy expensive cars and "lavish" mansions in Beverly Hills, and invested it in several U.S. companies, including a luxury hotel chain in New York, according to the complaint .

Viktor and Leila filed false tax returns that listed their combined net worth at around $113,000, when in reality they had "amassed a fortune that reportedly exceeds $300 million," the complaint states.

In Kazakhstan, Viktor faces 24 criminal charges of for embezzlement, fraud, abuse of power and other crimes, and Leila faces five charges of money laundering and organized criminal activity, according to the complaint.

Viktor Khrapunov did not return requests for comment Friday.

Almaty seeks compensatory, treble, and punitive damages for RICO violations, breach of fiduciary duty, conversion and conspiracy, fraud and deceit. It also wants the $300 million.

It is represented by David J. Schindler with Latham & Watkins.

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