Kazakh E&P firm linked to UK fraud probe

by James Norman

While federal prosecutors in New York are exposing massive alleged bribe-taking from oil companies like ExxonMobil by Kazakh president Nursultan Nazarbayev, London's Serious Fraud Office is probing companies connected with money-losing Kazakh E&P minnow Atlantic Caspian Resources (ACR). Headed by former British Gas chairman Cedric Brown, ACR has its own curious linkage to Nazarbayev, partnering in several small oil fields there with a company controlled by Nazarbayev's brother Bulat Nazarbayev.
It is not known whether the probe extends to ACR itself or its Kazakh dealings. But the SFO has confirmed it is looking at ACR's parents, UK property firm Lynch Talbot and its Orb Estates, accused of looting some £ 33 mm ($ 52 mm) from a failing software company called Izodia.

Lynch Talbot is controlled by ex-UK government official Salai Ozturk, through Channel Islands trusts and partnerships funded by "high net worth individuals." Ozturk, 64, is a Turkish national with past ventures in construction, finance, casino operations, oil trading, shipping and citrus growing.
"This case is still in the investigation stage," said a spokeswoman for the SFO, looking at "allegations of misappropriated of funds from Izodia." She confirmed that in December "we did some searches in offices in London and Jersey," the secretive Channel Islands tax haven.

On April 8 trading in ACR's 906 mm shares were halted on London's Alternative Investment Market at a price of £ 17. That was down from £ 375 in early 2001 and barely 1 % of its value in mid-2000, but still equates to almost a quarter of a billion dollars in market value. That is for a company with no revenues and an accumulated loss at June 30, 2002, of £ 39 mm $ 61 mm. The reason for the trading halt was resignation of "nominated advisor," or investment banker, Corporate Synergy. ACR said it is in talks to find a replacement for that required advisor role.
Corporate Synergy, which has come under sharp criticism from the UK Takeover Panel for its handling of a property deal by Orb which stripped some £ 11 mm of cash from Quays Group, is now controlled by London's Abingdon Capital. Its CEO is Edward Vandyk, who was also a director of Izodia. Other Izodia directors have included former ACR chairman Peter Catto and Abingdon director Jon Pither, a former director of small UK E&P company Emerald Energy. Izodia's executive chairman was Sir Anthony Joliffe, former Lord Mayor of London.

Another link between the companies is Charles Helvert, ACR finance director, chairman of Quays and former finance director at Orb. Helvert in 1989 led a management buyout of French aluminium major Pechiney. It was later sold to Pither's Amari, where Helvert led joint ventures with British Aerospace, Kaiser and Trafalgar House to build smelters in the Middle East.
Neither ACR chairman Brown nor Helvert would comment on ACR's current status. But last December the company admitted its long-running talks with Romania's Petrom for a merger or farm-in to fund its Kazakh obligations had collapsed. ACR claimed it is still seeking other partners there.
"It's another FSU story that didn't work out," concludes Charlie Sharp of Canaccord Capital in London. He is one of the few analysts who ever followed ACR and has now dropped coverage. "They had an assortment of small fields," Sharp says. "One they were working on didn't go anywhere. Then they drilled two exploration wells on a potentially big structure. Neither came in. They've tried some shallow gas plays, but prices in that area are low and the volumes were small."

ACR's great hope was the Akkulkovsky fields, thought to hold some 1 bn barrel of recoverable oil. It gained a 70 % stake in that play by swapping about one-third of its stock for an interest in a Kazakh company called TOO bn Munai, 30 % owned by Bulat Nazarbayev.
In 2000 ACR drilled a 9,000-foot well there that found water. Its second try found the reservoir heavily faulted and non-commercial. ACR took a £ 26 mm ($ 41 mm) write-off. But throughthe efforts of a Kazakh firm called Keites, which was one of the sellers of TOO bn Munai, the concession was expanded by Kazakhstan's Agency for Investments by 10-fold to 1.7 mm sq km.
ACR valued the extension at £ 20 mm ($ 31 mm) and issued another 328 mm shares to Keites in late 2000 for its services. ACR said the shares were then sold through an Istanbul broker to "a number of European and Middle Eastern investors," who are not disclosed since none own more than 3 % of ACR. Given ACR's odd connections, it seems likely its investors will quietly lick their wounds, and hope the world pays no mind.