The subject of lawsuits in the United Kingdom and the United States, former Mayor of Almaty Viktor Khrapunov, his TV-anchorwoman wife Leila, and their son Ilyas stand accused of embezzlement schemes amounting to at least $300 million. Resident in Switzerland since August 2008 when they fled their native Kazakhstan to join their son — loading up a chartered plane with an alleged 18 tonnes of art, antiquities and assorted booty — the family is now the subject of ongoing proceedings by the Public Prosecutor's Office of Geneva. With a network of connections that span the globe, though, is the Khrapunov house of cards about to come crashing down, or will their friends in high places save them?
Simple, Yet Audacious Schemes
Born to a family of bureaucrats in northern Kazakhstan in 1948, Viktor Khrapunov moved to Almaty — then the country's capital — after completing training at a college of industry and technology. Working as a mechanic while he continued with his studies, he decided to join the Komsomol (the All-Union Leninist Young Communist League), a move which marked the beginning of his political ascent. Khrapunov served as minister of energy and natural resources before being appointed mayor of Almaty, a position he held from 1997 to 2004. He went on to hold a governorship and another ministerial post, before retiring from all public positions in 2007, purportedly for “health reasons.” It is his tenure as mayor, however, from which allegations of corruption stem.
In August 2008, with local investigators closing in, Viktor Khrapunov and his wife hightailed it out of Almaty to the safe haven of Geneva, where their son was already resident. An investigation by the Kazakh authorities subsequently uncovered 83 shell entities that bore the family's fingerprints.
“The theft was committed through the alienation of properties in Almaty and land in protected environmental areas,” Sergey Perov, Kazakhstan's chief of Anti-Corruption Investigations and head of the inquiry into the Khrapunovs, told The Diplomat. “He also demanded bribes from entrepreneurs for issuing decrees of privatization, which were paid in the form of cash and real estate. We've uncovered 28 separate episodes of criminal activity.
“The schemes used by the Khrapunovs were simple, yet audacious,” Perov said. “The most common went like this: Mayor Khrapunov instructed his subordinates to conduct a fictitious tender for the sale of an asset to a predetermined company, the ultimate owner of which was his wife, Leila. After that, the Khrapunovs resold the object at its real value to a third party. For example, one piece of government land was bought and resold a day later at 45 times the price it was acquired for. He's not a moral man; he even privatized a kindergarten and a hospital for veterans of the Second World War.”
As laid out by the plaintiffs in a California court case, Kindergarten No. 186 serves as an example of how the Khrapunovs allegedly conducted their business:
On or about April 16, 2001, Viktor used his position as mayor to cause public land and a building in Almaty known as Kindergarten No. 186 to be auctioned and ultimately sold to Leila's company, KRI, for approximately $347,000… Under the laws of Kazakhstan, potential buyers of state-owned property are obligated to state how they intend to invest in and develop the property. In an attempt to make KRI's bid appear legitimate and to ensure they won, KRI fraudulently represented that they would invest more money than their competitors (based on inside information about the competitors' bids) in Kindergarten No. 186 and build a health center… Instead, Leila caused KRI to sell Kindergarten No. 186 to Karasha [a shell company] and three days later, Leila caused Karasha to sell Kindergarten No. 186 directly to her. The investment promise KRI used to win the bid was not passed on in the subsequent purchase agreements… [The asset] was then sold to an unrelated third party in a transaction that valued Kindergarten No. 186 at approximately $4.1 million.
It's Good to be Swiss
Founded at the time the family fled from Kazakhstan, the Swiss Development Group (SDG) — company slogan: “It's Good to be Swiss” — was established as a hub of financial operations for the Khrapunovs in Geneva. Among SDG's projects were a high-end beach resort on the shores of Lake Geneva, a mall in the city center, and a luxury ski resort, while the family also snapped up a string of other properties in Switzerland and elsewhere. As early as 2010, La Tribune de Genève ran a story raising suspicions that $10 million in capital raised for these ventures had been illegally funneled out of Almaty.
“Currently Switzerland isn't at the top when it comes to the fight against money laundering,” Martin Hilti, executive director of Transparency International Switzerland told The Diplomat. “We have several loopholes, one being the scope of our anti-money laundering act, which is limited to financial intermediaries and doesn't take into account other risky activities, such as the buying and selling of real estate.”
Hilti continued: “We published a report last autumn looking at the risk of money laundering in the Swiss real estate sector. It's pretty easy to buy Swiss real estate with dirty money because of the loopholes. The main actors, such as notaries and estate agents normally don't have any duty of due diligence or reporting. The banks have these duties, but are too far away from the business to detect money laundering.”
In 2010, the Swiss business magazine Bilan published an article naming the Khrapunovs among the wealthiest families in the country. By early 2012, however, with Viktor Khrapunov's name added to the Interpol Red List, Swiss authorities began to take tentative steps toward freezing the family's assets.
Meanwhile, in the Netherlands — where Kazakh authorities identified 15 entities that allegedly bear the hallmarks of Khrapunov shells — in May 2017, Ilyas Khrapunov's lawyers sought an injunction against the broadcaster Zembla, which was preparing to air a documentary examining the ties between kleptocrats and U.S. President Donald Trump.
“We approached Ilyas Khrapunov, and as soon as we told him the scope of the research and the issues we'd like to discuss with him, we got an email from his PR guy in Geneva,” Sander Rietveld, an investigative journalist and the creator of the documentary, The Dubious Friends of Donald Trump, told The Diplomat. “They warned us not to cross legal lines, but we were very transparent with him. We didn't hear from them for a couple of weeks, and then days before the documentary was set to air, we were served with an injunction. It was Ilyas suing us.
“His main argument,” Rietveld said, “was that the research was sloppy and we were accusing him of money laundering without any grounds. The judge basically said that the research had been conducted in the correct manner, so there was no reason to block the program. It gave the documentary more publicity; it definitely backfired on them.
“It's hard to search for the ultimate beneficial owners of entities in the Netherlands,” Rietveld said. “It's not information that the government or the Chamber of Commerce provides in a transparent way. For example, Leila Khrapunova used to have this Dutch shell company, Helvetic Capital B.V., which was 50 percent owner of Kazbay B.V. and the other owner was Bayrock B.V. which was a shell company of Felix Sater and Tevfik Arif, the owners of Bayrock in New York.”
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