According to sources familiar with the case, a former or current executive with one of the oil companies named in the investigation has been helping investigators: “a whistleblower,” in the words of one knowledgeable source. As previously reported in NEWSWEEK, the Justice Department suspects that Giffen, a longtime adviser to Kazakh President Nursultan Nazarbayev, may have violated the Foreign Corrupt Practices Act by transferring money to senior Kazakh officials from oil companies that, in return, received oil concessions in Kazakhstan. Giffen, through his attorneys, has denied any wrongdoing, and so have all three of the companies: ExxonMobil (which says it is cooperating with the case) and affiliates of Phillips Petroleum and Amoco. According to a Justice Department letter obtained by NEWSWEEK, Giffen is the only acknowledged subject of the investigation. But sources say others, possibly including oil-company executives, may yet become ensnared as well.
How this case fell into the Justice Department’s lap is an extraordinary tale. It originates in the pursuit of a money-laundering case led by Daniel Devaud, an aggressive, Geneva-based judge. Devaud currently presides over a series of diplomatically explosive corruption investigations, including one looking into whether former Russian president Boris Yeltsin’s daughters took bribes from a Swiss construction company. (The daughters have denied the allegations.) About a year ago, Devaud froze several Swiss bank accounts that he believed contained laundered funds belonging to current or former Kazakh officials. As in the United States, money-laundering cases in Switzerland require that the state show the funds in question were gained illegally. Lawyers for the Kazakh government appealed 20 to 30 times, Devaud says, to unfreeze them. They argued that the accounts were held for the benefit of the government of Kazakhstan and not for any individuals.
In an exclusive interview with NEWSWEEK, Devaud last week disclosed that to keep the accounts frozen and to possibly charge those officials he suspects of accepting bribes, he effectively needed to turn the U.S. Justice Department into an investigative arm of his court. Devaud said Kazakhstan was not cooperating in providing evidence that could prove that any of the funds in the frozen accounts were ill gotten. But he said he also knew that some of the money transferred into the Swiss banks had come from accounts controlled by Giffen–some $65 million worth of transfers. That raised the possibility of a case in the United States under the Foreign Corrupt Practices Act, which prohibits American companies from bribing foreign officials in return for contracts. So, over several months, and culminating in a quiet visit to Washington in May, Devaud turned his information over to the United States. Initially, the State Department was kept out of the loop–a remarkable fact, given the diplomatic sensitivity of the case. But Devaud informed only Justice.
Some critics of American policy in the former Soviet Union–who argue that Washington has consistently turned a blind eye to massive corruption–say Devaud was smart to stick with Justice. Though State Department officials say they have no problem with Foreign Corrupt Practices investigations where the evidence warrants one, skeptics in Washington say there’s not much enthusiasm at State or in the Clinton White House for this particular case. U.S. diplomacy in the Caspian region actively encouraged American energy companies to seek contracts, for developing both new oilfields and new pipelines. And while the United States has periodically chided Nazarbayev for his tarnished record in pursuing democracy, there was little bite behind the rhetoric. On the contrary, Washington has aggressively sought Nazarbayev’s support on a key U.S. foreign-policy aim: the construction of an enormous pipeline from the Caspian Sea to the Mediterranean Sea that bypassed both Russia and Iran.
The Swiss judge’s persistence may eventually pay big legal dividends. While Kazakh lawyers argued that Devaud had inappropriately frozen state accounts, the judge cites documents that make it appear they were holding funds intended for individuals, including Nazarbayev. According to similar documents obtained by NEWSWEEK, a government organization set up in 1994 called the International Foundation for Development of Kazakhstan maintained an account in Switzerland at Geneva’s United European Bank. The documents indicate that Nazarbayev was entitled to control 75 percent of the account’s funds. According to the documents, the amount of funds in the account peaked at nearly $20 million. The source of these funds is not clear from the documents. And to date there is no evidence that Nazarbayev made personal use of the money. But Devaud has convinced the U.S. Justice Department that similar accounts existed for the receipt of funds from U.S. oil companies, which then ended up–with Giffen’s help–in the private accounts of senior Kazakh officials. Whether they will be able to prove that is still unclear. But there are more than a few powerful people in Washington and abroad who wish they weren’t even trying, and for whom the existence of an inside informer may only mean more trouble.
