During the existence of FBRK, our editorial team has encountered countless 'hunters' after state assets. Today, in the so-called New Kazakhstan, the schemes for laundering budget funds differ little from what came before. As is well known, the basis of such matters is often cronyism, corruption, and incompetence. It is these cases that will be discussed.
Recently, we wrote about a standard public domain patent using the example of the activities of Troya Company LLP. The partnership patented a desk model which, as later turned out, was copied from a Chinese manufacturer.
The company's management decided to take a creative approach and initially registered the partnership as a society of the disabled. Thus, a publicly available design became the exclusive property of the partnership, which was then shamelessly promoted on the public procurement market through societies of the disabled.
"To obtain special status in public procurement, a society of the disabled needs to get a corresponding certificate from the 'Atameken' NPP. It would seem that this is the moment to control fake manufacturers, but I myself clearly remember how CT-KZ certificates were sold in any typical kiosk in Zhetysay," wrote public figure and journalist Kirill Pavlov in his Telegram channel.
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For reference: The 'CT-KZ' Certificate of Origin of Goods is a document confirming that the country of origin of the goods is the Republic of Kazakhstan.
Why 'Atameken' was so irresponsible in issuing the certificate – there are plenty of guesses. Corruption and incompetence are a volatile mix.
The owner of the Shchuchinsk medical institution 'Avicenna-Burabay', Yulia Gagarkina, also became notorious for her machinations. The businesswoman embezzled budget funds under a public-private partnership (PPP) agreement totalling over 1.16 billion tenge by simply supplying old medical equipment disguised as new.
With the proceeds, Ms Gagarkina built a polyclinic building for 890 million tenge and attempted to sell it to the state for 4.5 billion tenge. In April 2021, she left the country. In short, PPP in Kazakhstan has been turned into an excellent tool for financing business at the expense of the state.
Corruption in public procurement is also far from a new phenomenon. We have written about this many times: the misappropriation of 190 million tenge of budget funds in Kosshy, illegal public procurement worth 6 billion tenge in Pavlodar, inflating purchase prices by 2 billion tenge in the North Kazakhstan Region, and much more.
We will explain how such schemes work using the example of RSE 'Enbek-Oskemen'. The substantial turnover of budget funds in the public procurement system justifiably entails certain risks. After all, there will always be those who want, and more importantly, are able to exploit the system's imperfections.
In the summer of 2023, a court hearing was held in Ust-Kamenogorsk, where a scheme for the embezzlement of budget funds through collusion between the heads of RSE 'Enbek-Oskemen' (hereinafter – RSE) and SEE 'Ridder Centre for the Provision of Special Social Services' (hereinafter – SEE) was presented.
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For reference: Republican State Enterprises (RSE) 'Enbek' are involved in organising the labour activities of convicts and are financed both from their own income and from the state budget.
The State Enterprise (SEE) 'Ridder Centre for the Provision of Special Social Services' falls under the Department for Employment Coordination and Special Programmes of the East Kazakhstan Region.
So, according to the court case materials, the heads of these two socially important state institutions conspired to conclude a single-source contract for the supply of medical beds and bedside tables. To make this work, the acting director of the SEE convenes a commission to consider a request for using pension payments and benefits for this unplanned purchase, where they present a fictitious analysis of price quotations.
Put simply, the SEE compares the inflated prices for the equipment provided by the RSE with a price quotation from Numetek LLP. The partnership, at the request of the acting director of the SEE, provides prices that are even higher. From the two suppliers, the most affordable in terms of price is chosen, namely the RSE.
Naturally, no one actually intends to assemble the beds and bedside tables. For this purpose, Sole Proprietor 'Alimov Z. M.' and Sole Proprietor 'Dzhalali A. Zh.' are used, who enter into fictitious contracts with the RSE supposedly for the supply of the necessary equipment for assembling those very beds and bedside tables. The entrepreneurs, in turn, enter into contracts with the aforementioned Numetek LLP for the same purposes, but this time at market price.
A few more details worth noting: according to the case materials, the acting director of the SEE, Albina Potapkina, held her position based on an unsigned order, meaning it was illegal. Furthermore, her relative facilitated most of the transactions, particularly those between the RSE and the SPs, as well as between the SPs and the LLP.
Now let's look at the figures. The SEE was allocated about 106 million tenge from the state budget to purchase the equipment. The RSE spends about 90 million paying for the SPs' services, and the latter pay for the purchase of equipment at market prices from the LLP, about 36 million tenge. And since the heads of the SEE, RSE, and SPs are connected, it turns out that out of the allocated 106 million tenge, only 36 million tenge was actually spent. Where did the remainder go?
In a word, the scheme is as old as the hills. The problem, as usual, lies in the lack (often artificially created) of a competitive environment, which allows for unjustified single-source procurement. And we certainly have no shortage of those looking to make a profit. Those at RSE 'Enbek' know this firsthand, judging by the number of corruption scandals that repeatedly shake the enterprise's branches.