US embassy cable - 05ALMATY977

UNCLAS  ALMATY 000977 
 
SIPDIS 
 
 
DEPARTMENT FOR EUR/CACEN (JMUDGE, KLOGSDON), DRL/PHD PDAVIS, 
EUR/ACE (MO'Neil), EUR/PPD 
 
DEPARTMENT PASS TO USAID 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PGOV, PREL, PHUM, KPAO, KZ, POLITICAL 
SUBJECT:  Kazakhstan: Procurator General Begins 
Investigation of 33 U.S. Mission Implementing Partners 
 
Ref:  Almaty 346 and previous 
 
1. (SBU) Summary:  On March 9, the Procurator General's 
Office (PG) for the City of Almaty, Kazakhstan 
systematically began investigating 33 U.S. Mission 
implementing partners at the instigation of Mazhilis member 
E.A. Abilkasimov.  Officials from the Procurator's Office 
were often accompanied by members of the Financial, Tax or 
Immigration Police.  They requested immediate access to 
financial and program documents, in some cases taking copies 
with them and in others indicating return visits.  Partners 
received no advance warning and were told that non- 
cooperation would be grounds for office closings and 
criminal prosecution of individual staff. 
 
2. (SBU) Summary, continued:  The authorizing letter for the 
scope of the investigation was quite broad, requesting 
access to all financial and program documents dating back to 
the original registration date of each organization in 
Kazakhstan.  While the list of organizations to be audited 
contains a range of democracy, health and economic sector 
agencies, GOK officials have told us that the purpose is to 
investigate political party financing.  The list contains 
American for-profit and not-for-profit organizations, 
international organizations with diplomatic status and 
locally-registered NGOs.  Based on the Ambassador's 
discussions with senior GOK officials, the Mission has since 
developed a cooperative framework for the investigations. 
Nevertheless, they will continue for 30 days and will likely 
place significant burden on democracy partners, who have 
just finished complying with an earlier round of audits 
begun in mid-January.  End summary. 
 
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Details of Investigations 
------------------------- 
 
3. (SBU) In January 2005 the PG, Tax Police, and Immigration 
Police targeted five implementers of USAID's democracy 
portfolio -- the Eurasia Foundation, Counterpart Consortium, 
IRI, NDI and Freedom House (reftel).  In response, 
Ambassador Ordway and USAID's Regional Legal Advisor (RLA), 
David Harden, met with Procurator General R.T. Tusupbekov 
and agreed that no further investigations would be 
instigated until the PG had first contacted the U.S. 
Mission, discussed any concerns, and arranged mutually- 
agreeable, reasonable terms for the audit.  These 
procedures, however, were not followed in the March 
investigations. 
 
4. (SBU) From March 9-11, the PG visited 18 organizations, 
giving no advance warning to 14 of them, and in several 
cases threatening partners with office closings and criminal 
prosecution of staff.  The PG initiated the audits in quick 
succession, limiting the ability for anyone from the U.S. 
Mission to be present.  On the evening of March 9, after the 
inspections had already begun, the Ambassador received a 
faxed letter dated March 4 from Acting Procurator General I. 
Bakhtibaev, indicating that from March through April his 
office would conduct audits of U.S. funded organizations 
operating in Kazakhstan. 
 
5. (SBU) The audits were requested by Mazhilis member E.A. 
Abilkasimov.  Among the list of organizations to be audited 
are American for-profit and not-for-profit organizations, 
locally-registered Kazakhstani organizations, and 
organizations with diplomatic status.  The authorizing 
letter allows PG officials and other Government authorities 
access to all financial and program documents dating back to 
the organization's original date of registration in 
Kazakhstan. 
 
6. (SBU) From March 9-11, the PG visited the International 
Center for Not-for-Profit Law (ICNL), Counterpart 
Consortium, Eurasia Foundation, the National Democratic 
Institute (NDI), and the International Republican Institute 
(IRI), Abt Associates, Alliance Open Society Institute 
(OSI), Internews, Institutional Reform of the Informal 
Sector (IRIS) from the University of Maryland, John Snow 
Incorporated, the Kazakhstan International Bureau for Human 
Rights and the Rule of Law, Pokoleniye (a Counterpart 
grantee not on the original list), Project Hope, and 
 
 
International Foundation for Electoral Systems (IFES). 
 
7. (SBU) On March 10, 2005, USAID's RLA met with the Deputy 
Prosecutor General of the City of Almaty, who narrowed the 
scope to a single inquiry - support of political parties. 
They mutually agreed that the investigations would 
temporarily halt until a logical framework for the audits 
could be negotiated between the two governments.  However, 
inspections continued March 11 with visits to an additional 
four partners - International Research and Exchanges Board 
(IREX), Adil Soz, Pragma, and the International Organization 
for Migration (IOM). 
 
8. (SBU) In two cases - at IRI and Counterpart - the PG made 
several visits over the course of three days and directly 
threatened the American chiefs of party.  The PG visited IRI 
on three separate occasions within two days, each time with 
different letters and different teams of people.  One 
letter, signed by the Procurator General for Almaty, was 
delivered by the PG and Financial Police, indicating a 
general audit of financial and program related documents. 
The second letter, signed by the Deputy Procurator, was 
delivered by the PG and Immigration Police, requesting 
registration documents for all foreign staff with particular 
interest in a consultant from Russia, Yuri Asseev. 
 
9. (SBU) The two teams, although from the same office, were 
unaware of each other's mission.  IRI, at USAID's direction, 
requested that the PG return Friday afternoon so that 
someone from the U.S. Mission could be present.  The PG 
official initially complied, but then returned and insisted 
on access to all documents.  Officials were so insistent 
that IRI's Chief of Party went into her office and closed 
the door to phone USAID, but the PG team still tried to 
enter.  She then informed the officials that USAID's RLA was 
en route to a meeting with the Deputy Procurator to resolve 
this issue and requested that they return at a later date. 
The Immigration Police said they would return March 11, but 
did not. 
 
10. (SBU) Counterpart was visited March 9, 10 and 11.  The 
Tax Police had just favorably concluded an audit begun in 
January.  At that time, the Tax Police had asked for a list 
of all banking transactions since 2001.  After intervention 
from USAID, the authorities agreed to a brief summary rather 
than a detailed list.  However, on March 10, the Tax Police 
phoned Counterpart and demanded once more the complete, 
detailed list of transactions.  The call was immediately 
followed by a second visit from the PG, stating that USAID's 
meeting with the PG had just ended, the U.S. Mission had 
agreed to the audits, and therefore the PG had the right to 
continue its investigation. 
 
11. (SBU) The investigators threatened Counterpart, saying 
that any refusal to comply would be considered non- 
cooperation and grounds for the PG to close Counterpart's 
office and press criminal charges against staff.  They gave 
Counterpart three days to provide a range of documents. 
Nevertheless, they returned the following day.  Eventually 
they left, after talking to the RLA by phone, taking a copy 
of a USAID-issued email indicating that the PG had agreed to 
temporarily halt any audits until agreement could be reached 
on the scope, and receiving a letter from Counterpart 
stating a willingness to comply with the audit once the 
scope was resolved. 
 
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Ambassador's Meeting with the GOK 
--------------------------------- 
 
12. (SBU) Given the quick escalation of the situation, the 
Ambassador, accompanied by the USAID Acting Mission 
Director/RLA, met with Deputy Minister of Foreign Affairs 
Aleksey Volkov on March 11 in Astana.  Representatives from 
the PG, Interior Affairs/Migration Police, Financial Police, 
Finance/Tax Committee, and Presidential Administration also 
attended.  DFM Volkov praised the role of U.S. assistance in 
Kazakhstan and offered the meeting as an opportunity to find 
a way forward for the United States and Kazakhstan on 
questions of NGO activities in country.  The Ambassador 
highlighted the importance of the U.S.-Kazakhstan 
relationship, the U.S. expectation that NGO partners will 
 
 
abide by both U.S. and local law, and the need to engage the 
Embassy first and immediately if there is a question about 
the activity of a U.S.-funded NGO. 
 
13. (SBU) The PG representative explained that 
investigations into NGO activities had been launched based 
on a January request from Mazhilis member Abilkasimov.  The 
PG's principal concern was whether NGOs are funding 
political parties.  USAID Acting Mission Director/RLA 
challenged this assertion since some of the groups targeted 
do not work on democracy issues and the scope of the 
investigation order is appears to be unlimited.  Volkov 
interjected that the broad list of NGOs, some not even 
associated with the United States, simply demonstrated that 
law enforcement action was not directed solely at U.S. 
democracy NGOs but had the broader secondary purpose of 
accounting for the range of NGO activities in Kazakhstan. 
 
14. (SBU) The PG representative maintained that his office 
merely wishes to "look at the books" of NGOs.  The 
Ambassador emphasized that the United States does not object 
to audits or document checks of NGO partners, but there must 
be agreement on the manner in which verification proceeds. 
USAID Acting Mission Director/RLA spelled out three requests 
for Kazakhstani law enforcement -- fair notice to the 
Embassy of intent to visit a U.S. NGO partner; display of 
proper identification upon arrival at an NGO's premises; and 
a written order that sets out the scope of the 
investigation.  (Comment:  That the Kazakhstani reps 
appeared to see nothing unusual in broad/unlimited 
investigation orders suggested that this may be a more 
general law enforcement practice.  End comment.)  The 
parties agreed to meet again on March 14 to discuss in 
further detail how to accommodate these requests. 
 
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Meeting with Partners 
--------------------- 
 
15. (SBU) On March 14, USAID hosted a meeting between the 
Deputy Procurator for the City of Almaty and two of his 
investigators with representatives of the targeted 
organizations.  The DCM and Acting USAID director attended 
the meeting.  The Procurator's Office was very open about 
the scope of the investigation and fielded questions from 
implementing partners.  While the time frame will be limited 
to 30 days (with a possible additional 30 day extension in 
unusual circumstances), the scope remains quite broad.  It 
covers political party financing, employee records and 
salaries, program activities, legal status of the 
organization, and registration of branch offices.  Documents 
to be collected include the organization's charter and by- 
laws; asset, banking, taxation and accounting records, 
including contracts, invoices, agreement terms and amounts, 
and sub-grants; a list of main activities, seminars, 
trainings, and participant lists; employment documents; and 
similar information on branch offices. 
 
16. (SBU) The PG will issue a second letter this week to 
each organization indicating the start date for the audit 
and naming the investigators assigned to each audit.  If 
investigators overstep their scope, organizations have the 
right to protest to the PG.  The Deputy Procurator indicated 
that the inspections are not to impede normal operations of 
the organization.  At the end of the audits, the PG will 
issue a summary report per organization.  This will be made 
available to the organization for copying, so that they can 
prove the scope and completion of the audit.  The PG will 
then compile the reports into a single document for Deputy 
Abilkasimov. 
 
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Comment 
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17. (SBU) Comment:  The agreement of the GOK to work closely 
with the U.S. Embassy in defining the scope of the 
investigations is a step in the right direction.  Also 
positive was the willingness of representatives of the 
Almaty PG not only to meet with assistance organizations, 
but also to answer their questions in a USG venue. 
Nevertheless, resolving this issue is going to be a long, 
 
 
difficult, and time consuming process.   Representatives 
from assistance organizations remain extremely wary of the 
investigations.  Several Kazakhstani heads of local pro- 
democracy NGOs receiving USG grants held a March 14 press 
conference following the meeting with PG officials.  These 
NGO representatives accused the GOK of launching 
"politically motivated" inspections against their 
organizations.  End comment. 
 
18. (U) Minimize for Dushanbe considered. 
 
Ordway 
 
 
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