The CIA, Secretiveness and Jim Giffen's Gamble

Jim Giffen, a New York man accused of passing oil company bribes to Kazakhstan’s president, has asked a federal judge to determine whether U.S. intelligence agencies are purposely withholding documents that the defense says could exonerate him.

In a letter on Giffen’s behalf, his lawyer, William Schwartz, also asks U.S. Judge William Pauley to determine whether his client – whose trial has yet to be scheduled five years after his arrest – has been denied his constitutional right to a speedy trial. Earlier this month, Pauley suggested in court that the delays may have gone on too long.

The Giffen case has attracted attention as the largest Foreign Corrupt Practices Act prosecution since the 1977 law took effect. Kazakhstan President Nursultan Nazarbayev is an unindicted co-conspirator in the case. In Kazakhstan, the case is known as Kazakhgate.

The 67-year-old Giffen doesn’t deny the government’s charges that he passed along some $80 million in payments from U.S. oil companies to Nazarbayev and other officials from the country. But he has invoked a so-called “public authority” defense, asserting that he had reason to believe that U.S. intelligence agencies knew and approved of the payments because Giffen served a useful role for the U.S. as a Nazarbayev confidante. In order to prove his claim, Giffen has requested a trove of documents from the CIA. In an April hearing, a U.S. prosecutor told Pauley that he would produce some of the documents by September.

Giffen in fact had contact with the CIA for more than three decades as a businessman dealing with the Soviet Union and then post-Soviet Kazakhstan. During the Soviet period, he and other American businessmen were effectively required to brief the CIA after visits to the Soviet Union -- it was a price of being permitted to deal with the enemy in a relatively free manner. After the Soviet breakup, Giffen shifted to Kazakhstan, and he continued to make his visits to the agency, something he regularly noted at the time to acquaintances as a seeming sign that he was plugged in at the top in Washington.

In invoking the novel defense, Giffen has seemed at least in part to be gambling that the highly secretive Bush administration would refuse to turn over documents for public review, and that thus some of the charges might be dropped since he couldn't defend himself without the papers. The latest news seems the first indication that the strategy may pay off.

Giffen’s letter – dated Sept. 8 and entered into the court file yesterday – was triggered by remarks made by Pauley in Giffen’s hearing on Sept. 5. In the hearing, assistant U.S. attorney Stephen Ritchen said he didn’t have the CIA documents, and the usually patient Pauley for the first time suggested that the government demonstrate that it is serious about trying the case. He said he might order intelligence officials to appear and explain themselves. According to the latest court docket, Pauley has scheduled a closed hearing Sept. 25, apparently with representatives of the intelligence agencies.

``At some point, the government has to decide whether it wants to go forward,'' Pauley said Sept. 5, as reported in a story by Bloomberg reporter David Glovin, who has covered the case almost from the beginning. ``Oftentimes, there's nothing more effective than having to look at a federal judge and explain why you haven't done what you're supposed to.''

Pauley said, ``Five years -- that in itself is punishment and hardship'' to Giffen. ``I'm reaching the point where I can't let it go on for years.''

Asked why the CIA has not complied with the request for documents, CIA spokesman George Little said in an e-mail response to me yesterday, "The CIA does not, as a rule, comment on matters pending before U.S. courts."

In his letter, Giffen asks Pauley in the Sept. 25 hearing “to determine whether any delays in production to date have been the result of deliberate inaction or indifference on the part of those agencies such that Mr. Giffen’s rights to a speedy and fair trial may have been compromised.”

Prosecuting Foreign Bribery Under the Bush Administration

When they unveiled the indictment in April 2003, U.S. prosecutors portrayed their case against James Giffen as open and shut -- the largest foreign bribery case in U.S. history. And by the looks of the detail, they had reason for confidence. There they were -- six individual examples of U.S. oil company payments totalling some $80 million being coursed through European bank accounts linked to the president of Kazakhstan or his associates.

As regular readers of this blog recall, Giffen once controlled the biggest oil deals in the world as oil adviser to Kazakhstan President Nursultan Nazarbayev. He's the principal character in The Oil and the Glory.

Yet in a New York court hearing today, the case seemed a lot more complex. Judge William Pauley, who two years ago issued fiery warnings to both sides to accelerate the pace, was reduced to a mild rebuke of the prosecution, and scheduling the next hearing for April 18th. And jury selection? Not a hint.

There's also a strange moseyness about the prosecution. At one point, Pauley directed the government team to proceed with depositions of European witnesses who in previous hearings they mentioned requiring; the prosecutors themselves seemed to lack the initiative to grab these folks before they die or forget all they know.

That's not the main holdup. It's the defense, brilliantly led by former U.S. prosecutor William Schwartz, who wants documents from a handful of U.S. intelligence agencies to prove Giffen's contention that the whole time he was negotiating those oil deals for a fee, he was doubling as an effective agent for the American government.

This being probably the most secretive administration in U.S. history, dislodging such documentation takes time. Perhaps a friend of mine is right -- we may not see a trial until this administration is out of office.

Photo: debaird

Rights: Creative Commons

Is America's Dethroned King of Kazakhstan on his Way Back?

After four years of ignominious exile from his powerful perch in Kazakhstan, New York lawyer James Giffen may have an opening for a revival.

Those who have read The Oil and the Glory are familiar with the outsized Giffen, its garrulous principal character. Born to relatively humble roots in Stockton, Ca., the 66-year-old Giffen had a spectacular rise after marrying into American society, eventually becoming the go-to man for American blue chip companies wishing to trade in the Soviet Union. After the Soviet collapse, Giffen gained a similar gatekeeper role in Kazakhstan, where at one point he controlled the world's biggest oil deals.

All that crashed in 2003 with Giffen's indictment in the largest foreign bribery case in U.S. history, what's known in Central Asia as Kazakhgate. On Friday, there's a hearing in New York in the case, in which Giffen is accused of channeling some $80 million in payments from U.S. oil companies to Kazakhs including President Nursultan Nazarbayev and former Prime Minister Nurlan Balgimbayev. Meanwhile Giffen is stuck in New York, his passport confiscated, and by appearances no longer in contact with his old pal Nazarbayev.

It's Balgimbayev who's the key to my suspicion that Giffen may regain, or have already regained, some influence in Kazakhstan. Yesterday, Farkhad Sharip at the Jamestown Monitor reported that Nazarbayev had appointed Balgimbayev as an adviser. And that is Giffen's opening.

The 60-year-old Balgimbayev lost his power at about the same time as his mentor, Giffen. The two were rightly seen as a pair, with Giffen providing intellectual heft to Balgimbayev -- who headed Kazakhstan's oil industry when he wasn't prime minister -- and Balgimbayev supplying Giffen a place to channel his genius. Balgimbayev gave Giffen a hilltop house overlooking Almaty right next door to his, the properties connected by a gate. After the U.S. bribery scandal, Balgimbayev also vanished; some said he had moved to Dubai for awhile.

But now that he's back, I'd say Giffen may not be far behind.

As long as we're on the topic, I had already sensed Giffen's presence over the last couple of months in Kazakh affairs, specifically in the country's dispute with the Italian-led consortium developing the Kashagan oilfield.

The original Kazakh demands, and the style in which they've pursued them, remind me of previous, Giffen-led battles with the companies. One of Giffen's signatures is the use of meticulously prepared reports, done usually by western contractors in London and elsewhere, containing every conceivable profit formula, cross referenced for every conceivable production volume, and so on, all of them beautifully packaged in color and with the rest of the graphic design bells and whistles. Another is the juxtapositioning of these reports with extremely well-reasoned, breathtakingly ambitious, hardball demands.

Sound familiar?

We know that the Kazakhs have allowed Giffen's company, Mercator, to continue operating in Kazakhstan because they don't want him to become tempted to spill some of his many secrets about the First Family. So it's not a stretch to imagine the former King of Kazakhstan providing expert strategic advice from his distant exile, either directly or through his representatives.

Whatever the case, the Kazakhs have clearly been holding their own.

Photo: Andy Freeburg

The Biggest New (Suspended) Oilfield in the World

Kazakhstan eliminated any uncertainty today about where foreign oil companies stand in the country: on the defensive.

After weeks of salvos regarding work on the Kashagan oil field, Kazakhstan forced a three-month halt to development of the supergiant. The field is the largest found anywhere on the planet in three decades. But Ecology Minister Nurlan Iskakov says it has unresolved environmental problems. As Reuters stated: The dispute is reminiscent of Russia's row with Royal Dutch Shell, which ended up with the multinational oil firm losing control of the giant Sakhalin-2 oil project to Russia's Gazprom.

Here is Reuters' quote from Iskakov: “In 2003-2005 we specified a number of offshore sites and we put forward our demands. As of today, these ecological requirements have not been fulfilled. That's why we decided to carry out such an unprecedented step. I think you will hear in the nearest future what will happen next." Read story

Steve's comment: It's been clear that Kazakhstan has tough demands in store for the foreign consortium developing Kashagan. The companies, led by Italy's Eni, look to be about six or seven years behind schedule in producing first oil, plus they are far over budget.

That alone put Kazakhstan in the driver's seat in terms of changing the 1997 contract negotiated on Kazakhstan's behalf by the country's then-oil adviser James Giffen. But other objective factors have now also conspired in Kazakhstan's favor: the world crude oil supply shortage, expected to last at least through 2012; the shortage of fresh oil reserves for the major oil companies to exploit; and Russia's new, tough approach to the oil companies.

The last item on the list -- Russia -- may be the most influential at the moment. Like Russia, Kazakhstan seems to have taken off the gloves.

Before today's escalation of combat, Eni CEO Paolo Scaroni publicly conceded that the contract would have to change. In another soothing move, the company has arranged for Italian Prime Minister Romano Prodi to visit Kazakhstan on Eni's behalf.

But the field suspension shows that Kazakhstan isn't ready to be soothed.

So what does Kazakhstan want? For starters, a lot more money, and much earlier than the companies had planned.

Like most such deals, the Kashagan contract calls for most of the expenses to be paid out of initial oil production before the partners and government begin to take their big profit. But now look for the companies to be forced to cough up larger profit from virtually the first oil to come out of the ground, probably around 2012.

Another reason why the Kazakhs will play especially tough is that whatever ultimately happens will be a model for a probable follow-on challenge to the contracts governing production at the country's other two supergiants -- Tengiz and Karachaganak.

What If Rakhat Testifies?

Nazarbayev; Dariga and Rakhat in more powerful days

The word is that Rakhat Aliyev, Kazakh President Nazarbayev's former son-in-law, has met with U.S. Justice Department lawyers in Vienna. The subject: his possible testimony in the upcoming foreign bribery trial of James Giffen. While Aliyev was definitely in a position to know the degree to which Giffen did or did not serve as a cash conduit for Nazarbayev while he served as his main oil adviser, it is unclear he has the credibility to withstand cross examination.

It has been two months since Aliyev's fall from grace. In that time, he has seemingly lost everything -- his perch in Kazakhstan, his royal link, and even his retinue, most of whom have deserted since Nazarbayev ordered him charged with racketeering, and apparently led his daughter, Dariga, to divorce him.

What Aliyev does have left, however, is his tightly held knowledge of the inside workings of the Nazarbayev family. Some of the family finances was detailed in the Justice Department's indictment of Giffen, in which Nazarbayev is listed as an unindicted co-conspirator. But Aliyev could presumably say with some definitiveness just what role Giffen did or did not play with his former father-in-law. That is why U.S. prosecutors sought to see him in his exile in Vienna.

The question, if such testimony went forward, is whether Aliyev could overcome the natural presumption that he is settling scores.

As yet, no date is set for the trial to begin. Another pre-trial hearing is scheduled in New York this Friday.

Possibility of Rakhat Aliyev's Extradition

VIENNA, Austria, Jun. 2, 2007 (AP) The son-in-law of Kazakhstan's autocratic president has appealed to Austrian authorities not to extradite him to his homeland to face kidnapping charges, a magazine reported Saturday. Read the rest of the story

From Steve: The key question in the blockbuster news in Kazakhstan over the last several weeks is what pushed President Nursultan Nazarbayev to take such extreme measures: freeing himself to be president for life, and ordering the arrest of his son-in-law?

Both steps seriously diverge from Nazarbayev's long-crafted image as a global-level statesman. The events closely track his 2001 crackdown against both son-in-law Rakhat Aliyev and the country's young liberals; at that time Nazarbayev was convinced that Aliyev had launched a grave political plot against him.

It seems probable that this is the case now as well -- Nazarbayev became persuaded that Aliyev was mounting a worrisome challenge to his leadership, and decided to do away with his elder daughter's nettlesome husband once and for all.

Whatever the case, Nazarbayev's actions have required him to publicly bare his fangs, something he has never done in his 17 years of leadership. The events ask for a strong Western reconsideration of its foreign policy framework toward this oil-rich state.