Were we given falsified financial information? This is discussed in: Did Someone Change the Financials? Part 1 and Did Someone Change the Financials? Part 2.

I suspect we were not the only ones provided with potentially falsified financial information.

Kyrgyz Tax Authority

We requested financial information from Nurgazy when we were considering investing. We then did due diligence. I spent about a week in their office, going through documents and making copies. This included loan agreements, loan repayments receipts, sales receipts, purchase of equipment and payment to employees and agents. I realized that the financial information which Nurgazy provided to the Kyrgyz tax authority did not match the numbers that I got from him. It is no secret that Kyrgyzstan has a large shadow economy. According to the Cabinet Head Akylbek Japarov, the size of the shadow economy in Kyrgyzstan ranges from 20% to 50% of GDP. Some studies using different calculations say the shadow economy is up to 72% (source: AKIpress).

It is the business owner’s choice whether or not to operate in the shadow economy. However, we could not invest in businesses that are not in full legal compliance. Our plan was to invest in businesses and then introduce the business to foreign partners and investors. We cannot introduce non-compliant businesses to foreign partners. I brought this to Nurgazy’s attention and explained why it was an issue for us. He understood and said “I want to follow all laws and pay all taxes.” “I want to do everything officially.” “I want to work with the best auditors.”

During investigations by Financial Police, I provided documents to them which may have indicated that Nurgazy was not in compliance with tax laws. I was not officially informed why they did not investigate. But I was informed unofficially. I will share details in a later article.

Foreign Organisations

Our goal of investing in Trilight was to help it to grow and attract foreign investors and partners. This would mean providing them with financial and other information, which we did.  I met with many orgnisations, mainly in Europe. Nurgazy gave me whatever information I needed. Later I realized that the information was incorrect. I had to inform the organisations. I personally met with organizations in Netherlands, Germany and Sweden and told them what was going on. I also prepared a loan application for Asian Development Bank but thankfully this was not submitted.

Providing incorrect information to investors is fraud. Thankfully, we did not start the fundraising process with any organisation. We were in initial discussion stages. None of the organisations decided to take any action. However I did receive the attached letters of support from Hivos and Helvetas.

I know that Nurgazy himself provided financial information to organisations, to apply for funding. The information he provided, such as sales and profits, were different from what he provided to tax authorities. Financial Police is aware of this but no action was taken.

Local Organisations

Nurgazy has taken many bank loans. Most probably, the information he provided is different from what he provided to tax authorities.

Obtaining Financial Information

A criminal case is now open. Investigators should be able to request financial information from banks and other financial institutions based in Kyrgyzstan. They can then compare with the financial information provided to the Kyrgyz tax authority. So far this has not been done.

Why does it matter?

Providing false financial information to tax authorities can result in less taxes being paid. This means Government has less money to spend on roads, hospitals, salary for Government employees and many other areas. It affects everyone, except the person/organization paying less taxes and tax officials who may be receiving a ‘thank you’ payment. Only a few people benefit. People often complain about the quality of the road, hospital services and many other areas. If everyone paid taxes in compliance with the laws, Government would have more money to spend on infrastructure.

Providing false financial information to investors can result in loss of confidence. Investors may not be willing to invest. This would mean less jobs and less tax revenues for Government. Again, this affects everyone, except the person/organization paying less taxes and tax officials who may be receiving a ‘thank you’ payment.

In our case, we were in discussions with many foreign investors and companies. When problems started, we informed the foreign investors and companies and put discussions on hold. Unfortunately the problem was not resolved. The case was investigated and closed 4 times. A criminal case was opened, suspended and the suspension lifted. This process has taken years and has been costly. This kind of process not send confidence. Now through this website, details are being publicized widely. A positive outcome can mean positive PR for Government.

In many countries, when false information is provided to investors and the tax authorities, Government takes swift action. There are lots of examples. There is a good reason for doing this. One of the most notable recent cases involves Donald Trump. Even a former President of the US cannot escape investigation.

The next article discusses the first of many legal actions we started.

 

Note: A criminal case is currently open. These are two most recent letters I received from the prosecutor.

уведомление

Opening of Criminal Case March 2018

 

Next article: The First of Many Legal Actions

 

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