After we made our first investment in Kyrgyzstan, we faced many problems. Let me mention the most important ones. You can read more about our story here.

Before we invested, Nurgazy Nurgaziev did business with another local partner under the name “Namali”. Our initial discussions involved investing in Namali. We did due diligence and realised that were perhaps not complying with all laws. It seems taxes were not being fully paid and correct financials not disclosed to the authorities. We explained to Nurgazy why we could not invest in such businesses. And that is when the promises started. “I want to follow all laws and pay all taxes.” “I want to do everything officially.” “I want to work with the best auditors.” He even mentioned the fact that he was religious (Christian) and god will punish him if he cheats others. Such promises continued.

We signed the investment agreement in mid-September 2008. It came as a total shock when Nurgazy Nurgaziev, the local partner, asked for a loan of $100,000 the same month. We just invested and he asked for more money. Unfortunately this trend did not stop. It became clear that he was expecting a continuous stream of money.

After investing, we received financial information for October, November and December 2008. We also received our first dividend in December 2008. I do not know how Nurgazy calculated the ‘payments and how much ‘payments’ he received. We were not shown any calculations and when I looked at the financials, it did not make sense to me. There was lack of transparency, even though we own 45% of the business.

Soon after we invested, Nurgazy said he preferred to work alone and also did not like the idea of sharing 45% of profits. And he stopped sharing financial information and dividends. Our contract and the Kyrgyz laws did not matter to him.

We tried to solve the problem by nogotiating. Nurgazy offered three options. Convert our investment (shares) into am unsecured loan. Or give him 20% of our shares for free. Or secure him a loan. These options were very unreasonable, we could not accept it. He probably viewed the laws to be unenforceable, so he could make any unreasonable offers.

Nurgazy stopped providing financial information even though it is required by law and our agreement. We offered to look into buying his shares and needed financial information. He provided it but analysis raised suspicions that the financial information was falsified. See analysis here and here.

The following year, he decided to pay a nominal amount. He said we ranked after a bank loan and private loans. Even though we did not change our agreement, in his mind we were no longer shareholders. The Kyrgyz laws and our agreement were disregarded. He made his own rules.

He had a back surgery. Instead of paying us, he paid for his surgery. And he wrote this is an email. Normally one would not write such things in an email. But I guess Nurgazy felt that the laws do not apply.

This is a small sample of the kind of problems we faced. The next article will discuss lessons we learnt.

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

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