UPDATE 1-London-listed Kazakh paper firm raided by police in Almaty

Thu Dec 12, 2013 12:19pm EST

By Andrew Callus

LONDON Dec 12 (Reuters) - Kazakhstan Kagazy said its paper making operations in Almaty were raided this week by financial police who accused the company of involvement in criminal activities and tax evasion.

The raid, revealed by the maker of paper, board and packaging on Wednesday and confirmed by Kazakh financial police on Thursday, comes as the London-listed company battles former shareholders and directors in a London court where it accuses them of fraud.

Kagazy said in a statement there appeared to be a link between the Almaty raid and recent developments in its London legal action against Maksat Arip, Baglan Zhunus and Shynar Dikhanbayeva. On Nov. 20, the London High Court upheld a $100 million freezing injunction over assets of Arip and Zhunus.

"Since the injunction was upheld in London, the Kagazy group has come under increased scrutiny from state authorities. However, today's raid on the business shows a dramatic escalation in the level of pressure being applied against the company."

A spokeswoman for the Almaty regional financial police said "This (raid) was part of checks within the framework of a criminal case brought against the company".

She said she was not authorised to comment further on the nature of the charges against the company, or on Kagazy's suggestion of a link between the raid and the London court case.

Kagazy's statement went on to say the raid represented "clear disregard for due process and the rule of law" and "jeopardises Kazakhstan's ability to attract foreign direct investment from multinational businesses like Kazakhstan Kagazy".

Kagazy's main shareholder is now its chief executive, Thomas Mateos Werner, a former banker and partner of wealth management firm Werner Capital, who holds 29.9 percent.

In the London High Court Case, the Isle of Man-registered Kagazy accuses its former chairman Arip, chief executive Zhunus and finance director Dikhanbayeva of stealing $135 million from the company. All three deny the accusations.

Court documents say Arip and Zhunus originally owned 50 percent each of Kagazy, but reduced their holdings in the late 2000s.

Arip, the court papers say, is from Kazakhstan but now has dual Cypriot/Saint Kitts and Nevis nationality.

Kagazy had an initial public offering of shares in London in 2007, raising $273 million. In 2009, it ran into financial trouble and its controlling shareholders changed ahead of a debt restructuring agreement that was finalised with most bondholders and creditors in 2011.

Its shares were worth a total of about $12 million at the close of trading on Wednesday.

Arip is also the founder of Russian oil producer Exillon Energy Plc, another company whose shares are listed in London. He approached Exillon about repurchasing it earlier this year, but later sold his stake to Russian businessmen Alexei Khotin who is considering his own approach for the company.

Kazakhstan ranks 133rd for transparency - jointly with Russia and a number of others in a list of 176 countries compiled by the activists Transparency International. But it has attracted more foreign direct investment than most post-Soviet economies - some $170 billion to date - thanks in large part to its wealth of mineral resources.