An ex-president, a mining deal and a big donor

http://www.msnbc.msn.com/id/22926743/

Huge Kazakh deal follows financier's trip with Clinton, precedes donation

By Jo Becker and Don Van Natta Jr.

The New York Times

updated 1:11 a.m. CT, Thurs., Jan. 31, 2008

Late on Sept. 6, 2005, a private plane carrying the Canadian mining

financier Frank Giustra touched down in Almaty, a ruggedly picturesque city

in southeast Kazakhstan. Several hundred miles to the west a fortune

awaited: highly coveted deposits of uranium that could fuel nuclear reactors

around the world. And Mr. Giustra was in hot pursuit of an exclusive deal to

tap them.

Unlike more established competitors, Mr. Giustra was a newcomer to uranium

mining in Kazakhstan, a former Soviet republic. But what his fledgling

company lacked in experience, it made up for in connections. Accompanying

Mr. Giustra on his luxuriously appointed MD-87 jet that day was a former

president of the United States, Bill Clinton.

Upon landing on the first stop of a three-country philanthropic tour, the

two men were whisked off to share a sumptuous midnight banquet with

Kazakhstan's president, Nursultan A. Nazarbayev, whose 19-year stranglehold

on the country has all but quashed political dissent.

Mr. Nazarbayev walked away from the table with a propaganda coup, after Mr.

Clinton expressed enthusiastic support for the Kazakh leader's bid to head

an international organization that monitors elections and supports

democracy. Mr. Clinton's public declaration undercut both American foreign

policy and sharp criticism of Kazakhstan's poor human rights record by,

among others, Mr. Clinton's wife, Senator Hillary Rodham Clinton of New

York.

Within two days, corporate records show that Mr. Giustra also came up a

winner when his company signed preliminary agreements giving it the right to

buy into three uranium projects controlled by Kazakhstan's state-owned

uranium agency, Kazatomprom.

Deal stunned the mining industry

The monster deal stunned the mining industry, turning an unknown shell

company into one of the world's largest uranium producers in a transaction

ultimately worth tens of millions of dollars to Mr. Giustra, analysts said.

Just months after the Kazakh pact was finalized, Mr. Clinton's charitable

foundation received its own windfall: a $31.3 million donation from Mr.

Giustra that had remained a secret until he acknowledged it last month. The

gift, combined with Mr. Giustra's more recent and public pledge to give the

William J. Clinton Foundation an additional $100 million, secured Mr.

Giustra a place in Mr. Clinton's inner circle, an exclusive club of wealthy

entrepreneurs in which friendship with the former president has its

privileges.

Mr. Giustra was invited to accompany the former president to Almaty just as

the financier was trying to seal a deal he had been negotiating for months.

In separate written responses, both men said Mr. Giustra traveled with Mr.

Clinton to Kazakhstan, India and China to see first-hand the philanthropic

work done by his foundation.

A spokesman for Mr. Clinton said the former president knew that Mr. Giustra

had mining interests in Kazakhstan but was unaware of "any particular

efforts" and did nothing to help. Mr. Giustra said he was there as an

"observer only" and there was "no discussion" of the deal with Mr.

Nazarbayev or Mr. Clinton.

But Moukhtar Dzhakishev, president of Kazatomprom, said in an interview that

Mr. Giustra did discuss it, directly with the Kazakh president, and that his

friendship with Mr. Clinton "of course made an impression." Mr. Dzhakishev

added that Kazatomprom chose to form a partnership with Mr. Giustra's

company based solely on the merits of its offer.

After The Times told Mr. Giustra that others said he had discussed the deal

with Mr. Nazarbayev, Mr. Giustra responded that he "may well have mentioned

my general interest in the Kazakhstan mining business to him, but I did not

discuss the ongoing" efforts.

As Mrs. Clinton's presidential campaign has intensified, Mr. Clinton has

begun severing financial ties with Ronald W. Burkle, the supermarket

magnate, and Vinod Gupta, the chairman of InfoUSA, to avoid any conflicts of

interest. Those two men have harnessed the former president's clout to

expand their businesses while making the Clintons rich through partnership

and consulting arrangements.

Mr. Clinton has vowed to continue raising money for his foundation if Mrs.

Clinton is elected president, maintaining his connections with a wide

network of philanthropic partners.

Mr. Giustra said that while his friendship with the former president "may

have elevated my profile in the news media, it has not directly affected any

of my business transactions."

Mining colleagues and analysts agree it has not hurt. Neil MacDonald, the

chief executive of a Canadian merchant bank that specializes in mining

deals, said Mr. Giustra's financial success was partly due to a "fantastic

network" crowned by Mr. Clinton. "That's a very solid relationship for him,"

Mr. MacDonald said. "I'm sure it's very much a two-way relationship because

that's the way Frank operates."

Foreseeing opportunities

Mr. Giustra made his fortune in mining ventures as a broker on the Vancouver

Stock Exchange, raising billions of dollars and developing a loyal following

of investors. Just as the mining sector collapsed, Mr. Giustra, a lifelong

film buff, founded the Lion's Gate Entertainment Corporation in 1997. But he

sold the studio in 2003 and returned to mining.

Mr. Giustra foresaw a bull market in gold and began investing in mines in

Argentina, Australia and Mexico. He turned a $20 million shell company into

a powerhouse that, after a $2.4 billion merger with Goldcorp Inc., became

Canada's second-largest gold company.

With a net worth estimated in the hundreds of millions of dollars, Mr.

Giustra began looking for ways to put his wealth to good use. Meeting Mr.

Clinton, and learning about the work his foundation was doing on issues like

AIDS treatment in poor countries, "changed my life," Mr. Giustra told The

Vancouver Sun.

The two men were introduced in June 2005 at a fund-raiser for tsunami

victims at Mr. Giustra's Vancouver home and hit it off right away. They

share a love of history, geopolitics and music - Mr. Giustra plays the

trumpet to Mr. Clinton's saxophone. Soon the dapper Canadian was a regular

at Mr. Clinton's side, as they flew around the world aboard Mr. Giustra's

plane.

Philanthropy may have become his passion, but Mr. Giustra, now 50, was still

hunting for ways to make money.

Exploding demand for energy had helped revitalize the nuclear power

industry, and uranium, the raw material for reactor fuel, was about to

become a hot commodity. In late 2004, Mr. Giustra began talking to

investors, and put together a company that would eventually be called UrAsia

Energy Ltd.

About a fifth of world uranium reserves

Kazakhstan, which has about one-fifth of the world's uranium reserves, was

the place to be. But with plenty of suitors, Kazatomprom could be picky

about its partners.

"Everyone was asking Kazatomprom to the dance," said Fadi Shadid, a senior

stock analyst covering the uranium industry for Friedman Billings Ramsey, an

investment bank. "A second-tier junior player like UrAsia - you'd need all

the help you could get."

The Cameco Corporation, the world's largest uranium producer, was already a

partner of Kazatomprom. But when Cameco expressed interest in the properties

Mr. Giustra was already eyeing, the government's response was lukewarm. "The

signals we were getting was, you've got your hands full," said Gerald W.

Grandey, Cameco president.

For Cameco, it took five years to "build the right connections" in

Kazakhstan, Mr. Grandey said. UrAsia did not have that luxury. Profitability

depended on striking before the price of uranium soared.

"Timing was everything," said Sergey Kurzin, a Russian-born businessman

whose London-based company was brought into the deal by UrAsia because of

his connections in Kazakhstan. Even with those connections, Mr. Kurzin said,

it took four months to arrange a meeting with Kazatomprom.

In August 2005, records show, the company sent an engineering consultant to

Kazakhstan to assess the uranium properties. Less than four weeks later, Mr.

Giustra arrived with Mr. Clinton.

Reportedly discussed deal with president

Mr. Dzhakishev, the Kazatomprom chief, said an aide to Mr. Nazarbayev

informed him that Mr. Giustra talked with Mr. Nazarbayev about the deal

during the visit. "And when our president asked Giustra, 'What do you do?'

he said, 'I'm trying to do business with Kazatomprom,' " Mr. Dzhakishev

said. He added that Mr. Nazarbayev replied, "Very good, go to it."

Mr. Clinton's Kazakhstan visit, the only one of his post-presidency, appears

to have been arranged hastily. The United States Embassy got last-minute

notice that the president would be making "a private visit," said a State

Department official, who said he was not authorized to speak on the record.

The publicly stated reason for the visit was to announce a Clinton

Foundation agreement that enabled the government to buy discounted AIDS

drugs. But during a news conference, Mr. Clinton wandered into delicate

territory by commending Mr. Nazarbayev for "opening up the social and

political life of your country."

In a statement Kazakhstan would highlight in news releases, Mr. Clinton

declared that he hoped it would achieve a top objective: leading the

Organization for Security and Cooperation in Europe, which would confer

legitimacy on Mr. Nazarbayev's government.

"I think it's time for that to happen, it's an important step, and I'm glad

you're willing to undertake it," Mr. Clinton said.

A speedy process

Mr. Clinton's praise was odd, given that the United States did not support

Mr. Nazarbayev's bid. (Late last year, Kazakhstan finally won the chance to

lead the security organization for one year, despite concerns raised by the

Bush administration.) Moreover, Mr. Clinton's wife, who sits on a

Congressional commission with oversight of such matters, had also voiced

skepticism.

Eleven months before Mr. Clinton's statement, Mrs. Clinton co-signed a

commission letter to the State Department that sounded "alarm bells" about

the prospect that Kazakhstan might head the group. The letter stated that

Kazakhstan's bid "would not be acceptable," citing "serious corruption,"

canceled elections and government control of the news media.

In a written statement to The Times, Mr. Clinton's spokesman said the former

president saw "no contradiction" between his statements in Kazakhstan and

the position of Mrs. Clinton, who said through a spokeswoman, "Senator

Clinton's position on Kazakhstan remains unchanged."

Noting that the former president also met with opposition leaders in Almaty,

Mr. Clinton's spokesman said he was only "seeking to suggest that a

commitment to political openness and to fair elections would reflect well on

Kazakhstan's efforts to chair the O.S.C.E."

But Robert Herman, who worked for the State Department in the Clinton

administration and is now at Freedom House, a human rights group, said the

former president's statement amounted to an endorsement of Kazakhstan's

readiness to lead the group, a position he called "patently absurd."

"He was either going off his brief or he was sadly mistaken," Mr. Herman

said. "There was nothing in the record to suggest that they really wanted to

move forward on democratic reform."

Indeed, in December 2005, Mr. Nazarbayev won another election, which the

security organization itself said was marred by an "atmosphere of

intimidation" and "ballot-box stuffing."

Congratulations from Clinton

After Mr. Nazarbayev won with 91 percent of the vote, Mr. Clinton sent his

congratulations. "Recognizing that your work has received an excellent grade

is one of the most important rewards in life," Mr. Clinton wrote in a letter

released by the Kazakh embassy. Last September, just weeks after Kazakhstan

held an election that once again failed to meet international standards, Mr.

Clinton honored Mr. Nazarbayev by inviting him to his annual philanthropic

conference.

Within 48 hours of Mr. Clinton's departure from Almaty on Sept. 7, Mr.

Giustra got his deal. UrAsia signed two memorandums of understanding that

paved the way for the company to become partners with Kazatomprom in three

mines.

The cost to UrAsia was more than $450 million, money the company did not

have in hand and had only weeks to come up with. The transaction was

finalized in November, after UrAsia raised the money through the largest

initial public offering in the history of Canada's Venture Exchange.

Mr. Giustra challenged the notion that UrAsia needed to court Kazatomprom's

favor to seal the deal, contending that the government agency's approval was

not required.

But Mr. Dzhakishev, analysts and Mr. Kurzin, one of Mr. Giustra's own

investors, said that approval was necessary. Mr. Dzhakishev, who said that

the deal was almost done when Mr. Clinton arrived, said that Kazatomprom was

impressed with the sum Mr. Giustra was willing to pay and his record of

attracting investors. He said Mr. Nazarbayev himself ultimately signed off

on the transaction.

Longtime market watchers were confounded. Kazatomprom's choice of UrAsia was

a "mystery," said Gene Clark, the chief executive of Trade Tech, a uranium

industry newsletter.

"UrAsia was able to jump-start the whole process somehow," Mr. Clark said.

The company became a "major uranium producer when it didn't even exist

before."

A profitable sale

Records show that Mr. Giustra donated the $31.3 million to the Clinton

Foundation in the months that followed in 2006, but neither he nor a

spokesman for Mr. Clinton would say exactly when.

In September 2006, Mr. Giustra co-produced a gala 60th birthday for Mr.

Clinton that featured stars like Jon Bon Jovi and raised about $21 million

for the Clinton Foundation.

In February 2007, a company called Uranium One agreed to pay $3.1 billion to

acquire UrAsia. Mr. Giustra, a director and major shareholder in UrAsia,

would be paid $7.05 per share for a company that just two years earlier was

trading at 10 cents per share.

That same month, Mr. Dzhakishev, the Kazatomprom chief, said he traveled to

Chappaqua, N.Y., to meet with Mr. Clinton at his home. Mr. Dzhakishev said

Mr. Giustra arranged the three-hour meeting. Mr. Dzhakishev said he wanted

to discuss Kazakhstan's intention - not publicly known at the time - to buy

a 10 percent stake in Westinghouse, a United States supplier of nuclear

technology.

Nearly a year earlier, Mr. Clinton had advised Dubai on how to handle the

political furor after one of that nation's companies attempted to take over

several American ports. Mrs. Clinton was among those on Capitol Hill who

raised the national security concerns that helped kill the deal.

Mr. Dzhakishev said he was worried the proposed Westinghouse investment

could face similar objections. Mr. Clinton told him that he would not lobby

for him, but Mr. Dzhakishev came away pleased by the chance to promote his

nation's proposal to a former president.

Mr. Clinton "said this was very important for America," said Mr. Dzhakishev,

who added that Mr. Giustra was present at Mr. Clinton's home.

Denials, then acknowledgment

Both Mr. Clinton and Mr. Giustra at first denied that any such meeting

occurred. Mr. Giustra also denied ever arranging for Kazakh officials to

meet with Mr. Clinton. Wednesday, after The Times told them that others said

a meeting, in Mr. Clinton's home, had in fact taken place, both men

acknowledged it.

"You are correct that I asked the president to meet with the head of

Kazatomprom," Mr. Giustra said. "Mr. Dzhakishev asked me in February 2007 to

set up a meeting with former President Clinton to discuss the future of the

nuclear energy industry." Mr. Giustra said the meeting "escaped my memory

until you raised it."

Wednesday, Mr. Clinton's spokesman, Ben Yarrow, issued what he called a

"correction," saying: "Today, Mr. Giustra told our office that in February

2007, he brought Mr. Dzhakishev from Kazatomprom to meet with President

Clinton to discuss the future of nuclear energy."

Mr. Yarrow said his earlier denial was based on the former president's

records, which he said "show a Feb. 27 meeting with Mr. Giustra; no other

attendees are listed."

Mr. Dzhakishev said he had a vivid memory of his Chappaqua visit, and a

souvenir to prove it: a photograph of himself with the former president.

"I hung up the photograph of us and people ask me if I met with Clinton and

I say, Yes, I met with Clinton," he said, smiling proudly.

David L. Stern and Margot Williams contributed reporting.

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