Kyrgyzstan: Where Hydropower Dreams and Penny Stocks Meet
It is back to square one for Kyrgyzstan, as the Central Asian state strives to build a giant hydropower plant. Representatives of a little-known entity from the Czech Republic, which was the surprise winner of a tender last summer, acknowledged on September 18 that they do not have the money to proceed with the project.
Last July, the Kyrgyz government announced that the Czech company, Liglass Trading, had won the rights to a multimillion-dollar project to build and operate power plants on the country’s Upper Naryn cascade, along with several other smaller hydropower facilities.
The story that unfolded in the weeks that followed included unusual goings-on at a shell company in Nevada, a frantic flurry of trading on the US penny stocks market and calls for a parliamentary inquiry. Some in Kyrgyzstan believe there are shady financial machinations afoot, but the investors at the heart of the drama deny all accusations of wrongdoing.
After the story of Liglass Trading’s improbably successful bid for the Kyrgyzstan hydropower contract broke on July 10, media outlets in the Czech Republic scrambled to discover more about a company unknown to pretty much everybody in the business community.
Liglass Trading’s own corporate website initially suggested that it was an outfit with vast experience in running similar projects, not just in the Czech Republic, but also in Armenia and Russia. When investigations revealed this history to be wildly exaggerated, all of the website’s content disappeared, replaced by an “Under Construction” notice.
Later, when journalists from Czech news outlet Aktuálně investigated the address where Liglass Trading was registered, all they found was a crumbling factory with a leaky roof. Liglass Trading’s financial report for 2014 showed it registering losses of around $53,000 — an underwhelming record for a company expected to run a project that could end up costing up to $700 million to complete.
But as an investigation carried out by Kyrgyz activist Edil Baisalov revealed, Liglass Trading was busy elsewhere this year. A marketing prospectus produced by the company, subsequent to the announcement of the hydropower contract, showed that at some point in 2017, Liglass Trading acquired 92 percent of the common stock of China Intelligence Information Systems, Inc., or IICN. It was in effect a reverse merger that seemingly placed the fate of the Upper Naryn cascade project in the hands of an opaque entity.
IICN’s history is convoluted.
It was incorporated in the US state of Nevada in 2004, ostensibly to develop a mineral claim in Canada. It later drastically changed direction, ditching the mineral exploration business in favor of focusing on digital communications in China. In its last known SEC filing, in 2012, IICN announced it was defaulting on millions of dollars in outstanding loans.
At an unspecified date after that, the company passed into the hands of the trio behind Liglass Trading — Jiri Vojtechovsky, Michael Smelik and Juraj Pavol — and lay dormant.
The Kyrgyzstan contract changed everything.
About a week after the announcement, the persistently sluggish IICN stock caught fire. Shares selling on the over-the-counter penny stock market at $0.005 apiece in early July had, by August 18, soared to a historic high of $0.39. The stock closed at $0.16 on September 15.
In Kyrgyzstan, Baisalov, the activist, became suspicious and decided to follow the money. His investigation culminated in an article published by the Bishkek-based news website Respublika that accused Liglass Trading of involvement in a so-called pump-and-dump scheme — artificially inflating the value of stock for one’s own profit.
In an email to EurasiaNet.org, Liglass chief investment officer Juraj Pavol indignantly denied the accusation, insisting that neither he nor his two partners in Liglass and IICN were in any position to make money from trading in shares. “We have possession only of restricted stocks, which cannot be sold and [won’t] be in next [two] years. Otherwise it would be punishable by US law,” Pavol wrote.
Pavol said that he and his colleagues had specifically refrained from making any public statements about IICN in recent weeks. He declined, however, to comment on the details included in the Liglass Trading marketing prospectus, which dwelled in detail on the Czech company’s lucrative Kyrgyzstan contract.
Meanwhile, another figure with business ties to Liglass Trading has been extremely vocal on the internet about IICN and the fortunes of its stock.
Among Liglass Trading partners listed on the Czech company’s website is Florida-based Patienttrac Corp., an outfit run by an American businessman, H. Wayne Hayes, Jr.
Hayes insists that none of the recent stock movement amounted to anything improper. “These specious claims of millions of profits [are] an outrageous lie,” he wrote in a note to EurasiaNet.org. “There has been no pump and secondly you have to own stock to dump. There has been no significant increase in the volume of shares trading, and certainly no indication of a promotion of stock.”
What is certain is that Liglass Trading, with the September 18 announcement, has failed to stump up the $37 million required to buy out the previous leader on the project, Russia’s RusHydro. The State Committee for Energy and Industry had given the Czech company a September 19 deadline to come up with the money.
One particularly vocal MP, Janar Akayev, has demanded the creation of special commission to investigate how the contract came to be awarded to Liglass Trading in the first place.