Nightmare in Boomtown

Dark Days: Seidenfeld enters the courtroom to await a verdict.

As he watched the wind-scarred steppe of eastern Siberia scroll by the car, Mark Seidenfeld couldn't resist cracking a grin. Last night's vodka was still coursing through him, swirling with the high of yet another triumph. Newly appointed as the director of mergers and acquisitions for Golden Telecom, a U.S. firm based in Moscow, he had been sent along with two colleagues to Blagoveshchensk, a river port city of 200,000 on the Russian-Chinese border, to investigate a $2 million telecom outfit and see if it was worth buying. It was a perfunctory trip with a modest return, assuming the deal went through at all. But while in town, Seidenfeld had discovered two other companies that might be worth scooping up, and now he was looking at a possible $15 million deal. That morning, Seidenfeld had sat braced against the subzero cold in his sheepskin jacket and chatted with the town's deputy mayor. He was heading home to Moscow to relay the good news to his bosses. And soon he would be back in the cozy apartment he shared with his Russian fiancée, Natiya, who is 11 years his junior; in two weeks, they'd go on a lavish vacation in Spain. It was December 7, 2005. Life was good.

Seidenfeld, a native of Monsey, New York, who was then 37 years old, had been working in the former Soviet states for 12 years. During that time, he had learned an important Russian business maxim: "It is better to ask for forgiveness than permission." Seidenfeld had sailed close to the wind more than once, thrown in among people who were more gangsters than businessmen. That fact was made plain to him when one of his partners was shot dead, point-blank, in Moscow in 1997. But Seidenfeld himself had managed to thrive. He wasn't bulletproof, but he was proving clever and tough enough to stay in the game, and keep winning.

As he checked in for the flight to Moscow, though, something was wrong. The woman behind the counter eyed him suspiciously. Then a Russian police official in a sky-blue greatcoat and a massive Soviet-era cap stepped up and led him away to a room behind the check-in desk where a plainclothes detective sat waiting. Within hours, Seidenfeld was locked in a tiny, unheated cell in a detention center just across the Amur River from China. That night, terrified, he shivered under a coarse blanket as the temperature outside dropped to minus-20. At 5-foot-8, with a slight paunch from too many client dinners, he was a soft target for the thugs who surrounded him. His cockiness evaporated.

A few days later, Seidenfeld was taken to a holding cell at a local court. There he learned he was being charged with embezzling $43,000 from a company called Arna, in Almaty, Kazakhstan, where he had been CEO from 2002 to 2004; the Kazakh authorities wanted him back to face trial. So began a treacherous 19-month slog through the morass of the post-Soviet justice system. Seidenfeld would face extortion attempts, corrupt cops, fabricated evidence, and the wrath of a Kazakh tycoon. It was a nightmare scenario come to life--and a stark example of the perils of frontier capitalism.

Kazakhstan was once the boneyard of the Soviet Union. Its sprawling plains were home to Stalin's labor camps and later became the principal nuclear test site for the Soviets. In 1991, with the collapse of communism, Kazakhstan was the last of the Soviet states to declare independence. The country has rarely made the news since--unless you count the movie Borat, which lampooned the place as an inbred, anti-Semitic, goat-herding backwater where the town rapist is just another lovable rogue.

In reality, Kazakhstan has been riding a free-market boom of a magnitude few countries have ever seen, buoyed along on its elephantine oil reserves--the Tengiz, Kashagan, and Karachaganak oil fields. Unlike neighboring Uzbekistan, which has a history of shunning foreign investment, Kazakhstan embraced it early on, and U.S. firms promptly saddled up for a new gold rush in the wild, wild East, with oil companies such as Chevron carrying the flag. After Big Oil came power giant AES, which alone invested more than $200 million, and about 100 other companies: Citigroup, Hewlett-Packard, Nestlé, Philip Morris, Procter & Gamble. Some $46 billion of foreign investment has since been sunk into the republic, including about $15 billion from the United States, making this country Kazakhstan's biggest foreign investor.