FELIX VULIS BREAKS HIS SILENCE ON ERG: “There Are Obligations That Have Not Been Honored”

The Former ENRC Chief Executive on Kazakhstan, the Rise of a Mining Empire, and His Unfinished Business With ERG

For more than two decades, Felix Jeff Vulis occupied an unusual position inside one of the most powerful industrial groups to emerge from post-Soviet Kazakhstan.

But his relationship with Kazakhstan began even earlier.

Vulis says his involvement with the country dates to 1994, when he was invited to help prepare a presentation of Kazakhstan’s economy in the United States, following similar presentations he had organized for Ukraine in December 1992 and the Russian Federation in May 1994.

That effort culminated in a presentation in San Diego in December 1995 which, according to Vulis, was supported and acknowledged at the highest political levels, including by Kazakhstan’s President Nursultan Nazarbayev and U.S. President Bill Clinton.

Six years later, Vulis joined Eurasian Natural Resources Corporation.

He rose to become chief operating officer as ENRC prepared for its landmark London flotation and became chief executive in 2009.

ENRC would become a FTSE 100 company and one of Kazakhstan’s most important industrial enterprises, with interests spanning ferroalloys, iron ore, aluminium, energy and mining operations extending far beyond Central Asia.

It would also become one of the most scrutinized mining companies in London.

ENRC was taken private in 2013, with its assets subsequently becoming part of Eurasian Resources Group, or ERG. The years that followed brought litigation, regulatory scrutiny and a lengthy investigation by Britain’s Serious Fraud Office.

Vulis has largely avoided publicly discussing his relationship with the group.

Now, he says there are unresolved financial and contractual matters between him and ERG-related entities — and that after years of attempting to resolve them privately, continued silence may no longer be an option.

His position is straightforward:

Commitments were made. Obligations arose. And, he says, some of those obligations have not been honored.

BEFORE ENRC: KAZAKHSTAN

⁃ Your relationship with Kazakhstan actually predates ENRC. When did it begin?

Felix Vulis:

My first involvement with Kazakhstan goes back to 1994.

I was invited to help put together a presentation of the Kazakh economy in the United States. I had previously worked on similar presentations — for Ukraine in December 1992 and for the Russian Federation in May 1994 , so there was already a model for presenting the economic potential of countries emerging from the former Soviet Union to an American audience.

The Kazakhstan project ultimately led to an event in San Diego, California, in December 1995.

⁃ How significant was that event?

It was extremely significant for me because this was long before I joined ENRC.

The presentation was supported and acknowledged at the highest levels, including by President Nursultan Nazarbayev and President Bill Clinton.

It was enormously successful and gave me an early understanding of Kazakhstan  ,not simply its natural resources, but its ambitions as a newly independent country trying to establish itself internationally and attract serious foreign investment.

⁃ So when you joined ENRC in 2001, Kazakhstan was not new territory for you?

Not at all.

By then I already had a relationship with the country and an understanding of its economic potential.

That is important because people sometimes look at my history with Kazakhstan exclusively through ENRC.

My relationship with Kazakhstan began years before ENRC and extends beyond any individual corporation.

BUILDING ENRC

⁃ You spent more than a decade at the center of ENRC. When you look back today, what do you believe you actually built?

Felix Vulis:

I think the numbers tell part of the story, but not all of it.

When I joined, we had extraordinary industrial assets and extraordinary people, but the company still had to make the transition from a predominantly Kazakhstan-focused industrial group into an international corporation.

We professionalized operations, invested heavily, expanded internationally and eventually entered the London Stock Exchange.

ENRC became a FTSE 100 company.

That transformation didn’t happen because of one person. Tens of thousands of people contributed to it. But I was fortunate enough to be part of the leadership during that period, and I am proud of what we achieved.

⁃ ENRC’s 2007 London flotation was an extraordinary moment. What did London change?

Everything.

Once you become a major publicly traded company in London, you are operating under a completely different microscope.

Investors ask questions. Analysts ask questions. Journalists ask questions. Independent directors ask questions. Regulators ask questions.

That discipline can be uncomfortable, but it is healthy.

It forces an organization to explain itself.

POWER AND GOVERNANCE

⁃ Was ENRC actually governable according to conventional Western corporate standards?

It was certainly challenging.

You had very powerful founding shareholders, professional management, independent directors, international investors and the government of Kazakhstan as an important shareholder.

Those interests were not always identical.

My job as chief executive was not to participate in shareholder politics. My job was to operate the company.

Were you ever pressured to make decisions you disagreed with?

Every chief executive of a major corporation experiences pressure.

Shareholders have opinions. Directors have opinions. Governments have interests. Banks have interests.

The CEO’s responsibility is to listen and then make decisions within the law and in the interests of the company.

There were certainly moments when I disagreed strongly with people.

⁃ Did you refuse certain requests?

Yes.

⁃ Did those refusals have consequences?

Sometimes.

But if you accept the position of CEO, you cannot complain that difficult decisions are difficult.

You are paid to make them.

THE INVESTIGATIONS

⁃ ENRC later became synonymous in London with investigations and allegations of governance problems. Did that image correspond to the company you ran?

Not entirely.

ENRC was a huge organization operating across difficult jurisdictions and industries.

Were mistakes made? Of course. Every organization of that scale makes mistakes.

But reducing an industrial company employing tens of thousands of people to a collection of allegations was deeply unfair to the people who actually built and operated the business.

⁃ The Serious Fraud Office investigated ENRC for approximately a decade before closing its investigation without charges. What did that period do to the company?

An investigation lasting that long inevitably creates enormous damage.

There is financial damage, reputational damage and human damage.

The important fact is that the investigation ultimately ended without prosecution.

People can draw their own conclusions from that.

⁃ ENRC subsequently pursued major litigation involving the SFO, Dechert and Neil Gerrard. Do you believe the original investigation should have happened?

I think the judgments and subsequent developments speak much more powerfully than anything I could say.

I would encourage people interested in the subject to read the court record.

THE BREAK WITH ERG

⁃ When did you realize that your relationship with the group was changing?

It wasn’t one day.

Relationships inside corporations evolve.

ENRC changed dramatically after privatization. The structure changed, priorities changed and people changed.

Eventually it became clear that the relationship I once had with the organization no longer existed in the same form.

⁃ You remained formally connected with ENRC for years. Why?

Because certain matters remained unresolved and because corporate relationships do not necessarily end the day someone stops being chief executive.

There were continuing responsibilities and historical matters.

There has been some confusion about whether your formal relationship with ENRC has already ended. What is your position today?

As of today, my understanding is very clear: I remain the sole director of ENRC Ltd.

I have not been dismissed.

There may be an intention to terminate that position, and obviously circumstances can change. But there is a procedure that has to be followed.

My understanding is that I am entitled to 30 days’ termination notice.

Until that process occurs properly, I don’t think it is accurate to describe me as having already left.

⁃ Is this connected with your financial dispute?

There are several issues that overlap.

I don’t want to prejudge legal arguments through an interview.

But clearly there are unresolved financial and contractual matters between us.

⁃ Would terminating your directorship extinguish those claims?

No.

The two issues may be connected factually, but ending a corporate position does not extinguish pre-existing contractual or financial obligations.

Whatever ERG or the relevant entities decide about our relationship going forward, we still have to address what happened in the past and what remains outstanding.

(Part two of the interview, covering the financial dispute and what Felix actually knows, is coming up next .)