Guest Post: Settlements in Asset Recovery Cases—Neither Ethical Nor Effective

Robert Packer, a Masters student at of the University of Nanterre, Paris, contributes the following guest post:

When governments attempt to freeze, seize, and repatriate the assets stolen by corrupt government officials and others, they often confront what is sometimes presented as a conflict between pragmatism and principles. Given that kleptocrats can often hire the best lawyers and take advantage of every legal protection available, attempting to secure convictions and/or confiscation of all ill-gotten assets may be an expensive, time-consuming, and uncertain prospect. As such, across multiple jurisdictions, cases like the Giffen Affair (Kazakhstan) and the Abacha Affair (Nigeria) have ended up with kleptocrats forfeiting a part of their assets and accepting a slap on the wrist—what Mohammed Moussa, in his post last April , referred to as a “golden handshake.” Proponents of such settlements argue that it’s preferable to secure the restitution of a part of the stolen assets rather than risk a long and expensive process resulting in nothing. Those taking this view assert that settlements are better for the victims, and point to the failed case against the Moi regime in Kenya as an example of the risks of pursuing an uncompromising approach. And there’s a certain logic to that view. Asset recovery practitioners and proponents might well ask ourselves, who are we to push for a conviction or for forfeiture of all illicit assets for the sake of some high vaunted principles (if not our own egos!) if this means that the poor (almost always the victims of corruption) are left with nothing?

That pro-settlement view may sound plausible, high-minded, and sophisticated. But it’s wrong. And no case better illustrates this than the Obiang affair, which is currently at various stages of development in France, the US, and Spain. That case nicely illustrates the serious problems with negotiating “golden handshake” settlements with kleptocrats and their cronies, rather than pushing to do full justice.

Although there has been quite a bit of discussion about the Obiang case already, including on this blog (see here, here, and here) some quick background: Teodoro Nguema Obiang, President of the small oil-rich state of Equatorial Guinea, is Africa’s longest serving dictator–and one of its most corrupt. As under most dictatorships, regime critics are imprisoned and tortured, but in addition to maintaining his brutal security apparatus, Obiang also invests heavily in incorporating any opposition into Equatorial Guinea’s breed of faux democracy, in which the semblance of a democratic system and a civil society are almost completely controlled by the Obiang regime. Obiang has used his iron grip on power to enrich himself and his family, at the expense of the average citizen, leading to obscene levels of inequality: the average per capita income in Equatorial Guinea is $50,200, yet 67% of the citizens live in poverty.

Nevertheless, the party was rudely interrupted five years ago when, following the tireless efforts of French civil society organizations, France’s public prosecutor opened a criminal investigation into the illegal activities of Theordore Nguema Obiang Jr, playboy son of the president, and seized luxury assets worth tens of millions including a fleet 15 luxury cars and a private hotel. Around the same time, the Asset Forfeiture and Money Laundering Section of the DOJ (the so-called “kleptocracy unit”), opened civil proceedings against the assets of Nguema Obiang and froze all those held in the US. While the case in France is ongoing, the US came to an agreement with Nguema Obiang in 2014 which saw the dictator’s son forfeit assets worth $30 million, around half of what he had stashed in the US.

Sounds good, right? But there are a few problems:

  • First, although the US is insisting that the returned assets be channeled through an independent charity to benefit “the people of Equatorial Guinea” (an arrangement similar to that used in the settlement of an FCPA case involving Kazakhstan), the original 180 days deadline for designating such a charity passed last April with no agreement on an appropriate charity to administer the funds—probably because one doesn’t exist. Whether or not the US will now push for setting up a new NGO, as was done with the BOTA foundation in Kazakhstan, one can only speculate.
  • But more importantly, even if the US does manage to replicate the Kazakhstan restitution, whether the true victims (“the people of Equatorial Guinea”) are likely to significantly benefit from the return of the stolen assets remains in doubt. In a country with annual oil revenues of $3 billion, it’s not for a lack of money that most of the citizens are so poor. At no point during the negotiations between the US and Nguema Obiang were the supposed victims consulted, which suggests it is not their interests that are genuinely at stake here. Although such consultation might seem like it would have been practically difficult, we should consider whether, if we were the victims of such systemic political corruption, we would want our leaders let off the hook so easily.
  • Furthermore, an out-of-court settlement makes it easy for the responsible parties to spin their forfeiture any which way they like, including as an act of charity. In the case of Nguema Obiang, he claims to be happy to “continue the charitable work I have sponsored for many years in Equatorial Guinea.” A quick read of the Obiang regime’s propaganda (see here and here) shows how an out-of-court settlement can be presented as proof of the innocence and generosity of the corrupt! As such, in countries where the media is tightly controlled, a settlement may end up strengthening a corrupt regime’s grip on power.
  • Finally, it’s worth noting that while $30 million seems like a lot of money, it is still just a small part of Nguema Obiang’s looted wealth ($300 million according to the DOJ). As such, the danger is that corrupt officials begin to see asset confiscation as simply a business expense to be avoided yet accepted if necessary—an attitude that could end up increasing corruption rather than reducing it. So whether it’s ethical or not to strike a plea bargain, it seems that in corruption cases the victims are unlikely to benefit and the perpetrators will not be dissuaded. That doesn’t sound very effective to me.

So let’s not beat around the bush. Corruption is inherently political, and it’s only political change that will improve the lives of the victims. A conviction and seizure of all illicit assets is the best way to help achieve this.

5 thoughts on “Guest Post: Settlements in Asset Recovery Cases—Neither Ethical Nor Effective

  1. Interesting parrallels between settlements in kleptocracy and ransmom payments in hostage situations. A policy allowing allow the criminal to keep a portion of the criminal proceeds encourages future misconduct. Arguing that settlements are compelling in an indivdual instance misses the greater point, that this is a long-term and insitutional challenge, and practices will not hcnage until long-term and institutional changes are made.

  2. What I think the author needs to do in a follow up is grapple with this question: what would the impact have been if the U.S. government had lost its case against Teodoro Obiang? If the court had ruled there was insufficient evidence the assets were the proceeds of crime? Would that have been a better outcome than settling the case?

    • Thanks Rick, apologies for the late reply. Off the top of my head I would say (this is the idealist in me speaking) yes. This based on the principle that it is better to try and fail than to not try at all. Although a settlement can be seen as cutting one’s losses, in the case of Equatorial Guinea, given the near impossibility of a restitution, the victims at least have very little to gain. Also, the dissuasive effect of the forfeiture of a small part of one’s assets is negligible when compared to that of a conviction (or maybe even a trial) which goes a long way in undermining the legitimacy and domestic image of kleptocrats in power. This is illustrated by Obiang’s refusal to settle with French authorities who would necessarily demand some kind of conviction. What do you think? (I’m writing my Masters dissertation on this so would be interested din your opinion).

  3. I would suggest that one may want to distinguish between instances when an alleged kleptocrat has fallen out of power before the forfeiture / confiscation proceedings commence (e.g., Abacha) and those when he is still in power (e.g., Obiang). In the first scenario, it makes more sense to repatriate the proceeds of the forfeiture back to the state where they originated. There will remain questions as to whether the serving government of that state is able to ensure the efficient use of the recovered assets but that is a separate issue and the answer will depend on the circumstances. In the second scenario, however, as Robert has rightly written, it is invariably difficult to repatriate the assets for the benefit of the population while ensuring that the alleged kleptocrat does not lay his hands on them again.

    It follows that in the first case, the whole point of the forfeiture / confiscation proceedings is to return as much as possible to the victim state. In contrast, if the alleged kleptocrat is still in power, the primary aim is to divest him of as much wealth as possible. It is my intuition that settlements might be more justified in the former scenario than in the latter one.

    • I agree Anton. Furthermore because the primary aim should also be to divest the kleptocrat still in power of as much legitimacy as possible as well. this isn’t as important in the case where an alleged kelptocrat has fallen out of power, although I think sometimes this black and white distinction of in/out of power is a bit limited. Look at the Abacha case, the general lost power yet his sons continued to yield important political power in Nigeria that almost certainly perpetuates corruption.

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