The New York Times ran a very nice piece last week (with a GAB mention!) about the U.S. Department of Justice’s Kleptocracy Asset Recovery Initiative, and its ongoing efforts to seize foreign assets held by corrupt foreign leaders (and their cronies) in the United States. We’ve already had a lot of blog commentary on some of the issues associated with the Kleptocracy Initiative (see here, here, here, here, and here). But I wanted to pause for a moment to consider a question raised in the NYT piece: Is the effort worthwhile, given its resource costs and the relatively modest successes to date? The answer is not obvious; as Rick (quoted in the article) put it: “In terms of really helping the global anticorruption struggle, I wonder if this is the highest use of resources.” (Rick further suggests that the DOJ’s resources would be better spent on assisting countries pursuing their own anticorruption and asset recovery cases.)
Rick is right to raise these questions about the Kleptocracy Initiative—but my instincts are different from his. Even if it is the case, as the NYT reports, that the DOJ has so far only been able to recover around 8% of the assets it has gone after under the Kleptocracy Initiative, this still strikes me as a good use of DOJ resources. Here’s why:
- First, though this is more of a quibble, expressing the recoveries in terms of percentages of money sought may be somewhat misleading, for two reasons. One, the DOJ may start out with the most ambitious target it thinks it might be able to achieve, much as a private civil plaintiff will file a law suit seeking hundreds of millions in damages, even if her lawyer knows she realistically might only be able to recover a few hundred thousand at best. Two, a lot of these cases are still in the pipeline—the Kleptocracy Initiative is still relatively young, and the cases take a long time—and so perhaps the denominator ought to be not the total amount sought by the DOJ, but the total amount of assets whose ownership has been finally resolved.
- Second, as the article points out, one of the reasons the recoveries take so long, and are sometimes relatively modest, is because the targets hire big teams of top-notch (and very expensive) lawyers to fight the seizures. But these legal costs (and the costs associated with not having access to the assets while they’re tied up in court proceedings) are also costs for the asset owners, and so should be factored into the deterrent effect of the Kleptocracy Initiative. (Of course, this also raises concerns about potential abuse or overreach—not everyone targeted is always necessarily guilty, though so far the Kleptocracy Initiative’s targets don’t appear to have been close cases.)
- Third, as noted above, the Kleptocracy Initiative is still relatively young, and there’s likely to be a lot of learning-by-doing, such that I would expect that the success rate will improve over time.
- Fourth, and related to several of the above points, I think that the right way to evaluate a program like the Kleptocracy Initiative is not so much in terms of assets seized (and returned), but in terms of its deterrent effect. Asset seizures are nice and generate big headlines, and in some cases returned assets can be used to do some good in the victim country, but I actually think there’s probably too much attention to seizures and returns as the measure of success. The real measure of success should be the extent to which the DOJ’s approach (and other measures, such as greater financial transparency) make it harder for corrupt leaders to reap the benefits of their ill-gotten wealth. A big part of that is to make hiding those assets in places like the United States a riskier proposition. Unfortunately, it’s very hard to measure the deterrent effect of the Kleptocracy Initiative directly, and indeed the deterrent effect is only likely to emerge gradually, as kleptocrats start thinking twice before parking their money in the U.S. So I’m mainly going on instinct, but I tend to think that a high profile initiative like this, with at least a few high-profile, headline-grabbing seizures (Obiang, Abache, etc.) will have an effect.
- Finally, Rick offers as an alternative approach providing greater DOJ assistance to countries going after assets themselves. Of course, these aren’t mutually exclusive, though I recognize that there are trade-offs at the margin. It’s really a question of degree—I don’t think Rick believes the U.S. should not devote any effort to seizing illicit assets held in the U.S., and I certainly would strongly favor devoting more resources to mutual legal assistance. But perhaps I’m somewhat more skeptical than Rick about the effectiveness of other countries’ efforts to go after stolen assets themselves, even with U.S. assistance. Many of the victim countries will be plagued by a lack of capacity (these cases are very complex and expensive), a lack of will (especially when the owners of the illicit assets are still in power), or both. The best-case scenario would be for the victim country to take the lead on going after the stolen assets, with the U.S. and other countries providing support. But when that can’t or won’t happen, something like the Kleptocracy Initiative seems like a valuable backstop.