The anticorruption community has recently put more emphasis on freezing, seizing, and repatriating the assets of corrupt kleptocrats. But while this move is in many ways welcome, it is still the case that essentially none of the most infamous kleptocrats have ended up behind bars. Even when governments go after the illicit assets of these kleptocrats, their cronies, and other “politically exposed persons” (PEPs), the governments seeking asset recovery often find themselves put to an uncomfortable choice: either to accept the return of only a part (sometimes a small part) of the looted wealth in a settlement, or to continue to pursue their attempts, often in vain, to seize and repatriate all (or at least most) of the stolen assets.
Sophisticated PEPs know this, and usually take advantage of the slowness of the asset recovery process (as well as their ability to use their ill-gotten wealth to hire top-notch legal talent to wage a protracted legal battle), to the point where the governments are willing to allow the PEP to secure the “golden handshake” of a favorable settlement. Nothing illustrates this better than the attempts to recover the assets of former Nigerian President Sani Abache and of former Kenyan President Daniel Arap Moi. Abache’s family’s lawyers stiff resistance to asset recovery efforts eventually led to a settlement whereby the Abache family returned $1 billion–but got to keep $300 million. In the latter case, the Kenyan authorities insisted on recovering the full amount–and have ended up with nothing. The Kenyan experience has served as a cautionary tale, inducing for example many of the Arab Spring countries to accept settlements they would have never accepted two years ago. This result frustrates the foundational principle of penology that a criminal who gets caught should end up worse off than he would have been if he did not commit the crime. A corrupt official who knows that the worst that can happen is that he might have to give back half or two-thirds of the money he stole is unlikely to be deterred.
At the moment, it does not seem realistic to expect more severe criminal punishment for many kleptocrats, so reliance on settlement will continue for a while. Accordingly it is important to figure out how to use settlements to guarantee the maximum restoration of assets. The two most important factors that shape the content of a settlement are national and foreign justice. Consider each in turn. Continue reading