Author Archives: Richard Messick

Bad News for Bad People: Decision in U.K.’s First Unexplained Wealth Order Case

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Reports of a $21 million shopping spree at the posh London department store Harrods (examples here, here, and here) dominated accounts of the first court decision to test the new U.K. law requiring those owning a high-end property to show how they could afford it. The court cited the Harrod’s binge in its October 3 decision denying Zamira Hajiyeva’s application to quash an order compelling her to explain how she could afford her $15 million London home in Knightsbridge (walking distance to Harrods) when her only visible means of support is Mr. Hajiyeva, a deposed Azerbaijan oligarch now serving 15 years in an Azeri prison for bank fraud. Tabloid fascination with Mrs. Hajiyeva’s spending binge is understandable, but the decision’s import stretches far beyond the disclosure of the crass excesses typical of a gangland moll.

Even before the law took effect, concerns were heard it would not advance its objective of making the United Kingdom “a more hostile place for those seeking to move, hide or use the proceeds of crime or corruption or to evade sanctions.”  Would the British judiciary’s traditional respect for property rights and qualms about forcing individuals to reveal their personal finances produce such narrow readings of the law as to eviscerate it? Would law enforcement authorities reach too broadly when seeking an order, giving well-financed targets multiple grounds on which to mount a challenge?  The Hajiyeva decision is the first to answer these questions, and for kleptocrats, crime bosses, drug kingpins, and other malefactors hoping the law would go awry, the answers are all bad. Continue reading →

How We Did It: the U.S. Congress’ Exposure of the Grand Scale of Global Corruption

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 Over the past two decades the U.S. Senate Permanent Subcommittee on Investigations has laid bare how Gabonese President Omar Bongo, Chilean dictator Augusto Pinochet, Equatorial Guinean President Teodoro Obiang, and a gaggle of friends and relatives of the leaders of Mexico, Pakistan, Nigeria, Angola, Saudi Arabia, and other countries conspired with large, prestigious banks to hide the enormous sums they stole from their nation’s citizens.  Financial Exposure, the new book by subcommittee investigator and later staff director Elise Bean, recounts how Democrats and Republicans united not only to document egregious cases of grand corruption but to enact legislation making banks’ complicity in future cases a crime.

Americans depressed by the rancorous polarization now gripping Congress will find her book a welcome reminder that Democrats and Republicans can work together to advance the public interest.  Scandals involving money laundering by banks in other nations, most recently Denmark’s Danske Bank and Latvian bank ABLV, should prompt non-Americans to send their parliamentarians a copy of Ms Bean’s book.  Below Ms. Bean offers a few morsels from the book to whet readers’ appetites.    

There isn’t room here to recount all the subcommittee’s anti-corruption investigations, but a few examples will illustrate what they showed and what results they produced.

Citibank Private Bank.  Corruption was the subject of a key investigation by the subcommittee in 1999, which was led by then subcommittee chair Republican Senator Susan Collins of Maine. Rumors were flying then that the United States had become the preferred banker for corrupt foreign officials around the world. Working with Democratic Senator Carl Levin of Michigan (my boss), the subcommittee elected to zero in on so-called “private banks,” banking units that opened accounts only for wealthy individuals with at least $1 million in deposits.

The inquiry ended up detailing four accountholders at Citibank Private Bank: Raul Salinas, brother to the then president of Mexico; Omar Bongo, then president of Gabon; Asif Ali Zardari, then known for his marriage to Benazir Bhutto, former prime minister of Pakistan; and the sons of Sani Abacha, recently deceased president of Nigeria.  Senate hearings exposed how Citibank had not only accepted tens of millions of suspect dollars from the accountholders, but also created offshore shell companies to hide their identities, helped them secretly move millions of dollars around the globe, and continued servicing them even after learning of corruption allegations. Continue reading →

Kleptocracy and Neoliberal Shock Therapy – Talented Researchers Wanted

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Professor Kristian Lasslett of the University of Ulster in Belfast, Northern Ireland, posts this announcement about funding opportunities for doctoral candidates.

A kleptocracy is a state where government institutions have been captured and then employed to rig the national political-economy. Rigging the national economy allows the benefits from the revenues generated by the state’s many estuaries of activity to be politically choreographed, leading to a centralisation of wealth and an increase in inequality. It also allows revenues to be channelled from one sector of the economy to another through various rackets. It could be that public revenues are systematically pilfered, or profits from those sectors in the economy not controlled by members of the kleptocratic regime are squeezed so that those sectors under the command of kleptocrats can earn artificially inflated revenues. Kleptocratic regimes also see public and private assets alienated through means that allow kleptocrats to obtain fixed and circulating capital at a discounted price or permit the kleptocrats to offload the assets at an artificial premium.

What happens to a kleptocratic regime when it is subjected to neoliberal shock therapy? Does it allow state-organised criminal rackets to become legitimate?  Does it lead to a steady erosion of kleptocracy? Does it produce a new elite that sits alongside an old kleptocratic guard? Or does it intensify the kleptocratic dynamic thus creating a worst of all possible situations scenario?

Ulster University is currently advertising a generously funded doctoral research post to test a series of hypotheses emerging from regions where kleptocracy and shock therapy overlap.  Continue reading →

Guest Post: The Nigerian Foreign Minister’s Vilification of Switzerland and the Diplomacy of Asset Recovery

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Today’s guest post is from Dr. Matthew Ayibakuro,director of research and policy at the Africa Network for Environment & Economic Justice (ANEEJ).

On Tuesday, 11 September 2018, Nigeria’s Foreign Minister, Geoffrey Onyeama in a speech delivered at the opening of the 2nd International Conference on Combatting Illicit Financial Flows organized by the Presidential Advisory Committee Against Corruption (PACAC), called out Switzerland for being an accessory to the looting of the country by the former Head of State, Sani Abacha.

He further decried the difficulties faced by Nigeria in repatriating the infamous Abacha loot from Swiss authorities, referring to the process as “daylight robbery”.  For stakeholders working on issues of asset recovery from Nigeria and in foreign jurisdictions, these comments give room for some concern.  The potential impact of statements like this in the short and long-term can impede the progress made by the asset recovery regime in Nigeria over the last couple of decades.  There are obvious reasons for this. Continue reading →

Did Manafort Corrupt European Politicians?

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Former Trump campaign manager Paul Manafort’s guilty plea last Friday has fired speculation that he may “flip” on President Trump, telling prosecutors about Trump’s Russian ties in return for a lighter sentence. But for Europeans a much more important story emerges from the plea.  Buried in the 117-pages of documents released as part of the plea agreement is the story of how Manafort enlisted senior European politicians to paint Ukrainian President Victor Yanukovych’s pro-Russian, authoritarian regime as a democraticlly-led friend of Europe and America.  The story shows:

1) Manafort used the dark arts he learned as an American lobbyist to corrupt gullible European politicians;

or on another reading —

2) Some leading European politicians are as willing to prostitute themselves for whatever client will pay as some of their American counterparts.

The tale begins with Manafort’s June 2012 “Confidential: Eyes Only Memo” proposing to procure a “Super VIP Group of former European Heads of Governments and VIP Officials” to sell Yanukovych’s Ukraine to Europe and American policymakers.  The sale, Manafort explains, will be made “without any visible relationship” to the Yanukovych government through his “quiet direction” in newspaper articles, press commentary, and presentations at Manafort-organized conferences across Europe.

Less than a year later Manafort’s report on the work of what he christened the “Hapsburg Group” says: Continue reading →

Why Won’t Indian PM Modi Extradite KVP to Answer Corruption Charges?

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Four plus years ago the U.S. Department of Justice unsealed an indictment alleging a plot stretching from India to Chicago to pay senior Indian officials some $18.5 million for mining licenses in the state of Andhra Pradesh.  Central to the scheme was K.V.P. Ramachandra Rao, then senior advisor to the state’s Chief Minister.  He allegedly solicited and agreed to accept bribes for himself and other Indian officials in return for approving the licenses.

As soon as the sealed indictment issued, the U.S. requested KVP’s extradition from India.  In accordance with the U.S.-Indian extradition treaty, the Indian government is required to surrender anyone located in India accused of the crimes in the United States of the kind KVP allegedly committed.  Article nine provides that all the U.S. need do is provide Indian authorities with “information describing the facts of the offense and the procedural history of the case, a statement of the provisions of the law describing the essential elements of the offense. . . [and] a statement of the provisions of the law describing the punishment for the offense.”

The 43-page indictment (described here) easily meets these requirements.  It details the plot KVP, Ukrainian magnate and alleged Russian mobster Dmytro Firtash, and a U.S. resident, and others concocted to rob the citizens of Andhra Pradesh of hundreds of millions of dollars through a web of bribes and kickbacks. The charges against defendants — racketeering, money laundering, and related crimes arising from the scheme – are precisely and carefully specified.

So why is KVP still not in U.S. hands? Continue reading →

Brazil’s “Clean Slate” Law Keeps Lula Off Ballot — Now Let’s Smear His Prosecutors

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Brazil’s top electoral court ruled Friday, August 5 (here), that former President Luiz Inacio Lula da Silva, now serving a 12-year sentence for accepting a bribe, cannot stand as a candidate in Brazil’s upcoming presidential elections.  “Lula,” as he is universally known, was to be the candidate of one of Brazil’s major parties, and if pre-election polls are to be believed, he stood a very good chance of winning, setting up the unusual (to say the least) situation of a head of state governing from a jail cell.  Absent a last-minute reversal by Brazil’s Supreme Court, Lula will now sit out the election in jail and the threat Brazil’s government will be run by a convict is over.

Lula’s supporters claim he is a political prisoner and is being unfairly denied the right to run for president.   In doing so, they have glossed over the extraordinary protections the Brazilian legal system has afforded him, both in his effort to overturn his conviction and to run for office.  Having failed in the courts of law, they are now trying to smear the prosecution in the court of public opinion.  A report from a well-placed source in Brazil — Continue reading →

IACA Regional Anticorruption Academy: East and Southeast Asia

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The International Anticorruption Academy holds in fourth annual regional academy on corruption-related topics September 9 – 16 in Beijing.  Topics include asset tracing and recovery, best practices for anti-corruption agencies, and strengthening the anti-corruption dialogue in the region and beyond.

ACA has lined up a number of notable speakers including Cao Fuguo, Professor of Law at the Central University of Finance and Economics Law School in Beijing; Claremont University Professor Robert Klitgaard;  Martin Kreutner, Dean and Executive Secretary of IACA; Shervin Majlessi, Senior Legal Adviser, World Bank/UNODC Stolen Asset Recovery Initiative (StAR); Abu Kassim bin Mohamed, Director-General, the National Centre for Governance, Integrity and Anti-Corruption of Malaysia; Elisabeth Täubl, Senior Prosecutor, Public Prosecutor’s Office for Combating Economic Crimes and Corruption, Vienna/Austria; and Ai Li Zhao, Asia Australia Compliance Head, Siemens. I will give two presentations, one on extradition and a second on mutual legal assistance.

More information about the event is here.

 

Will the Swiss Government Heed Civil Society’s Advice When Returning Stolen Assets to Uzbekistan?

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Readers of this blog know the Swiss government faces a dilemma in returning several hundred million Swiss francs of stolen assets to Uzbekistan (here and here).  Although the current government has taken small steps towards reform, it remains dominated by the same clique of Soviet-era apparatchiks whose corrupt ways were behind the theft of the assets. Returning the money thus runs a high risk that it will go right back to the culprits or their cronies.

At the same time, the Swiss government has an obligation under the UN Convention Against Corruption to return the assets. Moreover, thanks to decades of misrule, living condition for the average Uzbek remain dismal at best.  Money for everything from basic education and health programs to investment in public works is desparately needed.

Uzbek civil society now offers a solution to the Swiss dilemma.  Acknowledging the reformist leanings of the current government, and wanting to encourage them, civil society proposes that the Swiss government return the funds in tranches.  The return would be keyed to progress in realizing the kinds of reforms the government says it is committed to making.   Internationally recognized measures would be used to gauge progress.

A phased, conditioned return has two advantages.  It offers those in the Uzbek government leverage to persuade reluctant colleagues of the need for change.  At the same time, a phased return avoids swamping the government with a massive amount of money its primitive public financial system simply couldn’t manage responsibly.

The proposal appears in a letter to Swiss authorities authored by prominent Uzbek citizen, both those who have had to flee the country to escape political repression and those (anonymously) who remain.  The English version is here; a Russian version here.  A commentary on the proposal in the Swiss press is here, and background on the circumstance the led to the theft is here.

India and Ireland Enact Anticorruption Compliance Program Laws

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Legislation just approved in both Ireland and India create a powerful incentive for businesses to establish anticorruption compliance programs.  Both give firms a defense to criminal charges if one of their employees or agents is caught paying a bribe. Section 18 of the Irish Criminal Justice (Corruption Offences) Act 2018 provides that a “body corporate” can avoid liability if it can prove that “it took all reasonable steps and exercised all due diligence to avoid the commission of the offence.”  Under section 9 of India’s Prevention of Corruption (Amendment) Bill 2018, a “commercial organization” escapes liability if it proves it “had in place adequate procedures in compliance of such guidelines as may be prescribed [by the Attorney General] to prevent persons associated with it from undertaking such conduct.”

The compliance provisions differ, as the quoted language shows, in two respects.  India imposes liability on any “commercial organization,” which includes not only corporations but partnerships and business associations “of any kind,” whereas the Irish law is limited to corporations alone.  Second, while the Irish Minister for Justice and Equality has the discretion to issue guidance on what constitutes “all reasonable steps” and “all due diligence” to prevent employee bribery, the Indian Central Government must, “in consultation with the concerned stakeholders . . .  prescribe such guidelines as may be considered necessary which can be put in place for compliance by [commercial] organizations.”

The Indian requirement follows a report of the Indian Law Commission on an earlier version of the bill.  Noting the “immediate and significant impact” the bill would have on corporations, particularly smaller ones, and that both the U.K. Bribery Act and the U.S. Foreign Corrupt Practices Act require law enforcement authorities to issue compliance guidance, the Commission recommended that the liability provision cum compliance defense be effective only once the Central Government published guidance on what was expected of companies wanting to assert a compliance defense.  An earlier post noted the burgeoning literature on compliance programs by governments, international organizations, and commentators alike evidences a broad consensus on what constitutes an effective compliance program.  Hence in practice the requirement shouldn’t lead to any real difference between what will be required under Indian law and what other nations with a compliance law already require.

The Nations with Anticorruption Compliance Laws table shows Ireland and India are now the fourteenth and fifteenth nations to enact legislation creating a defense to a criminal charge for businesses that have a compliance program.  (Readers are asked to submit a comment if I missed any country.)  With the six countries plus Quebec that require certain firms to have a compliance program, and with the United States, which both tempers corporate liability for firms with an “effective” compliance program and requires those winning public contracts of any appreciable size or duration to have one, the number of jurisdictions with some type of compliance program law now stands at 23.

What are the other 163 parties to UNCAC waiting for?  Why aren’t they enlisting their private sector in the fight against corruption?  Do they really think they can win the fight on their own?