Belgian and Uzbek Governments Profit from Termination of DoJ’s Kleptocracy Unit

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Central Asia Due Diligence and the Uzbek Forum for Human Rights have identified the latest fallout from the Trump Administration’s destruction of American institutions devoted to fighting global corruption. The governments of Belgium and Uzbekistan have each pocketed $108 million in stolen assets that should have gone to the people of Uzbekistan.

In this just released paper, the two human rights NGOs explain how the demise of the Department of Justice’s Kleptocracy Asset Recovery Initiative allowed the two governments to ignore provisions in the UN Convention Against Corruption and the principles of the Global Forum on Asset Recovery that together bar assets stolen by a corrupt official from being kept by the government of the country where the official stashed them or returned to the official’s corrupt cronies.

Lawyers for the Initiative had designed a sophisticated process (details here) to see the $216 million in bribes to former Uzbek first daughter Gulnara Karimova found in Belgian banks DoJ would go to the UN trust fund overseeing development programs in Uzbekistan. With the Initiative’s demise, the Belgian and Uzbek governments apparently saw no reason they should not divvy up the money between them.

So thanks to the Trump Administration, Belgium, one of the world’s wealthiest countries, is now $108 million wealthier, and Uzbek’s leaders, several Gulnara’s accomplices, now have $108 million to spend keeping themselves in power. Meanwhile, the citizens of Uzbekistan, GDP per capita $3,500, scrape by.

Guest Post: Global Lessons from Sri Lankan Civil Society for Post-Crisis Governance Reform

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Today’s guest post is from Nishan de Mel and Inoshini Perera of Verite Research and Nikhil Wilmink of the Open Society Foundations.

In 2022, Sri Lanka experienced the most severe economic crisis of its post-independence history. Foreign reserves were emptied as the currency depreciated by over 80% and essential imports such as fuel and medicine were curtailed. Sri Lanka was forced to default on its external debt of over USD 40 billion. In desperation, the government went to the International Monetary Fund (IMF) for assistance—the seventeenth time Sri Lanka has done so since 1965. The IMF’s rescue program, which prioritized price stabilization above all else, inflicted substantial hardship, as interest rates spiked, poverty doubled to around 30%, and the previous eight years of GDP growth were wiped out.

The crisis triggered an awakening among the Sri Lankan people about the consequences of corrupt governance. Protests proliferated and grew into an avalanche known as the Aragalaya (mass uprising), the largest democratic protest in Sri Lanka’s history. Protestors viewed Sri Lanka’s economic collapse as rooted in corruption, impunity, and the abuse of political power. The protests ultimately forced then-President Gotabaya Rajapaksa to resign and flee the country.

Given that concerns about corruption and misgovernance were so central to the discussion of Sri Lanka’s economic crisis, in early 2023 the IMF reached an agreement with the Sri Lankan government to conduct a “Governance Diagnostic Assessment” (GDA) – the first one in Asia. Civil society in Sri Lanka was not overly impressed, however. Sri Lankan civil society organizations (CSOs) were concerned that IMF consultations with civil society would be largely performative. CSOs were also concerned that there would not be sufficient accountability for implementation of the anticorruption measures that the IMF designed with the government. Leading think tanks and CSOs in Sri Lanka came together to form the Civil Society Initiative on Anti-Corruption Reform for Economic Recovery (CSI-group). The CSI-group initially requested that the IMF transcribe and publish its consultations with CSOs, but the IMF would not agree to this. Therefore, the CSI-group took an independent path by bringing hundreds of other CSOs together into a process for producing a “Civil Society Governance Diagnostic Report”. This was the first time any country’s civil society sector had ever drafted a governance report to guide the IMF’s GDA. That GDA, produced after the civil society diagnostic, was an excellent document that aligned closely with what had been produced by the CSOs. Sri Lankan CSOs also created of an independent IMF Tracker to monitor the government’s implementation of its IMF program commitments and to provide more transparency about the significant failures to comply with commitments on governance and anticorruption, even when these were not highlighted in the IMF’s reviews.

Recognizing the core governance weaknesses needed a multi-pronged approach. The Sri Lankan think tank Verité Research decided to involve bondholders as well. In June 2024, Verité Research proposed a new debt instrument: a “Governance-Linked Bond” (GLB), designed to reduce reducing the risk of repeated defaults in countries with poor governance. Through the GLB, creditors agree to reduce the borrowing country’s coupon payments if that country takes certain governance-improving actions—actions that benefit the creditors as well by reducing the risk of default. Thus, GLBs make the adoption of these governance improvements a win-win for both debtor countries and creditors. The GLB proposal was adopted by private creditors in Sri Lanka’s debt restructuring in December 2024. The final GLB issue made up about 13.5% of Sri Lanka’s new restructured debt (USD 1.44 billion) with a coupon reduction of 75 basis points, from 2028-2035 if three key performance indicators (KPIs) are met: (1) a target revenue-to-GDP ratio; (2) the publication of a fiscal strategy that complies with the new public finance management act that Sri Lanka adopted in August 2024; and (3) compliance with the information disclosure covenant in the restructured bond contracts. Notably, these KPIs were drawn from a set of sensible set of compliance actions related to the existing laws of the country, its macroeconomic targets, and stipulations on the bond contract; there was no need to link them to the IMF’s GDA.

In sum, CSOs’ engagement in Sri Lanka resulted in a number of meaningful improvements, including the IMF’s adoption of a much-improved GDA and the innovation of the GLB, a new global instrument to improve governance. With Kenya now undertaking a similar process, some key lessons from Sri Lanka include: being able to take advantage of windows of opportunity and momentum swings (such as the momentum from popular protests around corruption and the IMF program in Sri Lanka); and building diverse coalitions able to take a systemic approach (Sri Lanka’s significant achievements have come from partnerships with unusual partners including bondholders).

Guest Post: What Trump’s FCPA Enforcement Pause Means for Accountability in Europe

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Today’s guest post is by the Daphne Caruana Galizia Foundation. Established following the assassination of Maltese anticorruption journalist Daphne Caruana Galizia, the foundation seeks to ensure full justice for Daphne’s murder, advance her work, support and protect investigative journalists, and promote public interest litigation. It coordinates the Coalition Against SLAPPs in Europe (CASE), administers the Public Interest Legal Network (PILN), is a Transparency International chapter-in-formation, a partner of OCCRP, and a member of the UNCAC Coalition.

Here on the little Mediterranean island of Malta, located just south of Sicily, news of a Department of Justice investigation into Texas-based Steward Healthcare was met with a collective sigh of relief – “the Americans will help to get it done” – some thought to themselves. “It” in this case refers to the act of achieving accountability for one of the biggest corruption scandals to rock the country.

The scandal centers around Steward’s takeover of a fraudulent concession to develop and manage three of Malta’s public hospitals. The hospitals were left in a state of disrepair and under-resourced, as public funds intended for their development and upkeep by-passed them almost completely, landing instead inside the pockets of a well-positioned few through a carefully organized international network of consultancy agreements and intermediaries. In Malta, these few allegedly included Maltese former Prime Minister Joseph Muscat, Minister Konrad Mizzi, and Chief of Staff Keith Schembri. In the US, Steward executives allegedly     did their best to collect all they could of the money hemorrhaging from the concession.

So what did Maltese citizens hope the result of the Department’s FCPA investigation would be?

Continue reading →

So That’s Why the Kleptocracy Asset Recovery Initiative Was Abolished

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Thanks to Alexis Loeb’s March 26 Lawfare post, another Trump Administration attack on the global effort to curb corruption has been revealed. Buried in Attorney General Bondi’s February 5 Memorandum making the elimination of drug cartels and transnational criminal organizations the Justice Department’s number one priority, she reports, is an order disbanding the Department’s Kleptocracy Asset Recovery Initiative.

Loeb does a fine job of explaining what a loss its dissolution will be to the international fight against corruption, recounting its efforts to help nations around the world battle kleptocracy. Among its successes: Initiative’s lawyers forced notorious kleptocrat Nguema Obiang, Equatorial Guinea’s Vice President, to forfeit nearly $30 million in assets, and their efforts resulted in the return of millions stolen by Nigerian dictator Sani Abacha and former Uzbekistan “first daughter” Gulnara Karimova to their countries. The blockbuster was 1 Malaysia Development Berhad (1MDB). With the Initiative’s assistance, Malaysia has so far recovered $6.5 billion in stolen assets from the thieves (here). Indeed, Jeff Sessions, Trump’s first Attorney General, called the 1MDB scandal “kleptocracy at its worst,” and lauded the help the Initiative provided Malaysia’s government (here).

But Loeb leaves the big question unanswered. Why in the world would AG Bondi disband such a valuable unit? Especially since, when assets are forfeited to the U.S. government, the staff time and expenses incurred were covered.

Thanks to Washington Post reporter Peter Whoriskey’s story in today’s paper, we now have the answer.

Continue reading →

Conference on Global Capitalism, Trust and Accountability

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Can democratic governments hold global capital accountable? What are the consequences if they fail?  

These are the questions that will be examined at an April 4 and 5 conference at Stanford University. Among the issues speakers will address are the law and politics of corruption, opacity and illicit flows, and corporate misconduct and the law.

The live streamed event is being organized by Stanford’s Program on Capitalism and Democracy and is co-sponsored by its Graduate School of Business and the Center on Democracy, Development and the Rule of Law of the Freeman Spogli Institute for International Studies . In addition to academic authorities, speakers include Judge Jed Rakoff, Kenya corruption fighter John Githongo, TI USA Director Gary Kalman, and Italian prosecutor Fabio de Paquale.  

Registration and program details here.

An Assessment of the Swiss Return of Stolen Assets to Uzbekistan

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The return of assets stolen by corrupt means is “a fundamental principle” of the United Nations Convention Against Corruption, and the Convention mandates that its now 191 state parties “afford one another the widest measure of cooperation and assistance” to ensure states victimized by corruption recover the proceeds of the crime wherever they are located (article 51).

Easy enough to state the principle. And easy enough to implement where the victim state’s leaders are democratically chosen, committed to advancing citizens’ well-being, and corruption is under control. But what if those conditions don’t hold? What if the same kleptocrats who stole the assets are still in power? Even if the crooks have been purged, so long as autocrats run the government, what guarantee is there that the assets won’t simply enrich the current powerholders? Or worse yet, fund measure to further repress their citizens?

As my friend and former Soros Foundation colleague Alisher Ilkhamov describes in the current issue of Central Asian Due Diligence (here), Switzerland is working through these issues as it begins to return to Uzbekistan the several hundred million dollars the former president’s daughter Gulnara Karimova stole. Uzbekistan’s government is a step above where it was when Gulnara set the record for shaking down foreign investors, but a budding democracy it is not. By a long shot.

Alisher describes the conditions Switzerland attached to the return of a first tranche of $131 million in 2022, how they were implemented, and how that experience should inform the recent agreement between Switzerland and Uzbekistan to return another $182 million. His assessment will be of value to policymakers everywhere wrestling with the return of stolen assets to states that fall far short of democratic, good governance norms.

Who Will Defend the FCPA?

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Last month President Trump ordered Attorney General Bondi to “cease initiation of any new FCPA investigations or enforcement actions” while she determines whether the way the act is now enforced advances American interests. If she finds it is not, the Presidential Executive Order directs her to revise the current enforcement guidelines. In theory any revision will be driven by what an objective review finds; in fact Trump’s February 10 order has loaded the dice. It starts off proclaiming FCPA enforcement:

“has been systematically, and to an increasing degree, stretched beyond proper bounds and abused in a manner that harms the interests of the United States”

It continues:

“Overexpansive and unpredictable FCPA enforcement against American citizens and businesses … for routine business practices in other nations … wastes limited prosecutorial resources [and] actively harms American economic competitiveness.

These claims are patently false — as those who have watched the uptick in FCPA prosecutions or been involved in them know.  They must now speak up: To prevent Trump and Bondi from derailing one of the most successful efforts to fight global corruption since the international community made it a priority.

The list of witnesses is long. It includes not only American executives, lawyers, FBI investigators and federal prosecutors but the counterparts in countries rich and poor who have worked with them to curb the scourge of bribery. They need to present the “true facts” to Attorney General Bondi to counter the “alternate facts” in the Trump order.

Already two former OECD General Counsels and three former chairs of its Working Group on Bribery have. In a February letter to Bondi they explain that the FCPA has advanced American interests by protecting “US companies from unfair practices by foreign companies” and they go on to provide additional evidence and reasons why FCPA enforcement policy requires little if any revision. Others need to go on record with stories of how and where enforcement measures helped American businesses and created good will for American interests generally.

Given Bondi’s unwavering fealty to Trump, the real facts are unlikely to stand in the way of her making drastic changes in FCPA enforcement, but changes will be subject to challenge in both a court of law and the court of public opinion. The more evidence on the record that that current enforcement policy advances American interests, the more likely any misguided revisions will be rejected.

Bondi has until August 9 to complete her review with the possibility of a 180 day extension. The sooner the true facts are on the record and the alternate ones revealed as half-truths existing in an alternate universe, the better. Submissions should be addressed to: The Honorable Pamela Bondi with the salutation Dear Attorney General Bondi: Her address:

  •  950 Pennsylvania Ave., N.W.
  •  Washington, D.C. 20530

GAB would be pleased to receive and share with readers copies of any submission.

Will the Outgoing Namibian President Pardon the Fishrot Defendants?

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On August 4 two former Namibian ministers, other once high-ranking government officials, and their accomplices go on trial for stealing millions of dollars from Namibian citizens. Unless, that is, President Nangolo Mbumba pardons them before leaving office March 20.

The pardon would not only subvert the rule of law but indelibly tarnish ruling party SWAPO’s legacy. 

SWAPO, the South West Africa People’s Organization, began life fighting to free Namibians from the grip of apartheid South Africa. Since securing Namibia’s independence in 1990, the party has won the respect of democracy advocates everywhere. In contrast to Mozambique’s FRELIMO and Angola’s MPLA, it has begun the transition from a tightly disciplined, brook-no-opposition guerilla army to a broad-based political party.

SWAPO is not all the way there yet, but seeing that senior party members are held accountable for taking bribes in Fishrot, where Icelandic fishing giant Samerherji paid defendants and possibly other SWAPO members for the rights to fish off the Namibian coast, is surely a major stride forward. (Fishrot details here, here, here, here)

The trial could well put on display more of the party’s dirty laundry. Hence the reason why some in the party’s inner-circle are pressuring President Nangolo to pardon the crooks. Their argument: a pardon will clear the decks for incoming President Netumbo Nandi-Ndaitwah to carry through on needed reforms without the distraction of Fishrot prosecutions. And Nangolo is retiring and so can take the political fall out from letting defendants off the hook.

The truth is the inner-circle’s real motive is nakedly self-serving. During the campaign, Nandi-Ndaitwah made her commitment to the rule of law crystal clear, virtually ensuring she will neither derail the prosecution nor lighten defendants’ sentences if, as expected, they are convicted. Indeed, some in SWAPO’s inner-circle fear she may countenance civil suits to force all those responsible for Fishrot, including those insiders pushing pardons, to compensate Fishrot victims for the tremendous harms the bribery caused them. (Damages fisherman suffered documented here and here.)

Will those among SWAPO’s founders committed to a liberal democratic, corruption-free future for Namibia join with the party’s younger, more progressive members to persuade President Mbumba to leave office honorably? To ensure that the efforts revered party founder Sam Nujoma and others have made to set SWAPO and Namibia on the democratic path continue?  

Road Quality Guarantees in Nigeria: An Anticorruption Approach Off the Beaten Path

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To say it is hard to get around in Nigeria is an understatement. Only about 30% of Nigeria’s roads are paved. And even the paved roads are in terrible condition, with crater-sized potholes, stagnant pools of water, floods of waste, and disintegrating tarmac. Everyday commuters, who often sit in traffic for up to five hours daily, regard Nigeria’s roads as “death traps,” “deplorable,” and “dilapidated.” The low quality of Nigeria’s roads not only increases insecurity but also poses a major impediment to economic progress.

The poor quality of roads is not the result of insufficient funding allocated for road construction. Indeed, the Nigerian government has spent enormous amounts of money on road construction projects (approximately $922.2 million just last year). If this money was going where it was supposed to go, Nigeria’s roads should at least be decent. But the money is not going where it’s supposed to go. Very often construction firms bribe public officials to secure road contracts, and then the firms recoup the loss of the bribe by using low quality materials and substandard construction methods, resulting in roads that do not last even up to seven years. In some cases, contractors simply pocket the government money and disappear, abandoning their projects but simply pocket the government money and disappear. To take an especially high profile example of how massive road projects can be tainted by suspicions of corruption, a recent $13 billion highway project, commenced by President Tinubu in May 2024, was awarded—with no regard for a public bidding process—to a company of whose subsidiary Tinubu’s son is a director. In fact, Tinubu’s son owned an offshore company with the son of the tycoon who received the contract. (In 2000, that tycoon was convicted of money laundering and helping the Abacha regime siphon at least $120 million from the Central Bank of Nigeria.) This road project has been criticized for its lack of transparency, alleged fraud, and risk of noncompletion.

In short, corruption is one of the most significant reasons for Nigeria’s terrible road system. But the most effective way to improve road quality in Nigeria is to focus not directly on the corruption—even though that is the root cause of the problem. Of course, corrupt acts, in this context and others, should be caught and punished. But, rather than relying primarily on detecting and punishing corruption, the more effective way to address this problem would be to establish effective mechanisms to hold contractors and public officials accountable for the quality of the roads that are ultimately built. Enforcing performance standards will reduce incentives to engage in corruption—at least the sorts of corruption that have a significant adverse impact on quality.

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Guest Post: Getting into the Weeds of Victim Compensation in Foreign Bribery Cases

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Today’s guest post is from Sam Hickey, a lawyer and former regular GAB contributor:

Given the Trump Administration’s decision to pause FCPA enforcement and disband the DOJ’s Money Laundering and Asset Recovery Section, the United Kingdom has become an even more important actor in international efforts to remediate those most impacted by foreign bribery, and the global fight against corruption more generally.

Together with the Basel Institute on Governance, I have written a report on the UK’s use of Deferred Prosecution Agreements (DPAs) to compensate the victims of foreign bribery. Given the inherent difficulties in seizing, forfeiting, and repatriating illicit wealth through traditional asset recovery frameworks, DPAs possess immense potential to remediate the victims of corruption in low-income countries. But this practice also raises a number of questions and challenges, which the report seeks to address. Here are some of the more serious ones: Continue reading →