Tag Archives: Kleptocracy Asset Recovery Initiative

U.S. Justice Department Does What Mongolia’s Government Wouldn’t

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GAB readers will remember posts in late 2020 and early 2021 recounting damning evidence implicating Mongolian political kingpin S. Batbold in a massive corruption scheme (here, here, and here). Although Batbold fiercely and forcefully denied the allegations to GAB (here), the evidence that corruption during his tenure as Prime Minister netted him tens if not hundreds of millions of dollars seemed overwhelming.

So overwhelming that it prompted the Mongolian government to open a corruption investigation in Mongolia and initiate litigation in the United States to recover New York real estate press reports showed he had bought with corruption proceeds. Nothing came of either, however. Batbold runs the country’s dominant political party, the Mongolian People’s Party, and after a protégé won the June 9, 2021, presidential election, both the Mongolian and New York cases were shut down.

But the evidence did not go away. Yesterday, the U.S. Department of Justice took up what Mongolia had dropped, filing suit to seize the two New York apartments Batbold owns. As the head of the Department’s Criminal Division explained in disclosing the suit:

“Sukhbataar Batbold used his position as prime minister to award lucrative contracts to sell copper concentrates from a Mongolian state controlled mine to entities that were owned and controlled by his known associates or his son. These intermediaries, who had little to no experience in the copper trade, played no part in providing financing for the purchase of the copper concentrates or in arranging the sale or shipment of the commodities. They simply concealed the fact that Batbold and his family were violating Mongolian anti-corruption laws by benefiting from the sale of millions of dollars’ worth of Mongolian natural resources.

“The former prime minister of Mongolia abused his position as prime minister to profit from the sale of his country’s natural resources.  He and his family used the proceeds of their corrupt scheme to buy $14 million in high-end real estate in the United States.”

The Department’s Kleptocracy unit is responsible for the case, and consistent with its kleptocracy policy, the Department said it would work to see that the proceeds of whatever property of Batbold is recovered would go to the people of Mongolia, “the people harmed by these acts of corruption and abuse of office.”

Mongolians elect a new parliament June 9.  Suppose they might want to ask why it was left to the Department of Justice to do what their government should have done long ago?

See Hearing in Kleptocracy Fight Live at 11:30 EST Today

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The anticorruption community rarely has a chance to witness first-hand the fight against Kleptocracy.  Today, Thursday, July 8, at 11:30 US East Coast time it will have a rare opportunity to see the combatants in action. In a Zoomed court hearing, the Department of Justice will ask a federal judge to order Equatorial Guinea’s kleptocratic Vice President, Teodoro Obiang Mangue, to abide by the settlement he reached with the Department in the famously styled action United States v. One White Crystal-Covered “Bad Tour” Glove and Other Michael Jackson Memorabilia.     

One of its first salvos in the U.S war against kleptocracy, the Department filed suit to confiscate the Jackson glove and other Jackson memorabilia, a Southern California mansion worth north of $20 million, and other assets on the grounds Obiang had acquired them with corrupt monies (complaint here).  After a key witness disappeared (under mysterious circumstances), a settlement was reached. Obiang agreed to surrender some of the property and sell the mansion (here) with the funds from the mansion’s sale given to a charity that would see it was used “for the benefit of the people of the Republic of Equatorial Guinea.”   

The settlement provided that should the Department and Obiang be unable to agree on a charity, a three-member panel — one chosen by the United States, one by Equatorial Guinea, and a chair jointly selected — would decide how to use the funds. After years of Obiang’s stalling, so many it prompted Mathew to wonder whatever had happened (here), a panel was finally chosen. An agreement was reached this past May 4 to use $19.5 million of the funds to vaccinate Equatorial Guineans against Covid-19.

Obiang and the EG government are now trying to renege on the deal, prompting the Department to seek an order enforcing it. The Department’s memorandum in support of an enforcement order is here, the affidavit of the U.S. panel member, the American Ambassador to Equatorial Guinea Susan Stevenson, which details the agreement is here, and the e-mail Equatorial Guinea sent backing out of the deal is here.

Click here for the link to the home page of U.S. federal judge George Wu who will preside at the hearing.  At the top will be a Zoom link to the hearing.  

New Podcast, Featuring Robert Manzanares

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, I interview Robert Manzanares, who served for many years as a Special Agent with Homeland Security Investigations, a division of the U.S. Department of Homeland Security that investigates a variety of federal laws dealing with cross-border criminal activity. Though Mr. Manzanares worked on a wide variety of fraud and corruption cases during his career at HSI, he is best known in the anticorruption community for his role as the lead agent in the case that ultimately lead to the seizure of substantial illegally-acquired assets of Teodorin Obiang, the Vice President of Equatorial Guinea and the son of Equatorial Guinea’s president, Teodoro Obiang. Much of our conversation focuses on that case, including the background on how HSI and Mr. Manzanares got involved in the case, some of the challenges that the investigators faced, and the broader significance of this case for the fight against global kleptocracy. We also use our discussion of that case to explore some broader issues, including the question of why it makes sense for the U.S. government to prioritize these cases, what can or should be done to target the Western individuals and firms that facilitate misconduct like Obiang’s, and what to do with seized assets in settings where the corrupt actors are still in power in their home countries.

You can find this episode here. You can also find both this episode and an archive of prior episodes at the following locations:

KickBack is a collaborative effort between GAB and the ICRN. If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.

Are Legislative Changes to US AML Rules Finally on the Way? Some Thoughts on Tomorrow’s Subcommittee Hearing

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Although the United States has been a leader in the fight against global corruption in some respects—particularly in its vigorous enforcement of the Foreign Corrupt Practices Act and, at least until recently, its diplomatic efforts—there is widespread agreement in the anticorruption community that the United States has not done nearly enough to address the flow of dirty money, much of it stolen by kleptocrats and their cronies, to and through the United States. Effectively addressing this problem requires updating the US legislative framework, a task made difficult by the checks and balances built into the federal legislative process, coupled with high levels of political polarization. Yet there are reasons for cautious optimism: Thanks in part to skillful lobbying efforts by several advocacy groups, and aided in part by the Democrats taking control of the House of Representatives in the most recent mid-term elections, it looks as if there’s a real chance that the current Congress may enact at least some significant reforms.

Three of the reform bills under consideration are the subject of a hearing to be held tomorrow (Wednesday, March 13, 2019) before the House Financial Services Committee’s Subcommittee on National Security, International Development, and Monetary Policy. That hearing will consider three draft bills: (1) a draft version of the “Corporate Transparency Act” (CTA); (2) the “Kleptocracy Asset Recovery Rewards Act” (KARRA); and (3) a draft bill that currently bears the unwieldy title “To make reforms of the Federal Bank Secrecy Act and anti-money laundering laws, and for other purposes” (which I’ll refer to as the Bank Secrecy Act (BSA) Amendments). The subcommittee’s memo explaining the three proposals is here, and for those who are interested, you can watch a live stream of the subcommittee hearing tomorrow at 2 pm (US East Coast time) here.

For what it’s worth, a few scattered thoughts on each of these proposals: Continue reading →

What, Besides Creating a New Court, Could the International Community Do To Fight Grand Corruption? A Partial List

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Last week, Richard Goldstone and Robert Rotberg posted a response to Professor Alex Whiting’s critique of the proposal to create an International Anti-Corruption Court (IACC). Early in their response, Goldstone and Rotberg–both advocates for an IACC–remarked, a bit snarkily, that “[n]otably absent from [Professor Whiting’s] post is a description of what the other effective responses to combating grand corruption might be.”

That struck me as a bit of a cheap shot. Professor Whiting’s post offered a careful, thoughtful argument based on his experience and knowledge of the International Criminal Court (ICC) and similar tribunals, and not every such critical commentary on a given proposal must include a full-blown discussion of alternatives. Still, Goldstone and Rotberg’s implicit challenge to IACC skeptics to articulate alternative responses to grand corruption is worth taking seriously, for two reasons:

  • First, this seems to be a common rhetorical gambit by advocates for an IACC, or for other radical measures that critics deem impractical: Rather than answering and attempting to refute the critics’ specific objections directly, the move is to say, “Well, but this is a huge problem, and there’s no other way to solve it, so poking holes in this proposal is really just an excuse for inaction. This may seem like a long shot, but it’s the only option on the table.”
  • Second, and more charitably to those who make this point, grand corruption is indeed an enormous problem that needs to be addressed. And so even though not every critical commentary on a particular proposal needs to include a full-blown discussion of alternatives, those of us who (like me) are skeptical of deus-ex-machina-style responses to the grand corruption problem ought to make a more concerted effort to lay out an alternative vision for what can be done.

In this post I want to (briefly and incompletely) take up the implicit challenge posed by Goldstone and Rotbert (and, in other writings, by other IACC proponents). If the international community is serious about fighting corruption, what else could it do, besides creating a new international court and compelling all countries to join it and submit to its jurisdiction? When people like Professor Whiting (and I) suggest that lavishing time and attention on the IACC proposal might be a distraction from other, more effective approaches, what do we have in mind? What else could international civil society mobilize behind, besides something like an IACC, to address the problem of grand corruption?

Here are a few items on that agenda: Continue reading →

US Anticorruption Policy in a Trump Administration Revisited: An Evaluation of Last Year’s Doom-and-Gloom Predictions

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Almost exactly one year ago, the day after the U.S. presidential election, I published a deeply pessimistic post about the likely future of U.S. anticorruption policy under a Trump presidency. As I acknowledged at the time, “the consequences of a Trump presidency are potentially so dire for such a broad range of issues–from health care to climate change to national security to immigration to the preservation of the fundamental ideals of the United States as an open and tolerant constitutional democracy–that even thinking about the implications of a Trump presidency for something as narrow and specific as anticorruption policy seems almost comically trivial.” That statement is, alas, still true. But what about the impact on anticorruption specifically? In my post last year, I made a bunch of predictions about the likely impact of a Trump presidency on corruption, anticorruption, and related issues. What did I get right and where did I go wrong?

This may seem a bit self-indulgent, but I think it’s often useful to go back and assess one’s own forecasts, not only in the interests of accountability and self-criticism, but also because examining where we got things right and, more importantly, where we went wrong can help us do a better job in the future. Of course, one difficulty in assessing my own predictions is that many of them concerned longer-term effects that we can’t really assess after one year (really 9+ months). And in some cases the predictions concern things that it’s hard to assess objectively. But it’s still a useful exercise. So, here goes: Continue reading →

Day Three of the Trial of Teodorin Obiang

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GAB is pleased to publish this account of the 3rd day of the trial of Equatorial Guinean Vice President Teodorin Nguema Obiang by Shirley Pouget and Ken Hurwitz of the Open Society Justice Initiative.

court room

Much of the third day of Teodorin’s trial was taken up with a lengthy, and highly misleading, “explanation” by defense counsel of United States of America v. One White Crystal-Covered “Bad Tour” Glove And Other Michael Jackson Memorabilia, a civil forfeiture action the US Department of Justice filed and later settled that involved property Teodorin owned in California.  The Paris hearing began at 1:30 pm, Wednesday, June 22, with the three judges filing into the august Chambre des Crieés of the Tribunal Correctionnel of Paris.  The Presiding Judge asked the civil parties and the defense counsel to comment on the background to the case she had reviewed the preceding day.  While the civil parties’ counsel had little to say, the defense had much to say — little of which was accurate. Continue reading →

Will the Trump Administration Realize that Fighting Extremism Requires Fighting Corruption?

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That corruption breeds extremism is one of the abiding lessons of the last decade plus.  Whether it is Nigeria, Egypt, Somalia, Tunisia, Iraq, Afghanistan or Uzbekistan, allowing what a recent Carnegie Endowment report terms “acute, systemic” corruption to fester is the equivalent of putting out a welcome mat for extremists, home-grown and foreign. Eleven days after President Trump takes office, the world will see whether his national security team has absorbed this lesson.

January 31, 2017, is the day the Trump Administration must tell an American judge whether it will continue negotiations with the Government of Uzbekistan over the return $850 million in bribes paid in violation of the Foreign Corrupt Practices Act the Department of Justice has frozen.  Following a Bush Administration policy continued by the Obama Administration, the U.S. government position has been that such funds should go back the country of origin only if:

  1. the government take steps to curb grand corruption and
  2. the monies are used to improve the lives of ordinary citizens.

Candidate Trump called the FCPA a “horrible” law. On the 31st the world will see what that means in practice.  He could, as I explain here an article for the U.S. newspaper The Hill, tell the judge he has decided to turn the money over to the Uzbek government without strings.  That result would certainly show how horrible he thinks the FCPA is.  It would also ease the task the Islamic Movement of Uzbekistan, the Islamic Jihad Union, and the other radical groups in Central Asia have set of overthrowing the endemically corrupt Uzbek government.

Will the Trump Administration realize that fighting extremism requires fighting corruption? Visit this blog February 1 for at least the first answer to the question.

The U.S. Government’s New Anticorruption Proposals: A Cause for Cynicism, Optimism, or Both?

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Last Thursday, two United States cabinet departments – the Department of the Treasury and the Department of Justice – issued separate but thematically related announcements (see here and here) regarding new initiatives to combat corruption, money laundering, and related malfeasance:

  • Treasury announced the finalization of a new Customer Due Diligence (CDD) rule (discussed previously on this blog), which would require that financial institutions collect and verify the personal information of the beneficial owners of accounts held at those institutions. Treasury also announced a proposal for new regulations that would require certain foreign-owned entities (single-member limited liability companies (LLC)) to obtain a tax ID number and report comply with the associated reporting requirements—a move that would close a loophole that currently allows these entities to shield the foreign owners of non-U.S. assets.
  • Treasury also announced that it plans to send draft legislation to Congress (the text of which does not yet seem to be publicly available) that would require companies to know and report accurate beneficial ownership information at the time of a company’s creation, and to file this information with the Treasury Department.
  • Justice also submitted proposed legislation to Congress that would give the Department new investigative powers (including the use of administrative subpoenas, rather than slower and less flexible grand jury subpoenas, for money laundering investigations, enhanced authority to access foreign bank and business records, and the ability to restrain property based on a request from a foreign country for 90 rather than 30 days). The draft legislation would also creating a mechanism to use and protect classified information in civil asset recovery cases, and would expand the scope of the money laundering offense to include, as a sufficient predicate offense, any violation of foreign law that would be a violation of U.S. law if committed in the United States.

I have not yet had time to review the final CCD rule or the proposed LLC rule, and as I noted above, I don’t think the full text of the legislative proposals is yet available. So I’m not yet in a position to comment on the substance, but at least on the surface, all this seems encouraging. It’s possible to take the cynical view that most of this doesn’t mean very much or represent genuine progress. And I’ll admit part of me is inclined to embrace the cynical view. But on the whole, I do think that last week’s announcements are genuinely encouraging, and signal the possibility of building greater political momentum for real progress.

First, though, the reasons for cynicism: Continue reading →

When Should Governments Keep Stolen Assets?

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The Swiss government agreed in early March to return $321 million to the Nigerian government that was stolen by the late Sanni Abacha during his kleptocratic reign as the country’s president.   The agreement provides that the funds will be used for programs to benefit the Nigerian people in “an efficient and accountable way” and, to ensure the funds do indeed go to such programs, the World Bank will monitor their use.

World Bank oversight is one way to ensure returned assets are not again stolen, and in the case of Nigeria — a relatively open society with an elected government, a lively, unconstrained media, and a vibrant civil society – World Bank monitoring, when coupled with these conditions, may be sufficient to guarantee the funds are put to good use.  But what about in closed societies?  Those without elections, free media, an independent civil society.  Countries where the same tight-knit, authoritarian group which stole the assets in the first place remains in power?  Is there any way to ensure stolen assets returned to these countries will be used to benefit the nation’s citizens rather than going straight back into the pockets of the thieves? Continue reading →