The Missing Piece in UK’s Unexplained Wealth Order Mechanism

All of a sudden politicians, public figures, and oligarchs – such as Russian First Deputy Prime Minister Ignor Shuvalov and former Nigerian Oil Minister Diezani Alison-Madueke – have to explain how they are able to afford the swanky apartments in London’s posh Mayfair neighborhood on their modest official salaries. This is due to the UK’s new Criminal Finances Act (CFA), which came into force in February and is meant to crack down on the flow of dirty money into the UK—a flow that has given London in particular a reputation as a “Death Star” of global kleptocracy. Most notably, the CFA adds a new investigative tool, the Unexplained Wealth Order (UWO), into the civil recovery regime. Originally proposed by Transparency International UK a few years ago, a UWO is an order granted by the High Court in cases where there are reasonable grounds to believe (1) the respondent owns some property worth more than £50,000; (2) either the respondent is a politically exposed person (PEP), or the respondent or a person connected to the respondent has been involved in a serious crime; and (3) respondent’s lawfully earned income would not be sufficient to obtain the property in question. If there are reasonable grounds to believe that each of these three conditions is satisfied, the High Court may issue an order requiring the respondent to provide information regarding the nature of her interests in the property in question and how she was able to lawfully obtained such property. If the respondent is unable to provide a reasonable explanation, the UK Government can subsequently initiate the civil forfeiture process and seize these assets.

Lauded as “a powerful new weapon in[] the anti-corruption arsenal,” UWOs are expected to be particularly helpful when there is no conviction against the respondents in their countries of origin, or when efforts to get a corrupt foreign government to cooperate with investigations have led to naught. Moreover, even though UWOs are a civil enforcement mechanism, the information they uncover may be useful in pursuing criminal investigations, and if respondents recklessly or knowingly make false statements or mislead the enforcement body in responding to an order, they may be criminally prosecuted. There’s already some evidence that the new law will make a difference: In March, a month after the promulgation of the CFA, two UWOs were issued requiring a tycoon in Central Asia to explain how he is able to afford real properties in the UK totaling £22 million.

Yet notwithstanding the enthusiasm for UWOs in some quarters, the effectiveness of the UFO mechanism is likely to be hampered by an important missing piece in the UK’s anticorruption framework, namely an effective means for ensuring genuine transparency regarding the beneficial ownership of real and movable property. Without knowing who really owns what, the new law is unlikely to realize its full potential, and indeed may not make much difference outside of a handful of cases involving particularly careless criminals.

Continue reading

Remembering Ferdinand Marcos’ History of Corruption is Relevant to the Philippines’ Present Anticorruption Efforts

Ferdinand Marcos, who ruled the Philippines as a dictator from 1972 to 1986, is remembered for the thousands of human rights violations he committed, as well as his massive corruption. Indeed, Marcos holds the dubious title of being the most corrupt Philippine president (a title for which there is unfortunately stiff competition), and has been identified in one study as the second most corrupt government leader in the world, as measured by the value of public assets he stole. The profligacy of Ferdinand Marcos and his wife Imelda—even at a time when the Philippines was spiraling into recession and a debt crisis—was shameless, and symbolized by Imelda’s 2,700 pairs of shoes and extravagant shopping sprees.

Given the magnitude of the corruption and abuses he perpetrated, one would think that Marcos’ place in Philippine history and in Filipinos’ collective memory is already well-settled. But alarmingly, a “revisionist” account of his presidency has recently gained, and continues to gain, wide currency. Many Filipinos are now beginning to consider the notion that Marcos may not really have been so bad—that his “sins” were merely overstated by the victors who wrote post-Marcos history. (Some of these issues are discussed here, here and here, but they are more frequently debated informally in mass and social media platforms.) These revisionist narratives spiked during the 2016 Philippine elections, when Marcos’ son, Ferdinand, Jr. (known as “Bongbong”), ran for, and almost won, the Vice Presidency. During his campaign, Bongbong denied his father’s legacy of corruption and framed his own platform as a revival of Marcos’ supposed “golden age” of peace and progress. Bongbong’s efforts to whitewash his father’s historical record to suit his electoral objectives gained traction, and has even spread to other fronts, like Wikipedia and Facebook. It did not help that President Rodrigo Duterte favorably endorsed the Martial Law declaration that paved the way for Marcos’ dictatorial rule in 1972 (calling it “very good”), and that the Supreme Court, in a recent controversial ruling, allowed the interment of Marcos’ remains in the Libingan ng mga Bayani (“Cemetery of Heroes”).

From a historical perspective, this phenomenon is disturbing in itself; but, if not arrested, this distortion of collective memory about Marcos’ history of corruption would also have dangerous implications for the Philippines’ ongoing and future anticorruption efforts. Continue reading

Uzbek Civil Society on the Hazards of Investing in Kleptocracies

Tonight Uzbekistan President Shavkat Mirziyoyev will tout the benefits of investing in his country to executives of multinational firms at a swank dinner at the Onyx Room in mid-town Manhattan.  He will point to measures the government has taken since the death last year of its first president, renowned kleptocrat lslam Karimov, to open the country to foreign investment — from reforms to economic policy to steps to improve its atrocious human rights record.  But before they open their checkbooks, the execs will want to heed the warnings contained in a letter Uzbek civil society activities just sent Washington lawyer Carolyn Lamm, chair of the American-Uzbekistan Chamber of Commerce, the host of tonight’s get-together.

Reprinted below, the letter cautions that there are still many signs that Uzbekistan has yet to shed its kleptocratic past, from the appointment of one of the most notorious kleptocrats of the previous regime as prime minister to the rise to power of Mirziyoyev’s sons-in-law.  The authors remind Ms Lamm and the members of her organization what happened to those who invested in Karimov’s kleptocracy.  Not only did their investments turn out to be a bust, but the bribes the investors had to pay to do business have cost them (or more accurately their shareholders) dearly.  One firm was fined $795 million by Dutch and American authorities and a second recently told shareholders it anticipates paying over $1 billion to resolve the case against it.

The authors sent a copy of their letter to the members of Ms Lamm’s organization, a group that includes General Electric,  General Motors, Boeing, Catepillar, Coca-Cola, Honeywell, Visa, and other well-know, well-respected companies traded on American stock exchanges (and thus subject to the Foreign Corrupt Practices Act). Readers holding shares in any of these companies will want to ensure company executives pay careful attention to the letter’s warnings.

Ms Carolyn Lamm
Chair
American-Uzbekistan Chamber of Commerce
601 13th St NW # 600S
Washington, D.C. 20005

September 18, 2017

An Open Letter to the American-Uzbekistan Chamber of Commerce regarding the Situation in Uzbekistan on the Eve of its Meeting with President Mirziyoev

Dear Chairwoman Lamm:

We, the undersigned Uzbek citizens and activists, write to you on the eve of your dinner with President Shavkat Mirziyoev on September 20, 2017, to express concern that your members may be misled into believing that meaningful reform is underway in our country. We ask you to share with them this letter explaining the current conditions in Uzbekistan and the risks any firm investing or doing business in the country will face. We further ask you to urge the President to reform the judiciary and create an independent, impartial and effective body to investigate allegations of corruption. Continue reading

Upcoming Conference on “Populist Plutocrats: Lessons from Around the World” (Sept. 23, Harvard Law School)

On Saturday, September 23rd, Harvard Law School, in collaboration with the University of Chicago’s Stigler Center, will host a one-day conference entitled “Populist Plutocrats: Lessons from Around the World.” The conference will focus on an important and dangerous phenomenon: political leaders who successfully exploit anti-elite sentiment in order to achieve power, but who, once in office, seem primarily interested in enriching themselves, along with a relatively small circle of family members and cronies. Many Americans might find that this description accurately captures President Trump, who campaigned as a populist, but who is governing as more as a “crony capitalist” plutocrat—or, some would allege, as a quasi-kleptocrat.

Americans seeking to understand the challenges our country is now facing might do well to look abroad. After all, while Trump’s leveraging of the power of the presidency for personal enrichment—enabled by anti-elite sentiment among his supporters—may well be unprecedented in modern U.S. history, it is not, alas, unprecedented in the modern world. Indeed, while every country’s experience is different, and we must always be careful not to overstate the parallels, many other democracies have had leaders who could be described as populist plutocrats, or even populist kleptocrats, in something like the Trump mold. While such resemblances have occasionally been noted (see, for example, here, here, here, and here), but there has not yet been much of a sustained attempt to understand populist plutocracy/kleptocracy and closely related phenomena in comparative perspective. The September 23 conference will seek to initiate more sustained exploration of these issues, and will also provide an opportunity for experts from other parts of the world–who have more experience with political leaders who combine populist rhetoric with self-interested profiteering and cronyism–to offer a distinct perspective on the challenges the United States is currently facing.

The conference will feature the following panels: Continue reading

The Obiang Trial: Misstatements of Facts and Law in the Defense’s Closing Arguments

GAB is pleased to publish this account and analysis by Shirley Pouget and Ken Hurwitz of the Open Society Justice Initiative of the final arguments of Equatorial Guinean Vice President Teodoro Nguema Obiang’s lawyers at his Paris trial for what is in effect kleptocracy.

court roomTeodoro Nguema Obiang Mangue’s trial concluded July 5, 2017, with closing arguments by his defense counsel. The trial marks a major milestone in the struggle to ensure accountability for grand corruption, even when committed by those at the highest political levels.  A spicy mixture of high principle, juridical gravitas, and sophisticated argumentation on intricate issues of pressing urgency in the real world, the trial also contained moments of wrenching emotion and undignified, even scandalous, claims and insinuations.

The final day was devoted to arguments by Teodorin’s lawyers: Emmanuel Marsigny, Equatoguinean jurist Sergio Tomo, and Thierry Marembert.  In sum they claimed i) that their client didn’t steal enormous sums of money from the people of Equatorial Guinea, ii) that even if he did, the theft wasn’t illegal under Equatorial Guinean law, and iii) that even if he did steal the money and it was a violation of EG law, a French court did not have the right to try him for it.  Their arguments mixed misleading and often downright false statements of the evidence with strained and fanciful interpretations of the law, all seasoned with dark suggestions that the trial was about race and politics rather than the massive theft of resources from the citizens of Equatorial Guinea.     Continue reading

The Obiang Trial: Prosecutor Seeks 3 Years Imprisonment, Large Fine, Asset Confiscation  

GAB is pleased to publish this account and analysis by Shirley Pouget and Ken Hurwitz of the Open Society Justice Initiative of the concluding arguments the civil parties and the prosecution made at the trial of Equatorial Guinean Vice President Teodorin Nguema Obiang.

The July 5th proceedings in the Obiang trial opened with the court rejecting the defense request that it be allowed to pursue its claim that the prosecution was unconstitutional.  It closed with the state prosecutor asking the court to find Teodorin guilty, sentence to him three years in prison, fine him €30 million, and confiscate all of his assets located in France.  In between the two civil parties – CORED, a coalition of Equatorial Guinean political parties, and Transparency International-France – presented their arguments in support of conviction.  Continue reading

The Obiang Trial: Lessons from a Decade-long Legal Battle

The trial of Equatorial Guinean Vice President Teodorin Nguema Obiang before a French court for what is in effect kleptocracy is by any measure a giant step forward in the fight against grand corruption.  Indeed, it is such a significant milestone that GAB has, thanks to the Open Society Justice Initiative’s Shirley Pouget and Ken Hurwitz, provided readers in-depth reports of how it is unfolding (here, here, here, here, here, here).

Criminal trials are the result of a long and complex process meant to protect a defendant’s rights, and frustratingly, these human rights safeguards provide wealthy defendants, no matter their guilt, with many opportunities to derail a case.  In Teodorin’s case, not only does he have apparently limitless resources to spend on lawyers to pursue every legal defense to the nth degree, but the government of Equatorial Guinea, a family enterprise run by his father, has gone to extraordinary lengths to keep Teodorin from facing justice: naming him an ambassador to try and create a defense of diplomatic immunity, claiming that property he bought is state-owned and thus immune from legal challenge, and even filing an action against the French government in the International Court of Justice.

As Shirley and Ken draft the next installment in their series, this is an opportune time to stand back and examine how these many obstacles were overcome.   How did it come to pass that a senior official of the government of Equatorial Guinea is being held accountable before a criminal court in Paris for the wholesale theft of his nation’s wealth?  And more importantly, what can be done to ensure the Obiang trial is no fluke?  That the hundreds, if not thousands, of public officials who have stolen massive amounts from the people of their countries also find themselves in court answering for their crimes.

Thankfully, a fine paper answering these questions is now available. Authored by French attorney Maude Perdriel-Vaissière, a critical actor in shepherding the Obiang case through the French legal system, it recounts how a small, dedicated band of civil society activists overcame the many legal and political obstacles to bring Obiang before the bar of justice.  Continue reading