Tag Archives: kleptocracy

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.  

Kleptocracy Strikes Mongolia? The Batbold Case

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Offshore Alert yesterday revealed the Mongolian government has charged former Prime Minister Batbold Sukhbaatar with receiving hundreds of millions of dollars from kickbacks and fraudulent and illegal transactions in deals involving the nation’s two largest mines. The case against the former prime minister, senior member of the ruling Mongolian People’s Party, and the party’s likely 2021 presidential candidate, is spelled out in a November 23 filing in a New York court.  The New York case together with similar ones in Hong Kong and London seeks a freeze on assets Batbold holds until the main case, brought in Mongolia, is decided.  There plaintiffs — the agency responsible for overseeing Mongolia’s natural resources and the state-owned companies that operate the two mines – ask that agreements between the two operating companies and shell companies they say Batbold secretly owns be invalidated and Batbold and accomplices disgorge all profits made on secret deals and as well as pay damages. The total could run into the hundreds of millions if not billions of dollars.  

Documents submitted in the New York case paint a picture familiar to students of kleptocracy.  With assistance from lawyers, accountants, and other enablers, Batbold allegedly established some 100 shell companies in at least ten countries to conceal his actions and hide his wealth.  Two things make the case worthy of careful study by all seeking to end the massive theft of a nation’s assets by its rulers:

i) the political will the governing party has shown in pursuing one of its own, and

ii) the quantum of information on an alleged kleptocrat’s wrongdoing that can be gleaned from a painstaking search of the public record.

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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.

New Podcast, Featuring Charles Davidson

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In this episode, I interview Charles Davidson, currently the publisher of the American Interest magazine, and previously the co-founder of Global Financial Integrity and the Hudson Institute’s Kleptocracy Initiative. We discuss a variety of topics, including financial integrity, beneficial ownership transparency, and kleptocracy–including the threat that kleptocratic wealth from authoritarian states poses to liberal democracies, the use of targeted sanctions against individual corrupt actors, and concerns about how kleptocrats use Western institutions not only to launder their money, but also to launder their reputations.

You can find this episode, along with links to previous podcast episodes, at the following locations:

[NOTE: This episode begins with some introductory housekeeping material about future directions for the KickBack podcast. If you want to jump straight to the interview, it begins at 3:07.]

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.

Should a Kleptocrat Be Able to Bribe Her Way Out of Trouble?

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Gulnara Karimova parlayed her position as daughter of Uzbekistan’s first post-Soviet ruler into an international symbol of kleptocracy.  Reviled at home and abroad for vulgar excess, after her father’s death she was sentenced to a long prison term following a sham trial.  But most of the billion or so dollars she stole remains beyond the Uzbek government’s reach, tied up in complex litigation principally in Switzerland.

Now, as she recently revealed, she is in negotiations to hand back most of what she stole – in return for her release from one of Uzbekistan’s notorious prison colonies and the right to hang onto to perhaps as much as a hundred million for herself and the lawyers and fixers negotiating the deal. Uzbek citizens and activists are in arms over this blatant attempt by a posterchild for kleptocracy to bribe her way out of prison.  In an open letter, civil society activists call on the Swiss government, which would have to accede to this unseemly bargain, to repudiate it. They ask too that other government with claims over some of the assets, and thus possibly some say over the deal, to help kill it.

Allowing a kleptocrat to bribe her way out of jail sets a terrible precedent. Is it one the international community wants to see set?  Do Swiss citizens really want their government to be the one setting it? Why is the Swiss government in such a hurry to return dirty money to the Uzbek government?  Particularly in the face of opposition from representatives of the real victims of Karimova’s crimes, the citizens of Uzbekistan.

In their letter, the activists outline an alternative to a hasty return, one that would see Karimova held accountable in a real trial for her crimes and the stolen assets returned in ways that would advance the welfare of all Uzbeks. The English version of the letter here, the Russian one here, and the French one here.

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 →

Rewarding Whistleblowing to Fight Kleptocracy

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Last February, Massachusetts Congressman Stephen Lynch introduced the Kleptocracy Asset Recovery Rewards Act (KARRA), which seeks to improve detection of stolen assets housed in American financial institutions by paying whistleblowers for reports that lead to the identification and seizure of these assets. The logic of paying rewards to whistleblowers is straightforward, and nicely summarized in the draft KARRA itself:

The individuals who come forward to expose foreign governmental corruption and klep­toc­ra­cy often do so at great risk to their own safety and that of their immediate family members and face retaliation from persons who exercise foreign political or governmental power. Monetary rewards and the potential award of asylum can provide a necessary incentive to expose such corruption and provide a financial means to provide for their well-being and avoid retribution.

Paying whistleblowers for information is a sound economic idea.  But in light of the cogent explanation for these rewards, the original draft of the KARRA legislation doesn’t go nearly far enough. Indeed, this original proposal provides much weaker incentives and protections for whistleblowers than several other existing US whistleblower rewards programs. It is unlikely that this bill has a real chance of being enacted in the current Congress, but if its introduction this year is a harbinger of a more sustained effort to enact legislation of this kind—and I hope it is—then I also hope that the next time around KARRA supporters will introduce a more ambitious bill, one that provides much higher potential rewards, fewer limitations on which whistleblowers are eligible for rewards, and more robust anti-retaliation protections.

There are many ways to design a whistleblowing program, as demonstrated by the spectrum of existing programs that use whistleblowing to tackle fraud in other domains. We can examine the effectiveness of the proposed legislation through comparison to existing whistleblowing programs:

Continue reading →

The Missing Piece in UK’s Unexplained Wealth Order Mechanism

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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.

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

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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

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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 →