Justice Dept. Takes Aim at $1.5 Billion in Assets Stashed in U.S. by Dictators and Other Foreign Politicians

Wednesday, February 17, 2016
(graphic: FBI)

By Leslie Wayne, New York Times


It’s hard to imagine a public official with more toys than Teodoro Nguema Obiang Mangue, who spent $300 million on Ferraris, a Gulfstream jet, a California mansion and even Michael Jackson’s “Thriller” jacket. The buying spree is all the more remarkable since this scion of the ruling family of Equatorial Guinea, one of Africa’s smallest countries, bought all this while on an official salary of $100,000 a year.


But legal action by the Justice Department has brought an end to Obiang’s spendthrift ways. His $30 million Malibu estate is on the market, as are his luxury cars and six life-size Jackson statues. Proceeds from these sales are earmarked for citizens of Equatorial Guinea, who prosecutors claim are victims of Obiang’s “relentless embezzlement and extortion.”


The turnabout in Obiang’s fortunes is part of an effort by the federal government to recover assets it says were stolen by foreign officials — dictators, politicians and ruling elites — and laundered in the United States. Since its start in 2010, the Kleptocracy Asset Recovery Initiative has grown to include a dozen government lawyers and teams from the FBI and Homeland Security.


“We don’t want the United States to be a haven for this money,” said Leslie Caldwell, assistant attorney general and head of the criminal division. “If it comes into this country, we have the ability to reach out and grab it. Kleptocracy undermines the rule of law and breeds crime and terrorism.”


Yet for all this firepower, the Justice Department has found that bringing cases against kleptocrats has been daunting, and seizing their assets even harder still. A total of 25 cases have been brought against 20 foreign officials under the Kleptocracy initiative, and the government is seeking to seize $1.5 billion, mainly in American real estate and bank accounts. But most of that money remains in legal limbo.


The initiative comes as the government is stepping up efforts to halt the flow of illicit money into the United States through stronger anti-money-laundering rules, investigations into secret buyers of high-end real estate and measures to identify owners of anonymous shell corporations used to hide financial transactions.


Government prosecutors have taken aim at funds held by officials from Nigeria, Ukraine, Uzbekistan, South Korea, Taiwan, Honduras and even Canada. One case involves $630 million once controlled by the late Sani Abacha, the strong-arm Nigerian general who ran the country in the 1990s and reportedly took billions from it. Another seeks $250 million said to be embezzled by Pavlo Lazarenko, the former Ukrainian prime minister who spent several years in an American prison on money laundering charges. Then there is the glamorous Gulnara Karimova, the Harvard-educated daughter of the Uzbek president, who the government says absconded with $300 million from a telecom scheme and parked it in an American bank’s overseas branch.


The goal is, some day, to repatriate those assets to the countries from which they were taken. In unveiling the Kleptocracy Initiative, Eric H. Holder Jr., then the attorney general, called it a “top priority” and part of a larger effort to “deter corruption, hold offenders accountable and protect public resources.”


But those efforts have been slowed by the well-heeled targets of these actions, who have the resources to hire good lawyers and hold up the judicial process. Justice Department figures show that the government has taken possession of only around $120 million — about 8 percent of what it is seeking. And most of that money came from a single case involving Kazakhstan.


“Challenges in these cases are huge,” said Alexander W. Sierck, a lawyer representing Nigerian nonprofits in the Abacha case. “Justice has a lot of people working on this stuff and has only been able to get a small percentage of the assets.”


The global track record is not much better. The Stolen Asset Recovery Initiative, a World Bank and United Nations anti-money-laundering effort, estimates that of the $20 billion to $40 billion lost to developing countries annually through corruption, only about $5 billion has been repatriated in the last 15 years. And much of that disappeared without a trace.


“This is not like a murder, where you have a body,” said Matthew C. Stephenson, a professor at Harvard Law School and editor of the Global Anticorruption blog. “Financial crimes are much more complicated.”


Some are even questioning whether the Kleptocracy Initiative is worth the effort. “In terms of really helping the global anti-corruption struggle, I wonder if this is the highest use of resources,” said Richard E. Messick, a former World Bank adviser on anti-corruption projects, who suggests that it would be more effective for the Justice Department to instead provide legal assistance to countries pursuing their own anti-corruption cases.


In going after so-called kleptocrats, prosecutors rely on civil forfeiture statutes typically used for drug dealers and domestic crimes. These laws allow the government to seize assets suspected to be associated with criminal acts, which in these cases mostly involve money laundering. But pursuing a foreign government official is complicated. These cases involve acts and people outside of the United States, making it hard to gather evidence. Prosecutors must also prove that what the foreign official did was illegal in the official’s own country.


Witnesses are often reluctant to testify against their own leader out of fear of imprisonment. Nor will the Justice Department get help from the victim country while the corrupt leaders are still in power. In Equatorial Guinea, the main witness against Obiang remains in an “insect-infested” prison cell and subject to “torture including beating and flogging,” according to a report from Open Society and several other nonprofits.


“You are dealing with countries where the population is afraid of being asked to cooperate,” said Bruce Reinhart, a former federal prosecutor and asset forfeiture expert.


The assets themselves are often hidden behind opaque shell corporations and following the looted money can take years of work. The Lazarenko case, for instance, started in 2004 and $250 million is still stuck in offshore accounts in Guernsey as the case wends through the courts. Lazarenko, out of prison, remains in the United States, where he wants to settle permanently.


The Justice Department heralded the Equatorial Guinea case as a rare victory, and even that was a partial win. Last October, the government announced a settlement in which Teodoro Obiang would give about $30 million from the sale of his American assets to a charity selected by the U.S. government and the Obiang family to benefit the people of Equatorial Guinea. Still, the settlement was less than half of the $70 million prosecutors had sought.


In violation of a court order, Obiang whisked some of his holdings out of the United States and put them on display back home — including Michael Jackson’s famous white jewel-encrusted glove and all his gold and platinum albums.


“Despite the efforts of some Western institutions to prevent these objects from coming to our country, justice has returned them to their authentic owner,” an Equatorial Guinea government website says. Gone, too, is the $38.5 million Gulfstream jet — it flew away.


There are concerns that the money might end up in the Obiang family’s pockets. But the United States may have little choice. “No one is confident that this will work perfectly,” said Kenneth Hurwitz, senior legal officer with the Open Society Justice Initiative. “But that’s still better than if the U.S. didn’t try.”


Even though the Justice Department has few solid wins, merely tying up a corrupt foreign leader’s money in the courts is seen as a victory. “We’ve gotten a lot of forfeiture orders that have limited their ability to get their hands on their assets,” Caldwell said. “And that’s still significant.”


To Learn More:

Arab Dictatorships Pour Money into Clinton Foundation (by Noel Brinkerhoff and Danny Biederman, AllGov)

U.S. “Kleptocracy Initiative” Swoops Down on African Official Living in Malibu (by Ken Broder, AllGov California)

Equatorial Guinea Ambassador Accused of Beating Daughter with Chair Leg (by Noel Brinkerhoff, AllGov)

Justice Dept. Set to Seize Assets of African Dictator’s Son (by Noel Brinkerhoff, AllGov)

Dictator of the Month: Teodoro Obiang Nguema of Equatorial Guinea (by David Wallechinsky, AllGov)

U.S. Banks Help Cartels Launder Illegal Drug Money (by David Wallechinsky and Noel Brinkerhoff, AllGov)


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