One would think that an iconic Michael Jackson “Bad Tour” glove, covered in Swarovski crystals and worn on his first solo tour, would rest in a place of honor, perhaps at the Rock & Roll Hall of Fame in Cleveland.
The glove, and its odd stewardship, embody the profound difficulties surrounding the Kleptocracy Asset Recovery Initiative, a six-year effort by the United States to seize assets owned by kleptocrats — government officials who use their countries’ wealth to enrich themselves. In the most recent headline-grabbing case, the Justice Department is seeking to recover $1 billion that it says was stolen from Malaysia’s sovereign wealth fund and used, among other things, to buy high-end real estate in the United States and finance the movie “The Wolf of Wall Street.”
This is something that few other nations attempt. Now comes the hard part: returning the seized money to the people of the countries affected without enriching a kleptocrat all over again.
“We don’t want to see the funds disappear and go back to those who caused the harm,” said Leslie R. Caldwell, assistant attorney general for the Justice Department’s Criminal Division.
Some $3 billion, involving nations worldwide, has been frozen by the program — including a Malibu mansion and a $500,000 Ferrari (but not the white glove) owned by a member of Equatorial Guinea’s ruling family, the Obiangs. The family’s patriarch is so wealthy that he tops Queen Elizabeth II on lists of the global rich.
This repatriation effort is getting started just as Donald J. Trump’s election as president threatens to complicate the message of the kleptocracy initiative. Mr. Trump, a Republican, has promised to avoid potential conflicts of interest between his business empire and his duties as commander in chief, and has indicated he will come up with a plan before the inauguration.
Mr. Trump’s actions will have special resonance for a program that goes after foreign leaders whose business and government positions are porous. There are worries that if Mr. Trump does not sufficiently distance his business and his family from politics, it will be tougher for the Justice Department to criticize foreign leaders who have become wealthy based on their government ties.
“The election of Donald Trump might impede the commitment of the United States to fight kleptocracy,” said Matthew C. Stephenson, a professor who teaches anticorruption law at Harvard Law School. “The political consequences are that it reduces U.S. leverage because of the perceived hypocrisy. The moral case is drastically undermined.”
Tutu Alicante, executive director of EG Justice, a Washington nonprofit that monitors corruption in Africa, said: “It’s a perfect scenario for kleptocrats in Africa to point to someone in the White House. They will compare themselves to Donald Trump.”
Representatives of both the Justice Department and Mr. Trump did not respond to requests for comment.
The Obiang case is the biggest to date and, for that reason, is being closely watched. It is also the rare time that the kleptocracy initiative has gone after such a senior officeholder. A member of the Obiang family bought many of his assets as part of a “corruption fueled spending spree,” according to the Justice Department.
Under an agreement with the department, Teodoro Nguema Obiang Mangue, the son of Equatorial Guinea’s president, Teodoro Obiang Nguema Mbasogo, has promised to give up valuables he amassed in the United States, ending years of litigation. His title is second vice president, with an official salary of around $100,000. His father came to power in a coup in 1979 and is the longest-serving African leader and president in the world, ruling with “almost total control,” according to a recent report from the Central Intelligence Agency. The son is seen as a possible heir apparent.
‘Touching the Untouchables’
The Justice Department hailed its agreement with the younger Mr. Obiang as a significant step forward for its program. The idea is to create a charity in Equatorial Guinea funded by $30 million from the sale of his 15,000-square-foot Malibu oceanfront mansion, the Ferrari 599 and other assets, including additional Jackson memorabilia.
“We are touching the untouchables,” Ms. Caldwell said. “We are saying that the U.S. financial system is not a safe haven for corruption.”
The department has both a desire and an obligation to repatriate assets flowing through the American banking system. The United States, along with 140 other countries, is a signatory to the United Nations Convention Against Corruption, an agreement requiring countries to hunt down the offshore money of corrupt officials and return it to the victimized countries. The World Bank estimates that from $20 billion to $40 billion is stolen annually by corrupt public officials, mostly in poor and developing countries.
So far only a small number of nations are actively pursuing kleptocracy cases — mainly the United States, Britain, Canada, Luxembourg and Switzerland. This is in part because few countries have the resources to take on the complicated cases.
Ownership of the assets is often hidden by a web of shell companies. Offshore accounts created by sharp lawyers and accountants can be hard to trace. A court must determine whether other interested parties have valid claims to ownership and if the assets were bought with illicitly obtained money. Only then can the assets be seized and the money repatriated.
The corrupt assets that the Justice Department has tracked down are valued at $3 billion and have come from a laundry list of countries — Nigeria, Ukraine and Uzbekistan among them. In the case of Malaysia, money was also used to buy a $35 million jet, pay for gambling in Las Vegas and buy art by Van Gogh and Monet. The actor Leonardo DiCaprio, whose movie “The Wolf of Wall Street” was produced by the company tied to the Malaysian case, has said he was cooperating with the government case and would return any funds that his charity or the movie received that turned out to have been stolen.
The kleptocracy initiative comes as efforts to combat the flow of illicit money of all sorts into the United States are expanding. The publicity surrounding the Panama Papers heightened global awareness of the secret offshore accounts held by public officials and the wealthy, and put more officials on notice.
In the largest case against a person, the Justice Department is seeking $850 million from Gulnara Karimova, the socialite daughter of the late president of Uzbekistan who goes by the nickname Googoosha. The Harvard-educated former model and pop singer is accused by the United States of accepting bribes to allow a Dutch telecom company to enter the Uzbek market. A leaked American diplomatic cable said she was the “the single most hated person” in Uzbekistan and a “greedy power hungry individual.” After a falling out with her father in 2014, Ms. Karimova was placed under house arrest, where she remains today.
Three lawyers representing Uzbekistan in the Justice Department matter did not respond to requests for comment, nor did officials at the Uzbekistan Embassy in Washington. In court filings, lawyers representing Uzbekistan argue that the United States has “at best a minimal interest in the bribery and money-laundering scheme” involving Ms. Karimova because “the corruption alleged in the complaint is fundamentally an Uzbek matter.”
Another big-ticket case involves Gen. Sani Abacha of Nigeria, who died nearly two decades ago. His case has wended through the courts since then. In play is $630 million from his estate that the United States says he and his cronies laundered through the American financial system. The United States has gained access to $480 million and is in litigation over the rest.
Close behind is some $250 million caught in a legal battle between the United States and Pavlo Lazarenko, the former Ukrainian prime minister who fled his country in 1999 amid corruption charges and has sought political asylum in the United States ever since. Now living in California in modest circumstances, he was forced by the United States to give up his nearby 18,000-square-foot, 20-room mansion after a 2004 conviction for money laundering. He left federal prison in 2012 and is currently out of woirk.
Daniel Horowitz, Mr. Lazarenko’s lawyer, said that there had been “zero evidence of wrongdoing” by Mr. Lazarenko and that “the case is about the U.S. government wanting to keep the money.” He described Ukraine as “a place with no rules” and added that “80 percent of the world outside the United States and Europe has no rules.”
“It’s hard to determine what is right and wrong,” Mr. Horowitz said.
Read more: Shielding Seized Assets From Corruption’s Clutches
Source: Nytimes
