From Sea to Shining Sea

While their countrymen wrestle with daily existence, kleptocrats and their families have long been enjoying freedom in the United States. In 2002, the US Treasury Department gave the real estate industry a “temporary” exemption from establishing anti-money laundering programs and reporting suspicious financial transactions. For 13 years, realtors have not been required to research or report questionable transactions. The result is that foreign politicians and criminals suspected of money laundering have been buying up US real estate.

In March 2014, the National Association of Realtors estimated that total sales to international clients was $92.2 billion, of which $45.5 billion was spent by non-resident foreigners. Sixty percent of these purchases were made in cash – with no questions asked. 

So, whether it’s a lavish mansion along the Pacific Coast, a chic condo in Miami, or a luxury penthouse in Manhattan, corrupt officials from around the world are enjoying the benefits of freedom in the USA.

California Love 

A popular destination for corrupt capital is the California housing market. Kleptocrats have an eye for more than just the scenic beauty of the US West Coast.

One of the more sensational stories comes from Former Ukrainian Prime Minister Pavlo Lazarenko.  In 1998, on an annual reported income of $5,000, he bought a $6.5 million mansion outside San Francisco. His story illustrates some of the evasive maneuvers commonly used t0 move questionable money. In December 1998, Lazarenko was arrested for money laundering when he was caught attempting to use a Panamanian passport to cross into Switzerland from France. He was released on bail and travelled home to Ukraine. It was not long before he had to flee his own country for the United States, where he was arrested at New York’s JFK International Airport. Swiss, Ukrainian, and US officials accused Lazarenko of laundering and hiding $250 million abroad using banks and shell companies in Antigua, Guernsey, Liechtenstein, Lithuania, Poland, Switzerland, and the United States. After 8 years in prison, Lazarenko was released in early 2012 and reportedly remains in the US seeking residency.

The $6.75M home near San Francisco, California

Zhang Shuguang, a high-level official of China’s railway ministry, must not have read about the Lazarenko affair. In 2002, Zhang reportedly purchased a million-dollar home in Walnut, California. In 2011, following a deadly collision of two high-speed trains, Zhang was fired and an investigation into corrupt railway officials began. In 2014, Zhang was sentenced to death for taking bribes of more than $7.7 million over the course of eleven years.

The same year, the China Daily newspaper identified the United States as “the top destination for Chinese fugitives fleeing the law.”

Zhang Walnut

Zhang’s California home cost more than two hundred times his official annual salary.

In September 2013, businessman Ling Wancheng purchased a $2.5 million mansion in Loomis, California, a short drive from Sacramento. Ling used the pseudonym Wang Cheng and bought the house with his wife, Li Ping. In a story worthy of John LeCarré, Ling Wancheng’s two older brothers, politician Ling Zhengce and Ling Jihua, political “fixer” for former President Hu Jintao, played significant roles. With allegations of embezzlement, laundering millions of dollars, and selling economic and military secrets, it has been dubbed “the highest profile fugitive case since the cultural revolution.” China is rumored to have sent 100 agents to the US to find him in early 2015, but there is ongoing speculation that Ling Wancheng is still in hiding in in the country, seeking political asylum. In the meantime, China has launched corruption proceedings against all three brothers.

Ling Wancheng

Russian officials also enjoy California. In 2014, Mikhail Lesin resigned as Chairman of Gazprom Media after being linked to $28 million worth of real estate investments in Beverly Hills. As a Putin’s former press minister and founder of the RT network, Lesin is considered responsible for building Russia’s steady pro-Kremlin, anti-Western propaganda campaign. He became the subject of investigation by US law enforcement agencies when, shortly after ending his government service, he moved his family to California.  Investigators discovered that most of his California real estate was purchased via Dastel Corporation, a California company that reportedly employed two of Lesin’s children. Around the same time, the Lesin family was linked to another multi-million dollar home as a result of a lawsuit filed by a former housekeeper. While serving as a corporate officer for Dastel, Lesin’s son, Anton “Lessine,” was also involved in producing several Hollywood films.

Lesin Final

Possibly the most infamous case of illicit investment in California is that of Teodoro Nguema Obiang. The son of Equitorial Guinea’s president, Obiang’s lavish lifestyle was bankrolled by capital stolen from the country’s oil and gas reserves. He purchased a Malibu mansion overlooking the ocean, filled his garage with exotic sports cars, and travelled the world in his $39 million Gulfstream jet. In 2011, the Department of Justice sought to recover $70 million worth of the African leader’s assets in the United States. Obiang eventually settled with the DOJ, forfeiting his mansion, several cars, and an impressive collection of Michael Jackson memorabilia.

Obiang Final

I’m Going to Miami

For those who prefer the Eastern Seaboard, Florida is a natural hideaway and Miami, dubbed the Russian Riviera, is a playboy’s paradise.

That is, unless you’re Vladimir Pekhtin, a once-prominent member of the United Russia political party and chairman of State Duma’s ethics committee. Pekhtin resigned following exposure of his Miami properties by anti-corruption blogger Alexey Navalny. The documents detailed Pekhtin’s ownership of several properties in south Florida, including an apartment in South Beach, Miami. Pekhtin had not disclosed the overseas property on his official income and property declaration, where he claimed an annual income of roughly $72,000. The Miami properties were valued at close to $2 million.

Flamingo_South_Beach_apartments

Kleptocrats from south of the border are also drawn to the Sunshine State. Investigations by Nicaraguan authorities revealed that Former President Arnoldo Aleman embezzled nearly $100 million from the state treasury. Aleman laundered the money through shell corporations and fraudulent investments in Panama and the United States. In 2004, US authorities seized close to $2.7 million in US assets including a helicopter and cabana at the Key Biscane Ocean Club in Southern Florida.

key-biscayne-340815_640

New York State of Mind

New York has become one of the most attractive US cities for parking foreign money in real estate.

An early example is  China’s Yang Xiuzhu. In 1996, the Zhejiang Construction Bureau Deputy Chief purchased a Manhattan town home for $550,000. Yang made a sound investment – the five-story townhouse appreciated to roughly $5 million. But in 2003, the Chinese government caught on, firing Yang and expelling her from the CCP for corruption. The investigation revealed that Yang had pocketed over $40 million in bribes and misappropriated public funds. She fled to the United States and later to the Netherlands. In May of 2015, Yang was arrested in New Jersey after fleeing the Netherlands on a fake Dutch passport.

Also in New York, federal prosecutors recently alleged that some of the $230 million of tax money stolen by Russian organized criminals as part of the Magnitsky affair found its way to Manhattan. According to law enforcement, the cash was laundered through more than twenty front companies and banks, including entities in Russia, Moldova, Dubai, and the British Virgin Islands. Once ‘cleaned’, the money was allegedly used to purchase residential and commercial properties, including four luxury apartments near Wall Street. According to the federal complaint, the total cost of the properties was close to $24 million.

20 Pine Street NYC

Sergei Magnitsky was beaten to death in a Russian prison for investigating the tax defrauding of the Russian people.

Legal troubles also linked Russian oligarch and politician Vitaly Malkin to a $15.5 million condominium purchased at the Time Warner Center in New York City. Mr. Malkin was accused of involvement in a 1996 corruption scandal around a major restructuring of Angolan debts to Russia that reportedly earned him a $48.8 million dividend.  Malkin sued Canadian authorities after being refused admission to the country on the basis of “extended association with persons suspected to be involved in organized crime and money laundering.” Malkin denied the allegations and a Canadian judge subsequently allowed him entrance. In 2013, Russian anti-corruption activist Alexei Navalny exposed Malkin’s ownership of more than a hundred condominiums in Canada and dual Israeli citizenship, leading Malkin to resign from his position as a member of Russia’s Federation Council.

Time_Warner_Center_Towers_from_Tenth_Avenue

In early 2008, a shell company purchased an ornate apartment in the middle of Manhattan for $1.6 million. It turned out that these funds were part of a $6 million cash bribe paid to the wife of Taiwan’s President Chen Shui-bian. The money was shepherded from a bank vault in Taiwan to banks in Hong Kong, the United States, and Switzerland, finally settling in a Miami account. Along the way, an offshore trust on the Island of Nevis and shell companies in the British Virgin Islands concealed the money’s origin and owners’ identities. In late 2009, both the former President and his wife were convicted of bribery, embezzlement, and money laundering in Taiwan. US authorities seized the New York condo and a family home in Keswick, Virginia.

Onyx Chelsea Manhattan via Eden, Janine and Jim http-::bit.ly:1BkXpA6

In December of 2003, two sons of Philippine General Carlos Garcia landed in the US with clothes and luggage stuffed with $100,000 in cash. The brothers were arrested for attempting to smuggle the money into the United States. The US arrest prompted a Philippine investigation which uncovered the General’s nearly $6 million in undeclared income. General Garcia landed in prison, but not before more than$750,000 ended up in New York, purchasing a unit at the Trump Park Avenue tower in Manhattan. In June of 2015, US authorities returned over $1 million to the Philippine government. The money came from the sale of his condo and the contents of two Citibank accounts.

Trump Park Avenue via Reading Tom http-::bit.ly:1H7IcuT

In early 2015, a network of civil society organizations addressed a letter to the US Department of the Treasury calling for strengthening of American anti-money laundering rules. Calling kleptocratic investment a practice that “fuels corruption, breeds instability, and diverts resources from those who should benefit,” the coalition called for increased due diligence requirements for real estate professionals and higher standards for the know your customer rules in banking and finance. As a global leader, the US should consider the message it broadcasts to both allies and adversaries by allowing legal structures that protect assets plundered from some of the world’s most vulnerable populations. Before lamenting corruption abroad, we should stop enabling it at home.

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