Recovering Kleptocracy’s Assets

​Image: Former Attorney General Loretta Lynch discusses the 1MDB case with the Kleptocracy Asset Recovery Initiative in 2016 | FBI

KleptoCast 21: Casey Michel talks to Jack Blum about how the United States pursues the stolen wealth of foreign kleptocrats – and what else can be done. You can also listen on iTunes.

 

By Casey Michel

In 2004, Transparency International issued a list of the globe’s ten foremost kleptocrats.  Headed by late Indonesian dictator Mohammad Suharto, with an estimated loot of upwards of $35 billion, the roster included late Filipino head Ferdinand Marcos ($10 billion), former Serbian President Slobodan Milosevic ($1 billion), and ousted Haitian autocrat Jean-Claude “Baby Doc” Duvalier ($800 million).

The list provided, of course, an overview of some of the most successful kleptocrats to date – but it also highlighted the myriad shortcomings apparent in American efforts at rolling back kleptocratic gains at the turn of the century. At the time, the most prominent avenue Washington maintained for tamping down some of the kleptocracy rampant across the developing world stemmed from programs like the Foreign Corrupt Practices Act (FCPA). However, even the FCPA remained markedly limited, both in scope and enforcement. Meanwhile, nascent kleptocracies in post-Soviet states like Russia, Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan – to say little of the entrenched kleptocracies ranging from Equatorial Guinea and Gabon to Libya and Egypt – continued pilfering populations, blunting potential investigations, and hamstringing democratization efforts.

As such, in 2010, following then-President President Barack Obama’s diktats, the U.S.’s Department of Justice began outlining a new means to beat back the kleptocracies undermining American national security, fanning extremist networks, and ravaging local environmental concerns. Visiting Uganda in July 2010, Eric Holder, then working in his capacity as the U.S.’s attorney general, unveiled the fruits of his team’s renewed efforts. Announcing the formal launch of the U.S.’s Kleptocracy Asset Recovery Initiative, Holder said the new program would be “aimed at combating large-scale foreign official corruption and recovering public funds for their intended – and proper – use: for the people of our nations.” Compiling a raft of prosecutors, the team would “build upon efforts already underway to deter corruption, hold offenders accountable, and protect public resources.” As the Financial Transparency Coalition wrote at the time, “Government promises, as both Americans and Africans know, are often broken, but this announcement calls for (cautious) optimism.”

Seizing the momentum

 Of course, merely announcing such a program did not immediately undercut any of the kleptocratic gains seen over the decade prior. Nor did the program’s writ even mean any kind of assured success; after all, the FCPA, until the mid-2000s, remained only lightly enforced. And asset recovery had a spotty record of its own. As The New York Times reported, the World Bank’s and United Nations’ Stolen Asset Recovery Initiative had managed to stanch the flow of only a small percentage of corruption-related revenues elsewhere. Per one former World Bank adviser, “In terms of really helping the global anticorruption struggle, I wonder if this is the highest use of resources.” Or as the University of Cambridge’s Jason Sharman wrote, “Preventive measures are far more cost-effective than remedial action to find, seize, and return plundered wealth.”

However, working with the FBI, Department of Homeland Security, and foreign partners, the Kleptocracy Asset Recovery Initiative soon eyed its first targets. Interestingly, rather than pursuing heads of state or those topping global kleptocratic ranks, the Kleptocracy Asset Recovery Initiative instead targeted Diepreye Solomon Peter Alamieyeseigha, a Nigerian governor known colloquially as DSP. Before his impeachment, DSP, according to then-Assistant Attorney General Lanny Breuer, acquired multiple British properties worth nearly $9 million. One of these properties further held some $1.6 million in cash. All told, the U.S., under the auspices of the Kleptocracy Asset Recovery Initiative, targeted over $1 million of DSP’s assets – of his “ill-gotten gains,” as Breuer said.

Naturally, DSP steered clear of passing through the U.S. following the allegations, instead remaining ensconced in Nigeria. But DSP’s presence wasn’t necessary for the proceedings to continue. Said Breuer, pointing to one of the Kleptocracy Asset Recovery Initiative’s advantages, “We were able to bring these cases, even though DSP long ago absconded to Nigeria, because the law permits us to bring a civil action against the corrupt proceeds themselves rather than against the person to whom they belong.”

DSP’s case helped kick-start a series of high-profile targets pursued by the Kleptocracy Asset Recovery Initiative, ranging from an Afghan trucking contractor to the former president of Taiwan. In the latter instance, the U.S. seized $2.1 million worth of property purchased, as Breuer said, “with alleged bribes”; the U.S. later repatriated over $1 million from the forfeited assets to the Seoul. The Kleptocracy Asset Recovery Initiative also targeted current officials, including Equatorial Guinea’s vice president, who was forced to forfeit his Malibu mansion and a half-dozen life-size statues of Michael Jackson.

Building both momentum and a successful track record, the Kleptocracy Asset Recovery Initiative finally turned to those who’d led the most outsized cases of grand corruption over the past quarter-century. In 2014, the DOJ announced that it had helped freeze nearly a half-billion dollars tied to former Nigerian strongman Sani Abacha, who, with upwards of $5 billion tied to his name, had landed in fourth place on Transparency International’s list. As Leslie Caldwell, then serving as assistant attorney general, said, “Through the Kleptocracy Asset Recovery Initiative, the Department of Justice’s Criminal Division denies kleptocrats like Abacha the fruits of their crimes, and protects the U.S. financial system from money laundering.”

Dollars and sense

 Given the growing retinue of targets and assets alike, it appears the Kleptocracy Asset Recovery Initiative stands not only as one of the U.S.’s foremost attempt at combatting rising kleptocracy, but one of Washington’s most prominent successes. Moreover, from targeting hundreds of millions of dollars tied to Uzbekistan’s former first daughter to over $1 billion in assets allegedly embezzled from Malaysia’s sovereign wealth fund – the most substantial related case to date – the Kleptocracy Asset Recovery Initiative has only expanded its writ over the past few years.

And as the DSP, Abacha, and Malaysian cases have illustrated, the Kleptocracy Asset Recovery Initiative appears to have hit on a method for working around kleptocrats’ penchant for holing up in their home countries whenever allegations of kleptocracy crop up. Rather than pursuing criminal cases outright, the Open Society Justice Initiative’s Shirley Pouget and Ken Hurwitz noted that the types of civil forfeiture cases – such as the one related to the settlement that forced Equatorial Guinea’s vice president to part with his Malibu mansion, for instance – “offer three particular advantages: they can be pursued even when the alleged perpetrator of the underlying crimes is i) beyond U.S. jurisdiction, ii) enjoys immunity as a high-level official, or iii) is deceased. The stolen wealth can still be seized and returned to benefit the populations whose property it rightly is.” Added The FCPA Blog’s Martin Kenney, the “Kleptocracy Asset Recovery Initiative is now paying dividends. Any government initiative to undermine embezzlement, corruption, and bribery deserves credit.”

All told, the Kleptocracy Asset Recovery Initiative’s primary hurdle remains releasing frozen funds and assets to the populaces chafing under the respective kleptocrats. While over $1 billion has been frozen, the U.S. has taken full possession of only a fraction of the related wealth – hence, criticisms that such pursuit is folly, or at least a misallocation of resources.

But even if only a small portion of such assets remain accessible, and even if the majority of kleptocrats, at both national- and state-levels, remain untouched, the precedent the Kleptocracy Asset Recovery Initiative has set, both in will and success, is an example worth both emulation and expansion.  As Caldwell said last year, “I don’t think the success of the Kleptocracy [Asset Recovery] Initiative should necessarily be measured by the dollar amounts that we recover. I think it should be measured by the fact that we’re doing it at all.”

Casey Michel has worked as a researcher and journalist in the United States and former Soviet Union.