http://www.nytimes.com/2012/07/03/opini ... ml?_r=1&hp
Keep the Dictators Out of Malibu
By KEN SILVERSTEIN
Published: July 2, 2012
ON June 11, the United States government filed a complaint documenting a record of corruption as outlandish as anything seen since Ferdinand and Imelda Marcos plundered the Philippines in the 1980s. The complaint detailed allegations of massive bribery and money-laundering practiced by the son and heir apparent of Equatorial Guinea’s dictator, Teodoro Obiang Nguema Mbasogo. As his nation’s minister of forestry, the younger Mr. Obiang, known as Teodorin, accumulated a fortune by forcing foreign timber companies to pay him lavish bribes, often in cash-filled suitcases.
While Washington has gotten better at shutting down terrorist financing and starving regimes like Sudan and Iran of investment, it has done little to stop sitting dictators and their families from using America to stash their assets. Until now, Washington has sent a message to friendly dictators that you can steal and terrorize your people as much as you like as long as you hold power. We’ll only seize your assets if you’re overthrown.
Going after Mr. Obiang is especially courageous because Equatorial Guinea, sub-Saharan Africa’s third-largest oil producer, is an important energy ally. American oil companies have billions invested there, pump virtually all of its oil and ship a good part of it to the United States. Washington generally avoids the potential foreign policy fallout that comes from pressuring friendly states to clean up their acts on human rights and corruption. Yet now, a top Justice Department official has declared, “the United States will not be a hiding place for the ill-gotten riches of the world’s corrupt leaders.”
The Justice Department’s complaint is also a crucial test, because if the United States government can’t win a case involving the Obiangs, it might as well stop trying to hold corrupt dictators accountable. The message to tyrants and oligarchs will be, “Come here and spend without fear that we’ll confiscate any of your ill-gotten gains.”
Mr. Obiang’s father seized power in 1979 and is currently Africa’s longest-ruling leader. Since then, he has managed to accumulate a fortune of at least $600 million. (Meanwhile, one in three of his impoverished subjects dies before the age of 40.)
His son is infinitely greedier. In 1993, President Obiang awarded Teodorin — then 24 years old — logging concessions on nearly 90,000 acres of rain forest. The following year, he was named minister of forestry. Despite a salary of under $7,000 per month, Teodorin “spent more than $300 million,” according to the Justice Department, “acquiring assets and property on four continents between 2000 and 2011.” In America, his main purchases were a $30 million Malibu estate and a $38 million private jet — not to mention more than $1 million worth of Michael Jackson memorabilia, including a white crystal-covered glove. He also bought an $80 million home in Paris, a $15 million property in São Paulo, nearly $6 million worth of wine, and paintings by Degas, Renoir and Gauguin.
Companies that paid him off could cut down trees wherever they liked, including in reserves allegedly protected under Equatorial Guinea’s laws. Companies that refused to pay bribes got kicked out of the country and had their property and equipment stolen.
Despite this sordid record, legal loopholes and accommodating American attorneys and accountants have allowed Mr. Obiang to launder huge sums into the United States.
The primary legal shortcoming is that many jurisdictions — from the Cayman Islands to certain American states — don’t require companies to disclose their true beneficial owners (as opposed to their registered owners, who serve as fronts). Dictators and despots can therefore easily hide their assets: instead of buying property in their names, they instead will buy a mansion owned, for example, by a Panamanian trust controlled by a Bahamian corporation that’s run by a company registered in Lichtenstein.
Mr. Obiang hired lawyers and accountants to set up shell companies with bank accounts that were used to launder money into America. His own ties were kept hidden so banks didn’t know they were handling his money. If they discovered his ties, they closed the accounts, prompting him to use even more duplicitous methods.
Senator Carl M. Levin, Democrat of Michigan, has long advocated reforms that would require companies registered in the United States to reveal their beneficial owners. The World Bank, which found that America is the top destination for corrupt politicians trying to set up shell companies to access the financial system, supports the same goals.
Yet Mr. Levin’s bill has gone nowhere thanks to opposition from the United States Chamber of Commerce, the American Bar Association and the State of Delaware, America’s premier tax haven, where corporations outnumber people. “You can no longer open an account at a respectable bank merely with a suitcase of cash,” The Economist wrote recently. “Let the same apply to starting a limited company.”
Despots and crooks love to bring their money to America, not only for prestige but also because our corporate secrecy laws, like those of Switzerland and Luxembourg, make it almost impossible for law enforcement agencies to figure out who has money sheltered here.
So long as those loopholes remain open, even if the Justice Department wins its case, there is nothing to prevent future Mr. Obiangs from laundering their money in the United States and using the country as their personal shopping mall just as he has.
Ken Silverstein, a contributing editor at Harper’s Magazine, is a fellow at the Open Society Foundations.