What You Can Do in Sydney
- On November 2nd 2013 Occupy Sydney and Partners present The March Against Corruption Sydney ( https://www.facebook.com/events/490119467748556/ )
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Charmian Gooch, co-founder of anti-corruption NGO Global Witness, tracks money to expose deep-rooted global corruption. In yesterday’s talk, Gooch demonstrates that dirty money goes all the way to the top, and more sinister is that these cases of corruption are well-known to leaders and corporate elites. Nobody — banks, big oil, government leaders — is spared.
As Gooch stated, “So many of these scandals are hidden in plain sight — they’re down the road in the City of London. They’re in our company boardrooms. They’re in the corridors of power we walk past every day. What we need to do is piece these things together, expose the links and then we can start to break them.” What’s at stake is the fight for the world’s natural resources, says Gooch, a fight that “has robbed the Congo’s people of over $1.3 billion. It’s what’s left Sarawak with only 5 percent of its forests left intact, and it’s the difference between conflict and peace in countries like Afghanistan and Sudan.”
Gooch’s talk calls out some big-name players, but transparency is the first step to change — not just “over there,” in places where corruption seems isolated, but in all nations. So in the spirit of transparency, below you’ll find a transcript of Gooch’s talk along with detailed notes about and links to the cases she mentions.
TRANSCRIPT:
“When we talk about corruption, there are typical types of individuals that spring to mind.
There’s the former Soviet megalomaniacs. Saparmurat Niyazov, he was one of them. Until his death in 2006, he was the all-powerful leader of Turkmenistan, a Central Asian country rich in natural gas. Now, he really loved to issue presidential decrees. And one renamed the months of the year including after himself and his mother. He spent millions of dollars creating a bizarre personality cult, and his crowning glory was the building of a 40-foot-high gold-plated statue of himself which stood proudly in the capital’s central square and rotated to follow the sun. He was a slightly unusual guy.
And then there’s that cliché, the African dictator or minister or official. There’s Teodorín Obiang.1So his daddy is president for life2 of Equatorial Guinea, a West African nation that has exported billions of dollars of oil since the 1990s3 and yet has a truly appalling human rights record.4 The vast majority of its people are living in really miserable poverty5 despite an income per capita that’s on a par with that of Portugal.6 So Obiang junior, well, he buys himself a $30 million mansion in Malibu, California.7 I’ve been up to its front gates. I can tell you it’s a magnificent spread. He bought an €18 million art collection that used to belong to fashion designer Yves Saint Laurent,8 a stack of fabulous sports cars, some costing a million dollars apiece9 — oh, and a Gulfstream jet, too.10 Now get this: Until recently, he was earning an official monthly salary of less than 7,000 dollars.11
And there’s Dan Etete. Well, he was the former oil minister of Nigeria under President Abacha,12and it just so happens he’s a convicted money launderer13 too. We’ve spent a great deal of time investigating a $1 billion — that’s right, a $1 billion — oil deal that he was involved with, and what we found was pretty shocking, but more about that later.
So it’s easy to think that corruption happens somewhere over there, carried out by a bunch of greedy despots and individuals up to no good in countries that we, personally, may know very little about and feel really unconnected to and unaffected by what might be going on. But does it just happen over there?
Well, at 22, I was very lucky. My first job out of university was investigating the illegal trade in African ivory. And that’s how my relationship with corruption really began. In 1993, with two friends who were colleagues, Simon Taylor and Patrick Alley, we set up an organization called Global Witness. Our first campaign was investigating the role of illegal logging in funding the war in Cambodia.
So a few years later, and it’s now 1997, and I’m in Angola undercover investigating blood diamonds. Perhaps you saw the film, the Hollywood film Blood Diamond, the one with Leonardo DiCaprio. Well, some of that sprang from our work. Luanda, it was full of land mine victims who were struggling to survive on the streets and war orphans living in sewers under the streets, and a tiny, very wealthy elite who gossiped about shopping trips to Brazil and Portugal. And it was a slightly crazy place.
So I’m sitting in a hot and very stuffy hotel room feeling just totally overwhelmed. But it wasn’t about blood diamonds. Because I’d been speaking to lots of people there who, well, they talked about a different problem: that of a massive web of corruption on a global scale and millions of oil dollars going missing. And for what was then a very small organization of just a few people, trying to even begin to think how we might tackle that was an enormous challenge. And in the years that I’ve been, and we’ve all been campaigning and investigating, I’ve repeatedly seen that what makes corruption on a global, massive scale possible — well it isn’t just greed or the misuse of power or that nebulous phrase ‘weak governance.’ I mean, yes, it’s all of those, but corruption, it’s made possible by the actions of global facilitators.
So let’s go back to some of those people I talked about earlier. Now, they’re all people we’ve investigated, and they’re all people who couldn’t do what they do alone. Take Obiang junior. Well, he didn’t end up with high-end art and luxury houses without help. He did business with global banks. A bank in Paris held accounts of companies controlled by him, one of which was used to buy the art,14 and American banks, well, they funneled 73 million dollars into the States, some of which was used to buy that California mansion.15 And he didn’t do all of this in his own name either. He used shell companies. He used one to buy the property,16 and another, which was in somebody else’s name, to pay the huge bills it cost to run the place.17
And then there’s Dan Etete. Well, when he was oil minister, he awarded an oil block now worth over a billion dollars to a company that, guess what, yeah, he was the hidden owner of.18 Now, it was then much later traded on with the kind assistance of the Nigerian government — now I have to be careful what I say here — to subsidiaries of Shell and the Italian Eni,19 two of the biggest oil companies around.
So the reality is, is that the engine of corruption, well, it exists far beyond the shores of countries like Equatorial Guinea or Nigeria or Turkmenistan. This engine, well, it’s driven by our international banking system, by the problem of anonymous shell companies, and by the secrecy that we have afforded big oil, gas and mining operations, and, most of all, by the failure of our politicians to back up their rhetoric and do something really meaningful and systemic to tackle this stuff.
Now let’s take the banks first. Well, it’s not going to come as any surprise for me to tell you that banks accept dirty money, but they prioritize their profits in other destructive ways too. For example, in Sarawak, Malaysia. Now this region, it has just five percent of its forests left intact.20Five percent. So how did that happen? Well, because an elite and its facilitators have been making millions of dollars from supporting logging on an industrial scale for many years.21 So we sent an undercover investigator in to secretly film meetings with members of the ruling elite,22and the resulting footage, well, it made some people very angry, and you can see that on YouTube, but it proved what we had long suspected, because it showed how the state’s chief minister, despite his later denials, used his control over land and forest licenses23 to enrich himself and his family.24 And HSBC, well, we know that HSBC bankrolled25 the region’s largest logging companies that were responsible for some of that destruction in Sarawak and elsewhere.26 The bank violated its own sustainability policies in the process,27 but it earned around 130 million dollars.28 Now shortly after our exposé — very shortly after our exposé earlier this year — the bank announced a policy review on this. And is this progress? Maybe, but we’re going to be keeping a very close eye on that case.
And then there’s the problem of anonymous shell companies. Well, we’ve all heard about what they are, I think, and we all know they’re used quite a bit by people and companies who are trying to avoid paying their proper dues to society, also known as taxes. But what doesn’t usually come to light is how shell companies are used to steal huge sums of money, transformational sums of money, from poor countries. In virtually every case of corruption that we’ve investigated, shell companies have appeared, and sometimes it’s been impossible to find out who is really involved in the deal.
A recent study by the World Bank looked at 200 cases of corruption. It found that over 70 percent of those cases had used anonymous shell companies, totaling almost 56 billion dollars.29 Now many of these companies were in America or the United Kingdom, its overseas territories and Crown dependencies,30 and so it’s not just an offshore problem, it’s an on-shore one too. You see, shell companies, they’re central to the secret deals which may benefit wealthy elites rather than ordinary citizens.
One striking recent case that we’ve investigated is how the government in the Democratic Republic of Congo sold off a series of valuable, state-owned mining assets31 to shell companies in the British Virgin Islands.32 So we spoke to sources in country, trawled through company documents and other information trying to piece together a really true picture of the deal. And we were alarmed to find that these shell companies had quickly flipped many of the assets on for huge profits to major international mining companies listed in London.33 Now, the Africa Progress Panel, led by Kofi Annan, they’ve calculated that Congo may have lost more than 1.3 billion dollars from these deals.34 That’s almost twice the country’s annual health and education budget combined.35 And will the people of Congo, will they ever get their money back? Well, the answer to that question, and who was really involved and what really happened, well that’s going to probably remain locked away in the secretive company registries of the British Virgin Islands and elsewhere unless we all do something about it.
And how about the oil, gas and mining companies? Okay, maybe it’s a bit of a cliché to talk about them. Corruption in that sector, no surprise. There’s corruption everywhere, so why focus on that sector? Well, because there’s a lot at stake. In 2011, natural resource exports outweighed aid flows by almost 19 to one in Africa, Asia and Latin America.36 Nineteen to one. Now that’s a hell of a lot of schools and universities and hospitals and business startups, many of which haven’t materialized and never will because some of that money has simply been stolen away.
Now let’s go back to the oil and mining companies, and let’s go back to Dan Etete and that $1 billion deal. And now forgive me, I’m going to read the next bit because it’s a very live issue, and our lawyers have been through this in some detail and they want me to get it right.
Now, on the surface, the deal appeared straightforward. Subsidiaries of Shell and Eni paid the Nigerian government for the block.37 The Nigerian government transferred precisely the same amount, to the very dollar, to an account earmarked for a shell company whose hidden owner was Etete.38 Now, that’s not bad going for a convicted money launderer. And here’s the thing. After many months of digging around and reading through hundreds of pages of court documents, we found evidence that, in fact, Shell and Eni had known that the funds would be transferred to that shell company,39 and frankly, it’s hard to believe they didn’t know who they were really dealing with there.
Now, it just shouldn’t take these sorts of efforts to find out where the money in deals like this went. I mean, these are state assets. They’re supposed to be used for the benefit of the people in the country. But in some countries, citizens and journalists who are trying to expose stories like this have been harassed and arrested and some have even risked their lives to do so.
And finally, well, there are those who believe that corruption is unavoidable. It’s just how some business is done. It’s too complex and difficult to change. So in effect, what? We just accept it. But as a campaigner and investigator, I have a different view, because I’ve seen what can happen when an idea gains momentum. In the oil and mining sector, for example, there is now the beginning of a truly worldwide transparency standard that could tackle some of these problems. In 1999, when Global Witness called for oil companies to make payments on deals transparent,40 well, some people laughed at the extreme naiveté of that small idea. But literally hundreds of civil society groups from around the world came together to fight for transparency, and now it’s fast becoming the norm and the law. Two thirds of the value of the world’s oil and mining companies are now covered by transparency laws. Two thirds.
So this is change happening. This is progress. But we’re not there yet, by far. Because it really isn’t about corruption somewhere over there, is it? In a globalized world, corruption is a truly globalized business, and one that needs global solutions, supported and pushed by us all, as global citizens, right here.
Thank you.“
THE FOOTNOTES:
1. Teodorin Obiang’s full name is Teodoro Nguema Obiang Mangue.
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2. Teodorin Obiang’s father is President Obiang Nguema Mbasogo. According to the U.S. State Department’s most recent human rights report on Equatorial Guinea, following a military coup in 1979 he has “dominated all branches of government in collaboration with his clan and political party. … In 2009 voters reelected President Obiang with a claimed 95.4 percent of votes cast. The lopsided results and weak independent monitoring of the electoral process raised suspicions of systematic vote fraud.” U.S. State Department, “Country Reports on Human Rights Practices for 2012: Equatorial Guinea,” http://www.state.gov/j/drl/rls/hrrpt/humanrightsreport/index.htm?year=2012&dlid=204115.
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3. According to the U.S. Energy Information Administration, Equatorial Guinea became a significant oil exporter in the 1990s, and in 2005 supply peaked at 320,000 barrels per day. Nearly all oil production is exported. U.S. Energy Information Administration, ‘Country Analysis Brief: Equatorial Guinea’, 28th February 2012, http://www.eia.gov/countries/cab.cfm?fips=EK.
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4. The U.S. State Department’s most recent Equatorial Guinea human rights assessment was damning, describing unlawful killings, police use of torture, official impunity, arbitrary arrest and restrictions on free speech. U.S. State Department, “Country Reports on Human Rights Practices for 2012: Equatorial Guinea,” http://www.state.gov/j/drl/rls/hrrpt/humanrightsreport/index.htm?year=2012&dlid=204115.
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5. According to the latest World Bank World Development Indicators for Equatorial Guinea, the poverty headcount at the national poverty line is 76.8 percent of the population (based on 2006 data). Life expectancy at birth is 51 years (based on 2011 data).http://data.worldbank.org/country/equatorial-guinea.
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6. According to the latest information from the CIA Factbook (2012 data), Equatorial Guinea, which ranks 69, has a GDP per capita of 20,200 dollars. Portugal, which ranks 64, has a GDP per capita of 23,000 dollars.
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7. The Malibu house was named in a report by the U.S. Senate Permanent Subcommittee on Investigations (PSI) entitled “Keeping Foreign Corruption out of the United States: Four Case Histories,” 4th February 2010. The report shows “how some [Politically Exposed Persons] have used U.S. lawyers, real estate and escrow agents, lobbyists, bankers, and even university officials, to circumvent U.S. anti-money laundering and anticorruption safeguards.” One of the report’s case studies was of Teodorin Obiang. Regarding the Malibu house, the report states that “Mr. Obiang employed two U.S. real estate agents … to buy and sell high-end California real estate, including a 2006 purchase of a $30 million residence in Malibu.”
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8. According to an asset forfeiture complaint filed by the US Department of Justice in 2012, in 2010 Obiang spent over €18 million on 109 items acquired at the auction of Yves Saint Laurent’s estate. It was also reported in the New York Times that a forestry company owned by Obiang bought 109 items at the auction of the private art collection of Yves Saint Laurent and Pierre Bergé. “A French shift on Africa Strips a Dictator’s Son of His Treasures,” 23rd August 2012,http://www.nytimes.com/2012/08/24/world/europe/for-obiangs-son-high-life-in-paris-is-over.html?_r=0.
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9. As cited in the U.S. Senate PSI report, according to press reports, on one weekend in 2005, Mr. Obiang purchased two Bentleys, a Lamborghini, and two multi-million dollar luxury houses in Cape Town, South Africa, http://www.iol.co.za/index.php?set_id=1&click_id=86&art_id=vn20050720063046112C699596.
As reported in the New York Times, in 2011 police in Paris seized 11 luxury cars belonging to Obiang including Bugattis and Ferraris, among other assets worth millions. “A French shift on Africa Strips a Dictator’s Son of His Treasures,” 23rd August 2012,http://www.nytimes.com/2012/08/24/world/europe/for-obiangs-son-high-life-in-paris-is-over.html?_r=0.
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10. The Gulfstream jet is included in the U.S. Senate PSI report. According to the report, “[A] U.S. escrow company … facilitated Mr. Obiang’s purchase of a Gulfstream jet, again without a mortgage, by accepting 38.5 million dollars in wire transfers from Equatorial Guinea.”
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11. According to the asset forfeiture complaint filed by the U.S. Department of Justice in 2012, Obiang was Minister of Forestry and Agriculture and Minister of Forestry and Infrastructure from 1998 until 20th May 2012. He was then promoted to Second Vice President of Equatorial Guinea. The same document states that his official monthly salary was 6,799 dollars as an Equatorial Guinea cabinet minister, according to official Equatorial Guinea sources.
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12. During a recent court case in the U.K. (Energy Venture Partner v. Malabu Oil & Gas), Etete confirmed that he was appointed as petroleum minister in Nigeria in 1994, and held that position until Abacha’s death in June 1998.
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13. Etete was convicted of money laundering in France in 2007. Vanguard: Nigeria, “Money Laundering – French Court Hands Dan Etete 3-Yr Jail Term,” 7th November 2007,http://allafrica.com/stories/200711080184.html; The conviction was upheld in 2009 following appeal, Agence France Presse, “Paris court upholds Nigerian minister laundering conviction,” 18th March, 2009. During the U.K. court case mentioned above, Etete acknowledged that he was convicted for money laundering in France.
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14. According to French police documents seen by Le Monde, Obiang used an account at Barclays to buy the YSL art collection. Cited in a Global Witness press release that includes a response to the bank: http://www.globalwitness.org/library/barclays-account-used-dictator%E2%80%99s-son-buy-%E2%82%AC18m-artwork-suspect-funds.
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15. According to a presentation made by Walter Moran, special agent in charge of Immigration and Customs Enforcement, Miami, Florida, to French investigators; and a letter from Stewart C. Robinson, deputy director of criminal division at the U.S. Justice Department’s Office of International Affairs, to French investigators, 4th September 2007. These were previously undisclosed documents from a joint Justice Department / Immigration and Customs Enforcement investigation, obtained by Global Witness and cited in our November 2009 report, “The Secret Life of a Shopaholic: How an African dictator’s playboy son went on a multi-million dollar shopping spree in the U.S.,” available athttp://www.globalwitness.org/sites/default/files/pdfs/gw_obiang_low.pdf. According to the presentation and letter, wire transfers of 73 million dollars were sent “on behalf of” Obiang to the United States in a period of around a year, between 5th April 2005 and 10th April 2006. These claimed transfers involved American banks including Wachovia, Bank of America, UBS Bank in New York and others. According to the letter, investigators believe that “These funds were utilized to purchase a luxury home in Malibu, California valued at approximately 35 million dollars. … The home in Malibu was purchased in the name of a shell corporation, Sweetwater Management, Inc., of which Teodoro Nguema Obiang is listed as president.” Both documents are available here:http://documents.nytimes.com/investigating-teodoro-nguema-obiang. See also Global Witness report “The Secret Life of a Shopaholic” for some of the banks’ responses to Global Witness’ questions, including those about due diligence.
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16. See prior footnote.
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17. According to the U.S. Senate PSI report mentioned earlier, Obiang used an attorney to form two U.S. shell companies in 2004 and 2005, one of which was used to pay household bills associated with Obiang’s residence at 3620 Sweetwater Mesa Road in Malibu, California. The bills included paying private security guards, butlers, chefs, drivers and other caretakers. Over seven months in 2007, 330,000 dollars was paid for two bodyguards available 24 hours per day.
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18. Etete confirmed in the U.K. court case previously mentioned that he allocated rights to the oil block to Malabu Oil & Gas while he was Minister, but claimed he was not involved with Malabu until after he left office. Etete has denied ownership or control of Malabu Oil & Gas and claims he was hired as a consultant by Malabu, although according to an interim report finding of the Nigerian Economic and Financial Crimes Commission, Etete was a 30-percent shareholder of Malabu via a proxy shareholder at the time it was set up. Court transcripts indicate that Etete was questioned extensively about his relationship to Malabu during the U.K. court case mentioned above, and was presented with various pieces of evidence which challenged his claims. For further briefings and press releases on this deal see the Global Witness website,http://www.globalwitness.org.
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19. On 29th April 2011, subsidiaries of Shell and Eni signed an agreement (FGN Resolution Agreement) with the Federal Government of Nigeria (FGN) to be granted a licence to oil block OPL 245. This agreement set out the history of the allocation of the block, which shows changes in ownership and disputed claims involving a subsidiary of Shell (Shell Nigeria Ultra-Deep Limited – SNUD), Malabu, and various legal claims against each other and against the Federal Government of Nigeria. The document states that, “FGN has entered into agreements of even date, respectively with MALABU and SNUD (The ‘Resolution Agreements’) … by which, MALABU has relinquished all claims to OPL 245 and agrees to all future actions which FGN may take under this FGN Resolution Agreement with respect to OPL 245.” The agreement later states that a subsidiary of Eni, on behalf of itself, a subsidiary of Shell and the FGN, will “appoint an escrow agent for the purpose of paying to FGN … 1,092,040,000 U.S. dollars for the purposes of FGN settling all and any existing claims and/or issues over Block 245.” This agreement was included as an annex to a New York court case involving Malabu, International Legal Consulting Limited v. Malabu Oil and Gas Limited (Neither Shell, Eni, nor its subsidiaries were parties to this New York case. Also included in this court case was a “resolution agreement” signed by Malabu and the FGN on 29th April 2011 (the same date as the previously mentioned agreement). According to this document the FGN agreed to pay Malabu 1,092,040,000 U.S. dollars and Malabu agreed to waive any and all claims to the block. Further, documents seen by Global Witness indicate that a few months later transfers were made apparently by the Federal Republic of Nigeria to Malabu’s bank account totaling 801,540,000 U.S. dollars.
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20. Based on measurements of Intact Forest Landscapes in Sarawak from 2010, as mapped byGreenpeace/WRI, with additional subtractions for the Danum-Linau area to account for additional areas logged during 2011-12, as visible on Landsat TM satellite images. If updates were made to account for ongoing logging during 2011-12 in other areas this figure would almost certainly be lower.
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21. Various: press conference of Malaysian Anti-Corruption Comnission (MACC),http://www.youtube.com/watch?v=oLaFEPDZ-d0, Prime Minister’s response in an Al Jazeera English TV interview, http://www.youtube.com/watch?v=8L4TQ2FJhiI, Global Witness’ undercover footage of members of Chief Minister’s family, and corporate lawyers suggested by them, discussing how to make deals for land and forest areas involving setting up tax efficient corporate vehicles in Singapore, http://www.globalwitness.org/insideshadowstate/index.html. See also Faeh, Daniel (2011), “Development of Global Timber Tycoons in Sarawak, East Malaysia: History and Company Profiles,” report commissioned by Bruno Manser Funds; Jomo, K.S, Chang, Y.Y, Khoo, K.J et al (2004), Deforesting Malaysia: The Political Economy and Social Ecology of Agricultural Expansion and Commercial Logging, Zed Books; Dauvergne, Peter (1997), Shadows in the Forest: Japan and the Politics of Timber in Southeast Asia, MIT Press; Crambe, R.A (2007), “Reinventing Dualism: Policy Narratives and Modes of Oil Palm Expansion in Sarawak,” University of Queensland, Paper presented to Conference of Canadian Council of Southeast Asian Studies, Laval University, Quebec City, 19-21 October 2007.
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22. The footage can be viewed here, http://www.globalwitness.org/insideshadowstate/index.html.
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23. Forestry functions of Ministry of Resource Planning & Environment,http://www.kpps.sarawak.gov.my/modules/web/page.php?id=59&menu_id=0&sub_id=88. Chief Minister Abdul Taib Mahmud is Minister of Resource Planning & Environment, showing his various positions, some of which run concurrently, one position since 1985,http://www.sarawak.gov.my/en/sarawak-government/executive.
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24. See Global Witness’ film footage as mentioned in previous footnote. Global Witness’ investigator met with a range of Taib family members and associated individuals including corporate lawyers. See also the related Al Jazeera article,http://www.aljazeera.com/indepth/features/2013/03/2013318131755948174.html.
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25. Based on analysis commissioned by Global Witness reviewing publicly available information on the current operations of Sarawak’s major logging firms in Sarawak and abroad.
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26. The big six by concession size, taken from publicly available data.
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27. Based on Global Witness analysis. HSBC’s sustainability policy stated that all clients by 2009 would have to have 90 percent of concessions certified by FSC, PEFC or equivalent: GW analysis of publicly available data from these certifying organisations’ websites shows this not to be the case. HSBC, on 23rd May 2013 issued a statement saying that in response to concerns raised by Global Witness it has publicly announced a full review of forest policy and compliance worldwide, http://www.hsbc.com/news-and-insight/2013/hsbc-forest-land-and-forest-products-policy-update.
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28. Based on Global Witness analysis. Global Witness considers this a conservative calculation. It does not include interest and fees on overdrafts, foreign exchange services, banking and cash-management and advisory services, other than for an Samling Global Ltd’s initial public offering in 2007. It is based on financial charges to the forestry and oil palm subsidiaries of seven of the largest timber-plantation conglomerates in Sarawak, and/or their investment holding entities. It assumes an arrangement fee of 3 percent of the principal, as most charges are project financing or asset financing, and a fixed interest rate of 3 percent above the annual Base Lending Rate (BLR), set by Bank Negara. Though some later loans were to publicly listed entities (who may borrow at slightly lower rates linked to KLIBOR rate), the overwhelming majority of loans were to their private subsidiaries, who were likely to be borrowing at BLR-linked rates. Global Witness was only able to obtain historical BLR data from Bank Negara from 1997-present, and has modelled loans prior to this date on the historical average. BLR-linked average lending rates available at http://www.blr.my/. Loans prior to 1989 are modelled on a 7 percent rate, which is also the mean rate between 1989-2012. All amounts in U.S. dollars based upon conversion rate at November 2012 (3.07 Malaysian Ringgit to 1 U.S. dollar). See Global Witness report, “In the Future, There Will Be No Forests Left”, http://www.globalwitness.org/sites/default/files/HSBC-logging-briefing-FINAL-WEB.pdf.
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29. These figures come from the World Bank’s Grand Corruption Database Project. The relevant information is cited in “The Puppet Masters: How the Corrupt Use Legal Structures to Hide Stolen Assets and What to Do About It,” World Bank, 2011,http://star.worldbank.org/star/publication/puppet-masters. 213 grand corruption investigations originating from 80 different countries were examined. It was found that 150 of these cases involved at least one corporate vehicle that concealed, at least in part, beneficial ownership information. In these 150 cases, the approximate total proceeds of corruption were US$56.4 billion.
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30. The top jurisdictions for incorporation of the corporate vehicles involved were the United States, which incorporated 12.4 percent of the entities involved, followed closely by the British Virgin Islands which incorporated 11.1 percent. 2.9 percent of the corporate vehicles involved were incorporated in the United Kingdom.
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31. Global Witness carried out extensive research and analysis on this topic, and produced two memos containing full source references. Both are available here:http://www.globalwitness.org/secretsales.
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32. See the Global Witness memos mentioned above, which include references to corporate documents from the BVI.
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33. See the Global Witness memos mentioned above and the Africa Progress Panel report in the following note.
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34. The deals and the estimated 1.3 billion U.S. dollars potentially lost in revenues are cited in the Africa Progress Panel’s 2013 report, “Equity in Extractives: Stewarding Africa’s natural resources for all,” April 2013. See the report publication press release,http://www.africaprogresspanel.org/en/publications/africa-progress-report-2013-holding/press-release-apr-2013/.
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35. As calculated by the Africa Progress Panel based on government information about state expenditure in 2012, approximately 698 million U.S. dollars in total were spent on health and education (185 million U.S. dollars for health plus 513 million U.S. dollars on education). See footnote 105 in the report, http://www.africaprogresspanel.org/en/publications/africa-progress-report-2013/apr-documents/.
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36. The figure is based on WTO and World Bank data for Asia, Africa, South and Central America and the Caribbean for 2011. Exports of fuels and minerals for these countries totaled 1,408,517,416,308 dollars; net ODA received totaled 74,907,570,000 dollars.
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37. See previous footnote detailing the deal between subsidiaries of Shell and Eni and the Nigerian Government.
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38. See previous footnote detailing the deal between Malabu and the Nigerian Government. In particular, the amount agreed to be paid to Malabu by the FGN, and documents showing the bulk of the money being transferred to Malabu.
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39. See previous footnote detailing the agreement between subsidiaries of Shell and Eni and the Nigerian Government. The agreement implies that the money paid to the Nigerian Government is to settle Malabu’s claims on the block. Additionally, in a formal statement issued by the Attorney General of Nigeria it was alleged that “SNUD [a Shell subsidiary] and ENI agreed to pay Malabu through the Federal Government acting as an obligor, the sum of 1,092,040,000 billion U.S. dollars in full and final settlement of any and all claims, interests or rights relating to or in connection with Block 245.” During the U.K. court case mentioned above, Etete also claimed in court that Shell and Eni agreed to pay Malabu, through the Federal Government acting as an obligor, the sum of just over 1 billion U.S. dollars. In previous responses to Global Witness, Shell and Eni repeated that their agreements were with the Nigerian Government and were in full compliance with the law (see the following Global Witness press releases:http://www.globalwitness.org/library/shell-knew-us11-billion-payment-was-destined-convicted-money-launderer; http://www.globalwitness.org/library/eni-knew-us11-billion-payment-was-destined-convicted-money-launderer).
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40. Global Witness first called for companies to make their payments transparent in the 1999 report, “A Crude Awakening: The Role of the Oil and Banking Industries in Angola’s Civil War and the Plunder of State Assets,” December 1999,http://www.globalwitness.org/sites/default/files/pdfs/A%20Crude%20Awakening.pdf.
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2. Teodorin Obiang’s father is President Obiang Nguema Mbasogo. According to the U.S. State Department’s most recent human rights report on Equatorial Guinea, following a military coup in 1979 he has “dominated all branches of government in collaboration with his clan and political party. … In 2009 voters reelected President Obiang with a claimed 95.4 percent of votes cast. The lopsided results and weak independent monitoring of the electoral process raised suspicions of systematic vote fraud.” U.S. State Department, “Country Reports on Human Rights Practices for 2012: Equatorial Guinea,” http://www.state.gov/j/drl/rls/hrrpt/humanrightsreport/index.htm?year=2012&dlid=204115.
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3. According to the U.S. Energy Information Administration, Equatorial Guinea became a significant oil exporter in the 1990s, and in 2005 supply peaked at 320,000 barrels per day. Nearly all oil production is exported. U.S. Energy Information Administration, ‘Country Analysis Brief: Equatorial Guinea’, 28th February 2012, http://www.eia.gov/countries/cab.cfm?fips=EK.
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4. The U.S. State Department’s most recent Equatorial Guinea human rights assessment was damning, describing unlawful killings, police use of torture, official impunity, arbitrary arrest and restrictions on free speech. U.S. State Department, “Country Reports on Human Rights Practices for 2012: Equatorial Guinea,” http://www.state.gov/j/drl/rls/hrrpt/humanrightsreport/index.htm?year=2012&dlid=204115.
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5. According to the latest World Bank World Development Indicators for Equatorial Guinea, the poverty headcount at the national poverty line is 76.8 percent of the population (based on 2006 data). Life expectancy at birth is 51 years (based on 2011 data).http://data.worldbank.org/country/equatorial-guinea.
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6. According to the latest information from the CIA Factbook (2012 data), Equatorial Guinea, which ranks 69, has a GDP per capita of 20,200 dollars. Portugal, which ranks 64, has a GDP per capita of 23,000 dollars.
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7. The Malibu house was named in a report by the U.S. Senate Permanent Subcommittee on Investigations (PSI) entitled “Keeping Foreign Corruption out of the United States: Four Case Histories,” 4th February 2010. The report shows “how some [Politically Exposed Persons] have used U.S. lawyers, real estate and escrow agents, lobbyists, bankers, and even university officials, to circumvent U.S. anti-money laundering and anticorruption safeguards.” One of the report’s case studies was of Teodorin Obiang. Regarding the Malibu house, the report states that “Mr. Obiang employed two U.S. real estate agents … to buy and sell high-end California real estate, including a 2006 purchase of a $30 million residence in Malibu.”
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8. According to an asset forfeiture complaint filed by the US Department of Justice in 2012, in 2010 Obiang spent over €18 million on 109 items acquired at the auction of Yves Saint Laurent’s estate. It was also reported in the New York Times that a forestry company owned by Obiang bought 109 items at the auction of the private art collection of Yves Saint Laurent and Pierre Bergé. “A French shift on Africa Strips a Dictator’s Son of His Treasures,” 23rd August 2012,http://www.nytimes.com/2012/08/24/world/europe/for-obiangs-son-high-life-in-paris-is-over.html?_r=0.
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9. As cited in the U.S. Senate PSI report, according to press reports, on one weekend in 2005, Mr. Obiang purchased two Bentleys, a Lamborghini, and two multi-million dollar luxury houses in Cape Town, South Africa, http://www.iol.co.za/index.php?set_id=1&click_id=86&art_id=vn20050720063046112C699596.
As reported in the New York Times, in 2011 police in Paris seized 11 luxury cars belonging to Obiang including Bugattis and Ferraris, among other assets worth millions. “A French shift on Africa Strips a Dictator’s Son of His Treasures,” 23rd August 2012,http://www.nytimes.com/2012/08/24/world/europe/for-obiangs-son-high-life-in-paris-is-over.html?_r=0.
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10. The Gulfstream jet is included in the U.S. Senate PSI report. According to the report, “[A] U.S. escrow company … facilitated Mr. Obiang’s purchase of a Gulfstream jet, again without a mortgage, by accepting 38.5 million dollars in wire transfers from Equatorial Guinea.”
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11. According to the asset forfeiture complaint filed by the U.S. Department of Justice in 2012, Obiang was Minister of Forestry and Agriculture and Minister of Forestry and Infrastructure from 1998 until 20th May 2012. He was then promoted to Second Vice President of Equatorial Guinea. The same document states that his official monthly salary was 6,799 dollars as an Equatorial Guinea cabinet minister, according to official Equatorial Guinea sources.
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12. During a recent court case in the U.K. (Energy Venture Partner v. Malabu Oil & Gas), Etete confirmed that he was appointed as petroleum minister in Nigeria in 1994, and held that position until Abacha’s death in June 1998.
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13. Etete was convicted of money laundering in France in 2007. Vanguard: Nigeria, “Money Laundering – French Court Hands Dan Etete 3-Yr Jail Term,” 7th November 2007,http://allafrica.com/stories/200711080184.html; The conviction was upheld in 2009 following appeal, Agence France Presse, “Paris court upholds Nigerian minister laundering conviction,” 18th March, 2009. During the U.K. court case mentioned above, Etete acknowledged that he was convicted for money laundering in France.
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14. According to French police documents seen by Le Monde, Obiang used an account at Barclays to buy the YSL art collection. Cited in a Global Witness press release that includes a response to the bank: http://www.globalwitness.org/library/barclays-account-used-dictator%E2%80%99s-son-buy-%E2%82%AC18m-artwork-suspect-funds.
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15. According to a presentation made by Walter Moran, special agent in charge of Immigration and Customs Enforcement, Miami, Florida, to French investigators; and a letter from Stewart C. Robinson, deputy director of criminal division at the U.S. Justice Department’s Office of International Affairs, to French investigators, 4th September 2007. These were previously undisclosed documents from a joint Justice Department / Immigration and Customs Enforcement investigation, obtained by Global Witness and cited in our November 2009 report, “The Secret Life of a Shopaholic: How an African dictator’s playboy son went on a multi-million dollar shopping spree in the U.S.,” available athttp://www.globalwitness.org/sites/default/files/pdfs/gw_obiang_low.pdf. According to the presentation and letter, wire transfers of 73 million dollars were sent “on behalf of” Obiang to the United States in a period of around a year, between 5th April 2005 and 10th April 2006. These claimed transfers involved American banks including Wachovia, Bank of America, UBS Bank in New York and others. According to the letter, investigators believe that “These funds were utilized to purchase a luxury home in Malibu, California valued at approximately 35 million dollars. … The home in Malibu was purchased in the name of a shell corporation, Sweetwater Management, Inc., of which Teodoro Nguema Obiang is listed as president.” Both documents are available here:http://documents.nytimes.com/investigating-teodoro-nguema-obiang. See also Global Witness report “The Secret Life of a Shopaholic” for some of the banks’ responses to Global Witness’ questions, including those about due diligence.
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16. See prior footnote.
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17. According to the U.S. Senate PSI report mentioned earlier, Obiang used an attorney to form two U.S. shell companies in 2004 and 2005, one of which was used to pay household bills associated with Obiang’s residence at 3620 Sweetwater Mesa Road in Malibu, California. The bills included paying private security guards, butlers, chefs, drivers and other caretakers. Over seven months in 2007, 330,000 dollars was paid for two bodyguards available 24 hours per day.
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18. Etete confirmed in the U.K. court case previously mentioned that he allocated rights to the oil block to Malabu Oil & Gas while he was Minister, but claimed he was not involved with Malabu until after he left office. Etete has denied ownership or control of Malabu Oil & Gas and claims he was hired as a consultant by Malabu, although according to an interim report finding of the Nigerian Economic and Financial Crimes Commission, Etete was a 30-percent shareholder of Malabu via a proxy shareholder at the time it was set up. Court transcripts indicate that Etete was questioned extensively about his relationship to Malabu during the U.K. court case mentioned above, and was presented with various pieces of evidence which challenged his claims. For further briefings and press releases on this deal see the Global Witness website,http://www.globalwitness.org.
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19. On 29th April 2011, subsidiaries of Shell and Eni signed an agreement (FGN Resolution Agreement) with the Federal Government of Nigeria (FGN) to be granted a licence to oil block OPL 245. This agreement set out the history of the allocation of the block, which shows changes in ownership and disputed claims involving a subsidiary of Shell (Shell Nigeria Ultra-Deep Limited – SNUD), Malabu, and various legal claims against each other and against the Federal Government of Nigeria. The document states that, “FGN has entered into agreements of even date, respectively with MALABU and SNUD (The ‘Resolution Agreements’) … by which, MALABU has relinquished all claims to OPL 245 and agrees to all future actions which FGN may take under this FGN Resolution Agreement with respect to OPL 245.” The agreement later states that a subsidiary of Eni, on behalf of itself, a subsidiary of Shell and the FGN, will “appoint an escrow agent for the purpose of paying to FGN … 1,092,040,000 U.S. dollars for the purposes of FGN settling all and any existing claims and/or issues over Block 245.” This agreement was included as an annex to a New York court case involving Malabu, International Legal Consulting Limited v. Malabu Oil and Gas Limited (Neither Shell, Eni, nor its subsidiaries were parties to this New York case. Also included in this court case was a “resolution agreement” signed by Malabu and the FGN on 29th April 2011 (the same date as the previously mentioned agreement). According to this document the FGN agreed to pay Malabu 1,092,040,000 U.S. dollars and Malabu agreed to waive any and all claims to the block. Further, documents seen by Global Witness indicate that a few months later transfers were made apparently by the Federal Republic of Nigeria to Malabu’s bank account totaling 801,540,000 U.S. dollars.
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20. Based on measurements of Intact Forest Landscapes in Sarawak from 2010, as mapped byGreenpeace/WRI, with additional subtractions for the Danum-Linau area to account for additional areas logged during 2011-12, as visible on Landsat TM satellite images. If updates were made to account for ongoing logging during 2011-12 in other areas this figure would almost certainly be lower.
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21. Various: press conference of Malaysian Anti-Corruption Comnission (MACC),http://www.youtube.com/watch?v=oLaFEPDZ-d0, Prime Minister’s response in an Al Jazeera English TV interview, http://www.youtube.com/watch?v=8L4TQ2FJhiI, Global Witness’ undercover footage of members of Chief Minister’s family, and corporate lawyers suggested by them, discussing how to make deals for land and forest areas involving setting up tax efficient corporate vehicles in Singapore, http://www.globalwitness.org/insideshadowstate/index.html. See also Faeh, Daniel (2011), “Development of Global Timber Tycoons in Sarawak, East Malaysia: History and Company Profiles,” report commissioned by Bruno Manser Funds; Jomo, K.S, Chang, Y.Y, Khoo, K.J et al (2004), Deforesting Malaysia: The Political Economy and Social Ecology of Agricultural Expansion and Commercial Logging, Zed Books; Dauvergne, Peter (1997), Shadows in the Forest: Japan and the Politics of Timber in Southeast Asia, MIT Press; Crambe, R.A (2007), “Reinventing Dualism: Policy Narratives and Modes of Oil Palm Expansion in Sarawak,” University of Queensland, Paper presented to Conference of Canadian Council of Southeast Asian Studies, Laval University, Quebec City, 19-21 October 2007.
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22. The footage can be viewed here, http://www.globalwitness.org/insideshadowstate/index.html.
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23. Forestry functions of Ministry of Resource Planning & Environment,http://www.kpps.sarawak.gov.my/modules/web/page.php?id=59&menu_id=0&sub_id=88. Chief Minister Abdul Taib Mahmud is Minister of Resource Planning & Environment, showing his various positions, some of which run concurrently, one position since 1985,http://www.sarawak.gov.my/en/sarawak-government/executive.
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24. See Global Witness’ film footage as mentioned in previous footnote. Global Witness’ investigator met with a range of Taib family members and associated individuals including corporate lawyers. See also the related Al Jazeera article,http://www.aljazeera.com/indepth/features/2013/03/2013318131755948174.html.
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25. Based on analysis commissioned by Global Witness reviewing publicly available information on the current operations of Sarawak’s major logging firms in Sarawak and abroad.
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26. The big six by concession size, taken from publicly available data.
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27. Based on Global Witness analysis. HSBC’s sustainability policy stated that all clients by 2009 would have to have 90 percent of concessions certified by FSC, PEFC or equivalent: GW analysis of publicly available data from these certifying organisations’ websites shows this not to be the case. HSBC, on 23rd May 2013 issued a statement saying that in response to concerns raised by Global Witness it has publicly announced a full review of forest policy and compliance worldwide, http://www.hsbc.com/news-and-insight/2013/hsbc-forest-land-and-forest-products-policy-update.
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28. Based on Global Witness analysis. Global Witness considers this a conservative calculation. It does not include interest and fees on overdrafts, foreign exchange services, banking and cash-management and advisory services, other than for an Samling Global Ltd’s initial public offering in 2007. It is based on financial charges to the forestry and oil palm subsidiaries of seven of the largest timber-plantation conglomerates in Sarawak, and/or their investment holding entities. It assumes an arrangement fee of 3 percent of the principal, as most charges are project financing or asset financing, and a fixed interest rate of 3 percent above the annual Base Lending Rate (BLR), set by Bank Negara. Though some later loans were to publicly listed entities (who may borrow at slightly lower rates linked to KLIBOR rate), the overwhelming majority of loans were to their private subsidiaries, who were likely to be borrowing at BLR-linked rates. Global Witness was only able to obtain historical BLR data from Bank Negara from 1997-present, and has modelled loans prior to this date on the historical average. BLR-linked average lending rates available at http://www.blr.my/. Loans prior to 1989 are modelled on a 7 percent rate, which is also the mean rate between 1989-2012. All amounts in U.S. dollars based upon conversion rate at November 2012 (3.07 Malaysian Ringgit to 1 U.S. dollar). See Global Witness report, “In the Future, There Will Be No Forests Left”, http://www.globalwitness.org/sites/default/files/HSBC-logging-briefing-FINAL-WEB.pdf.
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29. These figures come from the World Bank’s Grand Corruption Database Project. The relevant information is cited in “The Puppet Masters: How the Corrupt Use Legal Structures to Hide Stolen Assets and What to Do About It,” World Bank, 2011,http://star.worldbank.org/star/publication/puppet-masters. 213 grand corruption investigations originating from 80 different countries were examined. It was found that 150 of these cases involved at least one corporate vehicle that concealed, at least in part, beneficial ownership information. In these 150 cases, the approximate total proceeds of corruption were US$56.4 billion.
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30. The top jurisdictions for incorporation of the corporate vehicles involved were the United States, which incorporated 12.4 percent of the entities involved, followed closely by the British Virgin Islands which incorporated 11.1 percent. 2.9 percent of the corporate vehicles involved were incorporated in the United Kingdom.
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31. Global Witness carried out extensive research and analysis on this topic, and produced two memos containing full source references. Both are available here:http://www.globalwitness.org/secretsales.
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32. See the Global Witness memos mentioned above, which include references to corporate documents from the BVI.
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33. See the Global Witness memos mentioned above and the Africa Progress Panel report in the following note.
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34. The deals and the estimated 1.3 billion U.S. dollars potentially lost in revenues are cited in the Africa Progress Panel’s 2013 report, “Equity in Extractives: Stewarding Africa’s natural resources for all,” April 2013. See the report publication press release,http://www.africaprogresspanel.org/en/publications/africa-progress-report-2013-holding/press-release-apr-2013/.
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35. As calculated by the Africa Progress Panel based on government information about state expenditure in 2012, approximately 698 million U.S. dollars in total were spent on health and education (185 million U.S. dollars for health plus 513 million U.S. dollars on education). See footnote 105 in the report, http://www.africaprogresspanel.org/en/publications/africa-progress-report-2013/apr-documents/.
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36. The figure is based on WTO and World Bank data for Asia, Africa, South and Central America and the Caribbean for 2011. Exports of fuels and minerals for these countries totaled 1,408,517,416,308 dollars; net ODA received totaled 74,907,570,000 dollars.
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37. See previous footnote detailing the deal between subsidiaries of Shell and Eni and the Nigerian Government.
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38. See previous footnote detailing the deal between Malabu and the Nigerian Government. In particular, the amount agreed to be paid to Malabu by the FGN, and documents showing the bulk of the money being transferred to Malabu.
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39. See previous footnote detailing the agreement between subsidiaries of Shell and Eni and the Nigerian Government. The agreement implies that the money paid to the Nigerian Government is to settle Malabu’s claims on the block. Additionally, in a formal statement issued by the Attorney General of Nigeria it was alleged that “SNUD [a Shell subsidiary] and ENI agreed to pay Malabu through the Federal Government acting as an obligor, the sum of 1,092,040,000 billion U.S. dollars in full and final settlement of any and all claims, interests or rights relating to or in connection with Block 245.” During the U.K. court case mentioned above, Etete also claimed in court that Shell and Eni agreed to pay Malabu, through the Federal Government acting as an obligor, the sum of just over 1 billion U.S. dollars. In previous responses to Global Witness, Shell and Eni repeated that their agreements were with the Nigerian Government and were in full compliance with the law (see the following Global Witness press releases:http://www.globalwitness.org/library/shell-knew-us11-billion-payment-was-destined-convicted-money-launderer; http://www.globalwitness.org/library/eni-knew-us11-billion-payment-was-destined-convicted-money-launderer).
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40. Global Witness first called for companies to make their payments transparent in the 1999 report, “A Crude Awakening: The Role of the Oil and Banking Industries in Angola’s Civil War and the Plunder of State Assets,” December 1999,http://www.globalwitness.org/sites/default/files/pdfs/A%20Crude%20Awakening.pdf.
