Corruption in Iraq: Where did all the money go?

Luay al-Khatteeb writes: Once again, the subject of illicit financial flows from kleptocratic regimes is in the international spotlight, this time in the form of the “Panama Papers.”

What is surprising is the level of shock at something that should have been obvious. For a long time, many financial institutions turned a blind eye to nefarious PEPs (politically exposed persons) and not just in Switzerland, as we see now with big names such as HSBC, once again deflecting allegations.

The industrialized world can’t afford any more surprises like this, otherwise aid and loans will continue to enter weak states, only to be rapidly snuck out.

Encouragingly, there are signs that governments and regulators are being energized by the Panama Papers. The U.S. Treasury will soon announce a requirement that banks disclose the owners of shell companies, and in the UK regulators set a deadline for banks to disclose details of clients’ relations with Mossack Fonseca, the company at the centre of the current storm.

Iraq, with lamentably high corruption, can be a litmus test for revived effort. Iraq also desperately needs to recover stolen assets, because it is running out of money for both fighting ISIS and rebuilding Iraq, in order to prevent ISIS 2.0.

Luckily, the United States is leading the way with the formation of the Kleptocracy Asset Recovery Initiative (KARI), but far more global coordination is needed. In Iraq, financial assistance should be put into ministries to train people in spotting and preventing corruption.

There are certainly good young people who want change in the Iraqi government, the challenge is creating a culture where they can speak out. That will take a renewed and internationally coordinated capacity building effort. As an example, the Higher Council of Education Development, an Iraqi organization that has sent four thousand students overseas to help ministerial capacity, had a budget of just over $100 million last year. The international community must urgently help Iraq to resource such work, because so far war expenditures dwarf other efforts. [Continue reading…]

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Navy chief tells fellow admirals to rethink integrity and behavior in aftermath of string of scandals

The Washington Post reports: the Navy has been dogged by a major corruption scandal involving an Asian defense contractor who has pleaded guilty to bribing Navy officers with cash, sex and luxury goods over a decade.

Three admirals were censured last year for accepting dinners and gifts from the contractor, Leonard Glenn Francis, a Singapore-based businessman widely known in maritime circles as “Fat Leonard.” At least two other admirals in the case remain under criminal investigation by the Justice Department. Four lower-ranking officers have pleaded guilty to corruption charges in federal court and are facing prison time.

While the corruption case has been slowly unfolding for more than two years, the Navy’s senior officer corps has had to endure other embarrassments in recent months.

In December, the Navy reprimanded a two-star admiral for getting drunk and wandering naked around a Florida beachfront hotel while attending a conference with defense contractors. In January, a one-star admiral was reprimanded and relieved of his command after an investigation found that he had spent hours watching pornography on a Navy computer while at sea.

And in March, under pressure from Congress, the Navy reluctantly denied promotion to the admiral in charge of its elite SEAL teams after the Pentagon’s inspector general determined that he had violated the law by retaliating against whistleblowers.

The Navy traditionally has set high standards for its commanding officers and makes a public announcement when they are cashiered for personal or professional lapses in conduct. Those relieved of command, however, are typically officers holding the rank of captain or commander, with admirals rarely getting into trouble. [Continue reading…]

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Why Putin tolerates corruption

Ivan Krastev writes: Russian elites have the right to be corrupt, but only if they have proved their loyalty. Paradoxically, the West’s sanctions against business figures closest to the Russian president helped whitewash some of the most notoriously corrupt Russian oligarchs and allow Russian propaganda to present them as selfless defenders of the motherland.

Ultimately, the most important reason for Mr. Putin’s reluctance to declare a war on corruption is that any anti-corruption campaign will inspire the public to demand change. It plays not only on the public’s anger, but also on its aspirations. And it is precisely this demand for change that the Kremlin fears most. Unlike in China, leaders in Russia avoid promising that life will be better tomorrow; what they promise is that things will not get worse. And unlike in China, they can afford to do so because the Russian economy is driven not by the entrepreneurial energy of the masses, but by natural resources.

This is why the Russian government is ready to acknowledge corruption’s ubiquity — the slickest propaganda couldn’t convince people otherwise. But the government also advances the idea that corruption is a way of life and is thus a natural phenomenon. In a way, corruption is like vodka: You know it hurts, but Russia is unimaginable without it. [Continue reading…]

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Afghanistan’s ‘ghost soldiers’: Thousands enlisted to fight Taliban don’t exist

The Guardian reports: From about 8.30pm until well after midnight, the dark blue sky above Babaji lit up, as rockets and flares crisscrossed above this cluster of villages close to Helmand’s provincial capital, Lashkar Gah.

At a mud fortress beyond a river bridge painted in the tricolours of the Afghan flag, 24 members of the Afghan border police dug in. They were not supposed to be there.

“We were not trained to fight on the front line,” said Cpt Ghulam Wali Afghan, the commander, when the Guardian visited the post.

As their name suggests, Wali Afghan’s men are meant to protect Afghanistan’s porous border, where smugglers cross with copious drugs, weapons and people.

But seven months ago, the captain and 122 other ABP men were relocated to Babaji, some 300km from the frontier with Pakistan in an effort to bolster the defence against the Taliban, who continue to capture territory the international coalition spent years getting little more than a slippery grip on.

On their first day on the front line, three border police were killed, said Raz Mohammad, a soldier stationed in Babaji. “For two months, we had trouble getting to know the area,” he said.

The police eventually repelled the Taliban assault. But with the calm of the poppy harvest over, and the fighting season just beginning, it is unlikely that the ABP officers will return to the border anytime soon.

With an estimated 25,000 troops officially based in Helmand, the government should have enough muscle to confront the Taliban.

The problem is many of those troops don’t exist.

Across Afghanistan, lists of troops and police officers are filled with fake names, or the names of men killed in the fighting, but not officially declared dead. Captain Wali and his men are in Babaji to fill the void of these “ghost soldiers”.

A recent investigation by Helmand’s provincial council found that approximately 40% of enlisted troops did not exist. The authors of an analysis commissioned by the Afghan government – and obtained by the Guardian – said the share might be even higher. [Continue reading…]

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What happened to billions in U.S. military aid to Egypt?

Julian Pecquet writes: The Egyptian government is hindering Washington’s ability to track billions of dollars worth of anti-aircraft missiles and other US weapons, the US government watchdog said in a blistering report just as Congress gets ready to renew the annual $1.3 billion request.

The United States provided $6.5 billion in military assistance to Cairo between 2011 and 2015 with the understanding that it would be closely monitored and it would serve American interests. Instead, the Government Accountability Office (GAO) asserts that the Obama administration has often failed to meet those requirements due to resistance from their Egyptian counterparts, lack of guidance from Washington and insufficient staffing at the US Embassy in Cairo.

The State Department and the Defense Department (DOD) have established programs “to provide reasonable assurance that military equipment transferred or exported to foreign governments is used for its legitimate intended purposes and does not come into the possession of individuals or groups who pose a threat to the United States or its allies,” the GAO said in its May 12 report. “However, gaps in the implementation of these end-use monitoring programs — in part due to limited cooperation from the Egyptian government — hampers DOD’s and State’s ability to provide such assurances.” [Continue reading…]

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Riots, slowdown and corruption eat away at southern Africa’s promise

By Stephen Chan, SOAS, University of London

These are dark days for southern Africa. The last month has seen xenophobic riots and killings in Zambia, once an almost immaculately peaceful country, and the reinstatement of several hundred corruption charges which could be delivered against South Africa’s president, Jacob Zuma.

Times have changed in Zambia since its first president, Kenneth Kaunda, galvanised the country’s 72 ethnic groups (not counting European and Indian populations) into a united nation. During his decades in power, he defied the white minority regimes to his south, Rhodesia and Apartheid South Africa. He hosted the exile headquarters of the ANC and sheltered the Namibian exile group SWAPO, whose country South Africa occupied in defiance of the UN.

Landlocked Zambia took a terrible hammering as the white regimes controlled its transport links to the sea. From time to time there were military incursions into Lusaka, the capital city – yet the Zambians took it all with a stoicism born of genuine solidarity.

But times have changed. Kaunda’s successors have not developed their own moral stature, and the country has been badly mismanaged.

[Read more…]

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Panama paper trail goes online with massive searchable database

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CNET reports: One of the biggest databases of leaked documents has just hit the internet, and what lies within is a massive and complicated web of corporate ownership that spans the globe.

The Panama Papers contain more than 2.5 million files, analysed by the International Consortium of Investigative Journalists and 112 reporters across 58 countries. Today’s data dump is just part of the picture, detailing the relationships between individuals, companies and offshore entities.

Think of it like a searchable corporate registry. But in this case, it’s a network made up of hundreds of thousands of individuals and companies, with seemingly endless links criss-crossing from Australia to Zimbabwe. The question now is which of these links can be used to prove the companies involved were attempting to hide massive wealth overseas.

While there’s no evidence that any of the entities have acted illegally, the “John Doe” behind the leak argues the data dump exposes the names behind growing income inequality, saying “it doesn’t take much to connect the dots.” [Continue reading…]

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How the kleptocrats’ $12 trillion heist helps keep most of the world impoverished

David Cay Johnston writes: For the first time we have a reliable estimate of how much money thieving dictators and others have looted from 150 mostly poor nations and hidden offshore: $12.1 trillion.

That huge figure equals a nickel on each dollar of global wealth and yet it excludes the wealthiest regions of the planet: America, Canada, Europe, Japan, Australia, and New Zealand.

That so much money is missing from these poorer nations explains why vast numbers of people live in abject poverty even in countries where economic activity per capita is above the world average. In Equatorial Guinea, for example, the national economy’s output per person comes to 60 cents for each dollar Americans enjoy, measured using what economists call purchasing power equivalents, yet living standards remain abysmal.

The $12.1 trillion estimate — which amounts to two-thirds of America’s annual GDP being taken out of the economies of much poorer nations — is for flight wealth built up since 1970.

Add to that flight wealth from the world’s rich regions, much of it due to tax evasion and criminal activities like drug dealing, and the global figure for hidden offshore wealth totals as much as $36 trillion.

In 2014 the net worth of planet Earth was about $240 trillion, which means about 15 percent of global wealth is in hiding, significantly reducing the capital available to spur world economic growth. [Continue reading…]

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Tony Blair: The former prime minister for hire

The Guardian reports: hen Jonathan Powell, the gatekeeper to the corporate empire of Tony Blair, sat down to lunch with the former Saudi intelligence chief Prince Faisal Al Turki in June 2010 he could not have known how lucrative it would turn out to be for the former British prime minister.

As the high-profile mediator of the stuttering peace process in the Israeli-Palestinian conflict, Blair had to be careful not to mix business with pleasure. However, one of those lunching with Powell at the annual “global mediator’s retreat”, organised by the Norwegian Ministry of Foreign Affairs, was looking to make a deal.

Nawaf Obaid, a security analyst who accompanied Prince Faisal, emailed Powell a week later, according to documents seen by the Guardian, with a suggestion to work with his brother Tarek’s company, PetroSaudi, which he “co-founded and co-owns with Prince Turki bin Abdullah, son of King Abdullah”.

“They have several projects that [they] are working [on] and I think it would [give] a very interesting perspective to see if we could establish a strategic partnership with former PM Tony Blair and yourself,” he wrote.

Tarek Obaid was a former banker who styled himself as an adviser to members of the Saudi royal family and a director of a joint venture with Malaysia’s multibillion-dollar development fund, 1MDB. This fund had put $300m through PetroSaudi and as the latter’s chief executive, Obaid was on the lookout for deals.

On paper PetroSaudi looked impressive: its chief investment officer was a former Goldman Sachs banker, Patrick Mahony. The chief operating officer was listed as Rick Haythornthwaite, a City insider who was also chairman of Network Rail and MasterCard.

Blair’s team sold the former prime minister as someone who could help “unlock situations which might otherwise be blocked by political factors” in places such as China and Africa. PetroSaudi was interested in Beijing’s appetite for oil and how Blair’s firm could help. [Continue reading…]

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Inside Trump adviser Manafort’s world of politics and global financial dealmaking

The Washington Post reports: Paul Manafort was hired by Donald Trump to bring the wisdom of an old Washington hand to a campaign of political novices and provide expertise on the arcane art of counting convention delegates.

But beneath the image of a campaign wise man is a more complex picture of a veteran consultant who has pursued parallel careers as a lobbyist, political adviser and global dealmaker. He has parlayed political relationships around the world into an array of intricate financial transactions with billionaire oligarchs and other controversial investors that have at times spurred legal disputes.

In one case, Manafort tried unsuccessfully to build a luxury high-rise in Manhattan with money from a billionaire backer of a Ukrainian president whom he had advised.

In another deal, real estate records show that Manafort took out and later repaid a $250,000 loan from a Middle Eastern arms dealer at the center of a French inquiry into whether kickbacks were paid to leading politicians in a 1995 presidential campaign.

And in another business venture, a Russian aluminum magnate has accused Manafort in a Cayman Islands court of taking nearly $19 million intended for investments, then failing to account for the funds, return them or respond to numerous inquiries about exactly how the money was used. [Continue reading…]

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How wartime Washington lives in luxury

Kelley Vlahos writes: In no place in America are the abrupt changes in the nation’s security posture so keenly reflected in real estate and lifestyle than the Washington, D.C. metropolitan area. In the decade after 9/11, it has grown into a sprawling, pretentious representation of the federal government’s growth, vices and prosperity, encompassing the wealthiest counties, the best schools, and some of the highest rates of income inequality in the country.

“People hate Washington but they don’t really know why,” says Mike Lofgren, a longtime Beltway inhabitant and arch critic of its culture. But show them what is underneath the dignified facades — particularly the greed and excess financed by the overgrown military-industrial complex — and the populist resentment recently harnessed by insurgent candidates Donald Trump and Bernie Sanders just might have a concrete grievance that can drive real change.

For Lofgren, “Beltwayland” is perhaps best described as analogous to the Victorian novel the Picture of Dorian Gray — a rich, shimmering ecosystem in which all of the ugly, twisted aberrations are hidden away in an attic somewhere, or rather sadly, in the poverty-blighted wards and low income zip codes of “the DMV” (The District, Maryland, and Virginia).

Oscar Wilde might have seen a bit of his Victorian England in Washington’s self-indulgent elite, but unlike the gentry of Dorian Gray, men and women here see not leisure, but amassing personal wealth through workaholism, as a virtue of the ruling class. For them, a two-front war and Washington’s newly enlarged national-security state, much of which is hidden in plain sight, have ushered in a 21st-century gilded age only replicated in America’s few, most privileged enclaves. [Continue reading…]

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‘It seems that no regime is too despotic for Tony Blair to work for – provided the price is right’

The Daily Mail reports: Tony Blair touted his firm’s services to a dictator for £5.3million a year, the Daily Mail can reveal today.

He made the shameless sales pitch to Nursultan Nazarbayev, offering the Kazakh president his ‘unique personal experience and insights’.

Leaked documents lay bare the former prime minister’s dealings with a regime behind appalling human rights abuses.

It is accused of routinely torturing citizens and massacring 15 defenceless protesters in 2011. The dossier reveals that:

  • A key aide offered Mr Blair’s ‘private strategic advice’ to Mr Nazarbayev only a year after he left No 10;
  • Six years on he was still touting for work in Kazakhstan, despite civil rights fears;
  • The pitch promised Mr Blair would be ‘particularly closely involved’ – for a bigger fee;
  • He rewrote a speech for Mr Nazarbayev to fend off criticism over the 2011 massacre;
  • His firm tried to involve an EU crony in lobbying for the Kazakh regime.

The extent of Mr Blair’s dealings with the former Soviet republic in central Asia raises further questions about his apparent willingness to work with unsavoury leaders.

‘It seems that no regime is too despotic for Tony Blair to work for – provided the price is right,’ said Conservative MP Andrew Bridgen.

‘Since leaving office he has become a gun for hire for all manner of dubious regimes, damaging our reputation around the world.’ [Continue reading…]

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Palestinians pop up in Panama Papers

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Adnan Abu Amer writes: Ever since the inception of the Palestinian Authority (PA) in 1994, local and international organizations have repeatedly issued reports on the rampant corruption plaguing its ministries and departments. The problem is not limited to administrative and financial excesses committed by irresponsible individuals for personal motives, but rather is seems entrenched in the PA’s structure.

The most recent corruption case was revealed by the so-called “Panama Papers,” which were published April 4. The Panama Papers exposed the involvement of international figures in tax evasion and money laundering.

Tareq Abbas, the son of Palestinian President Mahmoud Abbas, was among the Palestinian names contained in the papers. According to these documents, Abbas secretly owns, in partnership with the PA, a holding company worth more than $1 million in the British Virgin Islands. [Continue reading…]

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Offshore in central London — the curious case of 29 Harley Street

The Guardian reports: On 10 November, 2003, Gerry Florent, and Ralph Abercia, plus his son, Ralph Jr, left the Bellagio Hotel in Las Vegas, and drove to the Stirling Club, a high-end private venue just off the Strip. They were to attend separate meetings with Sir Richard Benson, but had met each other that morning, when they were collectively coached on the etiquette expected of them: speak only when spoken to, stand when he comes in. They were happy to comply. This was a man who had bailed out the Queen, after all.

Both Florent and the Abercias wanted the same thing from Sir Richard: money, of which he had plenty. Sir Richard, who was portly, balding and elderly, explained to them that he owned a company named Sherwin & Noble, which was worth billions and was prepared to finance their business projects. At their meetings, the prospective investors received a glossy spiral-bound summary of S&N’s balance sheet, which showed it to be a financial firm of significant size.

Florent wanted $55m to buy land on which to build a hotel in Florida; the Abercias needed $105m for an “aquarium/entertainment complex” in Houston. In return for the money, all Sir Richard asked was that they pay advance fees (two payments of $412,250 each from Florent, and two payments of $787,500 each from the Abercias) to signal their commitment to the projects. If S&N decided not to go ahead with the loans, the fees would be repaid.

The investors left Las Vegas, instructed their lawyers to wire the first tranche of the fees over, and settled down to wait for their money. They waited. And they waited. When they rang or faxed the S&N office in London, they were reassured that there was nothing to be concerned about. But, over the next few months, Florent and his business associates became suspicious. They held off wiring the second half of the fee, and brought in a private investigator, who discovered that S&N, far from being worth billions, was an empty shell company. The glossy booklet detailing its assets had been copied from the banking company HBOS, with the names changed.

Thus, the fraud fell apart. The Abercias, who had wired the whole fee asked of them, were devastated. “That was a lot of money,” Ralph Sr told a local journalist. “We’re still paying the damgum thing back.”

The whole saga had been scripted by a conman named Lal Bhatia. Sir Richard Benson was an actor. He had never rescued Buckingham Palace from foreclosure. The billions and the knighthood were fictitious. S&N had no assets, beyond a registered presence at a house in London – 29 Harley Street. [Continue reading…]

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Path of $681 million: From Saudi Arabia to Malaysian premier’s personal account

The New York Times reports: How did $681 million end up being deposited in the personal bank account of Malaysia’s prime minister, Najib Razak, last year?

Not in any corrupt way, officials insist.

Saudi Arabia’s foreign minister said on Thursday that an unspecified Saudi source had given a large sum of money as a “genuine donation” with no obligations attached. He joined top Malaysian leaders in waving away any suggestion of scandal.

For those who have never had fortunes deposited into their personal bank accounts with no obligations attached, this may sound suspicious. Indeed, Mr. Najib has been subject to fierce international scrutiny, including a United States Justice Department investigation, as he continues to deny any wrongdoing. [Continue reading…]

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