Philip Shenon / Newsweek – 2011-03-21 16:04:58

http://www.newsweek.com/2011/03/13/dirty-dictator-loot.html

Obama talks tough, but the US remains a haven for the ill-gotten gains of bloodthirsty despots

(March 13, 2011) — He is the West African equivalent of one of Muammar Gaddafi’s wayward, Lamborghini-loving sons.

Teodoro Obiang is a government minister in the tiny oil-rich African nation of Equatorial Guinea and son of the country’s brutal dictator. The 41-year-old Teodoro has made the US a second home, often jetting in on his $36 million US-bought Gulfstream V, spending quality time at his $35 million oceanfront mansion in Malibu. He recently commissioned designs for a $380 million superyacht that could be docked along the California coast.

Congressional investigators have determined that his lawyers easily established dummy companies in the US to mask tens of millions of dollars that, according to a four-year-old Justice Department memo, the Obiang family mostly looted from the government, sharing none of its wealth with the 700,000 people they rule. Seventy percent of the population lives on less than $2 a day; most have no access to clean water.

The Obama administration has made a show of freezing the Gaddafi kids’ assets. “There is a serious risk that Libyan state assets will be misappropriated by Gaddafi, members of his government, members of his family, or his close associates if those assets are not protected,” the president announced last month — part of his bid to show that the US is at the forefront of global efforts to track down and tie up the fortunes of kleptocrats worldwide.

But Teodoro is a stark reminder that Obama’s crackdown on the dirty assets of dictators’ families is a highly selective campaign. Much to Washington’s embarrassment, the Guinean playboy, who denies all allegations of corruption, has plenty of company among the kin and cronies of the world’s despots who are able to travel freely to the United States, to spend here lavishly, and to deposit billions of dollars of ill-gotten wealth in American banks and corporations. And the more the US depends on a dictatorial nation’s bounty — say, in the case of Equatorial Guinea, its oil — the more likely, it seems, America is to turn a blind eye.

Even the Libyan crackdown seems a bit suspect. After all, the United States has believed for years that Qaddafi and his family were misappropriating billions of dollars from the government and sending some of it off to the United States. Given reports of the tens of billions of dollars stashed abroad by Egypt’s Hosni Mubarak and Tunisia’s Zine Ben Ali, why hasn’t the Obama administration followed the lead of Switzerland and frozen their assets as well? (The White House won’t comment, but US diplomats suggest it reflects the years of close ties to the regimes of Mubarak and Ben Ali.)

The uncomfortable, often overlooked fact is that the US remains as much a haven for the loot of bloodthirsty foreign despots as Switzerland, Dubai, the Cayman Islands, and the other international banking centers that usually take blame for stashing autocrats’ dirty money. The Obama administration is criticized by anticorruption activists for doing little to change that, despite the president’s lofty pronouncements to the contrary over the past month.

“America is still very much a safe haven for dictators’ money,” says Robert Palmer, of the London-based the anticorruption group Global Witness. Palmer says the US deserved praise for its recent rhetoric and for its relatively stiff antibribery laws. But “there are still gaping holes in the American system that allow corrupt foreign politicians to bring corrupt money into the US,” he adds.

Jason Sharman, a respected money-laundering specialist at Australia’s Griffith University, says that “the educated guess is that there’s more corrupt money in the United States than in any other country in the world” and “the gap between US rhetoric on this issue and follow-through is huge.”

The Obama administration insists it is doing what it can. Last July, Attorney General Eric Holder announced the creation of an antikleptocracy unit at the Justice Department to search for the ill-gotten wealth of despots. (To date, the unit has announced no investigations of substance, which officials say is not surprising given how long it takes to develop cases.) Although it has not moved to freeze the assets of Mubarak and Ben Ali, the Treasury Department has sent a special notice to banks in recent weeks to be on the lookout for evidence of illegal transfers of money by the fallen Egyptian and Tunisian despots and their cronies. “There’s a lot going on behind the scenes,” says a department official.

Congressional Democrats say the administration missed its best opportunity to crack down on the movement of despots’ loot when it failed to sign on quickly to a bipartisan 2009 bill that would have forced state governments to determine the true owners of the corporations they register — effectively putting shell companies out of business. An earlier version of the bill was sponsored by then-senator Barack Obama.

Since the US imposes relatively tough due-diligence rules on banks, at least compared with lax standards elsewhere, shell companies have long been a preferred method for foreign despots to transfer money without detection. In a research paper, Sharman, the Australian scholar, found that he could set up an anonymous shell company in the United States over the Internet with little money upfront and a few clicks on his keyboard. “It’s as easy as ordering a book through Amazon,” he says. (A Treasury official says the administration supported the 2009 bill from the start but is working with Congress to strengthen it.)

Other antigraft laws already on the books are rarely enforced — notably one passed during the Bush administration that allows the State Department to block visas for anyone “involved in corruption relating to the extraction of natural resources in their country.” That would seem to describe Teodoro Obiang and others in his father’s corruption-ridden government in Equatorial Guinea, given a 2007 Justice Department memo that found the family’s wealth came largely from “extortion” and “theft of public funds.”

According to the Washington public-relations firm that speaks for Equatorial Guinea, Teodoro remains free to come and go (albeit not on the superyacht, which the firm now says he has decided not to build). The State Department refused to comment on Teodoro’s visa status and why he might be allowed to continue visiting the United States despite allegations of such rampant corruption. “Visa records are confidential,” a spokesman says.

So long as the oil keeps flowing, it seems, the Obiang family — and its loot — have a home on American shores.

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