US seizes $458m in corrupt funds - but what now?

By Leslie Wayne
Source:The Center for Public Integrity

With much fanfare, the U.S. Department of Justice recently announced it had frozen more than $458 million in corrupt assets that the former Nigerian dictator, Sani Abacha, and his friends had hidden in bank accounts around the world. This was hailed as the largest forfeiture action bought as part of Justices’ Kleptocracy Asset Recovery Initiative, two-year old effort to identify the proceeds of corrupt officials and return them to those who were harmed.

In the case of Nigeria, that money was allegedly embezzled from the country’s central bank, extorted from local businesses and sent through a maze of bank accounts controlled by Abacha and his associates for their own benefit.  When the Abacha asset seizure was announced, Justice officials pulled out all the rhetorical flourishes:  “Today’s action sends a clear message: We are determined and equipped to confiscate the ill-gotten riches of corrupt leaders who drain the resources of their countries,’’ said Mythili Raman, Acting Assistant Attorney General in a statement in March.

Now comes the hard part – what to do with that $458 million?

Justice has said it wants to return any seized assets back to their country of origin, whenever possible.  The goal of the Kleptocracy Initiative, said Lanny Breuer, the former Assistant Attorney General who once headed the program, is “to identify the proceeds of foreign official corruption, forfeit them, and repatriate the recouped funds for the benefit of the people.”

Even President Obama has struck the same theme of returning stolen assets to the people.  In a major speech in 2011 on the Middle East and Africa, Mr. Obama said “We will help newly democratic governments recover assets that were stolen.”

Rhetoric aside, returning the fruits of corruption may be easier said than done.  In far too many cases, one corrupt ruling elite is only replaced by another, making it impossible to return assets directly to a new government.  And, in some cases, the corrupt officials are still in power.

In the case of Abacha and Nigeria, Peter Carr, a spokesman for Justice told ICIJ that “What happens in each individual case is determined by court order, which will happen at a later date with the funds identified in the Abacha order.”
 
For several years, some have been advocating for more creative uses of the money and the Abacha case has stirred them to action. One advocate is Alexander Sierck, counsel to an organization called the Socio-Economic Rights and Accountability Project (SERAP), a non-governmental organization seeking to hold the Nigerian government accountable. In a letter to the Justice Department last month, Mr. Sierck asked that the $458 million “be conveyed to a reliable U.S. or Nigerian charitable organization to be spent on health care, for example, subject to anti-corruption safeguards.”

There is precedent for this approach.  In 2007, Justice took $84 million that had been seized as part of a bribery scheme involving officials in Kazakhstan and used the entire amount to create the BOTA Foundation, a non-governmental organization that supports education, health and social welfare in that country.  By all accounts it is working.  The BOTA Foundation has anti-corruption guidelines in place, has a solid track record of using the money wisely and the money has remained out of the hands of corrupt government officials.

In a 2009 speech, Attorney General Eric Holder cited several cases of repatriated assets, without giving any details.  These include $20 million returned to Peru, $100 million to Italy and several million to Nicaragua.  Mr. Carr, the Justice spokesman, said he did not have further information on these arrangements.

Mr. Sierck, a former Justice Department official and expert on white collar crime, has his own ideas – not just for the Abacha money but for all seizure cases.  He would like to see a general process set up to determine the fate of seized money, setting out rules and criteria for handling these windfalls. Once this process was in place, Justice could then decide whether it would keep the money and give it to the U.S. Treasury, return it to any new government that might replace a corrupt regime or give to a NGO for special projects, or anything else under the guidelines.

“What we are proposing is that Justice set up a process for handling this,’’ said Mr. Sierck, in an interview with ICIJ.  That, too, he acknowledges might be tough, given his own experience in government. There’s bureaucratic inertia, a resistance within the government to set up new mechanisms, and always the issue of turf, since any such program would also involve the departments of State and Treasury, he said.

So far, no one at Justice has answered Mr. Sierck’s letter, not even to acknowledge its receipt. And given how difficult it might be to enact the process he describes: “I’m not surprised I’ve not heard back.’’