US Justice Department hones in on corrupt African’s US assets

On June 11, 2012, the US Department of Justice amended its complaint seeking the forfeiture of real and personal property held for the benefit of Teodoro Nguema Obiang Mangue, son of the President of Equatorial Guinea and the nation’s Second Vice President for National Defense and State Security.

The US case, filed under Title 18, US Code Section 981(a)(1)(C) and (a)(1)(A), says the property was derived from violations of US and foreign law, including money laundering under Title 18, US Code Sections 1956 and 1957.

The new complaint alleges that Obiang obtained the property in California through abuse of public office and laundered the funds through US financial institutions and businesses. The complaint says the US already has possession of Obiang’s 2011 Ferrari.

US prosecutors target corruption with forfeiture law tied to laundering

As its basis for forfeiture, the US says the property constitutes, or is derived from, proceeds traceable to an offense that is a “specified unlawful activity” under the US money laundering law. (Title 18, US Code Section 1956(c)(7)) These SUAs involve offenses committed in another country, such as “extortion,” “the misappropriation, theft, or embezzlement of public funds by or for the benefit of a public official,” bribery of a public official, and domestic bank fraud, in violation of Title 18, US Code, Section 1344.

The complaint alleges assets are subject to forfeiture because they constitute property involved in a money laundering violation under Title 18, US Code Section 1957, or is property traceable to these assets. Section 1957 prohibits a monetary transaction with property known to be the proceeds of unlawful activity of a value greater than $10,000.

Hundreds of millions in corrupt assets hidden across four continents

The new complaint cites a litany of offenses under Equatorial Guinea laws, including abuse of public office, expropriation of assets by public official, taking advantage of official position to exercise a profession or involving oneself in a business related to official duties, and collection of illegal taxes.

The complaint discusses that in 1991 Obiang came to the U.S. to study English at Pepperdine University in Malibu, allegedly paid by Walter Oil and Gas Corporation, a U.S. company. Two years after he left Pepperdine, he was awarded a 20-year concession to harvest timber from 61,000 acres of rainforest in Equatorial Guinea by his father, the President.

While he had a salary of less than $7,000 per month, the complaint says Obiang “spent more than $300 million” acquiring assets on four continents between 2000 and 2011.” His US purchases included a $30 million Malibu estate, a $38 million private jet, and $1 million worth of Michael Jackson memorabilia.  He also brought an $80 million home in Paris, which is the subject of a criminal complaint in Paris brought by Transparency International and other Non-Governmental Organizations (NGOs), and a $15 million property in Sao Paulo.

The new 100-page complaint chronicles the deposit of huge amounts of cash at Riggs National Bank, in Washington, DC, including $11.5 million from 2000 to 2002. Riggs closed the Equatorial Guinea accounts in 2004 and later pleaded guilty for failing to file Suspicious Activity Reports on many customer transactions, in violation of the Bank Secrecy Act. (Title 31, US Code Sections 5318(g) and 5322.)

Obiang used shells, trust accounts to disguise ownership of US assets

The complaint details the alleged efforts by two California lawyers to help Obiang by allowing their trust accounts to be used for moving his dirty money so banks would think the funds were payment for legal services or otherwise related to their legal work in forming shell corporations used to conceal the beneficial ownership of the assets by Obiang.

The Senate Permanent Subcommittee on Investigations has held hearings on the legal and ethical issues on the ability of the Obiang family to use US banks, lawyers and real estate professionals to launder ill-gotten funds. Subcommittee Chairman, Senator Carl M. Levin, has introduced S. 1483, the Incorporation Transparency and Law Enforcement Assistance Act. He has introduced similar legislation over the past several years, but the bills have never been approved by the Senate committees for a vote by the full Senate.

Justice Department initiative aims to forfeit corruption proceeds

The case illustrates the proactive work of the US Justice Department’s Kleptocracy Asset Recovery Initiative, which was launched in 2010. Led by the Asset Forfeiture and Money Laundering Section of the Criminal Division, its goal is to enable the department to ensure that corrupt leaders may not obtain safe haven in the US for stolen wealth.

If the US government uncovers such wealth, the department has pledged to forfeit and return the stolen money to the people and government from which it was taken. One challenge in the Equatorial Guinea case and that of other countries with a history of corruption may be to return the stolen wealth and assure that it will be used for the benefit of the people.

(This article is adapted from the September 2012 edition of the International Enforcement Law Reporter (IELR), published by Bruce Zagaris, attorney and partner at Berliner, Corcoran & Rowe, in Washington DC. Mr. Zagaris, who is a member of the ACFCS Advisory Board, is one of the world’s leading experts on international issues in the financial crime field. IELR is a monthly publication covering global criminal and civil enforcement issues, including money laundering, fraud, corruption, tax enforcement, treaties and asset recovery. To subscribe to IELR, visit www.ielr.com.

Mr. Zagaris will be a speaker at the ACFCS Financial Crime Conference & Exhibition, September 13-15, 2012, at the Sheraton New York Hotel & Towers. www.financialcrimeconference.com)