(This ACFCS.org story is adapted from an article in the November 2014 International Enforcement Law Reporter, published and edited by attorney Bruce Zagaris. A partner at Berliner, Corcoran & Rowe, in Washington, DC, Mr. Zagaris is member of the ACFCS Advisory Board and a leading world expert on international financial crime matters.)
On August 7, the U.S. Department of Justice announced it had forfeited more than $480 million in corruption proceeds hidden in bank accounts worldwide by former Nigerian dictator Sani Abacha and his associates.
The forfeited assets are the proceeds of corruption during and after the military regime of General Abacha. On November 17, 1993, he took the office of the president of Nigeria through a military coup and remained in office until his death on June 8, 1998. The complaint alleges that General Abacha, his son Mohammed Sani Abacha, their associate Abubakar Atiku Bagudu and others embezzled, misappropriated and extorted billions of dollars from the Nigerian government and others, then laundered their criminal proceeds through U.S. financial institutions and the purchase of bonds backed by the U.S.
The judgment arises from a civil forfeiture compliant the DOJ filed in November 2013 against more than $625 million in the largest kleptocracy forfeiture action brought in DOJ’s history. The forfeiture judgment includes approximately $303 million in two bank accounts in the Bailiwick of Jersey, $144 million in two bank accounts in France, and three bank accounts in the United Kingdom and Ireland with an expected value of at least $27 million.
The ultimate disposition of the funds will follow the execution of the judgment in each of these jurisdictions. Claims to an additional approximately $148 million in four investment portfolios in the U.K. are pending.
The complaint alleges Gen. Abacha and others systematically embezzled billions of dollars in public funds from the Central Bank of Nigeria on the false pretense that the funds were needed for national security. The defendants withdrew the funds in cash and then moved the money overseas through U.S. financial institutions.
General Abacha and his finance minister also allegedly caused the Nigerian government to buy Nigerian government bonds at vastly inflated prices from a company controlled by Bagudu and Mohammed Abacha, generating an illegal windfall of more than $282 million. Additionally, General Abacha and his co-conspirators allegedly extorted more than $11 million from a French company and its Nigerian affiliate in connection with payments on government contracts. Funds involved in each of these schemes were allegedly laundered through the U.S.
The Justice Department said it appreciates the extensive assistance provided by the governments of Jersey, France and the U.K. in the investigation.
Case raises questions on whether and how to repatriate corruption proceeds
One of the interesting unknown issues is the extent to which forfeited funds will be returned to Nigeria or shared with the countries which participated in the asset forfeiture cases. On March 27, 2014, Nigeria’s Justice Minister Mohammed Adoke applauded the Justice Department’s efforts and said assets frozen by the U.S. should ultimately be returned to Nigeria. The U.S. government’s Kleptocracy Asset Recovery Initiative “where appropriate” provides for the return of stolen proceeds “to benefit the people harmed by these acts of corruption and abuse of office”.
However, repatriation of the Abacha funds directly to the Nigerian treasury may result in criticism among civil society leaders who fear the Nigerian government cannot be trusted to spend money on public services.
In past transnational corruption settlements, courts have directed that funds be channeled through non-profit organizations or special vehicles where the money would be directed for specific public projects and the expenditure was transparent and monitored. For instance, in 2011 BAE paid funds to the achievement of specific and measurable development objectives in the education sector in Tanzania as settlement of a bribery case.6
A similar case resulted from a Foreign Corrupt Practices Act (FCPA) investigation, which resulted in a U.S. citizen agreeing to transfer to the World Bank USD84 million, to be used in activities taking place in Kazakhstan. The funds were recovered after U.S. authorities indicted the defendant for bribes paid in Kazakhstan in connection with contracts in the oil and gas sector.
The BOTA Foundation, which was expressly created in May 2008 as an independent non-profit organization, managed the funds pursuant to an agreement among the governments of Kazakhstan, Switzerland, and the U.S., with the assistance of the World Bank. The funds were destined to programs for children and youth and were managed in cooperation with civil society representatives.