When Kleptocrats Bring Money Into The U.S., There's Now A Plan To Seize It

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When foreign leaders loot their homelands, they sometimes like to stash their valuables in the U.S. Yachts, mansions and artwork have all been purchased in America with laundered money, according the the U.S. Justice Department.

It happens often enough that the department has set up a special unit dedicated to tracking down international kleptocrats.

Some foreign rulers should get points just for pure audacity: Sani Abacha, Nigeria's authoritarian ruler from 1993 until his death in 1998, viewed his country's coffers as his own private ATM, says Stuart Gilman, who helped track down stolen assets for the United Nations and the World Bank.

"He would literally take suitcases full of money from the national bank and bring it to London and Switzerland and other places," Gilman says.

The Justice Department sought to recover $625 million from Abacha, and seized $458 million. Abacha's family is appealing the case.

Then there's Teodoro Nguema Obiang Mangue, the vice president of Equatorial Guinea and son of longtime President Teodoro Obiang Nguema Mbasogo. According to the Justice Department, the son went on a $100 million shopping spree in the U.S.

The U.S. government went after the younger Obiang's assets in 2011, including a hilltop mansion in Malibu, Calif., expensive sports cars and Michael Jackson memorabilia. Assistant Attorney General Leslie Caldwell says the memorabilia included a white glove encrusted with crystals that Jackson used on tour in the 1980s.

"In fact, I think the case was titled United States vs. One White Michael Jackson Tour Glove," she says.

The Justice Department was seeking $70 million and recovered $30 million in the Obiang case.

Two dozen cases

The special unit at the Justice Department, the Kleptocracy Asset Recovery Initiative, has pursued some two dozen cases involving dictators, corrupt foreign officials and royalty.

The unit, filled with criminal investigators, prosecutors and corruption squads from across a number of federal agencies, was created about six years ago. Caldwell says its mandate is to prevent illegal money flowing through the U.S. financial system

"Essentially that dirty money really hurts our financial system and hurts our markets," she says. "If you're spending $30 million or $50 million in cash to buy an apartment in New York, it skews the market."

Jack Blum, a Washington lawyer who has worked on asset recovery cases for the United Nations, says a favorite place for corrupt foreign leaders to stash their stolen money is U.S. real estate, where identities can be easily hidden using shell companies.

"You have to be pretty dumb, if you're a crook, to buy an apartment in New York and hang a sign on it that says, 'I'm a Russian oligarch who stole X, Y and Z money,'" he says.

Shell companies figure prominently in the biggest case to date for the Kleptocracy Initiative. It involves the alleged theft of $3.5 billion from the sovereign wealth fund in Malaysia, called the 1 Malaysia Development Berhad, or 1MDB.

Financing a hit movie

According to court papers, $1 billion in stolen money was spent in the U.S. on the purchase of luxury hotels and homes, executive jets, at gambling casinos, and to help finance the movie The Wolf of Wall Street, starring Leonardo DiCaprio.

DiCaprio thanked the team behind the film's financing when he picked up his 2014 award for best actor at the Golden Globes. There are no allegations DiCaprio did anything wrong, but the case implicates Najib Razak, Malaysia's prime minister, who denies all allegations of wrongdoing.

Gilman says seizing assets from a foreign leader — and Razak is still in power — can create a diplomatic nightmare, but he says that can't impact the case.

"The prime minister is not going to live forever. And when he's out of office and all this money is discovered in the U.S., are we better off having been pro-active or basically wait until the prime minister dies and apologize?" he says.

It's one thing to seize the stolen assets, another to retain them. The accused in all these cases employs a raft of lawyers, and it's often difficult to find witnesses and gather evidence overseas. For that reason, the Justice Department focus is on civil forfeitures, or trying to get the assets back, rather than prosecutions.

Any money from the seized assets is sent back to the country to which it belongs.

No one has been prosecuted so far, but Caldwell says there is a criminal investigation in the 1MDB case that could lead to a prosecution.

So far the Kleptocracy Initiative has recovered about 10 percent of the assets it has gone after. And that white Michael Jackson glove? It's back in Equatorial Guinea.

Still, Caldwell says the unit has been successful, for a relatively new initiative.

"I don't think the success of the Kleptocracy Initiative should necessarily be measured by the dollar amounts that we recover. I think it should be measured by the fact that we're doing it at all," she says.

The 1MDB case will be the big test, says lawyer Blum.

"It's a big challenge, because the money is so big and the consequences are so huge, they can't simply walk away and say it didn't happen," he says.