Globalizing stolen assets: greed, fear & a taste for the luxury goods of the West

Harvard professor and China expert Roderick MacFarquhar had an insightful op-ed in today’s New York Times, where he talks about why the Chinese elite are stashing their assets overseas and sending their children abroad for schooling. It’s not pure greed, he says, but fear.

China’s Communist leaders cling to Deng Xiaoping’s belief that their continuance in power will depend on economic progress. But even in China, a mandate based on competence can crumble in hard times. So globalizing one’s assets — transferring money and educating one’s children overseas — makes sense as a hedge against risk. (At least $120 billion has been illegally transferred abroad since the mid-1990s, according to one official estimate.)

Such massive asset transfers are happening not just from China, but other places as well, such as Russia and the resource-rich states of Africa, where the acquisitiveness of political leaders have earned some global notoriety. But is it really just fear that motivates the accumulation and transfer of wealth? Is it also not the sheer enjoyment of what money can buy?

For example, four years ago, Zeng Wei, the son of former Chinese vice president Zeng Qinghong, bought a $32.4-million mansion overlooking Sydney harbor. The elder Zeng was the right-hand man of former President Ziang Zemin and one of the most influential men in China. Using property databases, the Wall Street Journal confirmed the purchase of the house on Wolseley Road, ranked the ninth most expensive street in the world. The Journal and the Sydney Morning Herald reported that Zeng Wei and his wife had intended to build a new, $5-million, five-level, eight-bedroom house on the property, but neighbors objected to their original plan. So to get local council approval, they agreed to drop one swimming pool, instead of having one pool cascade water into another.

After all, what good is amassing wealth if you can’t enjoy it? What the West provides is not just a safe haven once things turn nasty at home. For the moneyed of the world, the West is also the lap of luxury.

This is why following the trail of luxury acquisitions by Southern or former Eastern-bloc elites has proven to be productive for investigative journalists and anti-corruption watchdogs like the London-based Global Witness. Corruption is difficult to prove; it’s less difficult to trace where the proceeds of corruption go. It’s easier to find evidence of the purchase of luxury goods than it is to document  ownership of Swiss bank accounts. Sometimes, the purchases themselves lead to those accounts.

At a forum at the Columbia Journalism School last month, Russian blogger Oleg Kashin said that what Russian elites fear most is not exposure and vilification in their homeland, but being banished from the West. “At the level of rhetoric, it’s still like Cold War times: America is our enemy, the Department of State pays for the opposition, and so on,” said Kashin, “but actually, Putin and his friends have money in Europe and America, they have children in universities there, they have vacation homes in Cote d’Azur. They’re afraid of being enemies of the West because they want to spend their money, not in Russia but in London, New York and Cote d’Azur.”

Angolan journalist Rafael Marques de Morais, who was also at the forum, agreed. He has spent years documenting high-level corruption in his country, which has been described as a “Stalinist petro-diamond state” because of its rich mineral resources and autocratic government. “All these individuals,” he said, “when they prey on the resources of the country have one big dream, they want to spend it in the West and they want the luxury goods of the West. Without the West, where are they going to spend all those millions?”

Where, indeed?
James Ibori, the convicted former governor of oil-rich Delta state in Nigeria who was believed to have stolen $250 million from his impoverished people, had a fleet of Rolls Royces, a Bentley and a Maybach parked in the garages of his London homes. He also had a $20-million Challenger jet. In three years, he racked up $920,000 on his super-exclusive American Express Centurion card. Last month, a London court sentenced him to 13 years in prison for laundering his stolen wealth through UK bank accounts, with the help of UK lawyers and accountants who set up shell companies.
Here are the details from the court proceedings, as recounted by Global Witness:

Ibori and his associates used multiple accounts at Barclays, HSBC, Citibank and Abbey National to launder funds. Millions of pounds passed through these accounts in total, some of which were used to purchase expensive London property.

In one case US$4.8 million was transferred from a Barclays account belonging to a company of which Ibori was formally a director to another account at Barclays controlled by Ibori’s lawyer, Badhresh Gohil. The funds passed through two Swiss accounts, including one at a branch of Schroders in Zurich, and were used as part payment for the private jet. In another case, Ibori and others were able to cream $37.8 million off from the sale of Delta state shares in the telecoms company V Mobile.

Ibori had numerous Barclays accounts. The prosecutor described how in one case between 1999 and 2006 Ibori deposited £1.5 million in a Knightsbridge branch of Barclays, much of this was in rolls of banknotes.

In America Ibori held two accounts at Citibank and ran up a $920,000 American Express credit bill between 2003 and 2006. He bought a $1.8 million house in Houston, as well as moving at least $500,000 through his lawyer’s client account at the now-defunct AIDT bank in Denver, Colorado.

Following the money in a globalized era, therefore, means searching for stolen assets worldwide, not an easy undertaking, given how resource-strapped journalism is these days. As UK journalist Misha Glenny said at the Columbia forum, “All this now is transnational in one form or another, there will always be trails leading from one country to another. When journalism itself is having problems with resources, investigative journalism about issues which are this difficult would need to involve cooperation between different types of journalists and different types of organizations. We need to find new ways to encourage cooperation aross border among journalists so they can have an impact.”

The unraveling of James Ibori, which spanned many years, saw journalists in Nigeria, the U.S. and the UK following the governor’s wealth trail. An investigation by the London Metropolitan Police and efforts by Global Witness helped uncover the movement of money across countries and bank accounts. To uncover corruption across borders, journalists are increasingly reliant on an investigative ecosystem – government and corporate investigators, NGO sleuthing and the work of reporters around the world.

Lone wolves may be heroic, but it’s difficult to do this kind of hunting alone.

One Comment on “Globalizing stolen assets: greed, fear & a taste for the luxury goods of the West”

  1. test says:

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