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Nigeria: Corruption & Its International Partners

AfricaFocus Bulletin
March 25, 2014 (140325)
(Reposted from sources cited below)

Editor's Note

The Nigerian government has pledged to order a forensic audit of alleged missing oil receipts, which Central Bank Governor Lamido Sanusi reckoned at some $20 billion before his suspension by President Goodluck Jonathan in February. Previous experience with such audits has led Nigerians to be skeptical of the outcome. On a much earlier case, however, this month the U.S. Department of Justice froze some $458 million of assets embezzled by former dictator Sani Abacha and his colleagues during his years in office from 1993-1998.

Details revealed in this Department of Justice case, as well as a new Swiss investigation on sales of Nigerian oil by Swiss trading companies in 2011, show that such internal corruption is part of an ecosystem of financial actors extending far beyond Nigeria to major banks and obscure shell companies in Europe and the Americas.

This AfricaFocus Bulletin contains (1) a press release from the U.S. Department of Justice and excerpts from the formal complaint to freeze assets stolen by Sani Abacha, and (2) the introduction from a report by the Berne Declaration in Switzerland on the central role played by Swiss trading companies in handling Nigerian oil exports and providing opportunities for fraud in collaboration with Nigerian officials.

For background on the latest charges about missing oil funds, see the blog entry on http://www.cislacnigeria.net / direct URL: http://tinyurl.com/oc27f5r and a March 10 New York Times article at http://tinyurl.com/p45vyfb Sites with extensive news coverage include http://allafrica.com and http://saharareporters.com.

See in particular the roundup of news stories at http://allafrica.com/view/group/main/main/id/00029460.html

For previous AfricaFocus Bulletins on Nigeria, visit http://www.africafocus.org/country/nigeria.php

For previous AfricaFocus Bulletins on corruption and capital flows, visit http://www.africafocus.org/debtexp.php

++++++++++++++++++++++end editor's note+++++++++++++++++

U.S. Freezes More Than $458 Million Stolen by Former Nigerian Dictator in Largest Kleptocracy Forfeiture Action Ever Brought in the U.S.

Department of Justice Office of Public Affairs

March 5, 2014

http://www.justice.gov/opa/pr/2014/March/14-crm-230.html

The Department of Justice has frozen more than $458 million in corruption proceeds hidden in bank accounts around the world by former Nigerian dictator Sani Abacha and conspirators. A civil forfeiture complaint unsealed today in the United States District Court in the District of Columbia seeks recovery of more than $550 million in connection with the largest kleptocracy forfeiture action brought in the department's history.

The restraint of funds announced today includes approximately $313 million in two bank accounts in the Bailiwick of Jersey and $145 million in two bank accounts in France. In addition, four investment portfolios and three bank accounts in the United Kingdom with an expected value of at least $100 million have also been restrained, but the exact amounts in the accounts will be determined at a later date.

Acting Assistant Attorney General Mythili Raman of the Justice Department's Criminal Division and Assistant Director in Charge Valerie Parlave of the FBI's Washington Field Office made the announcement.

"General Abacha was one of the most notorious kleptocrats in memory, who embezzled billions from the people of Nigeria while millions lived in poverty," said Acting Assistant Attorney General Raman. "This is the largest civil forfeiture action to recover the proceeds of foreign official corruption ever brought by the department. Through our Kleptocracy Initiative, we are seizing the assets of foreign leaders who steal funds that properly belong to the citizens they serve. 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."

"We will not let the U.S. banking system be a tool for dictators to hide their criminal proceeds," said Assistant Director in Charge Parlave. "This action demonstrates the FBI's ability to combat international corruption and money laundering by seizing the assets of those involved. I want to thank the special agents, financial analysts and prosecutors whose hard work over the years resulted in today's announcement."

The over $458 million in frozen funds and the additional assets named in the complaint represent the proceeds of corruption during and after the military regime of General Abacha, who assumed the office of the president of the Federal Republic of Nigeria through a military coup on Nov. 17, 1993, and held that position 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 from the government of Nigeria and others, then laundered their criminal proceeds through the purchase of bonds backed by the United States using U.S. financial institutions.

As alleged in the complaint, General 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 necessary for national security. The conspirators 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 Government of Nigeria to purchase 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. In addition, General Abacha and his associates 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 United States.

The complaint seeks to forfeit bank accounts and investment portfolios with funds located in Bailiwick of Jersey, France and the United Kingdom. On Feb. 25 and 26, 2014, U.S. arrest warrants for the assets were enforced in Jersey and France though mutual legal assistance requests and in the United Kingdom through litigation brought pursuant to the U.K. Civil Jurisdiction and Judgments Act. The complaint also seeks to forfeit five corporate entities registered in the British Virgin Islands.

This case was brought under the Kleptocracy Asset Recovery Initiative by a team of dedicated prosecutors in the Criminal Division's Asset Forfeiture and Money Laundering Section, working in partnership with federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where appropriate, return those proceeds to benefit the people harmed by these acts of corruption and abuse of office. Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to kleptocracy@usdoj.gov.

The investigation was conducted by the FBI. The case is being prosecuted by Trial Attorney Elizabeth Aloi and Assistant Deputy Chief Daniel Claman of the Criminal Division's Asset Forfeiture and Money Laundering Section, with substantial support from the Criminal Division's Office of International Affairs. The department appreciates the extensive assistance provided by the Governments of Jersey, France and the United Kingdom in this investigation.


Verified Complaint for Forfeiture In Rem

Case l:13-cv-01832-JDB Document 1 Filed 11/18/13

Asset Forfeiture and Money Laundering Section, Criminal Division, United States Department of Justice 1400 New York Avenue, NW, 10th Floor, Washington, DC 20005,

[Excerpts only]

I. Introduction

1. This is an action in rem to forfeit corporate entities and more than $500 million in other assets involved in an international conspiracy to launder proceeds of corruption in Nigeria during the military regime of General General his son Mohammed Sani Abacha, their associate Abubakar Atiku Bagudu, and others embezzled, misappropriated, defrauded, and extorted hundreds of millions of dollars from the government of Nigeria and others, including through the three criminal schemes described herein. They then transported and laundered the proceeds of those crimes through conduct in and affecting the United States. The defendants in rem are subject to forfeiture as property involved in money laundering offenses in violation of U.S. law.

2. As alleged herein, in one scheme, General Abacha, together with Mohammed Sani Abacha, Bagudu, and others, systematically embezzled public funds worth billions of dollars from the Central Bank of Nigeria (CBN) on the false pretense that the funds were necessary for national security. After causing the CBN to disperse the funds, often in cash, General Abacha and Bagudu then moved the funds overseas, including through U.S. financial institutions (the "Security Votes Fraud"). In another scheme, General Abacha and his finance minister, Anthony Ani, caused the government of Nigeria to purchase non-performing government debt from a company controlled by Bagudu and Mohammed Abacha at vastly inflated prices, generating a windfall of over $282 million for Mohammed Abacha and Bagudu through U.S. financial transactions (the "Debt Buy-Back Fraud"). Finally, in the third scheme alleged herein, General Abacha and his associates extorted more than million from a French company and its Nigerian affiliate in connection with payments on government contracts (the Extortion").

3. Proceeds of the Security Votes Fraud were transported into and out of the United States in violation of U.S. law and pooled into bank accounts in London, where they were used to purchase hundreds of millions of dollars of U.S. dollar-denominated Nigerian bonds. The bonds generated tens of millions of dollars in interest paid through Citibank in New York and guaranteed by the United States; in effect the conspirators lent money stolen from Nigeria back to Nigeria with zero risk and at enormous profit. By 2007, the bonds were liquidated, and the proceeds from the sale of the bonds, together with the proceeds of the Debt Buy-Back Fraud and Extortion, were deposited into the defendant accounts, using the defendant corporate entities and through U.S. financial transactions, as described herein. The defendant corporate entities are registered in the British Virgin Islands, and bank accounts and investment firms holding the other defendant assets are located in the United Kingdom, France, and the Bailiwick of Jersey.

IV. Factual Allegations

A. Key Participants - General Abacha, his Associates, and their Corporate Entities

8. General Sani Abacha was a military officer in Nigeria who assumed the office of the President of the Federal Republic of Nigeria through a military coup on November He held the office of the President until his death on June 8, Prior to assuming the presidency, he served as Chief of Army Staff (1985-1989), Chairman of the Joint Chiefs of Staff (1989-1990), and Minister of Defense (1990-1993). As described herein, General Abacha conspired with others to steal and defraud hundreds of millions of dollars from Nigeria, extort money from third parties wishing to do business in Nigeria, and launder the proceeds of that theft, embezzlement, misappropriation, and extortion throughout the world.

9. Ibrahim Sani Abacha was the first son of General Sani Abacha. Ibrahim Abacha participated in the conspiracy to steal hundreds of millions of dollars from the Nigerian government and launder the proceeds around the world. He died in a plane crash in January 1996.

10. Mohammed Sani Abacha is the second son General Sani Abacha. After Ibrahim death, Mohammed Abacha assumed his brother's role in the conspiracy to steal hundreds of millions of dollars from Nigeria and launder the criminal proceeds throughout the world. Mohammed Abacha received and helped to launder more than $700 million in cash stolen directly from Nigeria's public coffers. He also is a signatory and/or a corporate representative designated on many of the defendant assets.

11. Abubakar Atiku Bagudu was an associate of General Abacha and his sons who participated in the conspiracy to steal and launder hundreds of millions of dollars. Among other things, Bagudu played an instrumental role in setting up and executing the complicated financial transactions used to launder the proceeds of the conspiracy. He is also a signatory and/or corporate representative designated on many of the defendant assets.

12. Ismaila Gwarzo held the position of National Security Advisor (NSA) during the presidency of General Sani Abacha, and Gwarzo participated in the conspiracy to steal and launder hundreds of millions of dollars. Among other things, Gwarzo prepared and executed the false paperwork that caused the CBN to release hundreds of millions of dollars worth of U.S., U.K., and Nigerian currency as part of the Security Votes Fraud described below.

13. Alhaji Ahmadu Daura was an associate of the Abacha Family and operated the Sunshine Bureau de Change, a money exchange business located in Nigeria. Daura participated in the conspiracy by moving criminal proceeds out of Nigeria to accounts he controlled in England and by transferring criminal proceeds into and out of the United States to accounts controlled by the Abacha Family.

14. Anthony Ani held the position of Minister of Finance during the presidency of General Abacha. Minister Ani authorized the disbursement of Nigerian government funds in furtherance of the Security Votes Fraud and the Debt Buy-Back Fraud, both described below.

15. David Umaru was an attorney and associate of the Abacha family. Umaru participated in the conspiracy by communicating General extortion demands to third parties wishing to do business in Nigeria, including as described below to the owners of Group, a French-based construction company.

[Points 16 to 24 list the names of companies used in these transactions, including Doraville Properties Corporation, incorporated in the British Virgin Islands; Eagle Alliance International Limited, incorporated in Ireland; Harbour Engineering and Limited, incorporated in the British Virgin Islands; Mecosta Securities, Inc., incorporated in the British Virgin Islands and holding accounts in London, Zurich, and Geneva; Morgan Procurement Corporation, incorporated in the British Virgin Islands and holding accounts in London; Rayville International, incorporated in the British Virgin Islands, and holding an account in Paris; Ridley Trust, registered in Guernsey, Channel Islands; Ridley Group Limited (Ridley Group),incorporated in the British Virgin Islands on June 10, 1997; and Standard Alliance Financial Services, Limited, incorporated in the British Virgin Islands.]

[Official complaint goes on to detail the mechanisms used for obtaining the funds and laundering them through various accounts. For the full text visit
http://www.justice.gov/opa/pr/2014/March/14-crm-230.html]


Swiss traders' opaque deals in Nigeria

Berne Declaration

Lausanne, Switzerland

[Excerpts only. Full text at http://www.evb.ch/en/p21687.html]

Introduction

The number one producer of crude oil in Africa, the Federal Republic of Nigeria is having trouble lifting its population out of extreme poverty. For the last ten years the country has experienced strong growth, largely due to oil revenues. And yet this West African country, the most populous of the continent with around 173 million inhabitants, has hardly benefited. Both the percentage of children in full-time education as well as life expectancy are significantly below the average for sub-Saharan Africa. Moreover, the Gini coefficient shows that Nigeria is one of the most inegalitarian countries in the world. Oil, which makes up 58 % of State income, is clearly not contributing to the development of this country as much as it could and above all as much as it should.

This situation owes a great deal to the corruption that is rotting the State, which ranks 139th out of 179 countries in the Transparency International classification for 2012. The allpowerful national company, the Nigerian National Petroleum Corporation (NNPC), categorised as the most opaque national oil company on the planet, itself is evidence of Nigeria's 'resource curse' at work. The extent of the problem is illustrated by the fact that the NNPC has not published detailed financial reports since 2005! But this company, with its dozen subsidiaries operating at all levels of the supply chain, from production to distribution, cannot be ignored by anyone wanting to produce, export or import crude oil or petroleum products in Nigeria. It is here that Swiss commodity traders occupy a position of choice. The breadth of their activity in this country extends from the exporting of crude oil the subject of the first part of this report - to the delivery to local importers of petroleum products necessary for Nigeria's domestic consumption - the subject of the second part. In effect, this country is in a paradoxical situation: despite being the thirteenth largest producer worldwide, the structural failings of its refineries oblige the country to import petrol, kerosene and fuel oil.

In the export business, the top Swiss traders are dominant: according to the figures compiled by the Berne Declaration (BD), in 2011 they bought up no less than 36% of the 223 million barrels put up for sale by the NNPC. In value, the proportion of Nigerian oil exports allocated to Swiss firms reached 35.05% (8.731 billion dollars out of a total of 24.9 billion - see table in appendix). If Nigerian companies with a Swiss subsidiary are added to the Swiss traders, this proportion even rises to 56.22% (14.004 billion dollars). The Swiss traders operating in Nigeria appear to be closely in business with the badly managed NNPC.

The Geneva companies Trafigura and Vitol outclass their competitors thanks to opaque partnerships with the NNPC established in Bermuda. Instances show that sales between the NNPC and its two Swiss partners were carried out at prices lower than the market rates. This type of operation appears incongruous: why would the NNPC sell its crude oil at a discount? Who benefits from these transactions? The opacity of these arrangements and the frequent involvement of subsidiaries domiciled in tax havens make it impossible to answer these questions.

Swiss traders also play an important role in imports. They supply Nigerian importers with petroleum products necessary for domestic consumption. In this case it is difficult to know their market share, because the Nigerian authorities do not attribute their imports to the Swiss traders, but rather to local operators who act as intermediaries, and whose transactions are often performed outside of Nigeria.

In order to guarantee that petroleum products are sold at an affordable price on the internal market, imports are massively subsidised. But this importing system has given rise to one of the most massive frauds that the African continent has experienced. No less than 6.8 billion dollars of unjustifiable subsidies were paid out in 2009 and 2011 - that is the equivalent of nearly four times the Nigerian health budget for 2013. Police investigations carried out by the Economic and Financial Crimes Commission (EFCC), the Nigerian squad in charge of financial crimes, show that the Swiss traders do not hesitate to deal with questionable Nigerian firms, firms which in fact have no operational capacities or which are ultimately owned by politically exposed persons (PEPs). In this context, five Swiss trading firms are the object of a request for mutual legal assistance submitted by the authorities of Abuja to Berne. Moreover, as we will see in the third part, at least seven of the Nigerian 'importers' involved in this fraud have a subsidiary in Switzerland.

[The full 19-page report details the mechanisms and the lack of transparency in Swiss trading in Nigerian oil, and calls for transparency on ownership and trade as a first step to limiting the extensive fraud the system makes possible.]]


AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

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