Teodorin Obiang and asset recovery

Tena Prelec and Georgia Garrod

What happened?

The case of Teodorin Obiang is an emblematic case for the study of kleptocracy, corrupt capital flows and asset recovery. His father Teodoro Obiang Nguema Mbasago, one of Africa's longest-serving leaders, came to power by military coup in Equatorial Guinea in 1979. Obiang Sr's early authoritarian predisposition worsened with the discovery of huge offshore oil deposits in the early 1990s. Between 1993 and 2007, annual government oil revenues increased more than a thousand-fold, shooting up from $2.1 million to $3.9 billion; in the same period, a vast amount of this money was siphoned offshore, into the Obiang family's private bank accounts. A significant portion of these funds was deposited there by US oil companies (Firger : 1045). 2010

While Equatorial Guineans continued to live in abject poverty, the Obiang family made no effort to hide their riches. Teodorin, in particular, spent ostentatiously in some of the world's most expensive locations. In 2006, when he was earning an official monthly salary of $5,000 as Minister of Agriculture and Forestry, Teodorin bought himself a $30 million mansion overlooking the Pacific in Malibu, California, through a US limited liability company (Burgis 2020: 201). Shortly thereafter, he also purchased a $127 million six-storey mansion in Paris, decorated with more than $47 million worth of furniture (Chrisafis 2017).

Western firms offering professional services, particularly in the US, had long been accused of complicity in the movement of the Obiang family's illicitly gained wealth. A notable example was Riggs Bank in Washington, where members of the Obiang family controlled multiple accounts into which hundreds of millions of dollars from oil revenues were deposited (Silverstein 2011).

Following sanctions against Riggs for violating money-laundering regulations, the Obiang family were supported by US-based lawyers to set up a web of shell companies that would “defraud US financial institutions regarding [Obiang’s] relationship to accounts opened” (Adams 2012). Global Witness tracked the case for a decade and reported that Teodorin Obiang funnelled around $75 million into the US between 2005 and 2007. The Obiangs also retained the services of Washington PR firm Qorvis Communications, which sent out “scores of press releases highlighting all manner of good deeds by the Obiang government” (Lynch 2010).

Angola and the Dos Santos regime

Tom Shipley

What happened?

Under its long-serving former President, José Eduardo dos Santos (1979– 2017), Angola provides an example of a kleptocratic regime where an autocratic political system enabled vast resources to be directed to a select group of elites. This has led to extreme inequalities in wealth distribution that are highly damaging to Angolan society and a common consequence of this form of corruption. In a context where elite impunity has allowed kleptocratic practices to run unchecked for a long time, recent anti-corruption developments under Dos Santos's successor, President João Lourenço, show that even the most deeply rooted regimes can be disrupted, although the motives behind these countermeasures and their longevity remain open to question.

There are a distinct set of circumstances that led to the development of kleptocracy in Angola. The country endured a destructive civil war lasting from 1975 to 2002, from which Dos Santos's Movimento Popular de Libertação de Angola (MPLA) emerged as the undisputed ruling party. The MPLA's dominance has been the main feature of the political system ever since, with the party and Dos Santos winning three elections since 2008 by wide margins, while also facing accusations of repressing political dissent as well as any critical commentary from journalists and civil society.

The wartime period and domination of the subsequent peace allowed Dos Santos to carve out what the respected Angolan commentator Ricardo Soares de Oliveira has described as a “parallel state”, whereby Dos Santos assumed personal control over the “country's revenue-handling and coercive organizations” (Soares de Oliveira 2015: 22). Soares de Oliveira considers that this state, “while the bearer of some successes, is inextricably linked to the stunting of formal institutions, the misappropriation of public resources on an epic scale and the consolidation of JES’ [Dos Santos’s] authoritarian rule” (Soares de Oliveira 2015: 26). At the centre of this state sits the national oil company Sonangol, which manages the oil revenues that make up the lion's share of Angolan state revenues, as well as access to the economic opportunities that flow from the oil and gas sector.

While there is substantial secrecy shrouding the regime, over the years various controversies have come to light that suggest that corruption has been taking place on an extraordinary scale.

The case study format used in this volume was developed at the Centre for the Study of Corruption (CSC), based at the University of Sussex. It has been extensively field-tested amongst students and forms the basis for an entire module of our online MA in Corruption and Governance.

Case studies are a widely used tool in campaigning and policy-making, both in relation to corruption and other subjects. In an educational context, they are perhaps most frequently and systematically used in business schools, with the Harvard format being widely recognized as an effective device for practical analysis. The CSC Case Study Template is designed to allow a systematic analysis of a case; a judgement to be made as to whether it is or is not a case of corruption; and the presentation of information in a readable form that has multiple end-uses, including policy-making, advocacy, campaigning and education.

We are not offering a theory about corruption, although readers may tease one or more out from the case studies. Our faculty discussions have many times debated the extent to which rational choice is the nearest it is possible to get to an overarching explanation for corruption, or whether it is merely one of several means of analysing the problem. But we do not approach our case study analysis with a single theory that we are trying to illustrate. Indeed, with contributors from a range of disciplines using the same analytical template, one of our findings is how widely theoretical interpretations can vary.

Although we do not offer a single theory of corruption, we are instead offering an approach to anti-corruption problem-solving. The theory behind this approach is simple: if you have a good understanding or diagnosis of the problem, you are more likely to find a solution, and the diagnosis needs to examine a case from angles that include the harm, the benefits, the enabling environment, systems failures and the effectiveness of penalties. The CSC Case Study Template is designed to give such a description of a corruption problem, combining a concise narrative with a rigorous analysis from all angles, including the problem of how it came to happen.

An underlying observation is that there are plenty of successes in tackling corruption, not just failures.

Alstom and corporate bribery

Tom Shipley

What happened?

The Alstom scandal is a landmark corporate bribery case, which is notable for the seriousness of the offences and their global reach. In the words of Deputy Attorney General James M. Cole, a US Department of Justice official who had a leading role in investigating this case, the Alstom scheme was “astounding in its breadth, its brazenness and its worldwide consequences” having been “sustained over more than a decade and across several continents” (US Department of Justice 2014a). While the scale of this scandal, which involved millions of dollars in bribe payments to secure an estimated $4 billion in projects, is particularly shocking, it is a good illustration of the common mechanics of these schemes and the conditions that allow them to prosper.

Headquartered in France but with operations in around 70 countries, at the time these offences took place Alstom's core business was in the power and rail sectors. Alstom was a leading international firm engaged in building and maintaining the power plants and grids, which keep the lights on, and the rail networks, which keep countries on the move. The company clocked up sales of around €21 billion annually in the 2000s, employing up to 110,000 people around the world (United States v Alstom 2014). Operating in a competitive international market, a large part of Alstom's business depended on securing large, high-value contracts from state-owned power and transport companies.

The charges filed against Alstom by the US Department of Justice show that the company systematically employed bribery as a strategy for securing business from these state-owned enterprises (SOEs) (United States v Alstom 2014). The charges cover Alstom's operations in five countries – the Bahamas, Egypt, Indonesia, Saudi Arabia and Taiwan – and relate to conduct dating back to the late 1990s through to around 2011. The company's conduct in Indonesia, where some of the most egregious wrongdoing took place, provides an insight into how this scheme worked in practice.

A key client for Alstom in Indonesia was the state-owned electricity company PT Perusahaan Listrik Negara (“PLN”), which in the 2000s was looking for support to increase power generation in the country.

The Council of Europe and Azerbaijan: corruption in parliament

Roxana Bratu

What happened?

This case highlights corrupt practices that went consistently unrecognized at the highest level of the Parliamentary Assembly at the Council of Europe (PACE) for nearly 20 years. Azerbaijan engaged in “caviar diplomacy” from the inception of its membership of the Council of Europe (COE) in 2001, making consistent efforts to silence criticism and promote a favourable view within PACE in exchange for gifts and money extended to foreign politicians and public officials.

This lobbying strategy functioned in parallel with the Azerbaijani laundromat (Harding, Barr & Nagapetyants 2017), a scheme used to pay lobbyists, apologists of the political regime and MPs, as well as to launder cash via shell companies registered in the UK and elsewhere. Azerbaijan made significant use of this practice for a very long time. The justifications spun by those implicated gave the impression that these practices were generally viewed as acceptable. These factors point to an institutional culture based on a lack of transparency and accountability, high levels of informality and, ultimately, corruption.

A 2018 report into “allegations of corruption and fostering of interests” within PACE (PACE 2018a) was commissioned following reports by several NGOs, including the European Stability Initiative (2012). The investigation was carried out by an independent investigation body consisting of three former judges and highlighted that Azerbaijan joined the COE on the understanding that it would carry out reforms to human rights, fundamental freedoms of political prisoners and free elections. However, Azerbaijani officials instead created a network of supporters and apologists to silence critics (PACE 2018a). These “friends” consisted of around a dozen MPs and a few members of the secretariat who worked to further the interests of Azerbaijan from within PACE. In exchange for their support, the “friends” would receive material, symbolic and/ or political benefits.

The support by Azerbaijan, with a budget of €200,000, for the appointment of Pedro Agramunt, of Spain – first as chair of the party grouping EPP (European People's Party) and then as president of PACE – is indicative of the corrupt practices used (Freedom Files Analytical Centre 2017). This was not an isolated incident, as other MPs had received support from Azerbaijan in successfully obtaining appointments in PACE to the Monitoring Committee, the Rules Committee and as rapporteurs, leading to an apparent softening of the attitude of PACE reports towards Azerbaijan.