Past Corruption Is Nigeria's "Biggest Single Problem" (But expert calls for
worldwide reforms)
Author:  Charles W. Corey
Date:  2000/05/26

Text:
Washington File Staff Writer

Washington -- The "biggest single problem" Nigeria faces today is the
"corruption of the past" which is "hanging over" its future economic growth
in the form of a large external debt, an international corruption and
transparency expert has told the United States Congress.

Jack A. Blum, an attorney who specializes in controlling bank fraud,
government corruption and money laundering, said May 25 that "solving"
Nigeria's long-term debt and corruption problem "will take a lot more than
conferences on civil society and how to make people more honest."

To solve the problem, he told the Subcommittee on Domestic and International
Monetary Policy in the U.S. House of Representatives, "You have to bring
criminal justice and recovery of money into play. That is absolutely
essential."

That, he said, means "getting at the proceeds of corruption, going after the
billions (thousands of millions of dollars) that (Former Nigerian Head of
State, General Sani) Abacha took and the billions more that prior
governments looted from the country."


Blum, who was called to testify on the Nigerian debt and corruption
situation, said "Many of those people (who took those public funds) are
sitting in London as some of the wealthiest people in England. Those assets
cannot be overlooked.... Four billion (four thousand million dollars) with
Abacha, $40 billion ($40,000 million) at least since independence," with
some estimates running as high as $90 billion ($90,000 million).

Blum suggested a broad array of international banking and legal reforms
which should be put in place and enforced worldwide to combat this pilferage
of government funds. These include:

-- Treating money that is looted from a country the same "as we treat
(laundered) drug money," he said. Money laundering laws should apply to the
proceeds of such corruption, which has occurred on a global scale. The
countries victimized "are invariably desperately poor, and they are left
with a hangover of debt when the thieving head of state departs and that
debt" falls on their shoulders.

-- Banking laws should be changed so that money which has been looted from
national treasuries is viewed under law as "dirty money" and can be seized
in any jurisdiction. Blum said major international banks all have private
banking departments which help people "structure a way of hiding their
money" in trusts, offshore corporations, and in accounts sitting in
jurisdictions which enforce bank secrecy laws.

-- Banks that "knowingly handle the funds of corrupt officials" should be
subject to civil liability, Blum suggested. He voiced strong support for a
Transparency International proposal suggesting that authorities be able to
"go after whoever hid the money." Banks, he added, should be held
accountable to international legal standards based on the idea that they are
"trustees for the people whose money has been stolen."

-- The international "hide the money industry" which thrives in "offshore
jurisdictions" in the form of "no-name corporations and asset protection
trusts" must be brought under control, Blum said. The Organization for
Economic Cooperation and Development (OECD), the United Nations and groups
like the G-7 are essential to helping this become a reality, he said. "We
cannot tolerate secrecy," when it comes to concealing public funds, he said.


-- An international convention on the civil recovery of assets is urgently
needed, he stressed. "The problem here," he warned, "is that if you go to
court to try to get money back as proceeds of a crime, you have plenty of
treaties and ways to get at the money. If you go to court as a civil
litigant, those treaties don't apply. Yet civil law is really the first line
of defense because that is where you can make a complicated case. You don't
need jury trials. You don't have the same level of difficulty in brining the
case. We have to facilitate civil litigation where fraud and taking of
assets are involved."

-- Reforms are urgently needed in the multilateral lending agencies, he
added. "If you talk to people at the World Bank, they talk to you about
'leakage...' -- the euphemism for the money that disappeared from the money
that was lent. So far, the (World) Bank has not taken the responsibility of
recovering the money that has been stolen from (World) Bank loans. Period.
They don't do it."

Blum said the World Bank maintains that it is "the responsibility of the
country from whom the money is stolen.... And yet they have now begun a
process of auditing many of these loans and have found in those audits, as
much as 60 to 70 percent of the money has been stolen."

When this happens to these international loans -- not just from the World
Bank but all the international lending agencies, Blum said, the IMF serves
as the collection agent. "They come in and say, 'Here, we want you to
restructure so you can repay these loans,'" he said.

But "Restructuring," Blum he asserted, is simply "the taking of the money
from the poorest people in the country to repay the money that has been
stolen by the richest people. And that is an unacceptable proposition and it
should never be."

What should be happening, he said, is a "concerted, funded effort with
expertise by both the IMF and World Bank to go after the people who took the
money and make them repay it."

Additionally, he called for internal reforms at the World Bank and IMF. Both
institutions, he said, "should have personal financial disclosure"
requirements for high-level employees.

"It is inexplicable to me," he charged, "how they have gone all of these
years without the disclosure that any member of Congress makes, that any
high-level federal employee makes. Whenever any institution is in the
business of giving out $30 billion ($30,000 million) a year temptation does
arise."

Blum said when he raised the issue at the World Bank, he was told imposing
such disclosure requirements would be "bad for morale.

"If it is, so be it," Blum said.

The World Bank should set the standards for the rest of the world, he said,
"not with seminars at the village level on how to be honest, but with its
own direct performance."

Additionally, he called for transparency in the bank's internal auditing
process.

"Right now, they are doing audits which are disclosing major frauds with
loans and nobody has made public the contents of those audits and those
audits have to be made public for the democratic process to work," he noted.


(The Washington File is a product of the Office of International Information
Programs, U.S. Department of State. Web site: http://usinfo.state.gov)