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FCPA Blog Daily News

Entries in Anglo Leasing Finance (3)

Monday
Dec282009

Are We Safer Yet?

In light of the Christmas Day attack on Northwest Flight 253 from Amsterdam to Detroit, let's go off topic with an item from the December edition of Foreign Policy magazine. The story is hard to believe but apparently true:

Since 2007, the U.S. State Department has been issuing high-tech "e-passports," which contain computer chips carrying biometric data to prevent forgery. Unfortunately, according to a March report from the Government Accountability Office (GAO), getting one of these supersecure passports under false pretenses isn't particularly difficult for anyone with even basic forgery skills.

A [Government Accountability Office] investigator managed to obtain four genuine U.S. passports using fake names and fraudulent documents. In one case, he used the Social Security number of a man who had died in 1965. In another, he used the Social Security number of a fictitious 5-year-old child created for a previous investigation, along with an ID showing that he was 53 years old. The investigator then used one of the fake passports to buy a plane ticket, obtain a boarding pass, and make it through a security checkpoint at a major U.S. airport. (When presented with the results of the GAO investigation, the State Department agreed that there was a "major vulnerability" in the passport issuance process and agreed to study the matter.)

From "The Top 10 Stories You Missed in 2009," Foreign Policy (December 2009) here.

*   *   *

Proceed to passport control. Here's an excerpt from our March 9, 2009 post:

The government [of Kenya] in 2002 had said it wanted to update the way it printed and tracked its passports. Everything would be new and high-tech. A French company was found for the job, at a price of €6 million. But the contract went instead to an unknown U.K. company called Anglo Leasing Finance, at a price of €30 million. There was no public tender and the story only leaked to the press because of a junior civil servant. [Government graft-buster John] Githongo grabbed the investigation. Two years later, he'd uncovered about twenty government contracts awarded to phantom overseas companies at inflated prices, signaling the presence of high-level corruption. And most of the tainted contracts related to Kenya's security apparatus -- passport controls, forensic labs, security vehicles and satellite services, among others.

Sunday
Jun282009

Writing Modern History

An extended interview in this month's Guernica with Michela Wrong is great reading. She's the British journalist who's current book is It’s Our Turn to Eat: The Story of a Kenyan Whistle-Blower. In the book and the interview, she uses the story of John Githongo to talk about the root causes of corruption in Africa, digging deep into tribalism, colonialism and western aid. In other words, she's a serious (but never boring) journalist -- we'd call her a "writer and thinker" -- who doesn't fall for slogans and bumper stickers when it comes to the causes of graft and its cures.

We won't spoil the interview. But here's the set up:

On February 6, 2005, John Githongo appeared at Michela Wrong’s London doorstep, on the run and fearing for his life. Githongo, Kenya’s anti-corruption czar, had done his job too well. Over the past two years, Githongo had uncovered a string of shady procurement deals that led directly to the same ministers who had hired him, including President Mwai Kibaki. In the largest of these, a mysterious British firm called Anglo Leasing was awarded government contracts at hugely inflated prices.

When Githongo investigated the company, he was told to back off, eventually discovering that Anglo Leasing did not exist—“Anglo Leasing,” one minister told a stunned Githongo, “is us.” Then the death threats began. Wrong, a long-time Africa correspondent for various British publications and a friend of Githongo’s, had extended the invitation for a London stay at their last dinner together, where Githongo seemed nervous and distracted. That was three months earlier. Now here he was, suitcase in hand, in need of a safe house. . .

Read our prior posts about John Githongo here.

* * *
From Frederic Bourke's Trial. On Friday the prosecution rested its case. The defense called Robert Evans, Bourke's friend since their seventh-grade in Michigan. His account, Bloomberg's David Glovin reported, "contradicted that of Hans Bodmer, [Viktor] Kozeny’s former lawyer, who earlier testified that he told Bourke details of the bribery scheme during a walk around an Azerbaijan hotel at 8 a.m. on Feb. 6, 1998."

Evans said he and Bourke didn't arrive in Baku that day until 9:30 a.m. and didn't talk with Bodmer until hours later. Evans also said Bodmer told them the Azeri president supported Kozeny’s venture and “was in on the deal.” But he said nothing about illegal payments.

Glovin recaps the case this way: "Bourke, who was once married to a member of the family that owned Ford Motor Co., is accused of investing $8 million with Kozeny knowing he was paying bribes. Backed by $350 million, Kozeny wanted to buy Azerbaijan’s state oil company, known as Socar, for one-tenth of what he valued it and to re-sell it at a profit. . . . Bourke denies knowing of the bribes and says Kozeny stole more than $180 million from him and other investors. Azerbaijan, a nation in the Caspian Sea region, never sold Socar, wiping out the investment. Kozeny, who has also been charged in the case, is a fugitive living in the Bahamas."

Why, by the way, do we mention David Glovin so often? Because he's the only journalist publishing regular accounts of Bourke's trial. He's also a great reporter who covers the federal courthouse in Manhattan for Bloomberg. When the Madoff story broke on his turf, his dispatches -- packed with facts, color and analysis that reached beyond daily journalism -- led the international coverage. So we're lucky he's sitting in on the Bourke proceedings, which he thinks might conclude this week.

Read David Glovin's reports on the trial here.

Read all our posts about U.S. v. Kozeny and the prosecution of Frederic Bourke here.
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Sunday
Mar082009

Kenya, Corruption And Global Security

A Reuters report said FBI Director Robert Mueller made a one-day visit to Kenya last week. After meeting with the prime minister, Mueller was quoted as saying, "We discussed what could be described as the unhealthy climate of impunity here in Kenya and steps that can be taken to investigate and to prosecute public corruption."

Perhaps looking for a reason for Mueller's visit, Reuters said Kenya is "sandwiched between the chaotic Horn of Africa and turbulent Great Lakes region [and] was the target of Al Qaeda-linked extremists who blew up the U.S. embassies in Kenya and in Tanzania in 1998."

What's the connection between the corruption Mueller was talking about and the security concerns mentioned by Reuters? We haven't seen hard studies linking the two. But our eyes tell us that corruption breeds weak institutions that aren't dependable when it comes to the fight against terrorism. So does that explain why the FBI director was in Kenya last week? Was he there to urge the government to clean itself up or risk becoming a haven for extremists? We don't know the answer. But knowing John Githongo's story, it's easy to see why Kenya's corruption might be a special concern to Mueller. Here's what happened.

In December 2002, Kenya's new president, Mwai Kibaki, said he'd end corruption. And when he needed someone to lead the fight, he picked John Githongo (pictured above). Named permanent secretary for ethics and governance in the office of the president, Githongo, then 37, was a perfect choice. He was a popular journalist, a passionate anti-corruption crusader, and founder and head of Transparency International's Kenya office since 1999. It all looked good. But then came the so-called Anglo Leasing Finance scandal -- or Kenya's Watergate, as many called it.

The government in 2002 had said it wanted to update the way it printed and tracked its passports. Everything would be new and high-tech. A French company was found for the job, at a price of €6 million. But the contract went instead to an unknown U.K. company called Anglo Leasing Finance, at a price of €30 million. There was no public tender and the story only leaked to the press because of a junior civil servant. Githongo grabbed the investigation. Two years later, he'd uncovered about twenty government contracts awarded to phantom overseas companies at inflated prices, signaling the presence of high-level corruption. And most of the tainted contracts related to Kenya's security apparatus -- passport controls, forensic labs, security vehicles and satellite services, among others.

He wrote a report and delivered it to the president in November 2005. (A copy, later leaked to the public, can be downloaded here.) Soon after, he left Kenya for England, fearing for his safety. From his exile in the U.K., Githongo publicly blew the whistle on Kenya's top politicians. President Kibaki was forced to fire three ministers -- though he reappointed two of them a year and half later.

As his friend and fellow journalist Michela Wrong put it in 2006:

Appointed within days of the opposition's election victory in the 2002 polls, Githongo spent two years as permanent secretary for ethics and governance. When he fled to London last year, it was clear he had stumbled on something toxic.

His 36-page dossier . . . reveals what that was. In compelling detail -- Githongo was always fastidious about keeping a diary -- he records what he alleges were his conversations with Kenya's vice-president and three ministers, who confess their roles in concealing a series of bogus contracts designed to leach hundreds of millions of dollars from the exchequer. . . .

In July 2007, Britain's Serious Fraud Office opened a criminal investigation. It was looking into contracts between the Kenyan government and "business entities collectively known as the Anglo Leasing matter." With help from the City of London Police, in May 2008 private and business addresses in the U.K. were searched. Documents seized in the raids led the SFO to ask for and receive evidence from Spain, France and Switzerland. But Kenya refused to cooperate, and without its help, the SFO said it couldn't make a case.

On February 4, 2009, the SFO ended its investigation into Anglo Leasing Finance. Its announcement is here. A month later, FBI director Mueller was in Nairobi, talking about Kenya's "unhealthy climate of impunity."

Was Mueller perhaps telling the country's leaders that the FBI will pick up the case where the Serious Fraud Office left off, just as it did with BAE Systems? Did the director tell the Kenyan prime minister that the FBI and Justice Department will use the Foreign Corrupt Practices Act to pursue the people behind Anglo Leasing Finance and phantom companies like it? Did he explain that when that happens, Kenya's crooked politicians will be named and shamed on the global stage?

And what about John Githongo? In 2006, the New York Times had said:

In tilting against graft, Mr. Githongo seems to be positioning himself across a far broader front, part of a generational shift among Africans burdened by what he calls the ancestral ties between urban homes and rural roots that bind and, in his view, stymie much of the continent. . . . That has to change, he says. "Africa has been left behind by Asia and the others. We need to get our act together."
Maybe Kenya's exiled anti-corruption czar is about to get some badly needed help. This time from the FBI and the Foreign Corrupt Practices Act.
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Michela Wrong's book about John Githongo and the Anglo Leasing Finance scandal was published last month. It's Our Turn to Eat: The Story of a Kenyan Whistleblower is available from Amazon (UK) here.
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