U.S. Report Details Money Laundering

The New York Times | February 1, 2010

A suitcase containing $1 million in shrink-wrapped bills, hand-carried into New York by the former president of Gabon for his daughter to buy a Manhattan apartment. Purchases of a stretch Hummer H2 armored limousine and C-130 Hercules military transport planes for a civil war in Angola. And a shell company named Sweet Pink used to funnel millions of dollars into the United States from Equatorial Guinea.

These and other deals and money transfers took place in recent years because of inadequate controls on money laundering at large American banks and unregulated American lawyers, real estate agents and lobbyists, according to a Senate report released late Wednesday.

The 325-page report by the Permanent Subcommittee on Investigations, which will conduct a hearing on Thursday, sheds new light on how banks like Citigroup, Wachovia and Bank of America unwittingly shifted hundreds of millions of dollars on behalf of African politicians, their relatives and associates.

The banks ended up closing or restricting the accounts and cooperated with the subcommittee, offering comments on individual transactions.

In all cases, the Senate report says, the banks ignored controls intended to prevent money laundering and related screens on PEP, meaning politically exposed persons — high-risk clients from corrupt countries.

The report recommends strengthening regulations against money laundering at banks and revoking exemptions for lawyers and other third parties from restrictions on money laundering in the USA Patriot Act. It recommends that Congress pass laws requiring people who form corporations to disclose the true owners.

The report, brimming with bank statements and internal e-mail messages, contains four case studies.

“Together, these four case histories demonstrate the need for the United States to strengthen its PEP controls to prevent corrupt foreign officials, their relatives and close associates from using U.S. professionals and financial institutions to conceal, protect and utilize their ill-gotten gains,” it says.

The report details how Teodoro Nguema Obiang, the son of Teodoro Obiang Nguema Mbasogo, the president of Equatorial Guinea, used lawyers, bankers, real estate agents and escrow agents, all Americans, from 2004 through 2008 to move more than $110 million into the United States, including $100 million through Wachovia and Citibank.

Mr. Obiang, the subject of a criminal investigation into charges of money laundering, bribery and extortion, also employed Sidley Austin Brown & Wood, a law firm now known as Sidley Austin, to help him buy a $38.5 million Gulfstream G-5 jet in 2005, the report says.

Janet Zagorin, a spokeswoman for the firm, did not return telephone calls seeking comment.

The report says two American lawyers, Michael Berger and George Nagler, helped Mr. Obiang circumvent controls at the banks by setting up accounts for shell companies with names like Beautiful Vision, Unlimited Horizon and Sweet Pink, named on honor of the rapper Eve, Mr. Obiang’s girlfriend at the time.

Mr. Obiang, Equatorial Guinea’s minister of agriculture and forestry, used the accounts to pay his personal expenses, including chefs and butlers for his home in Malibu, Calif., and bills at Ferrari of Beverly Hills and Dolce & Gabbana, receipts cited in the report show. He also arranged for Mr. Berger to be invited to the 2007 “Kandy Halloween Bash” at the Playboy Mansion, the report says.

It says Mr. Obiang hired two American real estate agents to help him buy the $30 million home in Malibu, with suspect money transferred from Equatorial Guinea.

The report also details how in recent years an American lobbyist, Jeffrey Birrell, helped the former president of Gabon, Omar Bongo, buy six armored vehicles, including the Hummer, and obtain United States government permission to buy six C-130 military cargo aircraft to support his government, all suspect transactions. The purchases were routed through accounts set up at HSBC, Commerce Bank and JPMorgan Chase, the report says.

Another case study details how Jennifer Douglas Abubakar, an American and the fourth wife of the former vice president of Nigeria, helped her husband bring more than $40 million in suspect money into the United States. It says some of the money was then funneled through offshore accounts.

The report also details how Pierre Falcone, a native Algerian and known arms dealer now imprisoned in France, used nearly 30 bank accounts at Bank of America’s Scottsdale, Ariz., branch to funnel millions of dollars in suspect money through the United States over 18 years.

Bernie Becker contributed reporting.