University of Washington School of Law
Transcript: Ramasastry Gittinger Professorship
April 30, 2009
Everyone, welcome. Thanks for coming out on this beautiful afternoon.
And this wonderful, full room is just a testament to how we feel about
our glorious colleague, Professor Anita Ramasastry. We are installing
her today as the Wayne and Anne Gittinger Professor of Law. I'm Interim
Dean Greg Hicks and very pleased to be presiding here today.
Just to announce a few distinguished visitors that we have here with us
today, members of the judiciary, Judge Marlin Appelwick of the
Washington Court of Appeals and Judge Don Horowitz; and members of the
Washington Law School Foundation Board and the Law School Alumni
Association Board who are with us today, Joe Brotherton, Paula
Littlewood of the Washington State Bar Association, and Craig Wright.
So thank you all for coming out today.
This is our first professorship installation of this year. Last
year, we had a raft of them, and this has just been a glorious thing
for the school. These gifts are enduring ones. To have the great
privilege of being able to have endowed professorships and chairs for a
faculty is so important. It extends the reach of their scholarship. It
gives them resources for the travel, hiring, research, assistants, all
the things that are necessary for a truly effective career as a
producing scholar, and so we are so grateful for the vision of people
who make these permanent endowments.
These are enduring gifts; they go from year to year. Then, over
time, of course, each professorship takes on additional luster, from
the gifts of whoever the incumbent might be, who have this string of
wonderful holders of the different professorships.
The Gittinger Professorship was our very first, and the
inaugural holder of that professorship was our own Professor Richard O.
Kummert, whose work in corporations law scarcely needs to be described
for anyone who's been in Washington for a time, and of course, just one
of the leading citizens of our bar and of the law school. And it's a
splendid thing to have this turnover of this professorship from Dick
Kummert to Professor Anita Ramasastry. And so here a legacy begins, and
it's a rather splendid one, if that.
This endowment was established by Wayne and Anne in 1990, as I
said, and so it's been in place for a time. And again, as I said, it's
something that will be enduring over time.
The Gittingers have been great friends in so many other ways to
the University of Washington, not only this professorship but endowed
scholarship for a varsity athlete, University of Washington
letter-holder who's admitted to the school of law.
And their philanthropy here in the region is really peerless.
They do so much, they give so unstintingly, and ask so little in
return. And the university, the law school, just has such great reason
to be grateful for their generosity and for their vision and want to
thank them in the strongest way we can for just that commitment to us
over all the long years.
So, now, it falls to me to introduce Wayne Gittinger of the
class of 1957, a partner at the Lane Powell Law Firm, currently a
member of the Tyee Executive Committee, a member of the board and
executive committee of the Seattle Sports Commission, and a BA holder
at the University of Washington in 1954, and our own JD from 1957. And
Wayne will be talking about the Gittinger Professorship and then
introducing Pat Kuszler, who will be offering some comments and
thoughts on her friend, Anita Ramasastry. Wayne?
Thank you. This School of Law'sa lot different than one I went to, in many ways.
At least two buildings ago. But as Dean Hicks mentioned, I graduated
from law school here in 1957, and it was a great experience here. And I
remember so much, all the professors I had and all the friends I made,
and I'm honored to be here to say a few words about that.
About, I guess it was 18 years ago, I think you mentioned 1990, but I think it
was maybe 15 or 16,we decided that we could give back some way. So we
created this professorship, and Dick Kummert has been there for all
those years, and now we have a new person, and that's terrific.
And I'm really here to introduce Professor Pat Kuszler. And I
had not met her myself until today, earlier, but learned some things
about her, and among others, that she's the Charles Stone Professor of
Law. And Chuck Stone, as I knew him, was a good friend, and we miss
him. Professor Kuszler is also a director of the Center for Law,
Science, and Global Health, and the new Health Law LLM program that's
going to start, I understand, this coming year. That will be a terrific
She's an adjunct professor at the UW School of Medicine, and
also the School of Public Health. A BA from Mills College, her MD from
Mayo Medical, and her jurisdoctor from Yale University. So she'll be a
great addition to this staff.
Thank you very much. And Pat?
Professor Pat Kuszler:
Well, it's my honor and pleasure today to introduce our colleague and
friend, Anita Ramasastry, for her installation as the D. Wayne and Anne
Gittinger Professor of Law. Many of you in the audience are as good of
friends with Anita as I am, so it's a particular pleasure for all of us
to be here today.
Anita's early childhood, as some of you may know, was spent in New Jersey,
where both of her parents worked as scientists and engineers in the
then-early field of telecommunications. Like many children growing up
in that time period, teachers and parents, neighbors all pushed Anita,
a very bright child, to follow the Holy Grail of science or medicine as
However, very early on, Anita disabused them of this notion. In
fact, it was on a British Airways flight to the UK, at age four, that
Anita developer her first career set of aspirations. Thrilled by the
experience of flying and travel, she determined, in short order, that
she would become a flight attendant.
Alas, her wings were clipped, albeit temporarily, to start
kindergarten. Despite this frustration of her early career plans, Anita
was a terrific student, throughout grade school and high school, and
ultimately was admitted to Harvard College.
While she was at Harvard, she became deeply interested in South Africa's
anti-apartheid movement, which was just unfolding during that time. She
soon had more of an opportunity to become involved when she was
appointed to serve on Harvard's Shareholder Advisory Committee.
Sounds kind of boring, but actually, using her position on this
committee, Anita was able to help push Harvard to divest its South
African investments. She would maintain this position on the committee
for several years, and later went on to argue for Harvard to divest
their interests in the tobacco industry.
Before going to law school, Anita moved to Australia to study
at the University of Sydney and their master's program. She received
her master's in history, and her thesis project focused on historical
literature about women migrants.
During her time there, naturally, she took advantage of the
opportunity to see the country...a very large and sparsely populated
country, she realized when she spent her Christmas holiday on a
distance camping trip with eight other students. December is midsummer
in Australia. It's very, very hot. It's particularly hot when you're
trapped in a tent with eight other very diverse students, ranging from
an ex-Korean Marine sergeant to a beauty queen who came with her
electric curling iron. Anita's skills at building a consensus were
honed during this period of time.
They've served her well since.
After returning to Boston, she continued her education at Harvard Law. By the
end of her first semester, she knew she wanted to be a law professor
and soon began to pick up various teaching engagements, working as a
teaching fellow in history, in legal writing, American government and
She also found time to do other things, like develop her poker
game, which she became an extreme expert at, and it was a dedicated
pastime for her and several of her friends.
She also met Walter Walsh, her future husband, while at
Harvard. It seems that the Harvard dorm system is set up in an unusual
fashion, where the men's floor has a TV and the women's floor has a
Well, forget the sort of obvious gender issues that are here, but
suffice it to say that opportunities and need for collaboration are
During her law school years, she developed wide-ranging interests in law, many
of which were deepened by her work during and immediately after law
school. Many of these was law reform in transitional and emerging
After law school, she became one of the charter members of the
Central European University in Budapest, a new university funded by
George Soros. One of her mentors there, Helen Hartnell, is with us
today, and Anita has continued to work with students in Budapest and
around the world on legal reform, particularly with respect to
Following her initial work in Budapest, Anita returned to New
York, where she went to work at the Federal Reserve Bank in New York.
There she worked in the area of derivative and other financial fraud
fallout issues that came about after the Wall Street debacle of the
1980s. While there, her interests and knowledge in banking law and
payment systems grew, a very technical and difficult area. She largely
credits Martin Grant, her boss at the Federal Reserve, for having the
patience and the fortitude to help her become the expert she is now
today in this field.
While living in New York, Anita volunteered at SAKI, an
organization assisting South Asian women who were victims of domestic
abuse. Later, she would weave this experience into a project here at
the law school called the Immigrant Families Advocacy Project, which
trains lawyers and law students to assist immigrants who are victims of
abuse, neglect, or human trafficking.
Anita came to us in 1995. I was one of the lucky people on the
appointments committee. In fact, I was in my second year of teaching
myself. And we were tasked to go look for the best and brightest
candidates, and Anita's resume floated right up to the top.
Anita came to Seattle on a blustery December day. So blustery,
in fact, that gale-force winds and rains prompted the numerous
businesses to close and airlines to cancel flights. Never having
visited Seattle before, Anita would have only seen old Condon Hall,
which is where she went pretty much directly from the airport, and
returned to the airport almost directly after her talk. If Lou Walter
had not taken her for a ride around campus before whisking her back to
the airport, she would never even have seen main campus.
Moreover, poor Anita never even got the classic interview
dinner, which is beloved here at the law school, and ultimately had to
learn about Seattle from a King five production titled "First Steps to
Seattle." Miraculously, Anita and Walter joined our faculty despite
After she arrived in '96, Anita quickly established herself as
a teacher, scholar, and all-around superstar. She's been named Law
School Professor of the year not once, but three times, and won the
university-wide Distinguished Teaching Award in 1998.
Her teaching interests include banking law, payment systems,
business and commercial law, both domestically and abroad. She has
diverse and intriguing research and services projects. She's served as
a commercial-law adviser to the European Bank for Reconstruction, the
US Agency for International Development, the European Commission, the
Open Society on Law Reform, and most recently she's been working with
James Filpi at the United States Department of Commerce on commercial
law reform in the Arabian Peninsula.
Another facet of her research has focused on claims resolution
in the wake of war, political corruption, terrorism, and human-rights
violations. She worked with a special claims tribunal in Switzerland on
claims related to Second World War bank accounts.
She worked on revamping the Uniform Money Services Act here in
the States to close loopholes in payment systems related to terrorist
financing after 9/11; and this last fall, she worked at the World Bank
in Washington, DC, as part of the Stolen Asset Recovery Initiative,
dealing with stolen asset recovery in cases of political corruption.
She also directs the Commerce, Crime, and Conflict Project at
the Fafo Institute for Applied International Studies in Norway. She is
now the world's leading authority on the emerging field of business and
human rights. I will take a moment to mention that, of course, this
involves a great deal of travel, hearkening back to hear early
aspirations to travel.
While succeeding in all of these research and teaching and
service endeavors, Anita's also built a family and a large network of
friends here at the law school and in Seattle. Anita and Walter have
two children, and have also renovated their 100-year-old house over the
last 10 years.
Many of us, of course, have had the good fortune to be part of
the network of friends. And of course, we're all thrilled to see Anita
recognized here today for her work and her contributions by the Wayne
and Anne Gittinger Professorship.
Thank you so much, Pat. And of course, just under the skin of all the
remarks, all the accolades is the impact that this has had on Anita's
students over the years. Her work, her presence, her example have just
been a constant inspiration to the students. And there's a combination
of intensity of engagement and just evident caring and involvement in
the thriving of her students that I think lies so much at the heart of
the success that she's enjoyed.
And so, now it's my pleasure to call Professor Ramasastry to the podium, and to, I guess, drape a medal is what I'll be doing.
And the inscription on the medal is quite simple, but it says
everything that it needs to say: "D. Wayne and Anne Gittinger Professor
Law, Anita Ramasastry." And it's my great pleasure to invest you with
this medal, which is only a symbol of the professorship itself. And I
just invite you, as I drape, to please applaud.
The podium is yours.
Professor Anita Ramasastry:
Thank you so much. And I'm both nervous and also emotional.
I have to first say I really love my job. I love being an educator. And
while this is not the Oscars, it is a chance to really thank so many
people, because I wouldn't be here today if it weren't for your
I really, first, want to thank Mr. and Mrs. Gittinger for their
unwavering support of the law school and the University of Washington.
They have been referred to by the university administration as quiet
leaders at the university and have provided tremendous leadership and
financial support for our faculty and our students and staff.
Not only have they supported this professorship, but they have
also provided scholarships for student athletes at the law school and
the creation of the beautiful Gates Hall. And of course, they're also
strong supporters of the university itself. So, Mr. and Mrs. Gittinger,
thank you for all that you've done.
I'm also honored to follow in the footsteps of Professor Dick
Kummert as the second Gittinger Professor. As the Gittingers well know,
Professor Kummert has trained generations of our graduates in corporate
and business law and provided them with an excellent foundation for
their work as attorneys. Mr. and Mrs. Gittinger, I am committed to that
same goal of making sure our business and commercial-law teaching and
scholarship remains excellent to this school. So thank you.
I also want to let the Gittingers know that not only do I love
commercial law, which I do, but I'm a big Husky fan as well,
specifically college basketball, and my husband as well. So we also
share your love of university athletics.
Now, before I take you on a bit of an adventure, and a bit of a
crazy ride, I want to thank a few others. I want to dedicate this talk
to the memory of my friend and mentor, the late Professor John
Fitzpatrick, who I miss so very much every day. And I really thank Dean
Hicks and the law school community for bestowing this honor on me, with
special thanks to Assistant Dean Cox and her wonderful colleagues and
staff, Laura Paskin, Shari Ireton, and Hannah Hewson.
And then I want to recognize my friends and family, my spouse
and my colleague, Walter Walsh, and my two small children, who are too
small for a lecture like this so they're outside playing, Angelie and
Curon, as my biggest fans and supporters. I'm very honored, also, to
have my wonderful sister, Cyrah, and my brother-in-law, Chris, and
nephew, Rome, here today.
Pat Kuszler really is my closest friend on the faculty, and her
friendship over the years has been one of my high points of my work at
the university. That means so much to me.
I also have several mentors in the audience. Martin Grant was
mentioned, my friend and my boss at the Federal Reserve Bank of New
York. And I asked and he came in yesterday. As you can imagine, people
at the New York Fed are working really hard right now. Really, really
hard. So give him a pat on the back after the lecture.
Professor Helen Hartnell, who came in from California. She's
another law professor, and she was my mentor at the Central European
University in Budapest. Dean Emeritus Ron Hjorth. Department of
Commerce Attorney James Filpy. And Sharon Nelson, the first director of
the Shidler Center for Law, Commerce, and Technology at the law school.
And professor Michael McCann.
Each of these people has shown tremendous kindness, patience,
and encouragement as I cut my teeth in new roles and positions. And I
can say, if they had not been patient and willing to teach me new
skills, I would never have reached this stage in my career, so their
patience, I'm really grateful for.
I also want to thank my assistant, Ruth Beardsley, who has also
provided me tremendous support and encouragement for more than a
decade. I can say without a doubt that it is her guidance and
assistance that has been most critical in my ability to thrive and to
be effective in my work as a professor. Thank you, Ruth, for your
One person who could not be present today is Professor Lou
Wolcher, who, along with Pat Kuszler, saw my potential and called me
out to Seattle, and has been an intellectual role model for me and many
other faculty. He is currently visiting as a scholar in Bergen, Norway.
So thanks. And there are many other people here whose love and support
I cherish, so thank you.
And now to my talk. Now, the title was "The Quest for Global
Financial Integrity, " which is a little dry. But the nickname for this
talk, as I've been kind of thinking about it in the shower, has been
"Lifestyles of the Rich and Infamous, " right?
And so here's my first question to the group, which is, what do
a kleptocrat, and if you didn't know what a kleptocrat is, you'll find
out today, a tax evader...and nobody here knows what that is, right,
and a terrorist have in common? And the answer is that they all need
banks and bankers. More generally, they have all benefited from bank
secrecy and the existence of so-called off-shore, or banking-secrecy,
jurisdictions. In each instance, these actors need to move illicit
funds in order to either hide evidence of illegal activity or to
finance illegal activity.
And so, in this short talk today, I want to explore, number
one, the current emphasis on financial integrity which arises out of
the debate about tax havens, which has been in the news quite a lot
recently. Two, explain one particular type of illicit flows. Those are
the product of grand corruption. This is when we're talking about big,
bad dictators who steal and rob the treasuries of their countries. And
examine the weaknesses in the current financial system which allow for
these illicit flows to continue. And finally, conclude by analyzing
what needs to be done to rectify the situation.
Now, why did I become interested in this topic? You don't
really take a course in Illegal Financial Flows 101 or Terrorist
Financing in law school. But in 1998, soon after I had joined the
faculty, the Swiss banks came under fire with respect to their
retaining assets of Holocaust victims. And some of you in the room may
remember that. And under scrutiny, they were also criticized for
harboring Nazi assets and serving as the bankers to the Nazi regime.
And so it was a painful time for Switzerland, as it came to
terms with this aspect of its past, and there were a lot of other
European banks and insurers and others who had to deal with claims
relating to World War II. And because Paul Volcker, the former chairman
of the Federal Reserve, was asked to start a special commission, I
became asked to go to Zurich to establish a special claims tribunal to
deal with this, because his general counsel knew of my research in the
area of banking and money laundering and invited me out.
I also realized that at the same time Switzerland was dealing
with the issue of World War II bank accounts, it was also dealing with
claims to assets of the deposed leader, Ferdinand Marcos, by both the
Aquino government and by victims who had suffered human-rights abuses
by Marcos's regime. So Marcos was actually sued in court in the US by
some of the victims.
And so I wrote an article which tied these two different events
together but which examined Switzerland and the role of bank secrecy
and the role of financial institutions in shielding the assets of
leaders who are criminals. And this has led to a continued examination
of the relationship between bankers and illegal money. And I like
bankers. Don't get me wrong. I teach people about banking law. But I am
looking at and am critical of some aspects of the financial sector.
So let's move forward to more than a decade later. The problem
of bank secrecy is still with us, but perhaps the tide has turned, due
to the global economic downturn. The time is quite opportune for us to
ask banks to clean up their acts.
Now, earlier this month, the leaders of the G-20 announced that
as part of their plan to strengthen the international action, they were
going to take action against non-cooperative jurisdictions, including
And you may remember the quote from the G-20 summit which said,
"We stand ready to deploy sanctions to protect our public finances and
financial systems. The era of bank secrecy is over." And they continued
on, in another communique: "We note that the OECD has today published a
list of countries assessed by the Global Forum against the
international standard for exchange of tax information." And there was
a list published of countries that were seen as not cooperating when it
came to tax evasion and were considered tax havens.
And the word that was used is "We note" that the OECD has
published this list. And as you may recall, President Obama was given
great applause because he brokered a deal between President Sarkozy and
Hu Jintao, by using that word "note" rather than "condemn" in the
statement. So that was a particular moment.
But the G-20 continued that "It's essential to protect public
finances and international standards against the risks posed by
non-cooperative jurisdictions. We call on all jurisdictions to adhere
to the international standards in the prudential, tax, and
anti-money-laundering areas. And we stand ready to take agreed action
against those jurisdictions which do not meet international standards
in relation to tax transparency."
So, as you remember the tax-haven controversy. So, you have
leaders of the G-20, major countries of the world, taking a public
stance condemning tax evasion and countries that are not transparent
and don't cooperate to stop tax evasion and tax fraud.
And as you may remember, the tax-haven controversy broke after
Germany paid millions of euros for names of German citizens that had
secret accounts in Lichtenstein, right? That there was a disk that was
basically sold to a German investigator, and as a result Lichtenstein
was identified as one of these tax havens. And more recently, the US
has been cracking down on tax evasion in Switzerland.
Several days ago, Switzerland, under pressure to join the
global crackdown on tax fraud, asked the United States to drop a legal
case involving UBS Bank in return for a new tax accord that the two
countries are about to negotiate. UBS agreed recently to pay a
$780-million fine and to disclose the identity of about 300 of its US
clients, and I hope there's none of you in the room to avert criminal
charges. But the US authorities are still pursuing these cases, seeking
access to data of about 52, 000 other Americans they say are hiding
about $14.8 billion in assets in Swiss bank accounts.
So, like many other offshore financial centers and tax havens,
Switzerland has come under intensifying pressure from governments keen
to root out tax dodgers at a time when the global economic crisis is
shrinking their revenues and forcing expenditures sky-high.
So my first point is really this focus on tax havens and tax
evasion that is coming at a time when countries really need and want
access to those lost revenues; that it is not an accident that we are
seeing this focus. It is not as if the government officials woke up one
day and suddenly became very righteous; that there is an economic
necessity behind some of these actions.
But the tax haven controversy has highlighted a larger issue of
the role of banks with respect to illicit financial flows. So my talk
is about how tax havens may open the door for larger systemic reforms
to deal with illicit financial flows across the board.
Now illicit financial flows, if you didn't know, come in three
flavors. The first one are the proceeds of bribery and theft by
government officials. When this is large-scale, when you are really
stealing millions or billions it is referred to as grand corruption.
The second kind of illicit flows are the proceeds of criminal
activities including drugs, drug trafficking and terrorist financing.
The third category is the one I have already mentioned which are the
proceeds of tax evasion.
Raymond Baker who is someone who runs a center called The
Center for Global Financial Integrity, has dedicated his own research
to eliminating all kinds of illicit financial flows. So he talks about
how there are some key structures that comprise or allow these flows to
The first are tax havens and he defines these as "...places
where you can set up a non-functioning entity and then you can sell to
this entity and it can sell to other entities. Then you can structure
pricing in such a way that all or most of the profits are earned in the
tax haven entity and you pay only minimal or no taxes on the profit."
He claims there are 72 tax havens around the world. Some of the
tax havens intersect with what are called off-shore secrecy
jurisdictions. Now the term off-shore is a bit of misnomer.
Switzerland, last I could tell, is not off any shore. It is in the
middle of Europe. But there are the traditional off-shore Caribbean
islands that have made a lot of money by hiding other peoples.
But these are places where you can establish entities that are
hidden behind what are called nominees and trustees such that no one
knows whether you are the real owner or manager of either a bank
account or of a particular company. And finally, there are these
anonymous trust or bank accounts which are also hidden behind these
nominee owners and trustees so that no one knows who are the real
donors or who is providing the money that is held in these accounts.
Now what is the size of the problem? If we talk about illicit
financial flows as the whole basket, it is really hard to document
illegal financial flows. Can you imagine? I mean economists really try
to do that. Now Baker estimates that there is between $1 to $1.6
trillion a year of illicit money that moves across borders. Now that is
a very sketchy number. But it is one of the ones that is out there.
Now of the $1 to $1.6 million of illicit money that supposedly
moves yearly across borders, Baker further estimates that half of it,
so between $500 to $800 billion a year come out of developing and
transitional economies. These are countries that often have weak legal
and administrative structures.
Now he compares this to foreign aid and foreign aid has been
running about $50 to $80 billion a year in total through the 1990s and
into the current decade. Not just foreign aid from the United States,
we are talking about development loans and assistance. So you think
about that. $500 to $800 billion of illicit money is coming out of the
developing world and more money is coming in.
You think, "Wow. If that money could just stay where it came
from, wouldn't a lot of people be better off?" So tax havens, at
present, we've placed a greater emphasis on them and countries want
In the past, governments have focused on terrorist financing
which focuses on the blocking of assets and looking for terrorist
organizations. What has been less the focus in terms of illicit
financial flows is the issue of grand corruption and kelptocracy. But I
believe that these types of illicit flows should not be ignored as they
pose just as much a threat to our peace and security as do terrorist
Now why should anyone care in this room? We are not the ones
impacted directly by this. The first issue is that these leaders
impoverish their countries, stealing aid and making their countries
much more dependent on overseas assistance.
So first is just the empathy and understanding that there are
certain people who don't live in democratic regimes who have their
leaders steal from them daily. But on top of that, it leads to the fact
that we, in countries that have more economic resources, have to
continue to provide development assistance.
The second is the link between corruption and violence.
Kleptocrats often use violence as a means of repressing their
population which allows them to steal from their country with impunity.
It also allows them to start and ferment violence in other parts of the
world or in countries that are neighboring theirs.
Marcos, Ferdinand Marcos, Jean-Claude Duvalier of Haiti and
Charles Taylor of Liberia are examples of this phenomena. But you can
just look at "Parade Magazine's" top 10 dictators. Does anyone ever see
that on Sunday? To know that there are a few other bad guys on the
I hate to say this. I am not a sexist but they tend to be male.
So...if you have seen the movie "Blood Diamonds", Charles Taylor used
the sale of diamonds. The sale of these beautiful stones to purchase
weapons and finance the work of the Revolutionary United Front, a rebel
group in Sierra Leone and was responsible for financing a very, very
bloody civil war.
So here are some recent examples of kleptocracy and corruptions. So now my
talk, I'm just going to tell you what these people do. What kind of
things do they do, where do they put their money and why do I think it
The first is the Congo. Between February-there is a handout
outside which has some pretty diagrams of shopping trips of one
particular leader and some cars of another. So at some level it is a
bit funny. But seriously, between February 2004 and August 2006, Denis
Christel Sassou Nguesso, son of the president of the Republic of Congo
went shopping, many times; mostly in Paris. But also in Hong Kong,
Monaco, Dubai and Marbeya.
He spent hundreds of thousands of dollars on designer names
including Lacroix, Gucci, Escada, Luis Vuitton, Christian Dior, and
Roberto Cavalli. In addition to being the president's son, Mr. Sassou
Nguesso is head of Co-Trade, a public agency which sells Congo's oil on
behalf of the government.
His personal credit card bills along with any other Co-Trade
official were paid off by off-shore companies registered in Anguilla
which appeared to have received via other shell companies money related
to Congo's oil sales.
Now oil accounts for around 80% of Congo's income and in 2006,
oil revenues reached around $3.00 billion. Now despite this, Congo
remains one of the poorest and most indebted countries in the world and
it's oil wealth has contributed to several bloody civil wars.
While the majority of the population remains mired in poverty,
the president's family is able to live in luxury. Now Mr. Sassou
Nguesso's credit card spending in just one month, in June 2005 came to
$32, 000.00. This could have paid for, according to "Global Witness",
more than 80, 000 babies to be vaccinated against measles which is a
major cause of child death in Congo.
Now the documentation which the anti-corruption organization
Global Witness referred to came into the public domain in mid-2007
through creditor litigation by a so-called Vulture Fund in Hong Kong.
Vulture Funds are so described because they buy up distressed debt from
poor countries and litigate to gain creditor judgments forcing
When Global Witness obtained the documents they published them
on their website and they showed the payment chain all the way from oil
revenues through different accounts to Mr. Sassou Nguesso's credit card
shopping in Paris and elsewhere. So if the point is not clear, it is
about the fact that state revenues were what was financing these
Now, Mr. Sassou Nguesso attempted to force Global Witness to
take this evidence of his personal spending off it's website and a U.K.
high court judgment in August, 2007 dismissed this attempt saying, "It
is an obvious possible inference that Sassou Nguesso's expenditure has
been financed by secret personal profits made out of dealings in oil
sold by Co-Trade." And the justices continue that the documents, unless
explained frankly, suggest that Mr. Sassou Nguesso and his company were
unsavory and corrupt and that the profits of Co-Trades oil sales should
go to the people of the Congo, not to those who rule it or their
So to summarize, Global Witness tells us, "Here is a situation
where a president's son, who is responsibly for marketing his countries
oil is apparently using proceeds from government oil sales to pay for
luxury personal expenditure to the tune of hundreds of thousands of
dollars and has been described by an English judge as 'unsavory and
corrupt'. Meanwhile, the majority of the population of Congo languishes
in dire poverty."
He is not alone. We have Teodoro Obiang Ngueman Mbasogo. He
came to power in 1979 in Equatorial Guinea and he is listed in
"Parade's" list as the 14th worst dictator in the world. Most domestic
and international observers consider his regime to be one of the most
corrupt, ethnocentric, oppressive, and undemocratic states in the
world. Populations live under a dollar per day in Equatorial Guinea.
In the early part of this decade, President Obiang and his
government deposited up to $700 million in the United States Riggs
Bank. In a U.S. subcommittee investigation criticized Riggs in 2004 for
failing to report potential money laundering in the Equatorial Guinea
accounts. It also outlined examples of how Riggs allowed Obiang to make
cash deposits and withdraw from accounts he controlled personally.
Riggs later agreed to pay a $60 million fine to the U.S.
government for failing to report these and other suspicious
Now Equatorial Guinea's embassy insists the money which was
released back to the country belongs to the government. Now they may
say it is the country's money but the president does control everything
says Arvind Ganesan, a good friend of mine and a director at Human
Rights Watch who studied how the Equatorial Guinea government uses its
He tells us, "Under Obiang the country's wealth is basically a
presidential ATM." That whatever is coming in Obiang can take out and
spend. Now his son, a dictator in training, young Teodorin is under
suspicion for the corrupt handling of government funds as well after
purchasing a $35 million Malibu mansion in 2006.
Now young Obiang, despite his paltry official salary of $5,
000.00 a month paid cash for his 16-acre ocean front property complete
with a private golf course and you can see the mansion on the web.
"Forbes" ranked this house as the sixth most expensive home sale in
So although Equatorial Guinea earns $3 billion in annual oil
revenues, the country's riches don't reach the people. Again, most
people there live in abject poverty surviving on about a dollar a day.
Two more dictators I'll mention and then I'll talk about how do they accomplish these things. It is not just about Africa.
Peru's ex-president, you may recall, Alberto Fujimori, was just
sentenced last week to 25 years in prison for crimes against humanity.
But he is set to take the stand again in May on corruption charges.
Fujimori returns to the dock charged with funneling $15 million to his
top advisor, Vladimiro Montesano who is already charged and in prison
on multiple corruption charges. Montesanos' assets had been siphoned
out of the country.
Fortunately, Montesano, for some reason videotaped all of the
situations in which he accepted bribes and kept a very detailed library
which doesn't seem really smart. But that led to his conviction.
The last person I'll mention is Charles Taylor. Mr. Taylor
started the Liberian war which lasted for about 14 years and is
currently undergoing criminal trial for allegedly playing an important
role in the 10 year war with Sierra Leone which killed several
thousands and mutilated many others including the recruitment of child
Now Taylor was transferred for trial in the Hague due to his
influence in the region. So even though he is being tried by a Sierra
Leone special court, a war crimes court, he is being kept in the
Netherlands. He has denied all counts of war crimes and crimes against
But the big issue is that Charles Taylor is receiving legal
aid. He claims that he is indigent and that he has no money. Now
according to a recent U.N. expert's report, "Although Mr. Taylor claims
to be indigent, he has requested that the special court cover the cost
of his trial, there are credible allegations of investments in Nigeria
that remain unfrozen. The government of Nigeria has not permitted the
U.N. to investigate these allegations. In addition, Liberia has not
adopted legislation to freeze any Taylor assets in Liberia itself."
And you can understand the political sensitivity around doing
that. So to quote the prosecutor, "We've certainly found evidence of
hundred of millions of dollars taken by Charles Taylor illegally in
various banks at different times. We have evidence of two accounts that
were maintained in his name in the U.S. during his presidency. That was
at Citibank and the sum of the two accounts over time totaled $5
He has evidence that in one fell swoop $375 million was debited
from those accounts. Now Mr. Taylor denies all this and says if any of
this money is found he is going to give it back to the Liberian people.
And actually, I lie. I have one more leader to just mention
briefly and that is again, just to show you the geographic range of
corruption is Pakistan. I think you all know who Asif Ali Zardari is
which is the currant leader of Pakistan.
In 2004, he went and participated in a hearing that was trying
to prove that he was entitled to the proceeds of a wonderful mansion
located in England that the Pakistani government asserted was bought by
Benazir Bhutto and Zadari using corrupt funds that they had stole.
And just to give you a sense of Mr. Zadari, he was known as Mr.
Ten Percent when he was actually the finance minister in Bhutto's
government because he allegedly pocketed 10% as a kickback for any
government transaction and moved it into an off-shore jurisdiction.
Now Bhutto and Zadari initially denied that they owned this
mansion, this very expensive house and eventually did confess later
that they were the beneficial owners; that there had been a disguised
purchase. But if you look behind the shell company, in fact, they did
But when they were first accused of this, Mr. Zadari said, "How
can anyone think of buying a mansion in England when people in Pakistan
don't even have a roof over their heads?" He asked and this is what he
said in the press.
So there you have it. We have dictators living well and they
are coming from different parts of the world and do we find money?
Well, occasionally we do. Switzerland, after being criticized has
really gone much further when it comes to dealing with corruption and
so they have found funds from Mr. Montesano, from Marcos, from Sani
Abacha of Nigeria, from Kazakhstan, from Raul Salinas of Mexico.
And there are currently cases pending with respect to assets
belonging to Devalue and Mobuto Sese Seko from the former Zaire which
is now Congo.
So how do banks permit this? What is going on? Global Witness,
the organization I mentioned before and they are really, really
fascinating NGO, has recent and they are the ones that really exposed
the whole problem of blood diamonds and brought that out into the
public. They have a new report called "Undue Diligence: How Banks Do
Business With Corrupt Regimes".
And they have great evidence, what they can find, showing these
kinds of checks, credit card receipts and payments going into and out
of accounts belonging to people such as the leaders of Equatorial
Guinea and Congo.
So what's the problem? Now we have become aware of the failures
by banks and the fact that they are in some part responsible for the
global economy and the crisis we are having now in terms of just the
general economic downturn. What is less known is that for much longer
failures by banks and the governments that regulate them have caused
significant harm to the economies of some of the poorest countries of
And if we want to promote peace and stability, countries which
receive finances, which are not just off-shore islands, but major
financial centers, then we need to think about the message that they
send by taking in the assets of corrupt or despotic leaders. By doing
business with dubious customers and corrupt, natural resource rich
states, banks are facilitating corruption and state looting which deny
these countries the chance to lift themselves out of poverty and leave
them dependent on aid.
So there are two issues which are how can we stop these flows?
They are occurring. How do we know they are occurring? Because these
leaders are able to move and siphon funds out of their countries and to
take them out of treasury and to move them to other countries.
We found evidence, as evidenced by Switzerland itself, that
money, once these leaders are deposed from office or die, is suddenly
Those assets are there. And those are only the assets we can
find using forensic investigation. There's probably more. So how can we
stop these flows? The first concept that I want to talk about, there's
sort of two issues, one is stopping. And, I'm almost done. And the
other is, if you can't stop, what do you do in order to find and to
give back to the countries from which the money was stolen?
So, the concept that is being discussed today in banking
circles is that of the politically exposed person, the PEP. A
politically exposed person is simply someone who holds a political
office or a high office in a country. Being a PEP doesn't mean you're a
bad person, right? We have some PEPs in this room. If you are a
political official, you are politically exposed. You are vulnerable,
possibly prone to corruption. But not necessarily.
But, a PEP also includes your wife, your husband, your
relatives, your close business associates, right? Because when money
laundering occurs, Charles Taylor is not going to do it just in his own
name, although he actually did in numerous instances, but you're going
to use your friends and your associates to help you set up shell
companies or to move the money.
So, there's this universe of people called politically exposed
persons, and there's been a lot of call for years to have heightened
due diligence when a politically exposed person tries to open a bank
account anywhere in the world.
Now, today this has been a very ineffectual system. There are
few databases that are sold privately by commercial companies, which
banks are supposed to use to screen customer accounts. But, if you look
at the lists, they include people who are dog catchers. There's been
really no verification that these lists work.
But even if they do, in terms of that, there's really nothing
binding about banks actually having to go through this exercise. It's
meant to just be risk assessment and prudent due diligence to know your
We do have one set of voluntary principles that a group of
large banks put together at a lovely castle a few years ago called the
Wellsford Principles. They were developed by major banks, and again
they're in those really exciting CLE packets for those of you that have
them, as a way of creating enhanced due diligence.
They're voluntary, and to date they don't seem to be really
used very much. So the leader of Congo that I mentioned earlier, the
documents that global witnesses found showed that his account was
screened for terrorism purposes, but there wasn't any heightened due
diligence to figure out that in fact, he was the son of a head of
The concept of a politically exposed person exists in name, but
in practice banks aren't really figuring out who their customers are.
And the proof of that is simply because people who are very obvious
political leaders or close associates are able to open bank accounts
But the problem that is more serious is the problem of
beneficial ownership. And the financial action task force, a group
founded by OECD member countries of finance ministry officials, they're
sort of bureaucrats that sit around and made 40 recommendations that
are meant to help banks and governments stop money laundering and
They have recommendations that require countries to take
measures to prevent the unlawful use of legal persons, companies, or
trusts. And so countries are meant to ensure that there is adequate,
accurate and timely information on the beneficial control and ownership
of all of these legal persons or these business entities. That's really
where the problem lies.
It doesn't matter who is a politically exposed person. What
really matters is that many bank accounts that are opened in secrecy
jurisdictions are opened in the name of shell companies or trusts that
are registered by lawyers or other service providers. But there is no
attempt to really look behind those shells to find out who are the
people that are investing the money? Who are the natural persons who
are opening these accounts?
So it's great to talk about PEPs, but really it is beneficial
ownership. Banks really need to be required to engage in much more
obligatory screening to know who the natural persons are behind their
accounts. Many secrecy jurisdictions have thousands of companies
registered in each office building, none of which consists of more than
the legal documents and a lawyer or a company service provider's
The ownness should be put on banks to demonstrate that they
have established that the company opening an account is actually
operating a genuine business, and find out who are the principles
behind the company.
The last thing, and then I'm done and we can actually have a
nice drink, is about asset return. So, there's much more that can be
done to figure out who is opening a bank account. That's the first
step, right? We should prevent the money from leaving the country and
moving into the financial system in the first place.
But the other is asset return. In the area of international
cooperation, we now have a wonderful convention called the United
Nations Convention Against Corruption. It was adopted in 2005 and now
has more than 140 signatories and 135 parties, and it has a whole
chapter on asset recovery in case of corruption.
So we need to make sure in the decade ahead that all countries
who have signed this convention orderly implement and follow their
obligations to pursue this convention. This is where there's a really
My time at the World Bank this fall really helped me understand
that when a victim country seeks to recover corrupt funds from wherever
they think they're housed, mutual legal assistance is still one of the
largest stumbling blocks, which is that investigators in one country
have to cooperate and seek assistance from major financial centers.
It's not just about lack of capacity in the victim countries.
Of course, there is a question of lack of resources and more than that,
often problems of political will, because investigating and proving
that a former leader or a sitting leader is corrupt is something that
is very sensitive and very difficult to do.
But what I discovered was that many of the major financial
centers themselves are not well organized and are not responsive to the
requests that are coming from the victim countries. So I am going to
conclude my talk by saying that what I left, my experience at the World
Bank really showed me that the ownness is on the developed world and
the countries benefiting from these flows to really step up and to
engage in technical assistance to make sure the monies go back.
The biggest problem, I don't want to sort of throw up my hands,
but I am just going to end with that is, where do you try a corrupt
official, right? At the end of the day, in order to deal with the issue
of kleptocrats, kleptocrats are people who take advantage of their
leadership of a country or of a political unit to basically steal from
the people, is where do you try them?
If they happen to have engaged in violence, like Charles
Taylor, well then you have an international tribunal that can deal with
them, the international criminal court. But if someone is purely
stealing, where do you go?
It is so difficult to prove and to try these individuals in
their own countries. Again, it is up to those major financial centers
to think about the ways in which they can use their own money
laundering laws and other laws to hold these individuals accountable.
That's the much more difficult and political question and one that my
research has been focusing on, or will focus on in the years to come.
So, I hope you have learned a little bit about the fact that
there are some really bad people out there. And thank you very much for
Thank you, Anita. And thanks one and all for being here and
participating in this really grand moment for our entire community.
Join us for refreshments down, go down the end of the L to the Brick
and Schoolie room, and linger, visit, and once again thanks for coming.
final installation of this year will be on May 14th. Professor Veronica
Taylor is to be installed as the Dan Fin O'Henderson Professor of Law.
Please rejoin us on that occasion. Thanks.
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