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Haiti: The Long Road to Recovery

Public money stolen by a corrupt president finally to be returned

May 22, 2009BY Siri Schubert
"Poverty

During the 15-year reign of Haiti's former president Jean-Claude "Baby Doc" Duvalier, extreme poverty strangled the island nation. Ninety percent of the population subsisted on less than $150 annually. Eighty percent of children under 5 suffered from malnutrition. And almost a third of Haitian children died before they reached the age of five.

While international aid organizations tried to help, Duvalier pocketed much of the relief money for himself. According to documents, shortly after the International Monetary Fund granted $22 million to Haiti on December 5, 1980, $20 million of that money was withdrawn from the government's bank accounts. Former U.S. Secretary of State Alexander Haig received a cable saying that approximately $4 million may have been diverted to Haiti's secret police, the Tonton Macoutes, while the remaining $16 million disappeared into Duvalier's personal accounts.

At the same time, Duvalier was making lavish purchases, like the eighty-six foot luxury yacht, named "Nikki," that he bought for $1 million. Even after he fled the country in 1986 to escape an imminent coup, the spending continued. In 1988, a journalist from the St. Petersburg Times in Florida described Duvalier's luxurious villa in the French Riviera (monthly rent: $40,000) as having "Ferrari sports cars parked in the driveway."

While it is hard to link specific bank accounts or purchases to specific incidents of corruption or bribes, the rate at which money flowed out of the public coffers was staggering. All told, Jean-Claude Duvalier, his ex-wife Michelle Bennett Duvalier, and three people acting as agents are believed to have taken $504 million from the Haitian public treasury between 1971 and 1986.

But after two decades of tireless work by lawyers, prosecutors and government officials, some of that money -- $6.5 million frozen in the Swiss bank accounts of Duvalier -- is finally about to be returned to Haiti.

Baby Doc Duvalier

Jean-Claude "Baby Doc" Duvalier

"The return of the money [to Haiti] is a victory in the fight against impunity and corruption, although it is of a rather symbolic nature," says Pierre-Yves Morier, a lawyer at the Swiss Federal Department of Foreign Affairs in charge of asset return.

While the sum seems small compared to what Duvalier is suspected of stealing from Haiti's public budget, officials from government agencies and NGOs stress that even minor victories send an important message. "We need corrupt leaders to realize that they can't get away with crimes," says Marilyn Allien, Haiti's representative for the anti-corruption watchdog Transparency International in Port-au-Prince. "The return of these illicit assets demonstrates that despite the time lapsed, dictators continue to be responsible for their crimes and cannot benefit from their stolen assets," adds Morier.

The recovery of assets obtained through bribery, corruption, embezzlement and theft has become increasingly important in the international fight against corruption. The United Nations Convention against Corruption (UNCAC), which 132 countries have signed and ratified, has made it a priority, and a 2007 World Bank initiative, the Stolen Asset Recovery Program (STAR), provides legal and practical assistance to developing countries trying to get stolen money back. Before the initiative, efforts were often stymied because new governments -- frequently emerging from the chaos of tumultuous transitions -- were ignorant of the processes to ask for mutual legal assistance or had difficulties filing legal documents in the language of the countries where the money was suspected to be hidden. The STAR initiative now allows all legal documents to be filed in English.

These initiatives, including the efforts to get the money back to the people of Haiti, are designed to alleviate poverty but also to inspire other countries to seize the money that dictators have spirited away into secret bank accounts. They come at a time when an increasing number of developing countries are demanding that stolen assets be returned, at least in part to help fund development programs that aid in reaching the United Nations' Millennium Development Goals. With more international investigations into terrorist financing and money laundering, as a consequence of the 9/11 terrorist attacks, stolen assets are also more difficult to hide.

The efforts to return the money to Haiti started in 1986, shortly after Duvalier -- the notorious self-proclaimed "president for life" -- fled the country. The new Haitian government asked Switzerland for mutual legal assistance to track down any money Duvalier had stolen from public funds and hidden in Switzerland. It took several months, but they located $6.5 million in a suspicious Swiss bank account of the Liechtenstein-based Brouilly foundation, set up by Duvalier's mother through a Panamanian company.

It was difficult to establish that the money didn't rightfully belong to the Duvaliers but was instead pilfered from the state's budget or obtained by taking bribes. "The illicit origin of such funds is often difficult to prove," says Valentin Zellweger, Deputy Director of the Directorate of International Law in the Swiss Federal Department of Foreign Affairs. Corrupt leaders have been known to go to extensive lengths to obscure the money trail, often using middlemen and front companies in different countries. Electronic transfers can also move money with lightening speed from one country to another before law enforcement has a chance to freeze the assets.

Corrupt leaders have been known to go to extensive lengths to obscure the money trail, often using middlemen and front companies in different countries.

If the country of origin does not cooperate and does not provide bank records, financial documents and witness statements, determining which funds are illegitimate can become almost impossible. "In many countries, there are supporters of the old government who don't want the whole story to come out," says Randi Ryterman, senior manager at the World Bank.

Haiti's case proved to be no different. When the investigation in Haiti came to a halt in 2002, Swiss authorities froze the money after declaring Haiti a "failing state." Over the next five years, the Swiss Foreign Ministry extended the deadline for Haiti's statement of cooperation -- a legal necessity in such cases -- several times, but it wasn't until May 2008 that the new Haitian government supplied evidence of a criminal investigation against former president Duvalier. With the governments on both ends of the money trail involved, efforts to return the money to the people of Haiti ramped up.

While the return of the money to Haiti had been ordered by the Swiss Federal Department of Justice on February 12, 2009, a last minute appeal by Duvalier's family stalled the process once more. Lawyer Enrico Monfrini, who represents the Haitian government against the Duvalier family, is confident that this is just a minor hiccup. "I think it will be a matter of months before the money is returned," he says.

The $6.5 million is designated to go to social and humanitarian projects, most likely to a hospital or a water treatment facility. "Making sure that the money helps the poorest of the poor is very important to us," says Allien of Transparency International. "We want to see direct effects on the living conditions of the people who suffered rather than having it go to infrastructure projects with uncertain benefits."

Anti-bribery experts hope that the efforts in Haiti and elsewhere will help alleviate poverty and social injustice in the countries where public funds were plundered. UN experts estimate that public officials in developing countries receive tens of billions in bribes every year. Even if only a fraction -- an assumed $100 million -- were returned, it could pay for full immunization for 4 million children, AIDS treatment for 600,000 people for a year or provide running water to some 250,000 households, UN experts calculate.

While the UN and World Bank initiatives are still in their infancy, Switzerland has had some success in returning money hidden in secret bank accounts. Over the last 20 years, the Swiss government ordered the return of a total of $1.7 billion dollars to Nigeria, Kazakhstan, the Philippines and Peru. "No other government has returned a comparable amount of illicitly acquired assets," says Swiss lawyer Morier, confident that Duvalier's assets will be added to the list of successful repatriations soon.

In the case of Haiti, which had languished for 20 years, the Swiss government even provided the Haitian government with a lawyer, Enrico Monfrini, to help finish the case. Monfrini had been instrumental in returning more than $500 million dollars to Nigeria in 2006, money that resulted from corrupt deals and bribery.

In that case, using an inventive legal maneuver, Monfrini was able to show that former Nigerian president Sani Abacha and his clan operated like a criminal organization comparable to the Mafia. Monfrini proved before the Swiss Supreme court in 2005 that Abacha and his people had been secretive and used money laundering mechanisms and extortion, all characteristics of criminal organizations. This allowed him to reverse the burden of proof: Abacha's heirs had to provide evidence that Abacha obtained his wealth legally. They could not, so the money went back to Nigeria.

Monfrini has been using the same strategy in the case against the Duvalier family, the Federal Office of Justice confirmed. "This can really serve as a symbolic case and encourage other countries to come forward," says Monfrini.

Other Asset Recovery Cases

Nigeria: General Sani Abacha ruled Nigeria from 1993 until 1998, when he died, reportedly, from a Viagra-related heart attack. He is estimated to have taken between $3 billion and $5 billion out of the country and deposited the fortune into his and his family's personal bank accounts abroad. Part of that money was obtained through bribes paid by foreign companies doing business in Nigeria; part was stolen directly from the Nigerian Central Bank, according to experts at the World Bank. The money was laundered through a network of front companies in several countries and ended up in bank accounts in Switzerland, Luxemburg, Liechtenstein, Jersey and the Bahamas. After a request for a legal assistance investigation in 1999 stalled, Swiss lawyer Enrico Monfrini successfully argued in front of the Swiss court that Abacha's family operated like a criminal network and thus had to prove that the money was obtained by legal means. After several appeals by the Abacha family, the Swiss government returned a total of $505 million to Nigeria in 2006.

Philippines: Former Philippine president Ferdinand Marcos was elected in 1965, which was around the same time when he started accumulating vast wealth -- made famous by the lavish lifestyle and gigantic shoe collection of his wife, Imelda. Ferdinand Marcos remained in power for 21 years, 14 of which he ruled as a dictator under Martial Law, before he was removed from power in February 1986, during the so-called People Power Revolution. He is estimated to have taken between $5 billion and $10 billion out of the country during his rule. After he was ousted, the new government requested legal assistance from Switzerland to retrieve the money deposited in Swiss bank accounts. But twelve years passed before the money was transferred to an escrow account at the Philippine National Bank. Six more years lapsed while legal motions and appeals were filed before in 2004, $624 million were returned to the Philippine treasury. Part of the money came from kickbacks and bribes; the rest was obtained by embezzlement, the creation of monopolies for sugar, coconuts and construction, the taking over of private companies, and outright plundering of the treasury.

Peru: Between 2001 and 2004, Peru recovered some $180 million stolen by former president Alberto Fujimoro's security chief Vladimiro Montesino, who, according to a World Bank report, "methodically bribed judges, politicians and the news media." During Fujimori's administration, $2 billion allegedly vanished from the public budget. The widespread corruption and bribery became public on September 14, 2000, when a video showing Montesino paying $15,000 in bribes to a Congressman was broadcast. The subsequent investigation led to the discovery of a network of corruption and eventually to president Fujimori's resignation.

Democratic Republic of Congo: The Democratic Republic of Congo has been ravaged by wars and famines for decades, despite vast mineral wealth. But when Switzerland attempted to return $6.68 million deposited by the late president of Zaire, Mobutu Sese Seko, the DRC didn't cooperate, making it difficult to keep the assets frozen in Switzerland or return it to the country's public budget. The Swiss authorities not only froze bank deposits but also auctioned Mobutu's luxurious villa on Lake Geneva in Switzerland. But even though Mobutu was widely perceived as a corrupt leader and named head of a criminal network by Swiss courts, the money could not be easily given back to the impoverished population. Under international law, countries who request money to be frozen have to provide some evidence that the funds were obtained illegally, otherwise the money is returned to the person who deposited it or to relatives who claim it belongs to them. Mobutu's money has been frozen in Switzerland since 1997 and was about to be handed over to his family when Mark Pieth, professor of criminology at Basel University and chairman of the OECD anti-bribery convention, filed a "citizen's appeal" on April 27, 2009, to keep the illicit funds safe from the relatives of the people accused of stealing the money.

"All know that the DRC has refused to continue to follow the money, as the Mobutu clan has a very strong role in that government itself. One of Mobutu's sons is deputy prime minister and they have effectively undermined the recovery from the Congolese side," said Pieth in an interview with Swissinfo.com. The money remains frozen for another six months, but could still be returned to Mobutu's widow later this year.

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REACTIONS


(anonymous)
"Over the last 20 years, the Swiss government ordered the return of a total of $1.7 billion dollars to Nigeria, Kazakhstan, the Philippines and Peru. No other government has returned a comparable amount of illicitly acquired assets," says Swiss lawyer Morier, confident that Duvalier's assets will be added to the list of successful repatriations soon.A cynic might make the observation that the reason why Switzerland is the world leader in repatriated funds is because Swiss banks are also the world leaders in having accepted and vigilantly guarded the criminal money to begin with?


New York City, u.s.
Nice post, thanks for writing!


Lumiere Jules - NY, New York
I believe as long as there is a way to steal and a place to deposit that money...Dictators around the world will keep stealing from imroverished nation non-stop. Swiss Bank and all the other Banks that are involved in those secret accounts is the problem. without these banks the stealing would be limited...this action is like arresting the street drug dealer while paying no mind to the big guy/distributor. Without the distributor there is no street seller case closed and problem solved. As long as we have those facilitators -- banks acting with impunity...these crimes will never stop. Swiss banks are not serious about closing the loophole. What they are doing is for cosmetic reasons. If a bank's only reason to exist is to facilitate these criminals acts, that says a lot about the world we are living in.


Edward Stevens - Devon, Pa.
Man's inhumanity to Man, and the abuse of power are two aspects of life that have always concerned me. Power corrupts and absolute power corrupts absolutely ( I believe that is called the "Iron Law of Oligarchy).

Diffusing power is crucial to a democracy being able to survive; I hope all of us one day understand that principle of life.


Bronx Ny=20, Ny
I wounder how much money the Swiss banks are making because of these masses of money being deposited in their banks. Not all the money is being returned. Hello! Ten billion dollars and you are only giving back $500 million? Ir makes no sense.


Jim Johnson - Lexington, KY
Good, and interesting article! I am encouraged to learn of this sort of international cooperation. Also, I agree that while the amount recovered may be small in relation to what was stolen, it is of great symbolic importance -- that is, the message that the world is watching, and there will be an accounting.


Robin Southern - Tucson, Arizona
When I worked in Haiti as a Peace Corps volunteer, there were times I thought my work was considered a joke by Haitians. I worked as a consultant for five community banks. I trained for three months and around the time I arrived at my village to begin my work I was told that within the last month one of the largest community banks had just been robbed. Someone had stolen upwards of $500,000 in Haitian gourdes and fled to Miami. I could see/feel the extent of mistrust and hopelessness in Haiti, especially after that experience.

 

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