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://www.state.gov/r/iip/)

Charles W. Corey, The Washington File, May 25, 2005