NO ONE TOLD Deanna Walters she was about to lose her home. Not when her mortgage servicing company foreclosed on it, nor when it landed on the county auction block and sold to the highest bidder. She realized what was happening only when a man taped a note to the front door of her well-kept house in a leafy corner of Stockton, California, last January. "My son went out and took it down," recalls the 43-year-old single mother of two, "and that's when he told me it was a 'three-day or quit' notice."
Walters' discovery that her home had been sold out from under her marked the low point of a four-year fiasco that began when Ocwen Loan Servicing became her mortgage servicer in late 2004. Through no fault of her own, Ocwen incorrectly processed or lost dozens of Walters' payments and charged her more than $2,000 in late fees and thousands more in additional charges—all without notifying her. The Florida-based company tried to foreclose on her three times. After she paid more than $10,000, Walters figured things were settled. But Ocwen had other ideas.
In the wake of last's week Senate report on how dirty foreign money still flows into the US, an international group of energy activists pointed to the report's findings as fresh evidence for the need for more transparency in the oil, gas, and mineral industries. The exhaustive report, published by the Senate investigations subcommittee, details four corruption cases—three of them previously unreported—in which foreign individuals all from nations rich in oil or other natural resources funneled millions of dollars in "suspect funds" into the US for money laundering purposes. In several instances, that dirty money likely came from the countries' burgeoning energy sectors. The energy-transparency organization, the Publish What You Pay coalition, said the Senate's findings reveal the shadowy, corrupt figures in energy-rich nations like Angola, Nigeria, and Gabon—three countries cited in the report—and show the need for disclosure on how multinational energy companies do business in those countries. "More transparency is needed in these countries to empower citizens to prevent the theft of public funds," Isabel Munilla, Publish What You Pay's US director, said in a statement. "A comprehensive US policy response requires the passing of the Energy Security Through Transparency Act."
That legislation, introduced by Sen. Richard Lugar (R-IN) and Sen. Ben Cardin (D-MD) in September 2009, would force SEC-registered energy companies, like ExxonMobil and British Petroleum, to disclose how much they pay to foreign countries like Nigeria and the Congo to extract natural resources. Right now, information on those kinds of payments remains in the dark; the final destination of that money—be it the extraction company or the pockets of powerful foreign leaders—remains unclear. Lugar and Cardin's bill would go a long way toward tracking that money and potentially preventing those funds from ending up in the wrong hands—an all-too-often occurrence in countries where resource wealth is a curse and not a blessing and transparency is the exception and not the rule.
At a packed hearing today, the Senate investigations subcommittee led by Sen. Carl Levin (D-MI) shed new light on banks' negligence and wrongdoing—and this time it's not credit-default swaps or derivatives but money laundering and arms dealers. The hearing, held in conjunction with a 325-page report by the subcommittee, focused on four detailed cases of foreign money pouring in the United States and the ways in which American banks, lobbyists, lawyers, and other businessmen aided that money laundering. "For the United States, which has so much riding on global stability, corruption is a direct threat to our national interests," Levin said in his opening statement. "The stories we uncovered are striking in their misuse of our financial system."
In essence, the hearing and the report highlighted how institutions like Bank of America, HSBC, and Citibank snoozed when it comes to due diligence and investigating their clients, while notorious arms dealers, sons of despotic politicians, and even shady central banks channeled millions upon millions into the US to buy planes, sports cars, and luxury houses. Singling out HSBC, whose anti-money laundering compliance director testified at the hearing, Levin slammed the bank for actually encouraging the Central Bank of Angola—whose clients include many questionable red-flagged individuals, or "Politically Exposed Persons"—to move millions to an offshore bank in the Bahamas beyond the reach of British financial laws. "You claim that you're a leader in anti-money laundering rules and enforcement," Levin told HSBC's Wiecher Mandemaker. Yet "you facilitate people evading the law of your own country."
Levin, seated next to subcommittee ranking member Sen. Tom Coburn (R-OK), had also invited three active participants in the corruption cases detailed in the report—Beverly Hills attorneys Michael Berger and George Nagler, who'd aided Teodoro Obiang, son of the president of Equatorial Guinea, and Jeffrey Birrell, an American lobbyist who tried to purchase armored cars and military transport planes for Omar Bongo, the president of Gabon. All three directly implicated witnesses, however, chose not to speak at the hearing, citing the Fifth Amendment.
Levin and Coburn did offer a modicum of praise to a Bank of America senior executive who spoke at this morning's hearing. Bank of America appears several times in the subcommittee's report for allowing Pierre Falcone, an infamous arms dealer imprisoned several times, and his relatives to circulate at least $60 million through 29 accounts with the bank. In fact, Levin pointed to documents obtained by the subcommittee showing that Bank of America knew of Falcone's background and the millions flowing into his accounts from the secretive countries and shady "clients" yet concluded that "activity for the accounts of the Falcone's [sic] is not unusual." And while William Fox, the Bank of America executive, acknowledged that the bank had made "a bad judgment call" with Falcone, he emphasized the tougher disclosure and anti-money laundering safeguards that bank had installed in the past few years, measures that Levin praised.
In all, the hearing, together with the report, offered an unparalleled glimpse at the ways in which corrupt foreign figures still funnel their money into major American financial institutions. At the hearing, Levin said he hopes to close legal loopholes and revoke a 2002 exemption allowed by the Patriot Act, among others, to cut off the gaping holes that still allow dirty money to come into the US. "There is a lot more that can be done to combat foreign corruption," Levin said. "It doesn't have to be that way."
The explosive new report by the Senate investigations subcommittee out today, which I covered here, is filled with lurid, juicy details about four previously unreported money-laundering cases in the US and the Americans who aided that laundering. For instance, Teodoro Obiang, son of Equatorial Guinea's despotic president, used US attorneys and realtors to help him create shell corporations for his money—and in return, he feted them with VIP access to exclusive parties and other perks; in one email, an attorney who helped Obiang funnel money into the US, and who later got into a Playboy Mansion Halloween party thanks to Obiang, writes, "I met many beautiful women, and I have the photos, e-mail addresses and phone numbers to prove it."
Another eye-catching detail that appears is the appearance of Obiang's then-girlfriend, hip-hop starlet Eve Jeffers. (The two are no longer together.) Now, the relationship between Eve and Obaing had been reported long before the subcommittee's report came out Eve Teodoro Obiang. However, today's report does shed light on an unreported twist in their relationship: Eve was actually named president and CFO of one of Obiang's shell corporations, named Sweet Pink Inc., according to George Nagler, the attorney who created the corporation for Obiang. Eve was also a signatory for an account at Union Bank of California for the Sweet Pink corporation, the report found.
This was a shady arrangement to say the least. Indeed, soon after the Union Bank account was created that listed Eve as a signatory, two wire transfers of about $30,000 from one of Obiang's companies in Equatorial Guinea were deposited in the account. That raised red flags for Union Bank, which had listed Equatorial Guinea as a "high-risk jurisdiction," and the bank quickly examined the accounts and later closed them, less than a month after they were opened.
The report doesn't mention Eve outside the Obiang incident, but it goes to show that the ways in which foreign figures will launder money in the US are many, utilizing anyone from well-connected lobbyists and attorneys to even well-known music stars.
Among Bank of America’s 50 million customers, Pierre Falcone was far from ordinary. An infamous global arms dealer who unlawfully sold weapons to Angola for its civil war and an international fugitive, Falcone was convicted of tax fraud and illegal arms dealing in 2007 and 2009 and is currently serving six years behind bars. Yet for nearly two decades, Falcone and his relatives freely used 29 different bank accounts to funnel at least $60 million into the US from secretive havens like the Cayman Islands, Luxembourg, and Singapore, and from shell corporations and secret clients. Despite his criminal record and worldwide notoriety, Bank of America essentially treated him like any other depositor.
The story of how a criminal like Falcone used Bank of America—which later received billions in a taxpayer-funded bailout—and the US financial system to advance his criminal activities appears in a new report by the Senate investigations subcommittee, led by Sen. Carl Levin (D-Mich.). In revealing the operations of Falcone and others—in most cases for the first time—the report offers a lurid primer explaining how big banks, powerful attorneys, influential lobbyists, and a host of other businessmen in this country help launder dirty foreign money.
The report highlights several gaping holes in American money laundering and corruption laws, including an exemption made by the Treasury Department in 2002 to the Patriot Act. "Foreign officials still get access to our financial system at times because US officials aid and abet their actions," Levin told reporters on Tuesday. The 325-page report sets the stage for a hearing Thursday featuring US enforcement officials as well as some of the main players who abetted secretive individuals like Falcone and the corrupt former president of Gabon, the late Omar Bongo.