by Adam Roberts
As the scandal grew, the bank’s stock value slumped. Corporate predators prowled. In February 2005, PNC Financial Services gobbled up Riggs. Eight months later PNC agreed to pay another $5 million to settle a shareholder lawsuit from the Riggs case. Late in May 2005, Kareri was charged with bank fraud and money laundering. Prosecutors said he had stolen over $1 million from his clients through kickback schemes, forged cheques and wire transfers. He was accused of funnelling money to yet another shell company that he and his wife, Nene Fall Kareri, had set up in the Bahamas. Other charges followed. He eventually pleaded guilty to conspiracy, bank fraud and money laundering. The FBI seized over $1 million in assets; he was jailed for 27 months.
What of the other two parts of the triangle? For Obiang, the details of his thieving habits came at an inconvenient time. Just as he was posing as a fledgling democrat and victim of outsiders’ aggression he was cast again as a crooked despot. More suspicious, if the Wonga Coup had succeeded, the new government in Equatorial Guinea would – by mid 2004 – have been busy discrediting the previous rulers. To Equatorial Guinea’s government this suggested the American government had helped orchestrate the coup plot. The details from Riggs’ accounts would have been valuable material for the new rulers.
Obiang tried to respond to the Senate investigation. In September 2004 his government produced an 82-point, 8,000 word rebuttal accusing the Senate investigators of ‘conceptual confusions’, ‘repeated imprecisions’ and ‘unfounded extrapolations’. It also alleged a conspiracy between human rights campaigners, Severo Moto and others to besmirch the good name of Obiang. Though an effort was made to distinguish private and public accounts held in Riggs banks, the rebuttal gave no convincing evidence that the hundreds of millions of dollars kept in the Riggs accounts were stored for public use rather than for the private benefit of Obiang and his relatives.
The new scramble
How did the third part of the triangle fit? The Senate’s attention turned to the role of western oil companies in Equatorial Guinea. Its investigation provided a glimpse of how attention-shy oil firms work in poor countries. It was an extreme but revealing case. A wretched spot had had great wealth thrust on it. Like a tramp who wins the lottery, it had been ill-equipped to cope. Equatorial Guinea had seen its gross domestic product (GDP) leap by an average of over 40 per cent a year between 1997 and 2001. It all comes down to oil. Equatorial Guinea produces roughly a barrel of the black stuff for each of its citizens, every day. Its oil is sweet, pure, nectar-like. To hear experts talk, you could drink it like champagne. This is in great demand from refineries, as it is not the thick sludge used to tar a roof or to line a bear pit that some produce. With rising demand from Asia – now 30 per cent of the total global market – the scramble for supply has grown fierce. Energy importers increasingly fret that the supply of oil and gas is unstable. ‘We’re entering an era of energy insecurity’ is an oft repeated mantra of the American government. One response is to see friendly oil companies – those of your own country – secure as much supply as possible, especially in tempting spots like Equatorial Guinea.
In 2005, the International Monetary Fund (IMF) said the country again had the fastest growing economy anywhere, with GDP up by 34 per cent. It has kept the top spot for most of a decade. The tiny country is one of the largest recipients of foreign direct investment in Africa: some $6 billion between 1998 and 2005. Roughly 3000 Americans, mostly oil workers, are said to live there. A decade ago the country produced almost nothing. Now oil and gas account for 98 per cent of its exports and Equatorial Guinea is sub-Saharan Africa’s third largest oil exporter.
But it is proving a manic-depressive economy, swinging from lows to highs, exploited by outsiders, its people getting little. In the oil rush only the elite has prospered. Some responsibility for that lies with the oil firms: Equatorial Guinea earns less from its oil than most countries; and those revenues are used badly. The oil companies have squeezed the toughest deals possible from the country’s ignorant rulers. Even after a major renegotiation of production-sharing contracts in 1998, the country had a lousy deal. One expert, Jedrzej George Frynas, says Equatorial Guinea typically gets just 39 per cent of total revenues from its oil, while Gabon gets 78 per cent, Congo gets 76 per cent and neighbouring Nigeria 70 per cent. Equatorial Guinea did not milk oil companies for ‘signature bonuses’, when a firm pays tens of millions of dollars in advance of exploiting the oil. Thus contracts obviously favour the firms. Worse, audits show companies routinely fail to pay what they promised to the government. In 2003 the IMF noted oil firms underpaid by $88 million over five years. Only late in 2005 did Obiang’s government finally talk of negotiating a better deal.
Second, little of the oil revenues is spent on ordinary Equatorial Guineans. Thieving leaders and hopeless government structures surprise nobody, least of all oil firms. In 2004 the US State Department noted that most wealth in Equatorial Guinea ‘appears to be concentrated in the hands of top government officials while the majority of the population remained poor’. And conditions are worsening. The United Nations says the quality of life – judged by its index of life expectancy, wealth and education – shows the country in a worse position each year despite the rise in oil income. In 2005 the anti-corruption group Transparency International noted the three most corrupt countries in Africa were all oil producers: Chad was the most venal; Nigeria and Equatorial Guinea tied for the second worst spot.
The oil firms must take some of the blame, however. Bribepayers do much to spread corruption and help the politicians divert funds from legitimate uses. And firms operating in Equatorial Guinea certainly do nothing to stop oil money being stolen. Worse, graft is actively encouraged. The investigation into Riggs Bank showed oil firms happily channelling funds towards private accounts of leaders like Obiang. Several oil firms have operated in Equatorial Guinea in the past decade, but three dominate: ExxonMobil, Amerada Hess and Marathon. The Senate committee’s view of these firms is bold: ‘Oil companies operating in Equatorial Guinea may have contributed to corrupt practices in that country by making substantial payments to, or entering into business ventures with, individual EG officials, their family members, or entities they control, with minimal public disclosure of their actions.’
The oil firms frequently give money to the leaders of Equatorial Guinea, and their families. Examples abound. ExxonMobil, one of the largest operators in the region, paid $385,000 directly into the personal account of Obiang’s wife, Constancia Mangue Nsue. The same firm, plus Chevron-Texaco, another called CMS, Marathon, Triton and Vanco, gave as much as $275,000 each for ‘student funds’. In total, more than $4m was paid by oil companies to support over a hundred students abroad, ‘most of whom were the children or relatives of wealthy or powerful officials’. One firm, Triton, put more than $250,000 into a Riggs account to pay tuition fees for the children of Armengol Nguema, Obiang’s brother and Equatorial Guinea’s security boss. That looks remarkably like bribery.
The oil firms have close business ties with the ruling family. ExxonMobil leases buildings and land from Abayak, a firm owned by Obiang, and rents property from ministers. The Senate report notes that Amerada Hess paid some $300,000 to the same company controlled by Obiang, in exchange for vague ‘security services’. In 1998 ExxonMobil formed an oil distribution business in the country, granting a 15 per cent share to Abayak. Asked to estimate how many deals it had made with such well-connected individuals, ExxonMobil said it needed to research some 500 payments. Marathon paid $2 million for a plot of land which almost certainly benefited the president directly. The oil firms use services of local companies – in construction, security and other areas – owned by members of the ruling family.
One striking story involves the 14-year-old godson of a minister in Equatorial Guinea’s cabinet. Amerada Hess leased property from the teenager, passing nearly $500,000 to him, until a local court ordered the payments to stop in 2003. Then Hess was questioned by the minister concerned who wanted to know w
hy the payments were no longer coming. The minister immediately phoned up the judge, who promptly reversed the order, and the payments from Hess started up once more. The oil firm could have been in no doubt that it was behaving unethically – it even had a court order making that fact clear – yet the firm happily restarted payments.
There is no doubt that oil firms pay generous bribes to crooked rulers, and in return enjoy extremely profitable terms of business in Equatorial Guinea. The only losers are the ordinary people. Rather than deny it, the firms claim they have no choice but to behave in this way. Equatorial Guinea is a tiny country. To do business there at all means signing deals with companies owned by members of the government. The only land to buy and the only properties to lease are owned by the extended ruling family. A representative of ExxonMobil told the Senate that ‘it may be virtually impossible to do business in such countries without doing business with a government official or a close relative of a government official.’ And is it the concern of oil firms if the government fails to spend money to benefit ordinary people? Foreign firms obey the law, pay taxes and (sometimes) meet the conditions of their contracts. That is where their responsibility stops.
In fact, the firms were caught red-handed. Under no circumstances could they justify paying a teenage relative of the president large sums of cash. It was plain wrong to put money, supposedly for oil revenues, into the accounts of Obiang’s wife or other relatives. (One oil industry consultant close to Equatorial Guinea told the Financial Times in September 2004 that the multinationals had been ‘stupid’. With greater care they could have hidden the beneficiaries of their payments. ‘You [pay to] a company if you are asked to do that,’ he says. ‘You don’t write it out to a name.’)
As such they were conspiring with the crooked leaders of the country to defraud the people of Equatorial Guinea of revenues. And the firms seemed to admit as much. After the Senate report, and under threats of prosecution in the United States, the oil companies promised to change their behaviour in Equatorial Guinea. Some also adopted fig-leaf ‘social programmes’ – for instance, helping to eradicate malaria on the island part of the country – to polish up smeared reputations.
Here is a microcosm of corruption in Africa as a whole, and perhaps other parts of the developing world. In a country where democracy does not function, elections are not free, journalists are unable to investigate crooked leaders and the rule of law is not respected, there are no means to hold corrupt politicians or crooked businessmen – foreign or local – responsible. There is no chance that the powerful are going to regulate themselves. The local politicians seek out short-term gains from the resources they control: backhanders to stuff into bank accounts, flashy cars, assets held abroad. They have no serious interest in developing their countries, in part also because they may expect to flee into exile eventually or be put up in front of a firing squad. In turn the investors do not expect to remain in the country for long. Equatorial Guinea produces generous quantities of oil today, but this is no Saudi Arabia. A couple of decades from now the oil will be exhausted. Yet the oil firms have no incentive to develop the local economy, as they profit by extracting resources and exporting them, not by developing stable and growing local markets. Thus, for those with power, as in the many parts of Africa where extracting minerals and oil quickly is the main economic activity, the rationale is to make a quick buck and move on.
By 2006, with oil prices reaching $70 a barrel, two things became clear. Oil firms were struggling to find long-term supplies of oil and gas to replace that being sold and used. But, with high prices, they were making astounding profits measured in many tens of billions of dollars a year. Remote and repressive little countries, like Equatorial Guinea, prove profitable indeed.
22
The Price of Failure
‘We’ve been chained like wild animals.’
Nick du Toit
Crause Steyl rests his feet on the coffee table, puts his hands behind his head and chuckles. From the office of his aviation business in Bethlehem, South Africa, he ruminates on the good life of being a mercenary. He thinks it is a smart career choice. ‘I don’t have perfect morals. I don’t care too much what other people think. In essence, I think all men are mercenaries and all women are prostitutes. Men will kill for money and women will screw for money … For unattached people I’d recommend it. Given the opportunity, almost anyone would do a mercenary coup. If you have time on your hands, then why not? You need all sorts, not everyone carries a gun and shoots people.’
He has no regrets about the Wonga Coup. ‘If it had been successful we would have done it again! If I’d gone through life without trying these things I’d have been a civil servant serving somebody stupid.’ From the start he had reckoned the risk of the plot was not too grave and the potential reward huge. The price of failure, at worst, was death or a couple of years in an African prison. He felt that was an acceptable gamble.
That is easy enough to say. But Steyl himself faced neither death nor prison. He got a rap on the knuckles in South Africa, admitted after many months that he had broken an anti-mercenary law and paid a fine. In contrast Mann, in July 2004, was found guilty of two charges by the court sitting in Chikurubi prison. He had tried to buy firearms with no end user certificate. (The court did not ask why ZDI had been ready to sell without seeing the same certificate.) Mann had also broken a repressive law, the Public Order and Security Act. His two assistants, Carlse and Horn, were found not guilty and were freed. They returned to South Africa where – like Steyl later – they went through a plea bargain process, admitted breaking the anti-mercenary law, paid small fines and carried on as before.
Most of the accused in Chikurubi prison, the black foot-soldiers and the white ‘team leaders’, had pleaded guilty to immigration and aviation offences, as their lawyer Samukange advised. By September they had been behind bars for six months and awaited only sentencing. The men were chained together as usual, shackled hand and foot, doing what Piet Steyl and other visiting relatives now called the ‘Chikurubi soft shoe shuffle’. They were herded into the old hospital ward that served as a court while an armoured car trained a machine gun at their backs. Yet the atmosphere was hopeful. Most expected to get a fine and immediate deportation home. After all, the smaller fry said they knew of no coup plot, and had merely sat on a plane before they were arrested. They broke immigration rules only because the pilot taxied to the military side of Harare airport. They disembarked at gunpoint. Samukange said he was confident of their release.
But, to their shock, the magistrate handed down jail terms for all. The sentences clearly related to an act – plotting a coup – for which none had been charged, tried or convicted. Samukange said later that the politicians had ordered an example to be made: ‘The magistrate told us, “I am under pressure to sentence your guys”, he called me to his office and said that. Political pressure, but he did not say from whom. He apologised to me and said he hoped I could find a way to reduce their sentences. But I was shocked when I heard the twelve-month sentence.’ Most of the prisoners were told they would spend almost another year in Chikurubi prison as their six months on remand counted for nothing. To add insult to injury, they were fined, too: 2000 Zimbabwean dollars each, or thirty US cents.
The 727 pilot, Niel Steyl, and his co-pilot, Hendrik Hamman, landed sixteen-month terms. Piet said his brother paled visibly as sentencing was pronounced. His knees shook in his khaki shorts and he was ready to collapse. Mann sat unshaven, with long, tousled hair. ‘[H]e looked rather dishevelled – quite aloof from his present surrounding,’ noted Piet. When a television camera focused on the former SAS officer, he mouthed silent but indecipherable words and appeared to write with his finger on his chest. Mann stood to hear his sentence: seven years for the two offences (later cut to four on appeal); he also forfeited the Boeing 727 and $180,000 in cash that were grabbed on the night of his arrest. The same month his seventh child was born in Britain.
Amanda Mann kept her usual
silence. But the wives of the black footsoldiers were outspoken. Many had scraped together money, or used a one-off payment from a lawyer (acting for Mann), to visit their husbands during the trial. By September most were back in Pomfret, the asbestos town in the desert. They live in a decrepit area dubbed Esperensa, with overgrown gardens, cracked walls, gates hanging off hinges. Roads are named ‘Buffalo’, ‘Carpenter’ and ‘Carnation’.
Viviana Tchimuishi, wife of Eduardo, was desperate. ‘We depend on people who have pity, and on the churches. We get food parcels,’ she explains. Her daughter, Cecilia, says: ‘We heard the sentence of my father on the radio. We were surprised. They told us they would come out now.’ Tears appear in her eyes. She blames Mann and the financiers: ‘Those people put us into trouble. We are suffering because they put our father into problems.’ She wants Mann punished. ‘I’m happy. Not to give him seven years, no, to give him death penalty. He deserves it.’
‘We had no idea about Equatorial Guinea until after the men were arrested,’ declares Viviana. Then, using the past tense, she adds that her husband was a good person. ‘He didn’t bug me. We always had food. He was a great person. When he was here the children were always studying. Now there is no money for school. It seems to me as if he already died. I don’t know I’ll see him again … It’s just me. I’m mother and father to the children.’ Neighbours are unsympathetic, blaming the men for what happened. ‘They were rushing for money,’ says one.
Felicia Shapoda, wife of Bonifatius Matheus, had been in court in Harare for the sentencing and hoped to return with her husband. Instead he would spend a year more in jail. ‘I felt very bad because they are not guilty. Simon Mann, he was crying. I was feeling pity for him, I didn’t understand what he had done.’ She spent just five minutes with her husband, time only to give him some biscuits, cigarettes and milk.
