The Wonga Coup (27 page)

By mid 2004 Obiang had good reason to feel content. The Wonga Coup had failed. Legal cases against his enemies were underway in several countries. Some hundred plotters were in jail. And his government, long shunned for human rights abuses while poor, had found new friends. Most notably, relations had improved with South Africa, the dominant power on the continent. Then Spain grew friendlier, too. The ruling party (of course) won the local elections in April. Obiang visited South Africa late in April for Thabo Mbeki's reinauguration as president. After that, he visited Zimbabwe and saw his new friend Robert Mugabe, too. According to some reports, he even visited Chikurubi prison one night to observe those who had planned to depose him; Niel Steyl believed it was possibly the same night that he and the others had feared they would be executed.

Back home Obiang decreed a campaign to improve Equatorial Guinea's international image. No longer would he be seen as a bent dictator. He was a victim of foreign aggression, the head of a ‘fledgling democracy'. His was a plucky little
country that had defied foreign pillagers. Little matter that coups were made more likely by his own misrule. But just as Obiang began to enjoy his new, warmer image, trouble struck. In the middle of 2004 American investigators and the US Senate threw open Obiang's overstuffed Washington DC bank accounts to the public gaze, laying bare the unethical practices of despots, banks and oil companies alike.

In July 2004, the United States Senate released a report on a terribly dull issue: banking regulation. Due to the rise of terrorism and global organised crime, American banks were required to crack down on money laundering and other bad practices. No longer were they allowed to take deposits from someone – a tin pot dictator, for example – who might be expected to be corrupt, unless given proof the money was from a legitimate source. As a test case, an investigative committee in the Senate chose to look hard at a Washington DC bank, Riggs Bank, which did much business with embassies and foreign politicians. Riggs also had a reputation for taking some of its regulatory obligations lightly, and an investigation by the
Los Angeles Times
in 2003 suggested Obiang kept hundreds of millions of dollars in the bank.

Investigators were interested in at least six Riggs accounts held by former dictator Augusto Pinochet, who had long led the military regime that had overseen murder and torture in Chile. In 2004 investigators found his personal accounts at Riggs were crammed with dollars (the balance ranged from $4 million to $8 million over the years). They concluded that Riggs had not asked proper questions about the source of Pinochet's money and the bank had helped Pinochet set up ‘shell' corporations to disguise his identity. The same investigation threw up ‘troubling facts' relating to 150 accounts connected to Saudi Arabia, many of them controlled by a Saudi prince.

The investigators also looked at Riggs' largest client (by 2003), President Obiang. Equatorial Guinea had opened its first Riggs account in 1995, just as oil had been discovered. Over the next decade a triangle of partners had established bad habits: in one corner Riggs; in the next, Obiang and family; finally, some American oil companies. A Riggs manager, Simon Kareri, looked after some sixty accounts linked to Obiang and other members of the ruling family, sharing a cosy relationship with them and visiting Equatorial Guinea to give financial advice. He even had signing rights on one account himself. He brought to the bank suitcases crammed with dollars, which had been provided by officials and diplomats from Equatorial Guinea. There were scenes you would expect in a gangster movie. Twice such cash deposits by suitcase involved $3 million dollars, which meant the case weighed about 30 kilos (more than 60 pounds). The notes were usually in unopened, plastic-wrapped bundles. But the source was impossible to trace. The bank rarely asked anyway, and Obiang – or other account holders, like his wife – did not say.

Aggregate deposits in these Riggs accounts ranged from $400 million to $700 million. It was blindingly obvious that a dictator of a poor African country was stealing oil revenues and stashing them in his private accounts at a rate that would make Pinochet green with envy. And Riggs was helping him do it. While Obiang's family bought mansions and luxury cars, Equatorial Guinea spent the least of any government anywhere on health, education and other public services. An internal bank report noted Obiang's government was awful: ‘management of the oil sector may even become more opaque, and standards of governance are like[ly] to remain poor … Human rights have been an endemic problem …' Yet Riggs happily set up new accounts, then tried to hide his wealth
(as with Pinochet) in offshore shell corporations. Apologists said the benign despot planned to use this money to benefit his people later. He feared others would steal it, so he hid it in his own accounts. In fact, Obiang proved no different from his mad uncle Macias, who stuffed the national treasury in a wooden hut in the jungle.

Senate investigators concluded that Riggs behaved abominably. Its staff had ‘turned a blind eye to evidence suggesting the bank was handling the proceeds of foreign corruption'. There were ‘multiple personal accounts for the President of Equatorial Guinea, his wife and other relatives'. Riggs opened an account to receive legitimate payments from oil companies, but then allowed wire transfers of $35 million to other accounts, almost certainly to a company ‘controlled in whole or in part by the EG President'. Senators queued up to condemn Riggs. A Democrat on the investigating committee, Carl Levin, concluded: ‘It is a sordid story of a bank with a distinguished name which blatantly ignored its obligations under anti-money-laundering laws.'

Riggs paid a price. Kareri was sacked in January 2004. The next month, just as the first attempt at the Wonga Coup was launched, some of Obiang's accounts were frozen until evidence could be provided on the source of his income. He refused, so the accounts were eventually closed. The bank was fined $25 million early in 2004. In January 2005, Riggs pleaded guilty to criminal charges of failing to monitor suspicious financial deals and paid another fine of $16m. But the real damage was to its reputation. A venerable old establishment – which had provided gold for the US government to buy Alaska – was now the bank of choice for the dirty despot.

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.

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.