The announcement was made that the United States had blocked $30 billion of “Gaddafi’s money.” Further details were not included, though the intent was clear. It’s generally accepted that leaders of mineral rich countries (and some whose countries are not so rich) tend to funnel a portion of government wealth into their personal accounts. That appears to be the norm, but it’s not the whole story.
When the U.S. government blocks or freezes foreign assets, some of the blocked money will be legitimate government accounts placed with American financial institutions as sovereign investment. Similarly included are the accounts of bona fide commercial organizations. Of course, there also are cover accounts of the ruling families. In these categories and others, all Libyan assets in the United States would have been blocked.
There’s nothing new about this business of the U.S. being chosen as a safe haven for foreign nations’ and their leaders’ finances. Name a regime, democratic or dictatorial, and you’ll find governmental, commercial and personal accounts quietly residing in American banks, real estate, financial institutions and even equity participation in industry.
The problem is separating the financial holdings of individuals from the national wealth prudently placed in U.S. instruments and institutions. Britain’s insurance and banking houses over the years have been the effective majority holder of a great portion of New York City real estate. In the seventies Japan’s investments along the same line flooded the market in New York, Chicago and other major U.S. cities. Clever foreign investors of all kinds “piggybacked” on this activity.
It’s really extraordinary how trusting some foreign politicians are when it comes to hiding their personal fortunes and otherwise ill-gotten gains. In the field of precious metals and gems, it has been rather common in the past for deals to be made with national leaders and ministerial officials. Profits from exclusive contracts with international firms and intelligence agencies have been placed in special accounts around the world. The United States is merely one of those sites.
The U.S. Foreign Corrupt Practices Act eventually forced greater American imagination in placement of these “personal participations.” Of course, countries such as Switzerland, Luxembourg, Lichtenstein, and Austria have in the past had legal facilities for accounts that sought anonymity. Transferring financial and investment paper to these sites, however, was a vulnerability as far as U.S.-related activities were concerned. In consequence, other more direct devices were used to accommodate foreign participants. While in the case of Switzerland it might be establishment of a numbered account, in the U.S. the creation of an obscure tax paying entity would do. Wasn’t the olive oil import business useful for the American mafia?
It is these cover accounts that are the priority target of U.S. tax and foreign asset control authorities. These same foreign accounts often carry with them considerable advantage in the form of making political donations that are hoped to produce leverage. Past elections have exposed foreign contributions of considerable note.
Perhaps the best known of frozen asset actions has been the one taken five years ago against Cuba. It would appear that Americans who have new claims against Libya might follow the Cuban example in spite of the executive order restoring Libya’s immunity against past terror-related lawsuits in 2008. If the U.S. government wants to protect Libyan assets in the U.S. from future exploitation by the Gaddafi regime — the stated purpose for the account freeze — it also will have to contend with the 2002 Terrorism Risk Insurance Act as well as the wording of the executive immunity order.
Passed after the Sept. 11, 2001 attacks, the 2002 risk insurance law allows people with judgments against “terrorism parties” to pursue the assets “of any agency or instrumentality of that terrorist party.” This act was referred to successfully in a 2006 case against Cuba. Future cases against similar terrorist-designated countries would appear now to have considerable precedent in this Cuba case that allows for satisfying judgment for compensating damages.
That there has been an agreement by the U.S. to “unfreeze” the accounts of former Libyan foreign minister and long time intelligence chief Moussa Koussa (aka Musa Kusa) is now part of his developing plea deal in the UK. In this case “leverage” works both ways. But that, too, is only part of the story.
Whether they realized it or not, the flood of former Gaddafi senior officials who are now trying to resign and flee to the West may present another target of legal attack under the 2002 law. Once they realize they are vulnerable to claims of compensatory damages, they may think twice about defecting to the United States or anywhere they may have squirreled away money. Pleas for immunity will roll in like a desert sandstorm. Lawsuits for compensation in the U.S. and Europe will certainly be piling up by individuals, corporations, and governments that believe they have sustained losses during the Libyan central authority crackdown on the rebellion.
None of this will stop other foreign potentates and their agents from continuing to slip their swag into the U.S. and elsewhere. Their lawyers will become that much happier.