New Internationalist

Odious Debts

Issue 259

new internationalist
issue 259 - September 1994

Ferdinand and Imelda Marcos maintained their life-style through networks of bankers and cronies.
GYENES / CAMERA PRESS
Odious debts
Steve Askin
looks at some fresh thinking about
how the proceeds of kleptocracy can be recovered.

Though Leopold of the Belgians invented modern kleptocracy and Mobutu perfected the crime, it is hardly unique to Zaire.

Nicaraguan dictator Anastasio Somosa was rumoured to have exported at least $500 million before his overthrow in 1979. Emperor Haile Selassie of Ethiopia had perhaps $15 billion in foreign assets. Other illustrious kleptocrats included ‘Papa Doc’ and ‘Baby Doc’ Duvalier of Haiti, the Shah of Iran, Alfredo Stroessner of Paraguay and Nicolae Ceausescu of Romania.

In every case a worldwide network aided the criminals and profited from their crimes. Commercial banks, backed by government guarantees, made imprudent loans which often ended up as deposits in their own vaults, to be paid back by impoverished taxpayers.

Some successor governments have tried to use the law to recapture the money. The clearest case is the Philippines. The Aquino Government established a Presidential Commission on Good Government to recover between $5 and $10 billion from the assets of former dictator Ferdinand Marcos and his associates. The Philippine authorities located just $1 billion and recovered just a tiny fraction of that in exchange for immunity from prosecution for those responsible. Marcos’s wife Imelda and alleged co-conspirator Adnan Khashoggi were acquitted in 1990 of racketeering in New York.

Swiss banks, with their code of secrecy, are at the centre of the system. Soon after the fall of Marcos in the Philippines they appeared to be about to break precedent and froze several hundred million dollars of his assets. Similar action was being prepared for the accounts of other former rulers. The Los Angeles Times even ran a headline: ‘EX-DESPOTS CAN’T BANK ON THE SWISS’. But in the event Swiss courts placed insurmountable obstacles in front of every effort actually to get hold of the money.

Despite this, a post-Mobutu government in Zaire will have a uniquely strong case to make – because the documentation of foreign complicity is so strong – if it decides to challenge Mobutu-era debts.

Because previous international efforts have failed, experts are developing new legal theories for challenging kleptocrats, their cronies and their bankers. Ghanaian legal scholar Chris Mensah argues that ‘odious’ debts arising from corrupt collaboration between Southern dictators and Northern lenders are inherently illegitimate and uncollectable. Lenders are guilty of fraud, he argues, if they disburse to rulers when there is reason to believe that they will steal the proceeds.

NN Susungi, London Resident Director of the African Development Bank argued at a conference in 1993 that ‘it is morally unfair for the strong and powerful institutions to continue to demand unbearable economic sacrifices from the poor’. The banks, he argued, have a duty to help successor governments locate stolen wealth to pay off debts.

Even if they did, it would not mean that the money would then be used for the benefit of those who really need it. A financial system stacked against the poor will not be shaken until a movement can be mobilized – in rich countries as well as poor – to make the kleptocrats and their bankers pay the real price of their deeds.

Steve Askin holds a masters degree in Business Administration from Colombia University.

previous page choose a different magazine go to the contents page go to the NI home page next page


This first appeared in our award-winning magazine - to read more, subscribe from just £7

Comments on Odious Debts

Leave your comment