African Minister Drives Bugatti Over G-20

Commentary by Celestine Bohlen

May 27 (Bloomberg) -- When the playboy son of Equatorial Guinea’s president-despot bought a $35 million house in Malibu, California, in 2006, his neighbors, who included actor Mel Gibson and singer Britney Spears, barely blinked.

They should have taken a closer look. And leaders in Washington and other capitals must do more than that if they want to stop the world’s ruling kleptocrats from stashing loose cash in their countries.

Here are a few things the residents of Malibu might want to know about Teodoro Nguema Obiang Mangue, the guy now living next door. At 38, he is paid $4,000 a month as minister of agriculture and forestry. That hardly pays for a lifestyle spread across three continents withproperty in South Africa, as well as California, and a fleet of cars, mainly in Paris, worth $6.5 million.

This kind of excess would be hard to tolerate in a Wall Street executive. It is all the more outrageous from a member of the ruling family of a small coastal African country where three-quarters of the 500,000 inhabitants live below the povertyline, and most have no clean water or health services.

Equatorial Guinea has undergone an oil boom in recent years which -- on paper -- has produced the highest per-capita income in Africa. That wealth explains young Obiang’s purchase in Paris of a Bugatti Veyron 16.4 sports car for 1 million euros ($1.4 million). It also makes the nation’s infant-mortality rate of 92.3 per thousand unforgivable.

Conspicuous Corruption

This kind of conspicuous corruption has been on display in the U.S. and Europe for years. Think of the Florida villas belonging to Central American dictators, or the London townhouses owned by Middle Eastern potentates.

But the world has changed in the last year. Now everybody is clamoring for more transparencyand accountability from chief executive officers, regulators and U.K. parliamentarians.

That same scrutiny should be applied to corrupt rulers wherever they are.

First, their assets should be exposed, as happened recently in France; their access to the international finance system should be blocked; and in the best-case scenario, their money returned to the countries they looted.

Like any idea whose time has come, this one has popped up in several places, with different solutions floating around, all worth pursuing.

Flush Clients

One of them, put forward by Global Witness, a London-based anti-corruption group, calls for better regulation by international banks, which often fail to do due diligence on high-ranking or flush clients.

Existing rules designed to block money laundering and terrorist financing may be enough, but bankers must do more to check up on clients with connections to known shady regimes, says Anthea Lawson, a Global Witness campaigner, whotestified last week before the House Committee on Financial Services.

Identifying those regimes isn’t rocket science: One red flag is lack of transparency, particularly in resource-rich countries such as Equatorial Guinea, Russia and many others, where profits are easily hijacked by the ruling elite.

A second proposal, now pending in the U.S. Congress, would force oil companiesand other commodity producers to report all payments to host governments on a country-by-country basis.

The argument has been ignored for too long. Billions of dollars in Western aid to many of the world’s poorest countries could be saved, if revenue from the export of valuable resources went into the local economy, not the pockets of rulers.

Nowhere to Hide

A third approach is to apply the “Anti-Kleptocracy Initiative,” which PresidentGeorge W. Bush in 2006 promised would identify “critical tools to detect and prosecute corrupt officials around the world.” This initiative, like the 2004presidential proclamation that allows the U.S. to block visas for certain foreign officials, needs vigorous resuscitation.

There are many reasons why this is a good moment to go after kleptocrats. One is the recent global financial meltdown, which brought home the need for banks to be more open about the risks they take and the customers they accept. Then, there is the pledge taken by the Group of 20 nations to crack down on tax havens, where tax evaders and dictators get to hide behind banking secrecy.

In France, anti-corruption groups are hoping for a breakthrough with a lawsuit, now heading for the Court of Appeals, that charges three sitting African leaders with misuse of public funds. The case, brought by Transparency International’sFrench chapter and the Association Sherpa, could end in the restitution of the pilfered money to the citizens of Gabon, Congo and Equatorial Guinea.

‘Good Friend’

The French lawsuit has already shone an unkind light on the breath-taking wealth, totaling 160 million euros, held in France by the three presidents and their families. Details about the 15 Paris properties, 10 luxury cars and 70 French bank accounts held by the family of President Omar Bongo, Gabon’s president since 1967, have already put him on the defensive: he “temporarily” suspended his duties as head of state on May 7, before going to Spain -- not France -- for cancer treatment.

“Naming and shaming” isn’t enough. The next step will require diplomatic backbone both in France, which has a long history of coddling favored African leaders, and in the U.S., where geopolitics -- and oil -- can forgive a lot of sins.

In 2006, when young Obiang was buying the Malibu mansion, his father, PresidentTeodoro Obiang Nguema, in power since 1979 and long shunned internationally for human-rights abuses and impropriety, was welcomed in Washington as a “good friend” by Secretary of State Condoleezza Rice.

It’s time that kind of friendship got put to the test.

(Celestine Bohlen is a Bloomberg News columnist. The opinions expressed are her own)

To contact the writer of this column: Celestine Bohlen in Paris atcbohlen1@bloomberg.net