According to Casey Michel (American Kleptocracy) the US is “the largest provider of money laundering and financial secrecy services in the world…. The world of the ‘offshore [money laundering haven] has been brought back onshore.” The main way this is done is through “limited liability companies” (LLC’s). These are legally registered companies whose owners are kept secret from both the general public and the government. This allows drug cartels and others to hide the source of their gains, in other words launder their money. They establish an LLC and then use that LLC to purchase assets – most commonly real estate – which they can then sell. It doesn’t matter if they sell the real estate at a loss. They now have laundered money that they can use legally.
According to Michel, nearly 10% of global wealth (which totals $431 trillion, according to Forbes) reside in offshore tax havens. Different states have different laws governing registering a corporation. Several allow those who own the company to remain completely anonymous, with Delaware (Biden’s home state) being the best known.
Michel focuses on two kleptocrats, one of which is Teodorino Obiang, playboy son of the kleptocratic dictator of Equatorial Guinea, Teodoro Obiang. And make no mistake, his dictatorial rule comes with a cost to the people of that beleaguered country. The cost lies in the fact that over half the population lived without clean drinking water, 15% of children die before reaching the age of five, and one third of people die before reaching 40 years old. The cost also lies in the brutal repression by the Obiang dictatorship.
Teodorino first came to the US as a “student” at Pepperdine University in California, with all his expenses paid by Waller, International, an oil firm which does business in Equatorial Guinea.
After oil, timber exports the second largest source of finance for Equatorial Guinea, and Teodorino’s father put him in charge of that industry. Through it, he extorted and blackmailed timber companies out of millions of dollars. Here he faced a problem: He’d gotten a taste for the celebrity lifestyle in the US, especially Southern California, but how to legitimize his money? How to launder it, in other words.
Well, it turned out it wasn’t really a problem. Teodorino turned to Riggs Bank in Washington DC. This bank was considered the bank for embassies and was probably the most venerable bank in the entire capital. It turned out that this gilt-edged bank had also been involved in laundering money for Saudi Prince Bandar bin Sultan, whose money was used by the 9/11 terrorists. So, no problem for the Obiangs to become Riggs’s largest single client; from 1995-2003 they helped that family launder an estimated $700 million. Ultimately, a Senate investigation revealed that officials from Riggs had “colluded with Riggs’s transformation into a laundromat for the Obiangs.” At first, Riggs officials denied everything. Then, when they couldn’t deny it any longer, they blamed it all on the officer they’d put in charge, Simon Kareri, who’d fled the country. He later returned and was sentenced to two years in prison. Not only that, but the US Treasury Department’s “Examiner In Charge” (EIC), R. Ashley Lee, had turned a blind eye for years. (He’d also been the EIC when Riggs was laundering money for Chilean dictator Pinochet.) In 2002, Lee retired and was immediately offered a management position at Riggs. Ultimately the stink got so great that Riggs Bank went under. Not to worry, though, not a single top official did any time. The then head of Riggs, Robert Allbriton, did well for himself and became head of Politico.com!
As for Teodorin, he swept into Southern California where, among other things, he bought a $30.75 million estate in Malibu in 2006, a $38.5 million Gulfstream jet, and so many luxury cars (Ferraris, Maseratis, Rolls Royces, etc.) that he couldn’t keep track of them all. In order to make these purchases, without any busy body checking into the source of the money, he hired a lawyer named Michael Berger who laundered his money in various ways. This included setting up anonymous shell companies as well as putting some of Teodorin’s money into his law firm’s accounts so nobody knew which money was whose. He also set up attorney-client accounts which were shielded by attorney-client privilege.
Eventually, federal authorities did catch up with Teodorin, who then fled the country. After many twists and turns, a portion of his ill gotten wealth was seized by the federal government, but they had one little problem: According to the law, such stolen money was supposed to be returned to those from whom it was stolen, which was actually the government of Equatorial Guinea, which in turn was owned and controlled by exactly the thieves who’d stolen the money in the first place!
Another kleptocrat on whom Casey dwells is Ukrainian oligarch Ihor Kolomoisky. He is an unashamed gangster who used such tactics as sending an empty coffin to the office of those who displeased him. Nor was this just an empty threat. Kolomoisky used such tactics to gain control over Ukraine’s manufacturing industry during the wholesale privatization of state owned industries following the collapse of the Soviet Union. From there, he entered into Ukraine’s natural gas industry as well as in banking and he founded an all round corporation known as Privat Group (PG). He gained control over 40% of the country’s retail bank deposits and 20% control over the country’s entire banking assets.
Meanwhile, a nice little middle class family in Florida, the Korf family, sent their son, Mordechai Korf, to Ukraine supposedly to do community service for Ukraine’s Jewish community. There, young Mordechai mysteriously ran into Kolomoisky. Maybe it wasn’t a coincidence that both were members of the Zionist Chabad, run by the ultra reactionary Rabbi Schneerson.
In 1994, young Korf returned to Florida where he founded Optima International. Optima, in turn, was used to set up a host of shell companies – Limited Liability Companies (LLC’s) in Delaware, which is one of the states most famous for its lax incorporation laws which welcom these crooked shell companies. He hired his brother in law, Chaim Schochet, to serve as his emmissary. In that role, Schochet traveled all around the mid west, starting in Cleveland, Ohio, buying up millions of dollars of distressed property. In 2010, he kicked off that buying spree with an $86.3 million purchase of One Cleveland Center, which was one third more than the previous owners had paid just a few years earlier. He also bought up dozens of run-down steel mills.
Back in Ukraine their patron Saint, Kolomoisky, was having a field day. His bank, Privat Bank (PB) had become the country’s largest bank… and the world’s largest ponzi scheme ever. As Casey Michel writes, it was “pockmarked with all kinds of offshore entities, all kinds of obscure shells.” Privat Bank used these shells to shuffle around loan after loan after loan. In reality, he personally was skimming the loans into his own personal accounts, and he financed this by gaining an ever bigger share of Ukraine’s private depositers – one third of the total such deposits in the entire country. Loans were rerouted from one country to another, mixed together and shuffled around over and over. This was the ultimate source of Schochet’s buying spree in the US. Eventually, like all ponzi schemes, it came crashing down. In the aftermath one analyst explained that “’99% of the bank’s loans on the bank’s books were fake.’” The result was that the government had to nationalize the bank – in other words pay off the depositers for Kolomoisky’s multi-billion dollar thievery. When all was said and done, it turned out that Kolomoisky had laundered nearly a half trillion dollars.
This did not stop Kolomoisky, who got himself appointed governor of Dnipro province in Ukraine. He presently apparently splits his time between the US and Switzerland and is engaged in the same old investment schemes.
Recent legal reforms have enabled the US Treasury Department to find out who the owners of an LLC are, but this is clearly time consuming and according to a Wall St. Journal article, there is no record of their having used that power up until now. Anyway, according to one law firm, there are 21.6 million LLC’s in the US. So it’s obviously impossible to even scratch the surface. And given the influence and power of the banking and real estate industries – both of which are thoroughly integrated into the entire LLC industry – the federal government will not use this power.
As Oaklandsocialist has pointed out time and again, the issue is directly related to the number one figure in the drive for reaction to take over the United States – Donald Trump – who made his millions laundering money for the Russian oligarchs. (See Donald Trump, money-launderer-in-chief for the most thorough documentation.) The fact of his money laundering for the Russian oligarchs is directly related to his support for Putin.
War in Ukraine
The issue is directly related to the war in Ukraine in another way: As Oaklandsocialist pointed out in this article, the Biden administration has not touched the real assets of the Russian oligarchs, which are first and foremost their real estate holdings. As we point out, why should the Ukrainian oligarchs be untouched, though? Why should financial swindler Kolomoisky, who stole billions from the Ukrainian people and sent the money to the US, be untouched? Their assets should also be seized.
Overall, there is no justification for a company’s owners to remain hidden. The entire LLC set-up should be outlawed. But since companies are chartered by the states, not the federal government, this is difficult if not impossible. And, of course, since both major parties represent the interests of the capitalist class, neither will be willing to do it anyway.
These are just a few of the aspects of the entire issue and how they underlie the very way that capitalism functions in the 21st century.