Thursday, March 21, 2013

Corruption laid bare by Global Witness: A Manual for Stealing Your State's Resources for Personal Gain

Global Witness issued this must-watch video this week, which demonstrates how leaders steal from their own people with the help of lawyers and bankers. The crime itself is bad enough, but the blasé demeanour of these perpetrators is truly offensive. They must have done this a lot in order to view the proposed transactions in such a banal and relaxed way. Though one woman clutches a pillow quite closely as she calmly explains how to take care of the details. Is she nervous about her illicit behaviour, or just eager to close the deal?

This exposes a number of rotten practices, few of which I would guess are unique to Malaysia. Instead, what I think we are seeing here is a manual:

How to steal your state's resources for personal gain, in 8 easy steps.

Step 1: get control over state land allocation and resource extraction licensing by becoming a state authority.
Step 2: open a series of accounts in trust or corporate form, in places will hide your identity and assets from other state authorities, for example, in "the new Switzerland."
Step 3: have the state sell land at nominal prices to your family members and/or companies you control.
Step 4: when buyers inquire at your state offices about making land leases or purchases, direct them to your family members.
Step 5: have your family members and lawyers explain to the buyer that the purchase will require two purchase contracts plus a side arrangement for licensing rights.
Step 6: write the first purchase contract for a nominal price to legally transfer the property locally but generate minimal (or no) profit.
Step 7: write the second purchase contract to direct the remaining purchase price to be paid directly to one of the offshore accounts.
Step 8: have the buyer write the side arrangement fee directly to one of the offshore accounts.

Query: how do you make sure your buyer actually pays you the second purchase price? That is, if the first contract documents the sale, what stops the buyer exercising ownership rights if he double crosses you on the offshore bank contract? The woman in the video says no problem, this has "been done." How has it been done? Are we talking about hiring thugs to break kneecaps? I've heard of similar triangular contractual arrangements in other equally criminal schemes, and I always wonder about how that aspect works out. Honor among thieves?

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