Dictators, Despots, and Wealth, how do they get away with it?
February 11, 2011 3:57 PM Subscribe
Mubarak is estimated at being worth between $40 to $70 billion, how can he hide that type of money?
I was just reading some articles about Egypt's Mubarak estimated to be worth between 40 to 70 billion after skimming from likely every big deal made in the country. I've also read that the Swiss are freezing accounts they think are linked to him and his family. However, it is believed that he'll get the majority of "his" money back some way.
This brings me to my question. Are there any experts out there who study these types of things and can shed light or refer me to books on how dictators, despots, etc shift these massive amounts of money without anyone noticing? Is it just cooperation of shady banks? If these banks are shady, why not just take the money and blackmail the former dictator by making him accept 20% of his deposit while the bank parks 80% into their own pockets?
I understand how Mubarak might have the upper hand with an army behind him but once you are run out of your country and internationally seen in such a bad light, I find it interesting that you would be able to hold on to your wealth after burning so many bridges and making so many enemies.
I was just reading some articles about Egypt's Mubarak estimated to be worth between 40 to 70 billion after skimming from likely every big deal made in the country. I've also read that the Swiss are freezing accounts they think are linked to him and his family. However, it is believed that he'll get the majority of "his" money back some way.
This brings me to my question. Are there any experts out there who study these types of things and can shed light or refer me to books on how dictators, despots, etc shift these massive amounts of money without anyone noticing? Is it just cooperation of shady banks? If these banks are shady, why not just take the money and blackmail the former dictator by making him accept 20% of his deposit while the bank parks 80% into their own pockets?
I understand how Mubarak might have the upper hand with an army behind him but once you are run out of your country and internationally seen in such a bad light, I find it interesting that you would be able to hold on to your wealth after burning so many bridges and making so many enemies.
dfriedman, the WSJ reports that the Swiss fromze accounts linked to Mubarak. I had seen it on Reuters earlier, too.
And here's an article from the CBC addressing the source of Mubarak's wealth. I've also seen reports that he bought real estate in other countries, although I suspect that that may eventually be vulnerable to legal actions.
posted by dilettante at 4:22 PM on February 11, 2011
And here's an article from the CBC addressing the source of Mubarak's wealth. I've also seen reports that he bought real estate in other countries, although I suspect that that may eventually be vulnerable to legal actions.
posted by dilettante at 4:22 PM on February 11, 2011
Response by poster: A quick google search on Mubarak wealth
Guardian article
I'm not talking about state accounts. Once a dictator is run out of town, I'm assuming state accounts become property of the new rulers. I'm talking about when many politically powerful people skim money and hide it in personal accounts.
The guardian article I just found points towards real estate and multiple international banks aiding in hiding the money. I'm just interested because it's been reported that naive people will frequently attempt to create off-shore accounts to hide money from the IRS, only to fall victim to a scam where the money is not returned. In these scenarios, the naive person has no recourse due to not being able to incriminate himself as attempting to hide money from the IRS.
Hence, my question of dictators, despots, even other civil servants who have been corruptly skimming profits, driven from power, yet seem to be able to hold on to their wealth.
posted by InvestorMD at 4:30 PM on February 11, 2011
Guardian article
I'm not talking about state accounts. Once a dictator is run out of town, I'm assuming state accounts become property of the new rulers. I'm talking about when many politically powerful people skim money and hide it in personal accounts.
The guardian article I just found points towards real estate and multiple international banks aiding in hiding the money. I'm just interested because it's been reported that naive people will frequently attempt to create off-shore accounts to hide money from the IRS, only to fall victim to a scam where the money is not returned. In these scenarios, the naive person has no recourse due to not being able to incriminate himself as attempting to hide money from the IRS.
Hence, my question of dictators, despots, even other civil servants who have been corruptly skimming profits, driven from power, yet seem to be able to hold on to their wealth.
posted by InvestorMD at 4:30 PM on February 11, 2011
Response by poster: I'm starting to find more info as the media organizations pump out their stories.
ABC Article Mubarak Wealth
posted by InvestorMD at 4:37 PM on February 11, 2011
ABC Article Mubarak Wealth
posted by InvestorMD at 4:37 PM on February 11, 2011
I think you're thinking with a first-world bias. How does Mubarak hide his money from whom, exactly? From auditors, from government oversight committees, from opposition politicians asking probing questions and journalists making Freedom Of Information Requests?
Mubarak doesn't have to worry about any of those things, I'd assume. He would be able to spend government money on anything he liked, and not face any kind of investigation.
In other words, the average corrupt politician in the average country in the world can get away with a lot. The ones who face obstacles to corruption are the exceptions.
posted by AmbroseChapel at 7:34 PM on February 11, 2011 [1 favorite]
Mubarak doesn't have to worry about any of those things, I'd assume. He would be able to spend government money on anything he liked, and not face any kind of investigation.
In other words, the average corrupt politician in the average country in the world can get away with a lot. The ones who face obstacles to corruption are the exceptions.
posted by AmbroseChapel at 7:34 PM on February 11, 2011 [1 favorite]
I would guess he's not doing this alone and that there's a network of supporters that would help him hide or move the cash around. No doubt some may turn on him but if he's groomed them over a period of decades they're likely to remain loyal unless he does something stupid. Plus if he has access to even a fraction of his wealth he would be able to hire thugs to keep those who are thinking of crossing him, in line.
posted by storybored at 8:22 PM on February 11, 2011
posted by storybored at 8:22 PM on February 11, 2011
I have read that normal rich people hide their income by setting up shell companies through intermediaries and then drawing money from that.
I am sure that after being a dictator for 30 years you amass quite a wide contact network. I would guess that he has legitimate investments, black market investments(drug trade, arms, etc.), and multiple shell corporations that invest his money clandestinely in legitimate businesses.
posted by psycho-alchemy at 11:23 PM on February 11, 2011
I am sure that after being a dictator for 30 years you amass quite a wide contact network. I would guess that he has legitimate investments, black market investments(drug trade, arms, etc.), and multiple shell corporations that invest his money clandestinely in legitimate businesses.
posted by psycho-alchemy at 11:23 PM on February 11, 2011
the figure looks pretty bogus to me, that would be roughly 20 million a day, including weekends, of rule.
I'd take "revelations" about mubarak cum grano salis unless they are very solidly backed.
posted by 3mendo at 11:58 PM on February 11, 2011
I'd take "revelations" about mubarak cum grano salis unless they are very solidly backed.
posted by 3mendo at 11:58 PM on February 11, 2011
I would suggest that any bank looking to be the bank of choice for dictators and criminals would steer clear of fucking over even one of their dictatorial or criminal clients.
Agreed. The answer to your question of why banks (Swiss or otherwise) wouldn't just keep his money for themselves is that it'd be bad for business. If banks only did business with ethical people... haha, sorry, I can't even finish that sentence.
posted by empyrean at 6:14 AM on February 12, 2011
Agreed. The answer to your question of why banks (Swiss or otherwise) wouldn't just keep his money for themselves is that it'd be bad for business. If banks only did business with ethical people... haha, sorry, I can't even finish that sentence.
posted by empyrean at 6:14 AM on February 12, 2011
Prior to Swiss banking reforms, the answer would be easy: number-only swiss bank accounts.
These days, I would expect that someone would buy a lot of high value securities or offshore real estate. A suitcase full of securities can hold a REALLY lot of money.
But this is close to money laundering: the goal isn't to get your money back, but to get ANY of it back. If you can't spend the money you have illegitimate access to, it is just paper. The goal is to turn that paper into something of value.
Example: a car thief steals a $50,000 car. But, he can't drive it or he'll be caught. He can't sell it legitimately, because he doesn't have a title and will likely be caught. It is virtually worthless to him as a car. But Vinny the Fence will give him $2000 for it. He takes that money, because $2000 in hopefully untraceable cash is worth a LOT more to the thief than a $50,000 albatross.
(Or, look at it from the perspective of trading risk. He has a very risky $50,000 thing. He offloads nearly all the risk to Vinny, in exchange for almost completely risk-free cash.)
So you fill some suitcases with securities and distribute them in various places that you hope you'll have access to as you are being run out of town. You buy a bunch of palatial estates through trusts and corporations, and if half of your co-conspirators screw you, you still have the other half. Sell one estate, hire assassins.
posted by gjc at 8:29 AM on February 12, 2011 [2 favorites]
These days, I would expect that someone would buy a lot of high value securities or offshore real estate. A suitcase full of securities can hold a REALLY lot of money.
But this is close to money laundering: the goal isn't to get your money back, but to get ANY of it back. If you can't spend the money you have illegitimate access to, it is just paper. The goal is to turn that paper into something of value.
Example: a car thief steals a $50,000 car. But, he can't drive it or he'll be caught. He can't sell it legitimately, because he doesn't have a title and will likely be caught. It is virtually worthless to him as a car. But Vinny the Fence will give him $2000 for it. He takes that money, because $2000 in hopefully untraceable cash is worth a LOT more to the thief than a $50,000 albatross.
(Or, look at it from the perspective of trading risk. He has a very risky $50,000 thing. He offloads nearly all the risk to Vinny, in exchange for almost completely risk-free cash.)
So you fill some suitcases with securities and distribute them in various places that you hope you'll have access to as you are being run out of town. You buy a bunch of palatial estates through trusts and corporations, and if half of your co-conspirators screw you, you still have the other half. Sell one estate, hire assassins.
posted by gjc at 8:29 AM on February 12, 2011 [2 favorites]
With respect to Mubarak in particular, not all of it went through the government - there was a significant amount in personal bribes and skimming of government contracts that went directly to him and his family. Those who paid it either did so willingly because they profited significantly from the practice, or had no choice if they wanted to carry out their project.
As for how it was hidden from the people, the 30 year emergency law absolutely over-rode the constitution and eliminated the enactment of any process that ensured accountability. The main focus of the law was, in fact, to allow Mubarak and the upper level of government to act secretly and without justification. Under that set of rules, it is actually quite easy to hide what you're doing from the people, especially when you also control a significant chunk of the media and can arrest, torture, or kill anyone who starts asking questions you don't want asked.
posted by scrute at 10:14 AM on February 12, 2011
As for how it was hidden from the people, the 30 year emergency law absolutely over-rode the constitution and eliminated the enactment of any process that ensured accountability. The main focus of the law was, in fact, to allow Mubarak and the upper level of government to act secretly and without justification. Under that set of rules, it is actually quite easy to hide what you're doing from the people, especially when you also control a significant chunk of the media and can arrest, torture, or kill anyone who starts asking questions you don't want asked.
posted by scrute at 10:14 AM on February 12, 2011
Shell companies; lots of them owning other shell companies all "offshore" - Think Marshall Islands, Mauritius, Cook Islands etc.
posted by adamvasco at 10:20 AM on February 12, 2011
posted by adamvasco at 10:20 AM on February 12, 2011
3mendo: "the figure looks pretty bogus to me, that would be roughly 20 million a day, including weekends, of rule."
Egypt's GDP has a total of about $2.1 trillion since he came to power. $70 billion is about a thirtieth of that which does seem high but given much of it could have been skimmed off or come from bribes, it doesn't necessarily seem wildly inaccurate.
posted by turkeyphant at 10:25 AM on February 12, 2011
Egypt's GDP has a total of about $2.1 trillion since he came to power. $70 billion is about a thirtieth of that which does seem high but given much of it could have been skimmed off or come from bribes, it doesn't necessarily seem wildly inaccurate.
posted by turkeyphant at 10:25 AM on February 12, 2011
Carlos Slim, the world's richest person, has less 70 billion dollars. Warren Buffett is #2 at 47 Billion Dollars. Bill Gates is #3 at 26 billion dollars. That Mubarak would even be competitive seems unlikely.
posted by NortonDC at 5:09 PM on February 12, 2011
posted by NortonDC at 5:09 PM on February 12, 2011
NortonDC: "Carlos Slim, the world's richest person, has less 70 billion dollars. Warren Buffett is #2 at 47 Billion Dollars. Bill Gates is #3 at 26 billion dollars. That Mubarak would even be competitive seems unlikely"
That's far from the complete picture. Reliable sources suggest that Hasan Ali Khan has $900 billion, Putin has $400 billion and Lai Changxing has $100 billion. There are good reasons to think that Mubarak has a vast fortune - most foreign contracts require giving an Egyptian partner a 20% stake.
posted by turkeyphant at 6:01 PM on February 12, 2011
That's far from the complete picture. Reliable sources suggest that Hasan Ali Khan has $900 billion, Putin has $400 billion and Lai Changxing has $100 billion. There are good reasons to think that Mubarak has a vast fortune - most foreign contracts require giving an Egyptian partner a 20% stake.
posted by turkeyphant at 6:01 PM on February 12, 2011
turkeyphant, I just followed each of your links for the three new people you name and see no estimates of their wealth in any of the three articles. Do you have support for your assertions?
posted by NortonDC at 6:54 PM on February 12, 2011
posted by NortonDC at 6:54 PM on February 12, 2011
turkeyphant, in a situation like this it is only natural that wild rumors will spread about rulers that have fled. I am sure the dude will have a very comfortable retirement age but i am more sure that some stories will be exagerated.
Anyway, to return to the OP's question, hiding wealth while you're in power is easy because you more or less control banking institutions. For those that lose that power untraceable assets like metals, cash and bearer certiificates still retain value -- and in fact there are rumors that tunisia's previous ruler helped himself to some of the country's gold reserves before leaving.
however a person like mubarak probably does not need any of these, and can get someone to wire him money pretty easily. As a matter of fact, Hosni, if you're reading this, drop me a line! we could do a book deal.
posted by 3mendo at 2:29 AM on February 13, 2011
Anyway, to return to the OP's question, hiding wealth while you're in power is easy because you more or less control banking institutions. For those that lose that power untraceable assets like metals, cash and bearer certiificates still retain value -- and in fact there are rumors that tunisia's previous ruler helped himself to some of the country's gold reserves before leaving.
however a person like mubarak probably does not need any of these, and can get someone to wire him money pretty easily. As a matter of fact, Hosni, if you're reading this, drop me a line! we could do a book deal.
posted by 3mendo at 2:29 AM on February 13, 2011
Sorry, I was just copying these assertions from other sources and hadn't checked them myself. Seems some might be rather inflated. Of course, these people do each have a huge net worth (much of which is secret) and it does show how easy it is to squirrel away cash in almost any regime.
Hasan Ali Khan - seems the $900 billion figure might have been a typo but he has been taxed $15.6 billion by Indian government, implying that his wealth is far in excess of that. In any case, he has at least $8 billion stashed offshore and almost certainly much much more showing how easy this can be: [1] [2] [3] [4] [5].
Lai Changxing doesn't seem to have any reliable sources putting him at that figure but it does seem multibillion dollar amounts were involved [5].
Putin's opponents assert that he has over $73 billion just from stakes in energy companies [6].
posted by turkeyphant at 5:14 AM on February 13, 2011
Hasan Ali Khan - seems the $900 billion figure might have been a typo but he has been taxed $15.6 billion by Indian government, implying that his wealth is far in excess of that. In any case, he has at least $8 billion stashed offshore and almost certainly much much more showing how easy this can be: [1] [2] [3] [4] [5].
Lai Changxing doesn't seem to have any reliable sources putting him at that figure but it does seem multibillion dollar amounts were involved [5].
Putin's opponents assert that he has over $73 billion just from stakes in energy companies [6].
posted by turkeyphant at 5:14 AM on February 13, 2011
This thread is closed to new comments.
1) Where are you getting the $70 billion figure from? All I have seen are references to "very wealthy"; that encompasses a very broad range of figures, from tens of millions to tens of billions of dollars.
2) The accounts of dictators' states are often indistinguishable from those of the dictator
3) I'm not sure what enemies Mubarak has made outside of Egypt. The Americans have no reason to hate him, the Israelis signed a peace accord with him, and the Europeans never had a problem with him. So the notion that Switzerland would care who has de facto control over Egypt's various accounts strikes me as...naive.
posted by dfriedman at 4:13 PM on February 11, 2011