Combating Economic Crimes

Balancing Competing Rights and Interests in Prosecuting the Crime of Illicit Enrichment

Ndiva Kofele-Kale

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781136594427
• Edition: 1
• Topic: Law
• Subtopic: Law Theory & Practice
• Index: Law

In the last decade a new tool has been developed in the global war against official corruption through the introduction of the offense of "illicit enrichment" in almost every multilateral anti-corruption convention. Illicit enrichment is defined in these conventions to include a reverse burden clause which triggers an automatic presumption that any public official found in "possession of inexplicable wealth" must have acquired it illicitly. However, the reversal of the burden of proof clauses raises an important human rights issue because they conflict with the accused individual's right to be presumed innocent. Unfortunately, the recent spate of international legislation against official corruption provides no clear guidelines on how to proceed in balancing the right of the accused to be presumed innocent against the competing right of society to trace and recapture illicitly acquired national wealth.

Combating Economic Crimes

therefore sets out to address what has been left unanswered by these multilateral conventions, to wit, the level of burden of proof that should be placed on a public official who is accused of illicitly enriching himself from the resources of the State, balanced against the protection of legitimate community interests and expectations for a corruption-free society. The book explores the doctrinal foundations of the right to a presumption of innocence and reviews the basic due process protections afforded to all accused persons in criminal trials by treaty, customary international law, and municipal law. The book then goes on to propose a framework for balancing and 'situationalizing' competing human rights and public interests in situations involving possible official corruption.

1 Criminal law enforcement
strategies for combating
economic crimes

1.1 REDEFINING THE SCOPE OF HARM REDRESSED BY CRIMINAL LAW

Many writers speak of a quiet revolution taking place in criminal law and law enforcement theory that dates back to the decade of the nineties.¹ As new crimes sprung up, traditional law enforcement instruments were found wanting. The revolution in criminal law sought, therefore, to replace the reigning paradigm in criminal law where policy justifications for depriving “a human being of his fundamental right of personal freedom” were based on “[a]bsolute (retribution) and relative (general prevention, social re-integration, norm stabilization) theories of punishment justification.”² This traditional approach to criminal law owes its philosophical paternity to the harm principle first articulated by English philosopher and political theorist John Stuart Mill in the nineteenth century. Mill argued that the only time government should interfere with people's liberty is when it is necessary to prevent harm to others. In his groundbreaking book, On Liberty, Mill asserts the:

[v]ery simple principle, as entitled to govern absolutely the dealings of society with the individual in the way of compulsion and control, whether the means used be physical force in the form of legal penalties, or the moral coercion of public opinion. That principle is, that the sole end for which mankind are warranted, individually or collectively, in interfering with the liberty of action of any of their number is self-protection. That the only purpose for which power can be rightfully exercised over any member of a civilised community, against his will, is to prevent harm to others.³

(John Stuart Mill, On Liberty, 21–22 (4th ed. 1869)

The philosopher D. Lyons interprets Mill's harm principle to mean that the state may interfere with individual liberty in one of two situations: to prevent conduct that causes or threatens harm to others or to prevent harm to others.⁴

The nature of the criminal acts for which the criminal justice system prescribed punishment invariably placed some constraints on the reach and scope of the traditional paradigm of criminal law.⁵ Consistent with the harm principle, the state unleashed its most coercive instrument, i.e. interference with individual liberty, only for those crimes which caused a direct harm to an identifiable victim. Furthermore, when such crimes prompted damages of any kind, the criminal justice system had at its disposal a range of legal instruments that it could use to deprive offenders of their illegal profits. A victim “of the offence would most probably institute civil proceedings which would normally result in the restitution of any ill-gotten gains.”⁶ Finally, since direct harm to an “identifiable victim” was the cornerstone of punishment under the old paradigm, the absence of an injured victim usually meant that offenders were allowed to enjoy the fruits of their crimes.⁷

1.1.1 The new paradigm to combat profit-oriented crimes

Fidelity to Mill's harm principle changed in the post-Second World War era with the rise of new types of crime of an economic nature such as commercial, fiscal or environmental-related crimes.⁸ These new economic crimes proved to be quite different in four respects from the ones the criminal justice system was accustomed to addressing. First, they are acquisitive crimes that tend to generate huge profits, hence their description as “profit-oriented” crimes.⁹ Second, unlike the old ones these new crimes do not appear to cause any direct harm to any identifiable victim though, as Guy Stessens points out, offenders may reap benefits from them.¹⁰ Third, given the absence of identifiable victims, traditional legal instruments, designed to punish crimes that cause direct harm to an identifiable victim, proved to be of limited utility in judicial attempts to confiscate the proceeds of economic crime:

Whereas the majority of criminal justice systems were familiar with the more traditional forms of confiscation, namely, the confiscation—often known as forfeiture—of the instruments ( instrumentatum sceleris ), most of these systems did not provide for the confiscation of proceeds from crime ( product/fructa sceleris ).¹¹

Lastly, because of the infinite means available for disguising the proceeds of economic crimes, it is extraordinarily difficult to trace and directly link them to their original source: “criminals who, through their criminal activities, dispose of huge amounts of money, need to give this money a legitimate appearance: they need to ‘launder’ it.”¹² Laundering of dirty money helps in covering its tracks thus making it immensely difficult for law enforcement to link it to its criminal origins.

It is against this backdrop that the international community found it necessary to design new legal instruments that can adequately tackle the problem posed by profit-oriented economic crimes of which illicit enrichment appears to be the newest: ¹³

Attacking criminal profits after they have been earned … [has become] a central objective of many criminal law systems aiming at reducing any type of acquisitive crime. The underlying theory is quite straightforward: increasing the effectiveness of legal instruments to detect, seize, and confiscate ill-gotten gains will reduce the motivation for engaging in these criminal activities.¹⁴

(Jorge, supra note 1, at 14)

1.1.2 Illicit enrichment as a profit-oriented economic crime

Illicit enrichment is one of the predicate offenses of corruption,¹⁵ which results from the embezzlement of public funds by high-ranking public servants. It is now part of the criminal law of numerous countries and can be found in the three multilateral conventions that make up the global anti-corruption regime. Illicit enrichment, like much of official corruption, is a stealth activity¹⁶ where direct evidence of its commission is hard to come by,¹⁷ though it can be manifested by the lifestyle and the extraordinarily substantial assets of a public official when compared to his relatively modest salary.¹⁸ Because it is an offense against transparency, the national laws and conventions which establish the crime of illicit enrichment define it as a significant increase in the assets of a public official, which he/she cannot reasonably explain in relation to his lawful income during the performance of his official functions.¹⁹ A “significant increase” in an official's assets has been interpreted to mean not just any increase in wealth in excess of an official's lawful earnings but a significant excess, large and demonstrable, bordering on gross.²⁰ The assets in question include all earnings the official received for his duties or outside them, provided these outside earnings are not incompatible with his position. The operative word here is during the official's performance of his functions as opposed to based on the performance of the official's functions.²¹ Illicit enrichment is not a random act but one intentionally committed by public officials, usually high-ranking.

1.1.2.1 Targeting the public sector's upper echelon

The crime of illicit enrichment specifically targets public officials²² and for good reason.²³ We have argued elsewhere²⁴ that those most implicated in the systematic plunder of national wealth are a particular group of people who hold public trust: heads of state and government as well as other high-ranking constitutionally elected and appointed leaders, their families and closest friends.²⁵ For example, Chile's former military strongman General Augusto Pinochet, who during his 25 years as head of state earned a modest annual salary that never went above $40,000, is alleged to have hidden $27 million in overseas accounts under false names. His financial adviser would explain this immense fortune as the product of shrewd and prudent investing!²⁶ Not to be outdone, Nigeria's military strongman Sani Abacha, upon his death in 1998, left behind a fortune estimated anywhere between $2 and $5 billion, all of which he fleeced from the Nigerian people! It is alleged that Abacha used four methods for plundering public assets: outright theft from the public treasury through the central bank; inflation of the value of public contracts; extortion of bribes from contractors; and fraudulent transactions.²⁷ The corruptly acquired proceeds were laundered through a complex web of banks and front companies in several countries and localities, but principally Nigeria, the United Kingdom, Switzerland, Luxembourg, Liechtenstein, Channel Islands and the Bahamas.

As incredulous as this may sound, the recently ousted Egyptian dictator, Hosni Mubarak, may be richer than Bill Gates, founder of Microsoft! Middle Eastern sources place the wealth of Mubarak and his family at somewhere between $40 billion and $70 billion.²⁸ By comparison, the world's richest man, Mexican business tycoon Carlos Slim, is worth about $54 billion while Bill Gates’ net worth is about $53 billion.²⁹ How did a former military officer, turned civilian president, whose official monthly salary as president, counting benefits, came to 4,750 Egyptian pounds ($808) in 2007 and 2008, according to a Cairo think-tank,³⁰ amass so much wealth? Running a country with a suspended constitution for 30 years, Mubarak “was in a position to take a slice of virtually every significant business deal in the country, from development projects throughout the Nile basin to transit projects on the Suez Canal, which is a conduit for about four percent of the world's oil shipment.” In a country with no credible system of accountability and transparency, Mubarak “was able to reach into the economic sphere and benefit from monopolies, bribery fees, red-tape fees, and nepotism,” according to Professor Amaney Jamal of Princeton University.³¹

Take the case of another dictator, Alberto Fujimori, who in the ten years he was President of Peru (1990–2000) is alleged to have stolen more than $2 billion from the state.³² His intelligence police chief, Vladimiro Montesinos, was the architect of this vast network of illegal enrichment:

The main source of theft by Montesinos and his cronies was through the extortion of bribes in awarding national defense procurement contracts. These bribes were hidden from the public based on a legal provision that allowed the executive to deny disclosure of the bidding process on the grounds of “national security.” For laundering their proceeds, Montesinos and his cronies used shell companies based in tax haven jurisdictions that were managed by trustees.³³

(Dumas StAR Report, supra note 32, at ¶5.1)

There are other examples of illegal enrichment by high-ranking public servants that give reason for the creation of this new crime. Investigations conducted by the United States Senate on the role U.S. banks have played in protecting the assets of questionable origins revealed that Riggs Bank, one of Washington D.C.’s most venerable banks, managed more than 60 accounts and Certificates of Deposits (CDs) for the Equato-Guinean government, its officials and their family members with balances and outstanding loans that together approached $700 million in 2003.³⁴ These investigations also revealed the unemployed playboy son of President Teodoro Obiang Nguema of Equatorial Guinea owns a $7.5 million (an amount that was only $300,000 less than his country's external debt in 2001) penthouse apartment in Southern California; that the President himself has a $2.6 million mansion and a $1.5 million second residence for one of his several wives who, for good measure, was allowed to use a bank charge card with a daily limit of $10,000. This same president owns a $30 million presidential jet while the son has to make do with a fleet of Ferraris, Lamborghinis and Bentleys.³⁵

1.1.2.2 The staggering national toll of illicit enrichment

It is not only the sheer volume of assets looted by high-ranking public officials that has shocked the conscience of the community of nations, but the effect such financial hemorrhaging has had on the political and economic foundation of victim states.³⁶ Speaking of India, Professor C. Raj Kumar points out that “[t]he appropriation of public assets for private use and the embezzlement of public funds by politicians and bureaucrats have such clear and direct adverse impact on India's economic development that their costs do not warrant any complex economic analysis.”³⁷ He could very well have been speaking of Nigeria where Abacha stole between 1.5 and 3.7 percent of that country's GDP or Peru where the Fujimori/Montesinos tandem succeeded in stealing about 0.1 percent of Peru's GDP for every year in power.³⁸ According to the UNODC StAR Report:

[I]t is worth stressing that the true cost of corruption far exceeds the value of assets stolen by the leaders of countries. This would include the degradation of public institutions, especially those involved in public financial management and financial sector governance, the weakening if not destruction of the private investment climate, and the corruption of social service delivery mechanisms for basic health and education programs with a particularly adverse impact on the poor. This “collateral damage” in terms of growth and poverty alleviation will be pro...

Table of contents

• Front cover
• Combating Economic Crimes
• Routledge Research in Transnational Crime and Criminal Law
• Title Page
• Copyright
• Dedication
• Contents
• Acknowledgements
• Preface
• Table of Cases
• Table of legislation, treaties, and conventions
• 1 Criminal law enforcement strategies for combating economic crimes
• 2 Criminalization of illicit enrichment in domestic law
• 3 Reversing the burden of proof in international and domestic law
• 4 The right to a fair trial in international and domestic law
• 5 Guidelines for assessing the compatibility of reverse onus with fair trial rights
• 6 A framework for balancing competing rights and interests
• Appendices
• Notes
• Index