Kleptocracy Regular

[Phuong Fulsom]

DOWNLOADTHE REPORT A new report by Ben Judah analyzes how the counter-kleptocracy agenda intersects with, and is at times superseded by, competing geopolitical priorities. Additionally, the report analyzes...

TERRY GROSS, HOST: This is FRESH AIR. I'm Terry Gross. The Mueller investigation gave us insights into how Paul Manafort and his business partner, Rick Gates, hid their ill-gotten money with the help of shell companies and real estate, protecting it from the reach of the law, until the investigation. Crooks, oligarchs, kleptocrats and some of the superrich from around the world use this transnational shadow system of shell companies and real estate to stash their money.My guest, journalist Oliver Bullough, calls this transnational shadow world Moneyland. His new book is called "Moneyland: The Inside Story Of The Crooks And Kleptocrats Who Rule The World." As part of his work trying to expose the system, he runs kleptocracy tours in London, which we'll talk about later. Bullough is a regular contributor to The Guardian and is the author of two nonfiction books about Russian history and politics. He lived in and reported from Russia in the early 2000s.Oliver Bullough, welcome to FRESH AIR. So just give us a brief description. What is Moneyland? What do you mean when you use that original coinage?OLIVER BULLOUGH: Thanks very much for having me. Moneyland is a country I invented; it doesn't exist in the way that any normal country does. But it's basically the place where you can put your money, you can put your reputation, you can put your children, if you are rich enough to afford it services. And it is essentially a hybrid country that exists outside of ordinary nation-states, where the reach, the power of law enforcement, doesn't stretch to. So essentially, it's a secret country, a private country for anyone rich enough to afford its services, and it's essentially government, sort of, of the rich, for the rich, by the rich.GROSS: And it's a "country," in quotes, that includes many, many countries around the world that specialize in various things.BULLOUGH: Yeah, it's a sort of...GROSS: To hide ill-gotten money.BULLOUGH: Yes, it's a sort of portmanteau country. So you use little bits of the laws of many countries, and you create something that's much more powerful, much greater than the sum of its collective parts. So that might be, you know, you use a shell company somewhere like the British Virgin Islands, and then you add that to something like a trust in South Dakota, and then you've arranged all that via a lawyer in London, and you've - holding your money in a bank in - I don't know - Singapore.And essentially, any one of those structures would be vulnerable to the sort of attack from law enforcement or a business rival or whatever, but when taken together, essentially, it becomes almost entirely impregnable because no one can afford to combat all of those different countries' legal systems simultaneously and unlock all the protections the different countries give you.GROSS: And so, like, this is good news for the super wealthy who hide their money through these vehicles, with the help of other countries, through offshores and trusts and tax havens, dummy companies. But you say it's damaging to democracy, too. How are these offshores and secret ways of keeping money damaging to democracy?BULLOUGH: Well, I mean, to explain that, it's - I suppose it's important to back up a little bit and talk about where the idea came from and where I started work. I'm a kind of Russian-ist (ph), a former Soviet Union-ist (ph), if that's a word I can use - pretty ugly word. But it's - essentially, I came to this from having reported on sort of war and human rights abuses and degradation in the old Soviet Union. And I suppose when I first went there, I went there as a sort of naive, very-early-20-something, sort of slightly thinking that I was going to be reporting on democratic transformation and the flowering of a new society and the spread of democracy all across Europe.But instead, you know, I saw the spread of corruption and sort of increasingly authoritarian governments and all that. And it became - I suppose Moneyland was my attempt to explain and to understand why, instead of becoming democracies, instead of becoming, you know, ordinary European countries, these states - the republics of the old Soviet Union - went off in a very different direction and instead became dominated by these anti-democratic elites, these kleptocrats, oligarchs, people who really stole a huge amount of the country's resources.And so why Moneyland and what - is so inimical to democracy and why this sort of offshore finance that this is based in is inimical to democracy is because the core function of any democratic governments - and this, I think, is something that gets lost in a lot of the debate - the core function of a democratic government is to tax its citizens for the common good of everyone; that is what a democratic government is for. Essentially, with the consent of the governed, it taxes its citizens, and then it uses that money for everyone's good.If a class of society is able to opt out of that contract, if they will essentially enjoy the privileges of citizenship without any of the obligations of citizenship, then they are opting out of democracy. And if they are ruling the country, then that means that a democracy falls; that's why it's anti-democratic. Because the governments of these countries are unable to tax their wealth, they're unable to essentially impose any obligations on them as citizens, and instead, they get to enjoy all the benefits of citizens without any of the, you know, what might be termed the downsides.GROSS: While draining a lot of the money from the country and stashing it in other parts of the world.BULLOUGH: Yeah. I mean, incredible amounts of money is being drained. Because this isn't only a problem that afflicts the former Soviet Union; this is something that is - I realized, while researching this book - I started out in Ukraine and Russia and Azerbaijan and so on - I realized increasingly that the - from the money's point of view, it doesn't really matter what language a country speaks; it's all international. So it might be money from Nigeria, might be money from Angola, might be money from Malaysia or China or Indonesia or India; the money always essentially ends up in the same place, which is Moneyland, which is offshore.And the amounts of money involved is a little bit difficult to say because it's very well-hidden; it's hidden by the best people in the world at hiding it. But, you know, it's estimated by Global Financial Integrity, which is a think tank in Washington, D.C., that a trillion U.S. dollars - slightly more than a trillion U.S. dollars - is stolen every year from the world's poorest countries and stashed in the richest ones, countries like, you know, your country or mine. And a trillion - I mean, a trillion is one of those numbers - - you know, trillion, billion, million.I think we struggle to get our head around these big numbers that end in -illion. But if you had a trillion U.S. dollars in bills, and you settle down to count them, you know, one dollar at a time, one a second until you'd finished, that would take you about 30,000 years; it's an incredible amount of money. I mean, if the first humans to arrive in North America had started counting the moment they set foot in Alaska, you know, they'd be about halfway to a trillion by now. You know, and every year, that much money is being stolen.And once that amount of money has been put on the sort of balance against democracy, that money is being - it's opposed to oversight, it's opposed to equal rights for all citizens because these people want special rights - then that is a profound threat to any kind of democratic order.GROSS: So to exemplify just a small bit of "Moneyland," you use a company that was registered in the name of Rick Gates, Paul Manafort's business associate. And of course, Paul Manafort was Donald Trump's campaign manager and before that was a close associate of Viktor Yanukovych, when Yanukovych was running for the president of Ukraine. I think Manafort managed his campaign and then became an aide when Yanukovych became the authoritarian ruler of the country.So this - you trace, like, a shell company that was registered in Rick Gates' name, Manafort's business associate, and Gates cooperated with the Mueller investigation. And this company was located in what you describe as an unfashionable street in London. The company was named Pompolo Limited. So what was this company?BULLOUGH: Pompolo Limited was one of many companies Manafort used to essentially hide his money. He used - instead of owning his money in his own name - so when he bought, you know, an ostrich skin jacket or engaged the services of a sort of, you know, hi-fi shop, he - instead of it looking like he was doing all the buying, because that would have made the, you know, the tax authorities a bit suspicious, he used lots of little companies to do it. So it basically hid the fact that he was spending all this money.I mean, he had earned a huge amount of money in Ukraine, which he didn't pay tax on. He didn't want to pay tax on it and was, essentially, then smuggling it into the U.S. under the cover of legitimate money and then spending it on luxury goods.And Pompolo Limited was just one of these companies. It's based in a rather rundown and dull office block in Woodbury Grove in North London. And it was - I went there because it was in London. It was nearby. And I suppose you might think - you might hope that a nerve center in the sort of Manafort empire in this sort of very dramatic story of sort of skullduggery and high finance would be interesting, but it isn't. It's - you know, when I went inside, I was shown inside by a man wearing an Iron Maiden T-shirt - you know, rather sort of scruffy guy. And I went into a rather scruffy office where nothing really happened. But it was indicative, essentially, of the almost - the mundane nature of the way that giant crimes are being enabled. You know, there are people doing ordinary jobs, you know, creating companies, opening bank accounts and so on. But in doing this and not doing the kind of checks that they should be doing on the origin of the money that they're handling, they're, essentially, enabling these vast crimes, which is what the book's about.GROSS: This office that you visited - what this office does is to create shell companies for people like...BULLOUGH: Yeah, it...GROSS: ...Paul Manafort and Rick Gates.BULLOUGH: It creates companies for anyone who wants them, really. You know, I'm sure they will tell you that they will do all sorts of checks on the origin of the wealth, and perhaps they do now. Who knows? They've been rather sort of humiliated by the Manafort connection. But, yeah, essentially, this is a - it's a low-margin, high-volume business. You sell companies. Someone gets in touch. They want a company. You sell them one. That's it. You're done.You know, this is a very competitive market. There are lots of places all over the world, so Manafort had plenty of jurisdictions to choose from. And, you know, he had companies in Cyprus. He had companies in many different states of the U.S. He had - in St. Vincent and the Grenadines and here in the U.K. So he was using multiple countries, multiple jurisdictions to, essentially, hide what he was up to. So it was very difficult for any investigator to put the pieces together. And, yeah, had Robert Mueller not, you know, started investigating potential collusion, I feel sure that Manafort would have got away with this. He structured his assets very cleverly.GROSS: So these companies are what you call shell companies, right?BULLOUGH: Yes, exactly.GROSS: So I don't really understand how you, like, buy a company. And then, of course, you can use that company to hide your money and buy things that you wouldn't want to be buying in your own name because that would trace you to ill-gotten money. So how do you buy a shell company? Like, I don't get it.BULLOUGH: Well, it's funny because it is something that most of us have absolutely nothing to do with. But it's incredibly easy. If you were to use a search engine, type in, you know, buy a company, Nevada. Nevada is a good place to buy a company. You know, you would see a whole list of people who will sell you a company. You drop them an email, give them a call. And they will just sell you a company. And there are sort of additional extras that come with it. They will sell you a company. You might get a company with a registered office. You might get a company with a bank account. If you're particularly resourceful, you can get a company with a registered nominee shareholder, nominee director so no one can tell it has anything to do with you at all.But I mean, it's, essentially, an industry or business that most of us would have absolutely nothing to do with. But you can't commit financial crime without, essentially - on any kind of large scale - without shell companies. They are the building blocks to financial crime. And so they are incredibly useful for people like Paul Manafort, who are trying to commit these big acts of financial crime without being caught. And they are - there's a whole business out there. There's all these sort of networks of agents. They're very easy to get. And, you know, if you need any, I could give you suggestions for a couple of them.GROSS: (Laughter) Oh, thank you very much. I really appreciate that.(LAUGHTER)GROSS: Hide my billions.(LAUGHTER)GROSS: You mentioned Nevada is a good place to start a shell company. Why?BULLOUGH: Nevada is - has very relaxed regulations on creating companies. It doesn't - a lot of places, the U.K., for example, now publish the identity of people who own companies. They publish a lot of information about this - information online. You can just find it online. Nevada doesn't do that. It doesn't publish lists of its companies. It doesn't publish who owns its companies. And they're very cheap and very easy to get. So, essentially, it's a revenue generator for Nevada. Nevada uses it to complement its budget. And I mean, so it does well out of it.But I mean, I don't want to pick on Nevada, particularly. I mean, Delaware does this too. Lots of other states of the Union do very well out of, essentially, selling shell companies. In fact, it's got to the point when U.S. companies are pretty much the best shell companies out there now, really, compared to - it used to be places in the Caribbean. But they've slightly been cracked down on. So, yeah, for the discerning international crook, I would say the U.S. is probably the best place to get a shell company at the moment.GROSS: We're number one. We're number one (laughter).BULLOUGH: You know, I'd say number one, yeah. I mean, it's not all of the U.S. Some states are more difficult than others. But, you know, these guys know their business. So, yeah, I would say the U.S. is number one now. I mean, there've been academic studies of the - you know, where it's easiest just by going and asking people to create companies. And, yeah, the U.S. is way out in front when it comes to the ease of setting up a company.GROSS: Let's take a short break here, and then we'll talk some more. If you're just joining us, my guest is Oliver Bullough, and he's the author of the new book "Moneyland: The Inside Story Of The Crooks And Kleptocrats Who Rule The World." We'll be right back. This is FRESH AIR.(SOUNDBITE OF MUSIC)GROSS: This is FRESH AIR. And if you're just joining us, my guest is Oliver Bullough. His new book "Moneyland" is about how crooks and kleptocrats hide their money and launder it through a secretive global system of money-laundering shell companies, foundations, real estate. He's a journalist and the author of two nonfiction books about Russian history and politics. He was based in Russia during the 2000s.So one of the things you do in London that ties in directly to your new book is a tour. What's the name of the tour?BULLOUGH: These are the kleptocracy tours. They're a lot of fun. They're modeled loosely on the Hollywood tours that - I've never been to Hollywood, but I understand you can get on a bus and be driven around. And they'll point out, you know, where - I don't know - Charlie Chaplin used to live or where Scarlett Johansson buys her lattes or whatever. And, you know, it's a thing that tourists do, and it's a lot of fun. So we decided to do these in London. But instead of pointing out the homes of, you know, the rich and the legendary, we point out the homes of the rich and the crooked. The kleptocrats, as it were. So we put people on a bus. We normally start at a site just near the House of Commons, where the Russian deputy prime minister has an apartment. And we point out his apartment. And then we put everyone on the bus, and we drive around mainly West London because that's what might be called a target rich environment for kleptocrats. And then we point out - it depends on our mood, on the day.But you can talk about, you know, houses belonging to Nigerian governors, you know, politicians from Kazakhstan, Russia, Ukraine, Angola, Libya. I mean, you know, we're spoiled for choice, really. But sadly, we can only really do, you know, five or six properties at a time because otherwise, everyone would get exhausted. I mean, if we really wanted to keep going, we could probably do this for weeks and weeks on end without ever exhausting the variety of kleptocrat-owned property in London. London is very popular with kleptocrats.GROSS: If you wanted to expand the kleptocracy tours, you could probably expand them to the U.S. What would the best cities for the tours be?BULLOUGH: We've talked about this, yeah. New York would obviously be a winner.GROSS: Yeah.BULLOUGH: You know, New York and London are kind of the capitals of "Moneyland." They can spar with each other. In fact, to be honest, from a "Moneyland" perspective, New York and London are kind of the same place. They sort of blur into each other. So New York would obviously be a winner - up and sort of, you know, Central Park West, I suppose, up there. But I mean, Miami - obviously huge, too - Miami, particularly popular with the Latin American kleptocrats.It's been amazing to me, you know, if you watch the sort war of rhetoric between the government in Washington and the government in Venezuela. You know, this sort of war of rhetoric has absolutely not - you know, disrupted Venezuelan investment in top-end Miami real estate at all. You know, the Venezuelan - the powerful Venezuelan elite - they'd love to put their money in Miami. So that would be a fun place to do it. In fact, have a sort of historical angle. You could go back to Al Capone, as well, if you wanted it there.LA, Los Angeles, would be good. The former deputy president of Equatorial Guinea, a gentleman called Teodoro Obiang, spent a lot of money in Malibu. So that would be quite fun. And then you could go up a bit, up the coast to San Francisco. There's been a couple of good sort of investments there, including the former prime minister of Ukraine, a guy called Pavlo Lazarenko, who had a really nice place up in Marin County that I - well, I didn't visit because it's behind these high fences, but I had a bit of a look at it from a surrounding hill. And that was - yeah, a very nice property, indeed. Though, he didn't get to keep it, sadly. He was put in prison and had it confiscated.But yeah, so all those would be my kind of picks for the kleptocrats who are in the U.S. Obviously, New York. Then Miami, second place. And then I'd say LA and San Francisco in a sort of, kind of - somewhere in third and fourth. And I'm not sure which would come first.GROSS: Is that because these cities that you've mentioned are great places to live with, you know, wonderful, you know, palatial places to buy or to live? Or is it because of the laws in those places, too?BULLOUGH: You know, these are, obviously, lovely places to be. But, you know, if you think about, if you're a crook and you've stolen a fortune, you're well-aware of the fact that anyone in your country can steal a fortune. So they're maybe going to steal your fortune if someone else comes along who's bigger and more of a bully than you are. So, you know, it's a priority to get your money out of the country where you've earned it and where you've stolen it, and get it somewhere, you know, where it's safe.So though they themselves love breaking the law and abusing, you know, their fellow citizens as much as they can, for their own accounts, they don't want a country like that. So they depend on being able to get their money into a place with the rule of law. So that's why London is so popular, why New York is so popular. These are places where, once you've bought property, it's very, very difficult to have that property taken away from you.GROSS: How have all the places in London, where you live, that are really owned by often-absent oligarchs and kleptocrats, how is that affecting life in London?BULLOUGH: Well, it's really interesting, actually, because there are these districts - I mean places like Kensington, Knightsbridge - districts which were, you know, they were always kind of high-end districts. But, you know, ordinary British people lived in them until 20, 30 years ago. And yeah, they were a bit posh. But they weren't that unusual.But now you can walk around these places sort of in the evening, and there are no lights on. There aren't really any shops, like, ordinary shops, you know? There are lots of sort of boutiques, places where you buy, you know, Rolexes. You know, there's one point in Knightsbridge where you can see three Rolexes without even, you know, having to squint your eyes up. They're all within about 30 yards of each other. You know, these shops are everywhere.But in terms of an ordinary shop, the kind of place where you'd go and get, you know, a pint of milk, you know, these places don't exist in those neighborhoods. There are no pubs because, you know, these people don't go to pubs. So it has changed the fabric of these districts, which means that not only is it too expensive now for any ordinary people to live there but also ordinary people wouldn't want to live there because if you went there, there's no social life. There's no - there's no nothing. These are sort of almost dead environments.And so what this is, is it's turned parts of our major cities - places like London and New York - it's turned them - they're now essentially bank accounts. They're sort of, you know, bank accounts in the form of bricks and mortar.GROSS: My guest is journalist Oliver Bullough. His new book is called "Moneyland." After a break, we'll talk about how Donald Trump fits into "Moneyland," and Ken Tucker will review the new album by rapper and singer Lizzo. I'm Terry Gross, and this is FRESH AIR.(SOUNDBITE OF MUSIC)GROSS: This is FRESH AIR. I'm Terry Gross. Let's get back to my interview with British journalist Oliver Bullough, author of the new book "Moneyland" about how oligarchs, kleptocrats and crooks hide their spoils in shell companies and real estate. To illustrate his point about how money is stashed in real estate, he takes London sightseers on kleptocracy tours, pointing out the mansions and apartments owned by kleptocrats and oligarchs. Bullough is a regular contributor to The Guardian and is the author of two nonfiction books about Russian history and politics. He lived in and reported from Russia in the early 2000s.So one of the places that you visited on your own personal kleptocracy tour was Viktor Yanukovych's - you describe it as a palace in Ukraine.BULLOUGH: Yes.GROSS: So, again, he is the president that Paul Manafort was close to and where he worked as - Manafort worked as his campaign manager. And when he was elected president, he worked as Yanukovych's close aide. And then tried to launder his reputation in the western world - launder Yanukovych's reputation in the western world. So you visited what had been his residence. I think he'd already fled the country when you visited. And it sounds like this palace had become a tourist attraction.BULLOUGH: Yeah. I mean, I have a little bit of previous with Yanukovych because he was - in fact, the only press secretary who's ever bitten me was his press secretary. She tried to stop me asking a question. And the only way she could figure to do that was by biting me. So, you know, I had...GROSS: Whoa, whoa, whoa, whoa. Let's stop there (laughter). What part of the body did she bite you on?BULLOUGH: My shoulder. It was very painful though.GROSS: That is strange. Like, how did that happen?BULLOUGH: Well, it was at a meeting. And I was trying to push my way to the front in a sort of slightly pushy, journalistic way. And there were lots of security guards around, and I'd managed to get in front of the security guards. And she kind of threw herself at me in - slightly like a dragon in "Game of Thrones" sort of - but instead of breathing fire, bit me. Yeah. It was very sore. I got my question in though.GROSS: Did she break the skin?BULLOUGH: No, but she did break the jacket.GROSS: Wow (laughter).BULLOUGH: She was - that was - yeah. It was, you know - she had a go. Anyway, the point is he had been around on the scene for a long time in Ukraine.GROSS: Yes.BULLOUGH: That was in a previous revolution in 2004-5, which he also lost that one as well. He has a record of losing revolutions. So he'd been around on the scene for a long time in lots of roles. He had been prime minister. He'd been this and that. And all the time, he'd been accumulating this money because he was a real crook. And then when he was president, he really went for it. You know, he stole anything, and he built himself these palaces. Then after he fled the country in February 2014, you had this glorious period after revolution when kind of anything goes. You can do what you like. And I used to - yeah - go and invade these places really and just wander around and have a look. And one of the places was the palace outside Kiev - just on the edge of Kiev. It is, I think, the biggest log cabin in the world. It was a five-story log cabin. It's incredible. You know, a palace of sort of vulgarity. And I mean, I'd wandered around there and explored there. And then there's a shooting lodge a bit further outside the capital, which was on a smaller, more modest scale but still very luxurious indeed. Yeah, so he had stolen all this money. He had spent it on building himself these palaces, and then he'd had to leave them behind when he fled in a bit of a hurry.GROSS: So the land in this, like, a - what? - hunting lodge that you refer to was owned - wasn't registered to Yanukovych. It was registered to a company named Dom Lesnika.BULLOUGH: Yes.GROSS: So tell us about that company and its role in laundering Yanukovych's money.BULLOUGH: So this is where the idea for "Moneyland" came from for me - was because, I suppose, I was visiting these palaces with a kind of bit of a sense of humor. You know, they were vulgar. They were trashy. They were bling. And it was - you could write about it, and it was very funny. But then I was with a friend of mine, Anton, who's a revolutionary. And he took me to the hunting lodge. And I suppose I was maybe laughing a bit much. And he sort of was a little bit annoyed with me, I think. He basically said, look. You think this is funny, essentially. But look. This isn't owned in Ukraine. This is owned in England. You know, essentially, you're complicit in this, too. And I went and looked up the registration. And, yes, Dom Lesnika, which is the company that owned the land, was owned by a British company. It was owned by a British shell company. And that shell company was owned by another one and another one and - and a foundation.The fact is that his involvement in having, essentially, stolen this forest and privatized it to himself was hidden behind a British shell company. And that was that sudden realization of the transnational nature of this. And so I was trying to think, you know, where is this palace owned? It's not owned in Ukraine, but it's not owned in England either. So that's when I said, well, it's owned in Moneyland. That's where, you know, these people keep their money. They keep it in Moneyland. So that's where that came from for me with this - you know, wandering around this astonishingly vulgar hunting lodge, laughing at it and being slightly told off by Anton for not understanding the seriousness of the issue that I was looking at.GROSS: And when you describe your friend as a revolutionary, you meant one of the people who is trying to and succeeded in overthrowing Yanukovych.BULLOUGH: Yeah. He's got - he had serious, you know, cajones, as I believe you say in your country.GROSS: (Laughter).BULLOUGH: He turned up the morning after the revolution at the big gates of this hunting lodge with his daughter, who I think was 8 at the time. And he turned up with his daughter and just told the policeman guarding it, who were all these highly armed police guards, you know, guarding a presidential residence, and just said, I'm from the revolution. Give me the key. And they did.GROSS: Wow.BULLOUGH: So Anton and his daughter went through the gates into this kind of pleasure garden, you know, with the sort of spreading lawns and ponds and - I mean, gorgeous place - yacht harbor, a shooting range and everything - and just told the people who work there - said, I'm in charge now. You know, it's me. I'm the revolution. I'm in charge. You know, Anton is a guy with serious initiative, and so he was a very useful friend to have.GROSS: Yes. So what you've described - you know, the hunting lodge was owned by a company named Dom Lesnika, which was registered in England. But that company was owned by another co