A US Senate investigation into lax controls on money laundering at a Washington bank has revealed the misappropriation of at least US$35 million of oil revenues by President Teodoro Obiang Nguema of Equatorial Guinea and his family and other senior government officials since the country started exporting oil in the mid 1990s.
The report into irregular financial operations by Riggs Bank in Washington by the Permanent Sub-Committee on Investigations of the US Senate Committee on Government analysed hundreds of millions of dollars of payments made to Equatorial Guinea through Riggs Bank since 1995.
It found that in many cases the money went into straight into accounts controlled personally by the president and his close associates.
In one case, a series of payments totalling US$11.5 million were made into an account controlled personally by Obiang in the form cash lugged into the bank in suitcases..
The report published on Thursday, said most of the irregular payments made into a series of more than 60 Equato-Guinean accounts at Riggs Bank came from the three US oil companies responsible of most of the West African country's 350,000 barrels per day offshore oil production - ExxonMobil, Amerada Hess and Marathon.
It revealed secret shareholdings owned by Obiang and his family in several large joint ventures between these US oil companies and the government of the small West African state.
The report also highlighted the extent to which US oil companies felt obliged to pay senior figures in the regime millions of dollars for land purchases, accommodation rental and security services in order to be allowed to operate in Equatorial Guinea.
Gavin Hayman of the advocacy group Global Witness, which investigates the links between the exploitation of natural resources and the funding of conflict and corruption, said the report showed that it was virtually impossible tell the difference between state funds and the personal fortune of Obiang and his family
"There is this whole issue of fungibility of what is the government's money and what is Obiang's money, because it is all really the same thing," he told IRIN by telephone from London.
Attempt to extradite alleged mercenaries
The embarassing and detailed revelations of high level corruption in the small West African country, were published as Obiang is seeking to extradite 70 alleged mercenaries from Zimbabwe, suspected of planning to overthrow his government. Their plane was intercepted by the Zimbawean authorities during a fuelling stop in Harare in March after leaving South Africa.
The men, all of whom have a military background, say they were on their way to the Democratic Republic of Congo to work as security guards for a mining company.
The government of Equatorial Guinea has also arrested 15 people in the island capital of Malabo in connection with the alleged plot. One of these has since died in prison.
Obiang has ruled Equatorial Guinea, a former Spanish colony of 500,000 people, since he deposed his uncle, Francisco Macias Nguema, in a palace coup in 1979. There have been several unsuccessful attempts to overthrow him.
Senator Carl Levin, a member of the Investigations Sub-Committee, criticised US oil companies for indulging in irregular financial dealings in order to get their hands on Equatorial Guinea's oil wealth. He also lambasted the banks which connived with them.
"It is critical to fight corruption in a part of the world with so much abject poverty," Levin said in a statement. "Neither our companies doing business abroad, nor our banks here at home should be contributing to the corruption problem."
Senator Norm Coleman, the chairman of the Investigations Sub-Committee, said: "Until recently Riggs held approximately US$750 million of accounts connected to Equatorial Guinea. A State Department report on Equatorial Guinea identified poor fiscal management, a lack of transparency and little evidence that the country's oil wealth has been used for the public good."
Child received $450,000 for renting out office space
"In fact," he continued," most of the oil wealth appears to be concentrated in the hands of top government officials. Yet despite these concerns, Riggs serviced these accounts with very little attention to the bank's anti-money landering obligations. This resulted in the withdrawal of US$35 million from the Equatorial Guinea oil account to various companies, some believed to be owned by the Equatorial Guinea president."
Senator Levin gave details of one such scam. "We came across a large number of payments by US oil companies into the accounts of Equato-Guinean officials and their relatives," he said.
"These payments were as high as US$ 250,0000 at a time. We investigated and learned that these payments were being made for a variety of reasons such as land purchases, offices leases and security services. In one instance, an oil company paid more than US$450,000 over four years to a 14-year-old relative of the Equato-Guinean president for office space."
Levin also cited an instance of Marathon going into business with a company called GEOGAM to operate two petrochemicals plants in Equatorial Guinea. GEOGAM was billed as a state-owned enterprise, whereas it was in fact 75 percent owned by Abayak, a company controlled directly by President Obiang, he noted.
One of the most curious cases of money being diverted from government coffers concerned the payment of grants to Equato-Guinean students studying overseas.
"Altogether, the Subcommittee was able to document payments in excess of US$4 million made by oil companies to support more than 100 Equato-Guinean students studying abroad, most of whom were the children or relatives of wealthy or powerful Equato-Guinean officials," the Investigations Subcommittee report said.
Riggs Bank, which has also been criticised for the way it handled several million dollars on behalf of former Chilean President Augusto Pinochet, was fined US$25 million in May by the US Office of the Comptroller of Currency for its failure to impose proper controls against money laundering.
The Senate Investigations Subcommittee hinted that the ruling elite in Equatorial Guinea was embezzling state oil revenues on a much bigger scale than its own inquiries had revealed.
"In 1998, according to the IMF, the government received US$130 million in oil revenues and Obiang simply pocketed US$96 million of it," the report said.
It contrasted this massive misappropriation of state funds by the president and his cronies with their failure to use the oil bonanza to improve the living standards of their own people.
"Although three out of four Equato-Guineans suffer malnutrition, between 1997 and 2002, Obiang spent just over one percent of his budget on health," it noted.
IRIN was unable to contact Equatorial Guinea's Information Minister, Agustin Nse Nfumu, for comment on the US Senate report.