1) United States of America -v- Abacha & Ors (CL-2014-000073)
2) National Crime Agency -v- Abacha & Anor. (QB-2019-003029)
3) Federal Republic of Nigeria -v- National Crime Agency and Ors. (CO/2986/15; QB-2020-003744)
Summary
The Nigerian and US governments are set to resolve a long-running dispute over US$182 million held in the UK. The funds are connected to the industrial-scale looting of Nigeria by General Sani Abacha and his associates during his 5-year military reign.The funds were laundered through an intricate web of Western bank accounts across the globe and subsequent efforts to recover the stolen Abacha loot have spanned decades, governments and continents. Those who assisted General Abacha include his son, Mohammed, and the current governor of Kebbi State, Abubakar Bagudu, who are parties to the UK proceedings.
The money held in the UK is currently frozen under a prohibition order brought by the National Crime Agency (“NCA”) on behalf of the US. As part of its Kleptocracy Asset Recovery Initiative, the US has sought the forfeiture of these funds so that the proceeds can be returned to the “people of Nigeria”. In a controversial move, the Nigerian government has applied to the High Court for an order directing the NCA to release the US$182 million in frozen funds.
This latest development brings to a head the complexities and compromises that have plagued the progress of repatriation. Due to backroom deals between Nigeria, Abubakar Bagudu, and various companies in 2003 and 2018, almost US$100 million out of the US$182 returned could be paid onwards to Bagudu. Whichever way this legal tug-of-war goes, there is a real risk that the outcome will be a lose-lose for the Nigerian people who are the ultimate victims of Abacha’s corruption.
Why does this case matter?
– This case exposes how British and other western professional enablers provided the means for General Abacha and his associates to siphon funds out of Nigeria. Through opaque corporate structures and with help from financial institutions in the UK, US, Jersey, France, Germany, Switzerland, Ireland, Lichtenstein and Luxembourg, billions were kept out of reach. The Pandora Papers shed further light on the role that British firms have played since 2010 in representing Bagudu and setting up offshore trusts in secrecy jurisdictions to protect the assets.
– The global hunt for the loot reveals the challenges of asset recovery processes and the importance of effective international co-operation in tracing, freezing and confiscating stolen assets. UK law enforcement lags behind its counterparts in the US and Europe, having been slow to take action after early requests from Nigeria and the US for assistance. Subsequent recovery efforts have become bogged down in UK court proceedings while other countries have returned stolen assets, including US$505.5 million from Switzerland in 2006 (“Abacha I”), US$322.5 million from Switzerland in 2018 (“Abacha II”, although concerns have been expressed about delays in these disbursements) and US$311 million from the US and Jersey in 2020 (“Abacha III”).
– The twists and turns in this case over the last two decades show the political complexities of tackling corruption by successive governments. The 2003 settlement agreement and further backroom deal struck in 2018 between the Nigerian government and Bagudu undermine the anti-corruption efforts of international law enforcement agencies and indeed Nigeria’s own efforts to recover stolen public funds. Despite allegations of his complicity in General Abacha’s scheme, Bagudu is currently the governor of Kebbi State and enjoys close ties with President Buhari.
– Finally, this case highlights the importance of ensuring that recovered assets are used to benefit the victims of corruption. Past returns of Abacha loot have charted a steep learning curve in responsible and accountable asset return, but the current legal tussle between the US and Nigeria over the UK Abacha loot risks a major setback if non-transparent deals end up diverting funds from the victims of corruption in Nigeria. Bagudu’s continuing influence in Nigerian politics brings these challenges into sharp focus and highlights the important role that civil society organisations can play to ensure stolen assets are returned in an accountable and transparent manner.
Global context
The “Abacha loot”
General Sani Abacha came to power in Nigeria on 17 November 1993 following a military coup. He died on 08 June 1998. In those five years, he “drove Nigeria into the ground” through sanctions, diplomatic isolation, corruption and outright theft. It is estimated that he and his associates stole between US$3 billion and US$5 billion which was filtered through western financial institutions in the US, UK, Jersey, France, Germany, Switzerland, Ireland, the Bahamas, Lichtenstein, and Luxembourg. After his death, his wife was stopped at Kano airport in Nigeria with 38 suitcases stuffed with cash.
The money was looted through various means, including the following:
a) The Security Votes Fraud: Most was taken directly from the Central Bank of Nigeria. Between 1994 and 1998, over 60 requests totalling US$2 billion were made under the auspices of national security purposes.
b) The Dumez Extortion: Gen. Abacha is also said to have extorted US$97 million from a French engineering company to release sums worth US$390 million for government contracts.
c) The Debt Buy-Back Fraud: Colluding with the then finance minister, General Abacha caused Nigeria to purchase non-performing government debt from a company owned by his son, Mohammed Abacha, and his associate, Abubaker Bagudu.
d) The Vaccine Fraud: Between 1995 and 1997, Morgan Procurement won two public contracts worth US$110 million to procure vaccines from Nigeria’s National Commission for Women and the Federal Ministry of Health. The former was owned by Mohammed Abacha and Bagudu, the latter by General Abacha’s wife, Maryam. Of the sums received, only US$48 million was used to purchase vaccines.
Efforts to recover the stolen assets
Abacha’s successor, General Abdulsalami Abubakar, set up a Special Investigation Panel (the “SIP”) to investigate the loss of government money during the regime. In some three months, the SIP uncovered 130 accounts with 50 banks. Following his election in 1999, Olusegun Obasanjo sent envoys to seek access to these accounts. The Swiss lawyer, Enrico Monfrini, was also instructed to pursue and retrieve the loot.
In addition to the SIP, General Abubakar issued Decree 53. This ordered the return of assets taken by General Abacha and his associates. By the time Obasanjo had left office on 29 May 2007, he and General Abubakar had recovered some US$2 billion. Around US$750 million came directly and voluntarily from Bagudu and Mohammed Abacha.
Significant amounts have been confiscated in other countries over the last two decades. Switzerland has made several returns, including initial payments of US$64 million in 2000 and US$88 million in 2003 before the more significant returns of US$505 million in 2005 (“Abacha I”) and US$322.5 million in 2018 (“Abacha II”) which is yet to be fully disbursed. In 2014, US$227 million was recovered from Liechtenstein. In 2003, US$160 million was repatriated from Jersey and most recently, US$330 million was returned by the US and Jersey in 2020 (“Abacha III”).
Asset recovery efforts in the UK have spanned decades. In the late 1990s and early 2000s, at Nigeria’s request, a court in England and Wales froze assets belonging to several individuals, including Mohammed Abacha and Bagudu. This also required an explanation of their assets and what had happened to the Security Votes Fraud money. On 21 August 2003, Nigeria and Bagudu entered into a settlement agreement which was approved by the High Court of England and Wales. This was varied on 14 November 2003 (the “2003 Agreement”). The Agreement shielded Bagudu, his family and connected companies from claims connected to financial impropriety during the Abacha regime. Nigeria would also relinquish its claimed interest in assets including accounts in the Ridley Group, a BVI company (the assets it held were subsequently transferred to the Blue Companies). This was in exchange for Bagudu returning “certain assets”.
Assets in the UK
Significant sums linked to Abacha made their way through the United Kingdom. Between 1996-2000, US$1.3 billion had filtered through 42 UK bank accounts, including over US$900 million from Switzerland. Banks included household names, such as HSBC, NatWest, RBS, and Barclays. The extent of “significant control weaknesses” were highlighted in a confidential Financial Services Authority (“FSA”) report which was handed to journalists by a cleaner. These concerns of an “insufficient improvement in banks’ AML systems and controls”were repeated by the FSA in 2011.
Nigeria had made early efforts to engage with the UK authorities, much of which seems to have fallen on deaf ears. The Home Office drew criticism for throwing back requests for assistance on technical flaws. Repatriation of assets had also been raised in a meeting between Obasanjo and Tony Blair in 2003 to no avail. Even Swiss investigators expressed concern that the UK was paying lip-service to condemning money laundering, and dragging its feet on asset recovery efforts.
For the purposes of the ongoing court proceedings in the UK, the known assets can be divided into three clusters:
a) The Mecosta Money
This concerns US$21.7 million held in two Standard Bank accounts held in the name of Mecosta Securities, Inc. Mecosta was a BVI company formed in 1995 and was jointly owned by Bagudu and Mohammed Abacha.
Investigators say the cash is traceable to the Security Votes Fraud and was transferred to the UK via Bagudu’s Nigerian bank account. A larger sum was originally transferred to these accounts and used to buy Nigerian Par Bonds (securities whose interest is guaranteed by the US Treasury). The Bonds were transferred to a French bank account and the $21.7 million was what was left.
b) The Mohammed Abacha Money
This concerns an HSBC account in Mohammed Abacha’s name with a US$1.6 million balance. This is traceable to the Security Votes Fraud and Dumez Extortion.
c) The Blue Money
A sum of US$182 million is held by two Singaporean companies, Blue Holding (1) Pte Limited and Blue Holding (2) Pte Limited (“Blue 1” and “Blue 2” respectively; collectively the “Blue Companies”). These, in turn, are owned by a trust, Blue PTC PTE Ltd, registered in the Cook Islands. According to the Pandora Papers, these companies were set up in 2010 with the assistance of solicitors in the UK, Farrer & Co, and Byrne and Partners, and Singaporean trusts specialist, Asiaciti Trust.
The assets held by the two funds are said to have originally derived from the Security Votes Fraud. Sums held in an ANZ Bank London account were transferred to companies held by Mohammed Abacha and Bagudu. These were mixed up with other sums and used to buy Nigerian Par Bonds worth US$490 million. A parcel of these bonds went to an account at Credit Agricole Indosuez and were liquidated. They were then transferred to accounts in favour of the Blue Companies with Waverton Investment Management Ltd and James Hambro & Partners LLP in 2010. Blue 1 holds around US$32 million and Blue 2 around US$150 million.
The US civil forfeiture proceedings
The US claims to have been investigating the Abacha loot since at least 2007. Around this time, it had received a tranche of evidence from Monfini, Nigeria’s Swiss lawyer. Further evidence was forthcoming from Monfrini in 2012. Nigeria also made a formal request to the US for assistance in reclaiming assets.
On 18 November 2013, the US started forfeiture proceedings against misappropriated assets in the UK, France, the Republic of Ireland, and Bailiwick of Jersey. It claimed that the sums had involved money laundering within the US’ jurisdiction.
On 16 June 2014, Nigeria withdrew its request in respect of sums held by the Blue Companies and disavowed any claim to the assets. This was on the grounds of the 2003 Agreement with Bagudu. The US continued with its forfeiture application.
On 06 August 2014, the court granted default judgment in the value of US$458 million. The consequence was that all the property vested in the US and all other interests were extinguished. It then started domestic proceedings in each state.
Various members of Bagudu’s family tried to claim an interest in various sums. These were all struck out save for the one by his younger brother, Ibrahim, which remains outstanding. This was because he received an annuity for some US$100,000.
The cases in the UK
A bumpy start: the US freezing order
The UK authorities had initially declined to help the US on the basis of advice it had received on the limitation period to reclaim the assets. Therefore the US applied for an ordinary freezing order. This was granted by the High Court on 25 February 2014 and later extended to 08 April 2015. These decisions were overturned by the Court of Appeal on 15 May 2015. This was because only the UK authorities could apply to freeze these sums and the US lacked jurisdiction to apply for a normal freezing order. The injunction was accordingly discharged. By this time, however, the NCA had applied and been granted a prohibition order.
The NCA prohibition order application
On 02 July 2014, the NCA were granted a prohibition order by the High Court against the assets in the UK. This was to support the US’ confiscation efforts. It was later renewed and remains in force to date.
Default judgment
On 16 April 2014, Bagudu and the Blue Companies filed a claim against Nigeria. The essence of their case was that by seeking the US’ assistance Nigeria had breached the 2003 Agreement. This was not served on Nigeria until 18 March 2015. No response was forthcoming. Bagudu and the Blue Companies were awarded judgment in default on 09 July 2015. Damages have yet to be awarded and the court has made further orders to stay the award. The consequence of this judgment is that whatever the US recovers will be payable under this judgment. As Nigeria said in a motion to the US court, the award has “created exposure for Nigeria [that is] not only expensive but also highly detrimental to the interests and reputation of Nigeria”.
A secret deal
On 26 October 2018, Nigeria entered into an agreement with Bagudu and the Blue Companies. This varied the 2003 Agreement and was signed by the Nigerian Justice Minister and Attorney General, Abubakar Malami SAN. In short, Nigeria and Bagudu agreed to use all reasonable efforts to discharge the Blue monies currently subject to a prohibition order. When this occurs, the proceeds of the accounts held by the Blue Companies would be transferred to the Central Bank of Nigeria in favour of Nigeria. Nigeria would then pay Bagudu €98.5 million in satisfaction of the default judgment that Bagudu and Blue had obtained. If the parties do not vary the prohibition order, the money would be due by the Nigerian government. Spotlight understands that Nigeria did not consult the US on this deal and it only became public knowledge when Nigeria applied to the UK courts to vary the prohibition order (see below). On 06 September 2019, a further agreement was signed. This extended the expiry date of the agreement.
The Nigeria variation application
On 10 September 2019, Nigeria applied to vary the NCA’s prohibition order so that it could repatriate the Blue Company assets. This was on the basis that it was a victim of crime. In accordance with the agreements with Bagudu, Nigeria intends to pay him the sum set out above.
Since filing the claim, the parties have attempted to settle the claim and have been required to file updates with the US courts. They reveal a large difference in opinion, with the US feeling that there is an unavoidable impasse. The Nigerian case was due to be heard in the UK High Court on 23-24 March 2022 but it was again adjourned.
Confiscating the Mecosta and Mohammed Abacha money
On 23 August 2019, the NCA issued a claim in the High Court of England and Wales to register and enforce the US’ request for these sums totalling US$23.44 million. Nigeria had initially made a claim to these sums. This was withdrawn at a later date.
Though Mohammed Abacha was aware of the proceedings, he did not engage with the process. Mecosta had been struck off the register of BVI companies and dissolved on 30 April 2016. The result was that the money vested in the Crown.
On 28 July 2021, Justice Saini ordered the registration of the US judgment and a civil asset recovery for the property requested. The judge found that the sums were linked to alleged breaches of Nigerian and US law.
In May 2022, the NCA announced that it had successfully recovered US$23.44 million which would be transferred to the US DOJ with the ultimate intention of being repatriated for the benefit of the Nigerian people.
Where next?
The UK’s return of the Abacha loot has been long and complex, with the Nigerian people as the ultimate losers. Successive Nigerian governments and UK inactivity have helped Bagudu to make a legal quagmire from which only he benefits. As things stand, the €182 million will stay frozen and out of anyone’s reach while the US, UK and Nigeria engage in back-room talks. Whichever way things go, Bagudu will be paid.
