25-01-2010, 09:27 AM
Global Witness presents...
The devastating story of oil and banking in Angola's privatised war.
"ALL THE PRESIDENTS' MEN"
On general release from March 2002
"ALL THE PRESIDENTS' MEN" : DIRECTORS' CUT A Global Witness Report
Starring JACQUES CHIRAC and JOSE EDUARDO DOS SANTOS
Co-starring BORIS YELTSIN as himself o Special guest apprearances by GEORGE W BUSH and DICK CHENEY o Based on an original idea by CHARLES PASQUA and JEAN-CHARLES MARCHIANI o Lack of transparency by most of the INTERNATIONAL OIL AND BANKING INDUSTRIES o Introducing the notion of "PUBLISH WHAT YOU PAY" No rating: uncensured by the INTERNATIONAL COMMUNITY
Contents
1 Recommendations 1
2 All the presidents' men - an introduction 3
Part One: The Scandal
3 A story of state looting and a privatised war - a summary 5
4 Angolagate - the full story 11
Pierre Falcone and Sofremi 11
The Brenco network and deals with Angola 15
Gaidamak's business empire 18
Deals and connections to other countries 21
Whose billions are in this bank account? 22
Does Angolagate reach the United States? 22
The searches and arrests begin 26
Jean-Christophe Mitterrand 27
Jacques Attali 28
Angolans connected to Angolagate 32
President dos Santos confirms suspicions about Angolagate 32
Part Two: The Complicity of Oil Companies
5 Introduction 33
Development of Angola's oil industry 34
The top ten oil companies in Angola 35
Current practices on tax payment declaration 37
6 Company dialogue 37
Elephant's tail or elephant - the reality of oil companies contributions to the Angolan State income 38
The IMF in Angola 39
7 Campaign progress to date 41
Corporate social responsibility - Genuine sentiment or mere PR? 45
8 Regulating payment disclosure 47
Risks of complicity 48
9 The truth about tax payments to the Angolan Government in 2000 - another case of missing funds? 48
Complicity-O-Meter 49
10 The complicity of oil companies - conclusion 50
Part Three: The Financing
11 Introduction - international lending to Angola 51
12 The credit tap remains wide open... 52
New lending since December 1999 53
The Wolfsberg Principles - Anti-money laundering guidelines for private banking 55
Shutting Down the Dictators' Laundromats 57
13 Conclusion 59
References 61
Acknowledgements 62
1 Recommendations
Oil companies should:
* Adopt a policy of full transparency. This involves:
1. Rendering summary figures of taxes and other payments made to national governments publicly available for all countries of operation. In addition to information already available in the reports of subsidiaries, data should be listed as total net payments to national authorities for each country of operation and should be provided in the parent company's consolidated annual reports and in annual returns to investment authorities.
2. Data should be provided locally in the national language of each country of operation as well as in the home language of the company.
3. Parent companies should publish the names and locations of registration of all subsidiary companies operating in each country.
* Embrace a unified stand on full transparency of payments to national governments amongst all companies in the oil sector for all countries of operation.
* Facilitate the rapid publication of the IMF Oil Diagnostic study for Angola.
* Adopt a policy of independent, transparent auditing of social programmes both for the purpose of the project and for its value for money.
Commercial banks involved in existing loan arrangements to countries with severe corruption problems (such as Angola) should:
* Publish full details of loans provided, including details of the amount lent, recipients, interest rate, expiry date and purpose of the loan.
* Ensure internal systems are in place to prevent loans breaching internationally-agreed lending limits, such as Angola's US$269 million limit on new lending agreed with the IMF for 2001.
* Clarify measures taken to verify that actual expenditure corresponds with that stated on bank documentation and during negotiation and insist that such expenditure is verifiable as a condition of providing the loan.
* Diagnose and implement mechanisms to ensure fiscal transparency in international lending in conjunction with multilateral lending institutions. This includes conditionality in loan attribution: loans should be approved when expenditure of previous loans has been verified and approved by an accredited committee; expenditure should be monitored and irregularities punished by non-attribution of further loans.
* Ensure that any future loans to Angola are payable through one appropriately audited governmental channel, rather than the current situation with a multitude of parallel channels.
* Immediately subscribe to the Wolfsberg anti-money laundering guidelines. Wolfsberg signatories themselves - particularly ABN Amro, Citibank and Société General which already loan money to Angola - should not collaborate with or take part in any loans in which all parties are not fully transparent as to their disbursement and subsequent expenditure.
* Banks such as Lloyds Bank in London, which runs the Cabinda Trust, should publish regular updates detailing the resources held by the Angola oil-back offshore trusts funds and the demands being made upon them.
Bilateral Export-Credit Agencies should:
* Impose full transparency on all participants as a condition for future export-credit agreements.
National governments should:
* Ensure that their national oil companies adopt full transparency criteria on overseas operations. National governments should require them to adopt a forceful common position on this issue. In particular, the French and the American governments should promote transparency in their oil industry: as major oil extractors in the off-shore of Angola, TotalFinaElf, Chevron and Exxon's apathy on this issue is appalling.
* Insist that financial regulators of international stock exchanges should legally oblige companies filing reports with them to disclose payments to all national governments in consolidated and subsidiary accounts.
* Insist that their export financing agencies practice full transparency as a condition for setting up credit agreements, and that full transparency of funding partners and recipients becomes a pre-requisite for funding.
* Fast-track the 'name and shame' process to isolate jurisdictions that are hiding and laundering dirty money and identify and seize assets of corrupt, non-transparent regimes.
The Angolan Government should:
* Immediately implement a policy of transparency for government income and its expenditure. The Government should fully clarify all revenues that are controlled or disbursed extra-territorially, in parallel budgets and/or by the Presidency.
* Attend to civil society's demands for more accountability and increased social spending.
* Publish immediately the oil sector diagnostic results and allow the IMF to publish this data too.
The IMF should:
* Render publicly and widely available the results of the Staff Monitored Programme, in particular the over-due KPMG report on the Oil Sector Diagnostic.
The international community should:
* Institute appropriate national enquiries into influence peddling around access to oil reserves and revenue misappropriation from the Angolan oil industry and facilitate the French investigation into 'Angolagate'. Who knew what and when did they know it?
* Insist that the oil industry and the financial world institute a policy of full transparency on all revenues and loans to Angola and other corrupt, neo-authoritarian regimes.
* Provide a mandate to require the IMF to provide a retrospective analysis of oil revenues from 1993 onwards as part of an international effort to identify and repatriate misappropriated state assets in the wake of the 'Angolagate' scandal and insist that the IMF renders public all information uncovered by the Staff Monitored Programme public.
* Ensure that current UN peace-building efforts, focused on UNITA's war effort, are extended to take into account the lack of transparency over Government oil revenues as part of the peace-building and demobilisation process. In addition, the UN must include civil society in any unfolding peace process.
* Recognise that the definition of acceptable corporate behaviour is bound up with the operation of transparent and accountable business practices and the provision of information on payments to national governments to the citizens of that country. Future regulatory programmes or voluntary codes-of-conduct should recognise that the 'stakeholder' concept includes the general population of a country in whose name the resources of a territory are being exploited. Civil society is entitled to be provided with adequate information to be able to call their governments to account over the management of 'their' resources. It is time to move from debating corporate social responsibility to corporate accountability.
The G8, EU, OECD and the New Partnership for African Development (NEPAD) should:
* End the practice of secret deals between governments and multinational companies by issuing clear contracting guidelines defining and legislating 'good practice' for multinational enterprises in structuring transparent financial arrangements with host governments. Such an initiative requires the G8 and others to make it a priority for national regulatory authorities to legally require full transparency for all companies over payments to national governments.
2 All the presidents' men -
an introduction
All the presidents' men is the product of two years of investigations, and provides an update on the campaign for full transparency in the oil and banking sector. It continues an exposé, which started with December 1999's A Crude Awakening, into the mechanisms of wholesale state robbery in Angola.
Central to the issue of state looting is a glaring discrepancy: the progressive impoverishment of a country during almost four decades of war and civil conflict has gone hand-in-hand with rising oil revenues. Despite earning around US$3-5 billon from oil last year (an estimated 87% of state revenue), social and economic development in Angola has continued to deteriorate. Three-quarters of the population are forced to survive in absolute poverty on less than one dollar a day; one in three Angolan children die before the age of five and one child now dies of preventable diseases and malnutrition every three minutes (480 every day);1 life expectancy is a mere 45 years; and about 3.1 million civilians have had to flee their homes since the war resumed in January 1998.2
Rising oil revenues have been diverted straight into parallel budgets of the shadow state. Information emerging from economists involved in analysis of Angola's oil sector suggests that up to US$1.4 billion in revenues - comprising almost a third of state revenue - is unaccounted for the year 2001. Although the exact amount of missing revenue is debatable - information on loans and payments revealed in this report suggest that this amount may, in fact, be a substantial underestimate - such figures nevertheless stand in stark contrast to the US$200m the UN barely managed to scrape together to feed the one million internally-displaced Angolans dependent on international food aid.
Global Witness' investigations into this missing revenue culminated in uncovering how top government officials now make money out of a highly over-priced military procurement process and benefit financially from almost every item consumed in the pursuit of the war against UNITA. A billion dollar bank account connected to this process in the British Virgin Islands is also exposed, whose signatories include two high-powered Angolans.
Whilst Global Witness does not deny that the majority of the Angolan Government would welcome genuine peace, it clear that the political and economic disorder brought about by the civil war has been deliberately exploited to enrich the ruling elite. Meanwhile, the failure of the Angolan state to provide for its citizens has been blamed on the conflict. The death of sociopathic UNITA leader Jonas Savimbi on 19th February 2002 may herald the end to that excuse; the international community must seize this opportunity to call the Angolan Government to account over its use of oil revenues.
part one - the scandal follows on from the 'Angolagate' arms-to-Angola affair that broke in France at the end of 2000. It reveals how what started as a legitimate exercise in self-defence by an internationally-recognized Government threatened by rebel insurgents in the early 1990s, ended up with full-scale appropriation and laundering of state assets through parallel budgets, over-priced arms deals and deliberate indebtedness through mortgaging of future oil production. Culpability and complicity amongst political and economic actors in France and Angola has reached to the highest level; significant links can also be inferred to the US, Israel, Russia and across Europe, including a direct lobby in the EU Parliament.
The recent spectacular meltdown of Enron provides clear lessons on the dangers of 'influence peddling'. Enron's political donations clearly bought a substantial reformulation of national energy policy and diminished regulatory oversight. It is therefore impossible not to be concerned about the 'assistance' being sought through major donations (subsequently returned) to George W Bush's election campaign by a company connected to a figure central to Angolagate. If the impact of influence peddling can be so severe for US company employees and investors - theoretically, a domestic audience - imagine what its effect might be on the far-removed people of Angola.
part two - the complicity of the oil companies argues that international oil companies operating in Angola are complicit in the economic abuses of the ruling elite because they choose not to publish the revenues that they pay to the Angolan State. These companies claim that they do not get involved in the politics of the countries where they operate, yet the active decision to withhold information about payments to the State, when such information could clearly be provided (and is provided as routine in the developed world) is itself a political statement.
Under the Angolan Law, 'all deposits of liquids and gaseous hydrocarbons ... belongs to the Angolan people'3; thus, it is outrageous that these owners are not allowed to know - and are actively deterred from finding out - what 'their' resources are worth. By not 'publishing what they pay', oil companies endorse a double standard of behaviour that would be unacceptable in the North and make it impossible for ordinary Angolan citizens to call their government to account over the management of revenues earned from resources that are meant to be held in trust for the general population. Instead, oil company revenues are diverted into non-transparent arms and other commodity deals.
Despite the resistance from companies and the Angolan Government in rendering public information on revenue disclosure, Global Witness is pleased to reveal this information for the first time for the year 2000. ChevronTexaco and TotalFinaElf top the list of hidden contributions: these two companies are also notable for refusing to engage in discussions on transparency. Disturbingly, the data show that between the Ministry of Petroleum and the Ministry of Finance, some US$770 million unaccountably disappeared, indicating that the missing money from year 2001 is only part of a prolonged sequence of economic abuse.
part three - the financing looks at how the international banking sector has operated offshore havens for these assets and gleaned lucrative commissions on oil-guaranteed loans with minimal oversight. Oil-backed loans represent a vast additional source of unaccountable income to the State; investigations by Global Witness suggest that the Angolan Government borrowed over US$3.55 billion by mortgaging future oil production at high interest from September 2000 to October 2001 alone. This was provided by various banks with almost no procedures to check that the money was actually spent on that for which it was requested and, if correct, these figures indicate that informal estimates of US$1.4 billion of revenue and loans diverted may be a substantial underestimate. Certainly, international banks have given no regard to the fact that they have vastly exceeded the Government's agreement with the IMF to restrict new lending to US$269 million during 2001. Northern Export Credit Agencies are guilty of a similar lack of care; taxpayers' money in Northern countries is being used to underwrite unaccountable export financing arrangements in highly corrupt countries with no transparency provisions attached.
Despite this pressing need for the natural resource sector to be open and transparent about payments to unaccountable regimes, there is a startling lack of pressure in this direction from the international community. Angola, for example, has seen the full-scale retreat of any objective and principled foreign policy towards the country: recognizing the importance of future oil production, diplomatic efforts have at best refrained from hindering, and, at worst, have actively colluded with, the operations of their industrial interests. Policy engagement with the Angolan Government has resolutely focussed on sanctioning UNITA with the aim of moving the group back into line with its obligations under the 1994 Lusaka Protocol. Whilst this has been an admirable effort - indeed Global Witness made an important contribution to this effort by exposing UNITA's funding through the diamond trade and continues to negotiate and promote the Kimberley Process to address the conflict diamond issue - the international community has failed to examine faults on the side of the Government, including its manifest failure to provide adequately for the population as a consequence of corruption.
Without support from a broad international coalition for change, oil companies operating in the country are in a difficult position - even if they want to do the right thing and publish what they pay to the Angolan Government, they face immediate reprisals from those with a vested interest in the status quo. Indeed, the announcement of a policy of transparency by BP brought a vicious response from the Angolan State oil company, Sonangol, in a confidential letter reproduced in this report, which shows their apparent contempt for the issue. It is clear that a single company cannot make such a move alone, so there is a pressing rationale for coordinated group action by the major oil companies in the country, all of whom, according to their fine-sounding corporate mission statements, are committed partners in equitable development and social justice.
The international community must also act conclusively to level the playing field amongst competitors and introduce mandatory disclosure of revenue payments to governments by transnational resource companies for all their countries of operation. This could be achieved overnight by requiring such summary disclosures in annual reports to major international securities exchanges.
The international community should also identify and freeze, pending repatriation, all overseas assets that have been looted from Angola. This report reveals how the machinery for state robbery and money laundering took on a global dimension. The events of the destruction of the World Trade Centre have created a new sense of urgency to confront money laundering, arms trafficking and internationalised crime. The same resolution to trace and impound the assets of terrorist groups should also be directed against the mechanisms used for state looting in corrupt, neo-authoritarian regimes.
As World Bank President James Wolfensohn wrote after the 11th September 2001 'central to conflict prevention and peace-building must be strategies for promoting social cohesion and inclusion, ensuring that all have opportunities for gainful employment, that societies avoid wide income inequalities that can threaten social stability and that poor people have access to education, health care, and basic services such as clean water, sanitation and power'.4
Full disclosure of payments and royalties to all national governments by natural resource companies is a necessary precondition to deliver just and equitable development and is central to preventing the blatant exploitation of political disorder for private economic gain. This report is a challenge to all involved to move forward creatively to address the real forces underpinning the Angolan civil war and deliver fiscal accountability of Angola's oil wealth such that it might, for once, deliver some benefit to its real owners.
Angolan Social Indicators
Population 12.4 million
Life expectancy 48.9 years
National Budget US$5.1 billion
GNP per capita (Constant 1995 US $) US$233
Children
Population under 15 48%
Infant mortality rate for children under 1 12.4%
Infant mortality rate for children under 5 male 20.9%
female 19.2%
School enrollment rate, Primary 37.5%
Children under 5 years suffering malnutrition 35%
Underweight children 42%
(14% severe)
Poverty Statistics
Population living in absolute and relative poverty 82.5%
Maternal mortality rate during 1996 1.9%
Population without access to drinking water 62%
Population without access to adequate sanitation 56%
Population without access to healthcare 76%
People requiring food aid 3.2 million
Estimated rate of severe malnutrition 13%
Internally displaced persons (an estimate) 3.5 million
Unemployment rate 80%
Adult literacy rate 42%
Land Mines
Disabled land mine victims 86,000
Part One: The Scandal
3 A story of state looting and a privatised war -
a summary
Following the December 1999 report A Crude Awakening, Global Witness continued its investigations into the financing of Angola's war machine. The result is a story of how a legitimate exercise of self defence against UNITA turned into a conspiracy involving highest level politicians and individuals in Angola and beyond to rob the country of its wealth through kick-backs related to over-priced arms deals, financed by oil-backed loans.
Investigations indicated that certain key individuals benefit financially from the military procurement process, from almost every item consumed in the pursuit of the war against the UNITA. This leads to a disturbing conclusion: political and economic disorder and a total absence of financial transparency of the Government's oil revenues are the necessary conditions for this machinery of cash diversion and kickbacks to operate. Recent indications of a will to make peace appear to have received a major boost following the death of UNITA leader Jonas Savimbi, providing an opportunity which should be grasped with both hands by all sides to the conflict. The recent suggestion of a ceasefire is the first indication that peace negotiations are a possibility. However it is still far from clear how a genuine peace will be achieved, and as conflict and instability continues, Angola's wealth will continue to be siphoned off through a myriad of corporate and offshore centres, courtesy of the global banking system, whilst a major proportion of Angola's dispossessed are left to the mercy of donor assistance.
All the Presidents' Men reveals an international scandal that encompasses a global process of control over oil and the predatory nature of the international financial and banking systems. The miasma of dirty dealing discussed in this section demonstrates how members of the international community have sought mutual advantage with Angola's shadow state to ensure future oil supplies. From the perspective of oil interests, this has been largely successful, but it has been a disaster for the ordinary citizens of Angola, who have paid a devastating price for access to resources that are being exploited in their name.
An insight into state looting in Angola?
Angolagate is the name given by French and international media to a scandal that saw, amongst others, the December 2000 arrest of Jean-Christophe Mitterrand, son of former French President François Mitterrand. Fortune Magazine wryly commented that, 'it is de rigeur for French corruption scandals to be very complicated' and, so far, the scandal discussed in the press only concerns allegations of influence peddling, illegal weapons trading and abuses of public trust by a complex web of individuals in the supply of arms to Angola during 1993 and 1994.
Global Witness' investigations have uncovered additional information which, taken together with published material, leaves little doubt that Angolagate and associated events of 1993/4 are but a small proportion of a much wider international scandal involving key international political and business players. In fact, the true story is about the privatisation of Angola's war and the architecture of state looting on a scale to rival Mobutu and Abacha. Just how far this scandal reaches, and which other international political leaders are tainted, is difficult to determine. But as Philippe de Villiers, previously vice-President of former French Interior Minister Charles Pasqua's Rassemblement pour la France (RPF) party explained, 'I can confirm in a very explicit manner that the Mitterrand-Pasqua affair [Angolagate] is a very serious state affair, with inter-continental ramifications...'.
This introductory section provides a summary of, and a background to, the whole affair and explores its wider international implications. The full account begins with the section entitled 'Angolagate - the full story'. Global Witness points out that we are not implying guilt on behalf of any party, and those individuals that are named have yet to be tried or convicted in a court of law. Nevertheless, we invite those named to clarify their actions.
Africa is seen from France as a 'judicial no-man's land which, in the name of mutual political interests, was to stay for eternity a land of unpunished crimes.'
- Reuters, quoting from Le Monde editorial, December 200092
The start of French influence peddling in Angola
By 1993, despite having won the 1992 Angolan elections, President dos Santos' Government was losing the war against UNITA. The latter had reverted to armed conflict following electoral defeat, and at the time controlled around 80% of the country. The Government had neither the arms, nor the financing, to fight back.
The resultant call-for-help from dos Santos was aimed at sympathies within Mitterrand's Presidency in Paris. It also provided a potential solution to France's increasing paranoia about likely United States domination of Angola's oil sector following the Clinton Administration's formal ending of US support for UNITA. However, there was a major barrier to official French help for the Angolan Government due to the fact that President Mitterrand was going through his second period of co-habitation, sharing power with the centre-right Government of Prime Minister Edouard Balladur. Any official military assistance from the French Government to Angola would require the support of the French Minister of Defence, who at that time was one of the strongest supporters of UNITA in Paris. Official channels of support were thus closed.
Jean-Christophe Mitterrand allegedly then introduced businessman Pierre Falcone to engineer a solution. Falcone headed a group of companies under the umbrella, 'Brenco International', whilst simultaneously working as 'key advisor' for Sofremi, a security export company that was controlled by the French Interior Ministry, then headed by Minister Charles Pasqua.
Pasqua's team immediately saw this as an opportunity to head off US oil dominance in Angola. According to the press, though Falcone had been brought into the discussion courtesy of the French Political left, he now received endorsement from Pasqua's team on the right, and was thus tasked to provide a solution to Angola's weapons and finance requirements, on the proviso that supplies did not come directly from France.
According to numerous French press articles, Falcone then formed a partnership with Russian émigré and businessman Arkadi Gaidamak (also spelt 'Gaydamac'). In a telephone conversation with Global Witness, Gaidamak claimed that at that time, both he and Falcone travelled to Angola where they were provided with Angolan diplomatic passports, after which they operated as de facto Angolan officials. During this conversation and in earlier press reports, Gaidamak claimed that the purpose of their cooperation related to the provision of oil-backed loans for Angola, and he denied that they had been involved in the supply of weapons. In a later conversation with Global Witness, Gaidamak subsequently admitted that arms had been supplied, though he denied direct involvement. His justification was that these deals had been arranged with a legitimate government.
The French press describe a series of contracts that both Falcone and Gaidamak reportedly put together to supply arms to Angola during 1993 and 1994, totalling some US$633 million. Documents detailing some aspects of these contracts have been published and although they appear to contain Falcone's signature, Gaidamak is conspicuous by his absence.
L'Express reports that Falcone and Gaidamak were the 'tandem who would deliver arms to the Angolan regime' and to do so, they took 'defacto control of a company, ZTS-Osos, based in the Slovak Republic.'5 The paper refers to arms including 'tanks, rockets, helicopters, combat vehicles and troop transporters, all of which were of Russian manufacture', being delivered in reference to contracts from 1993 and 1994, and that negotiations were 'conducted in Paris and the money transited through a Banque Paribas account in the capital.'5
Banque Paribas, now taken over and subsumed into the group BNP-Paribas, was also one of the key banks involved in the provision of oil-backed loans to Angola. According to Gaidamak, both he and Falcone were effectively given control over the disbursements of funds from such loans exercising, as he put it, their duties as effective representatives of the Angolan Government.21 Were any of the loans provided by Paribas used to fund arms supplies through the arrangements discussed above? Regardless of whether or not this has happened, another major question arises: given the high exposure of banks to risks associated with bad loans, why was Paribas willing to be involved in the provision of substantial loans to a government that was, at that time, by no means sure of its own survival?
Did Angola get value-for-money?
It is not clear if arms supplied from these contracts represented value-for-money for Angola. Weapons clearly were supplied during this period that were of sufficient quality to change the fortunes of the Government, allowing it to fight back to a position of stalemate with UNITA, which in turn led to the Lusaka protocol agreement in 1994. However, the issue of arms supplies to Angola in general throughout the 1990's, together with the supply of other commodities, have been dogged by claims low quality. These claims have ranged from shipments of rotting meat being imported, solely for the commission involved, to the delivery of tanks and other heavy equipment, of such low quality that they had to be removed from their delivery vessels by chains, whereupon they were transported to 'tank graveyards', outside Luanda.
The situation across Africa
This is a pattern that does not affect Angola alone. Investigations conducted by Global Witness into a number of different African conflict hotspots suggest that in many cases, arms deals are often extremely bad value for money. For example, in a number of deals, arms have been supplied worth a fraction of the money ultimately used to pay for them. On one occasion, the government concerned paid their suppliers approximately 35% of contract face value, whereupon the latter delivered weapons worth around 25% of contract face value, generating an immediate 10% profit on the deal. As if this was not bad enough, the suppliers then arranged additional financing from a number of banks, secured by revenue from natural resource extraction, up to the value of the contracts. These additional funds, essentially worth 65% of contract face value, were then added to the 10% profit already generated from the up-front payments. The result - the country concerned obtained weapons worth a quarter of what they paid, generating enormous profits along the way for those involved in the deals.
Beyond Angolagate - arms trafficking following 1993/4
Global Witness' investigations revealed that at least one further arms supply contract was put together by ZTS-Osos in 1995 or 1996. Though the date of the contract is not clear, it is possible that this contract, worth approximately US$44 million, was agreed at roughly the same time that Paribas provided its 19th September 1996 oil-backed loan of US$135 million.
Interestingly, Gaydamac's (sic) signature appears to have been included alongside Falcone's on this 1995/6 ZTS-Osos contract, reproduced on page 16. Well-placed sources have suggested that it was very rare for Gaidamak to sign documents. However, based on available documentary evidence, Falcone's signature appears to be genuine; if it is, then Gaidamak, at the very least, should explain how his name appears on this document.
Investigations also revealed that in addition to arms, a similar method of financing and supply has been used to provide food, medicines and other commodities required by the Angolan Government in its war effort. One of the key vehicles used to supply food and medicines for the Angolan armed forces is a subsidiary of Falcone's company Brenco International, called Companhia Angolana de Distribuição Alimentar (CADA), that reports have suggested gained a monopoly of supply to the Government Forças Armadas de Angola (FAA) for a period of five years.
The scene unfolding before our eyes is overwhelming. At the heart of the State [France], Socialist and neo-Gaullist networks joined hands to enrich themselves by facilitating sales of heavy Russian arms to a country ravaged by war and misery. It is a disgrace for France and Africa.
- Reuters, quoting from Le Monde editorial, December 200092
A lesson in transparency - do you keep accounts like this?
Global Witness' investigations have also identified the existence of a bank account - number 15468991 - held at the so-called 'First Virgin Bank' in the British Virgin Islands (BVI). This account held approximately US$1-1.1 billion during 2001, with two high-powered Angolans acting as signatories. The true identity of the 'First Virgin Bank' remains a mystery. (For further information, see Whose billions are in this bank account? - page 22.)
Angolagate and legal action
Following a complex series of judicial investigations, described later in this report, Pierre Falcone was arrested on 1st December 2000. His arrest, together with interviews and searches at the offices and residences of other individuals allegedly connected to this scandal, precipitated press reports and speculation about Angolagate. Prominent individuals, including Jean-Christophe Mitterrand, Jacques Attali, former advisor to President Mitterrand and first Director of the European Bank for Reconstruction and Development, and some lesser-known individuals were subsequently arrested and charged for a variety of alleged offences. During 2001, both former French Interior Minister Charles Pasqua and his right hand man, Jean-Charles Marchiani, were also formally cautioned and questioned in relation to this issue; the latter two appear not to have not been formally arrested because they enjoy immunity of prosecution as Members of the European Parliament.
An international arrest warrant, number 0019292016, was issued for Arkadi Gaidamak on 11th January 2001. Nevertheless, it appears that Gaidamak currently enjoys the protection of Israel. Well-placed sources have suggested that he continues to travel freely between Israel and Angola, to South America and into the UK.
After numerous legal challenges, Falcone was finally released on 1st December 2001, after spending precisely one year in prison. His release was accepted on a bail posting of 105 million French Francs (US$14,351,000),6 more than ten times France's previous highest bail demand. Nouvelle Observateur reports that the Court of Appeal reduced Falcone's bail demand to €5 million (US$4,309,000)7, which it says is to be paid by Angola's State oil company Sonangol, as a mark of Angola's solidarity with Falcone.8
The Brenco group and links to the United States
Reports in both Arizona Republic and in Newsweek Magazine suggested that Falcone is well established in the United States and that he has strong connections with the US political elite. In late 2000, Falcone purchased an immense mansion in Paradise Valley, Arizona, for a reputed US$10.6 million, the highest value personal property purchase in Arizonan history. Interviews in Arizona Republic with individuals claiming familiarity with Falcone and his Bolivian beauty queen wife Sonia, suggested that they led a dream life, circulating within the party circuit of Arizona's elite, and spending significant funds on a variety of philanthropic ventures.9
Sonia de Falcone runs Essanté, a Utah-registered company specialising in health and beauty products, and of late, a range of products aimed at enhanced sexual pleasure. The company was incorporated in Delaware on 6th April 1994, with Sonia and Pierre Falcone listed as directors.10 Essanté is also connected to the Brenco group in terms of shareholdings and common addresses, both in the UK, and for holding companies in the British Virgin Islands. According to both Newsweek Magazine and Arizona Republic, and supported by US Federal election funding records, Essanté donated US$100,000 to George W. Bush's election campaign. This money was returned in January 2001, with the Arizona Republic quoting Newsweek 'the money was returned to avoid questions about whether an international weapons merchant was trying to buy influence with the new Bush Administration.' The Arizona Republic reported that Falcone family spokesman, Jason Rose, 'scoffed at that insinuation.' Newsweek's January 2001 article referred to both the donation and to Falcone's December 2000 arrest in France.9
The US publication In These Times furthered the discussion about Essanté's donation to Bush's campaign. In an article entitled 'The arms dealer next door', In These Times reports claims by Sonia Falcone that '...her husband had no connections to Essanté and that the company's political contributions came out of corporate profits.'10 The article went on 'more significantly, Essanté, which has been losing money for the past seven years, has no profits from which to make political contributions.' The article then provides comments attributed to the legendary Hollywood PR agent, Lee Solters, which reportedly claimed that 'Essanté spent its first six years, and US$6 million, developing its product line. Sales only began in earnest last September, after Essanté threw a three-day launch party at the Paris Hotel in Las Vegas.10 In These Times concludes by quoting a source which it described as 'familiar with the family' 'the company [Essanté] has come a long way with Pierre's generosity, but after a few years he'd like to see some profit. It rubs him the wrong way, but out of love for his wife he's done it with a smile on his face.'10
Had Newsweek not raised the issue of Falcone's arrest, together with Essanté's donation, would the money have been returned by the Bush campaign? According to In These Times, 'The GOP [Republican Party] returned the contributions following Pierre's detention - "to avoid the appearance of impropriety," in the words of a statement issued by the Republican National Committee.'10
According to Swissinfo, a Swiss-based web site covering Swiss affairs, on the 16th March 2001, 'Justice authorities in the Canton Geneva [...] launched another money laundering investigation involving alleged arms trafficking to Angola.' The article described how this initiative 'follows an earlier money laundering investigation, also involving alleged arms trafficking to Angola, which was launched by Geneva's top prosecutor, Bernard Bertossa, in January [2001].'11 According to Swissinfo, as part of this investigation, '...several Geneva banks have been ordered to reveal whether any of the people or businesses on the list [a list of individuals and companies forwarded to the Geneva prosecutor by the French investigating judges] have ever held accounts with them.' It continued, 'if so, officials are expected to request account statements dating back to 1990, when Swiss money laundering laws came into effect.' According to Swissinfo, 'one of the most prominent names on the list is that of the former French Interior Minister, Charles Pasqua, and his son, Pierre Pasqua. European Deputy Jean-Charles Marchiani, and Sonia Falcone, wife of the alleged arms dealer Pierre Falcone, are also on the list.'11 There are no suggestions of any charges against or wrong-doing by Sonia Falcone - it appears this request relates to the investigation into her husband.
Further US connections - a smoking gun?
Shortly prior to Falcone's arrest in December 2000, judicial investigations in France led to a raid on the apartment of Falcone's secretary. According to French press articles, investigators located some 26 diskettes, containing significant quantities of documents detailing activities, contracts and letters relating to Falcone's activities in Angola. Given that these diskettes provided sufficiently good quality primary information that led to the subsequent questioning, and in some cases arrests of, amongst others, Jean-Christophe Mitterrand, Jacques Attali, Charles Pasqua and Jean-Charles Marchiani, it is logical to assume that the information they contain is considered reliable by the investigating Judges.
Allegedly, amongst these documents, investigators discovered a letter inviting then US Presidential candidate, George W Bush for a meeting with Angolan President dos Santos at Falcone's Arizona ranch. Global Witness understands that this meeting did not actually take place, though the reason why is not clear. However, given the Bush Campaign's acceptance of Essanté's money until it was publicly embarrassed, one might conclude that the meeting may not have taken place due to scheduling reasons, rather than for any specific distrust of Falcone, or his overtures.
In a late December 2000 article, the French publication, La Nouvelle Observateur, implied yet another close link between the Falcone and Bush families. The magazine suggested that, in addition to campaign financing, Laura Bush and Sonia Falcone are friends. Meanwhile the publication, In These Times, suggests any such relationship is due more to connections generated by Arizona State Senator Bundgaard, and because of funds provided to Bush's election campaign, than out of any real friendship. Regardless of the reality of any such relationship between the two families, it is not difficult to imagine that Falcone might have been in a position to arrange meetings with the future President of the United States.
It seems likely, however, that Falcone's potential influence did not end with political donations to the Bush campaign alone. In These Times reports that a meeting took place between Falcone and three un-named high-level Phillips Petroleum Corporation executives in June 2000, some five months prior to Falcone's arrest in Paris.10 Phillips Petroleum Corporation holds a 20% stake in Angola's Block 34, allocated in 2001, but for which negotiations were already well-underway at the time of the company's alleged meeting with Falcone. The article states that Phillips refused to comment on the meeting.
Global Witness sought clarification about what role, if any, Falcone might have played regarding the acquisition of Phillip's stake in Block 34. Bryan Whitworth, Executive Vice President and General Council for Phillips, responded in January 2002, stating that he was unable to identify a meeting in Scottsdale in June 2000, but that there was a meeting in September and a follow-up in Washington in October 2000, '...to determine whether or not Phillips wanted to utilize Mr. Falcone as a consultant [...] it was concluded that Mr. Falcone should not represent Phillips.' Further, the letter stated that 'Mr. Falcone has never been employed by Phillips Petroleum Company nor represented Phillips in any respect on any matters.' This response, of course, raises the question as to why Pierre Falcone should have been considered as a possible consultant in the first place, and on what basis did Phillips come to the conclusion that he was inappropriate for such a job afterwards?
Michael Austin, an Arizona-based friend of the Falcone family and domain name holder of a website in support of Falcone wrote to Global Witness in an e-mail, '...Pierre derives a great deal of income from Exxon Block 33 located within the boundaries of Angola.' Given the apparent meetings between Falcone and Phillips, and given ExxonMobil's operatorship of Angola's Block 33, ExxonMobil should clarify what, if any role is, or has been played by Falcone in Block 33. In particular, ExxonMobil should clarify if it has also held meetings with Falcone, and if the latter played any role in advising, or facilitating the company's acquisition of its operatorship of Block 33. Global Witness sought clarification from ExxonMobil on 23rd January 2002, and has yet to receive a response.
Following Falcone's arrest in December 2000, the Sunday Times hinted at possible links between Vice-President Dick Cheney, in his role as CEO of the oil services company Halliburton, and Angolagate. The paper commented that '...as Defence Secretary, Cheney had been an outspoken supporter of UNITA ... he now finds himself in the intriguing position of having recently headed a company that pursued contracts aggressively with UNITA's sworn "enemy."' According to the Sunday Times, during the American election campaign, Cheney was reportedly 'accused of using his connections as a former Defence Secretary to secure the company [Haliburton] contracts.' 80 Given the suggestion from the Sunday Times that 'French authorities [connected to the Angolagate investigation] are scrutinising the activities of several oil companies that provide Angola with most of its foreign revenues - including Haliburton Co,...', a key question arises: Did Pierre Falcone play any role in securing contracts for Haliburton? Vice-President Cheney should immediately clarify Haliburton's success in Angola.
It is obvious from the Enron scandal that influence peddling is a major problem in the United States. Interestingly, Enron CEO Kenneth Lay's US$100,000 donation to the Bush campaign is strikingly similar to the Falcone's US$100,000. We have seen what Enron managed to achieve through its 'donations' - what was Falcone hoping to achieve, and perhaps more to the point, what would he have achieved, had the embarrassment of his arrest not facilitated the belated return of his money? It is a matter of urgency that a full and thorough investigation into the reaches of Angolagate is conducted in the United States. It is clearly good, for legitimate US domestic concerns, that the current spate of Enron investigations might lead to a clean up and end to efforts by companies to buy influence in Washington. However, given the plight of Angola's population, suffering from nearly 40 years of fighting, and given the strategic value and benefit accrued to the US from the exploitation of Angolans' resources, nothing less than a full investigation will do. What did the key players know, and when did they know it?
Russian debt and guns
Sources suggest a strong Russian involvement in ZTS-Osos, the Slovak-based supplier of arms involved in Angolagate; including significant shareholding in the company by a number of Russian State arms production companies (See Russian State interests in ZTS-Osos - page 17).
According to a number of press reports, both Falcone and Gaidamak were involved in a deal to renegotiate Angola's US$5.5 billion debt to Russia. According to a February 2002 article in the Geneva publication Le Temps, 'in 1996, the pair [Gaidamak and Falcone] negotiated the re-purchase of Angola's debt to Russia: the latter was intended to receive US$1.5 billion instead of the US$5 billion owed by Luanda's Government.' The paper continued, 'the Angolans agreed to reimburse this amount, thanks to the country's oil revenues.' Commenting on those involved in the deal, the paper reported 'swiss-based companies took part in the operation: Glencore, in Zug, traded the oil; Paribas (Switzerland), together with other banks, advanced the money promised by Angola.'12
The role of Falcone and Gaidamak in this operation is not clear. However Le Temps commented that 'Pierre Falcone was in charge of the distribution of revenue from the debt repurchase amongst Angolan dignitaries, while Arkadi Gaidamak did the same thing for the Russian side.'12 Both Falcone and Gaidamak have commented on this deal, with Falcone suggesting he made a modest, 'less than US$15 million,'13 for his services - ironically, roughly the amount required to post his bail demand on the 1st December 2001. Gaidamak has boasted, 'as a matter of fact, I even supervised the relations between Russia and Angola, looking after the interests of both parties.'14
Whatever the truth of this arrangement, it is clear that the IMF is concerned about what really went on. By December 2001, the IMF had been unable to obtain any clarification about these arrangements, either in Luanda, or Moscow. It is time, not only for the Russian and Angolan Governments to be transparent about this arrangement, but also for all the banks that have participated in oil-backed loans to Angola since 1996, to provide details of what they know of this situation.
The French connection
Numerous detailed French press articles leave the reader little alternative but to conclude that at the start of the 1993/4 finance and weapons supply programme described earlier, a number of top level officials, both closely connected to then President Mitterrand and within Prime Minister Balladur's party, were intimately aware of what was going on.
A number of questions have yet to be asked. What happened after the end of the Mitterrand Presidency? What did President Jacques Chirac, Mitterrand's successor, know of these events and when? These questions are especially poignant given that loans continued to be provided, together with the provision of arms and other commodities to Angola, well into the period of Chirac's Presidency.
Falcone wrote personally to President Chirac both in 1997 and in 1998, and these letters provided considerable detail about projects underway. Further, sources suggest that during President Chirac's state visit to Angola in 1998, at least one meeting was held in Luanda between Chirac and dos Santos in which Falcone was present.
Another area of concern relates to the 1995 release of three French pilots, who had been shot down over Bosnia. According to press reports General Gallois, who was the main negotiator, had successfully secured their release but he was formally instructed to terminate discussions prior to bringing them to their conclusion. A few weeks later, Gaidamak reportedly stepped in to secure the hostages' freedom, which resulted in their arrival in Paris, shortly prior to a post-Dayton peace conference on Bosnia, hosted by newly elected President Chirac.
According to Le Monde, the former Prefect of the Var Region, Jean-Charles Marchiani, presented Gaidamak with the 'Order of Merit', in recognition of his services in the release of the hostages. However, a January 2002 article in Le Monde stressed that General Gallois deplored the existence of 'parallel negotiations', and stressed that he did 'not understand why Gaidamak and Marchiani intervened after [him], it did nothing. It only had the effect of slowing down the release of the hostages.'15
In an article about the 22nd May 2001 indictment of Jean-Charles Marchiani, Le Monde reported that, 'the former Prefect of the Var is also suspected of having received a financial compensation for the attribution, in 1996, of the Ordre National du Mérite to Mr Gaidamak, which was agreed by the President of the Republic, Jacques Chirac.'16 Le Monde stressed that Marchiani vigorously denied all allegations that have been laid against him.16
Given recent articles about corruption and the 'Travelgate' affair during Chirac's tenure as Mayor of Paris, any potential involvement of Chirac, or his knowledge about arms trafficking and state looting in Angola, is of major concern. To date, President Chirac has simply side-stepped all questions relating to his tenure as Mayor citing Presidential immunity. This has led, for example, to the bizarre situation with 'travelgate', where other members of Chirac's family have been required to respond to questions from investigating Judges, whilst the President himself is able to maintain his silence.
It is time for all to come clean
The essence of corruption in Angola, is that instead of relatively small sums, or petty personal advantage as epitomised by 'Travelgate', here we are talking about Mobutu- and Abacha-scale state looting. This is a process which has been intimately tied to the conduct of war in Angola and perpetuated by the highest-level elites for personal and political gain. It is the general population of Angola that has had to pay a terrible price - that includes more than 500,000 killed from 1992-1998 alone, approximately 480 children dieing every day of preventable causes, a quarter of the population displaced, and more than a million citizens entirely dependent on emergency food aid; conditions, which despite suggestions of a ceasefire, appear set to get worse before they improve.
It is imperative that decisions should be made on an international basis to ensure that the events and actions discussed in this document can never again be repeated. Part of this process of change could so easily be instituted through the suggested actions and recommendations in this report with little or no pain for any corporate or national interests, excepting those that currently profit from the Angolan shadow state.
[FONT=Arial]In this regard, it is imperative that responsible leaders must come clean about what they know of events relating to the arming and financing of Angola's war machine. For example, President Chirac is facing the electorate during 2002, and the conduct of the democratic process in France cannot tolerate the continued concealment of vital information central to unravelling these events, especially when a lack of information undermines the capacity of Angolans to hold their Government to account for its actions. The cost to An...
The devastating story of oil and banking in Angola's privatised war.
"ALL THE PRESIDENTS' MEN"
On general release from March 2002
"ALL THE PRESIDENTS' MEN" : DIRECTORS' CUT A Global Witness Report
Starring JACQUES CHIRAC and JOSE EDUARDO DOS SANTOS
Co-starring BORIS YELTSIN as himself o Special guest apprearances by GEORGE W BUSH and DICK CHENEY o Based on an original idea by CHARLES PASQUA and JEAN-CHARLES MARCHIANI o Lack of transparency by most of the INTERNATIONAL OIL AND BANKING INDUSTRIES o Introducing the notion of "PUBLISH WHAT YOU PAY" No rating: uncensured by the INTERNATIONAL COMMUNITY
Contents
1 Recommendations 1
2 All the presidents' men - an introduction 3
Part One: The Scandal
3 A story of state looting and a privatised war - a summary 5
4 Angolagate - the full story 11
Pierre Falcone and Sofremi 11
The Brenco network and deals with Angola 15
Gaidamak's business empire 18
Deals and connections to other countries 21
Whose billions are in this bank account? 22
Does Angolagate reach the United States? 22
The searches and arrests begin 26
Jean-Christophe Mitterrand 27
Jacques Attali 28
Angolans connected to Angolagate 32
President dos Santos confirms suspicions about Angolagate 32
Part Two: The Complicity of Oil Companies
5 Introduction 33
Development of Angola's oil industry 34
The top ten oil companies in Angola 35
Current practices on tax payment declaration 37
6 Company dialogue 37
Elephant's tail or elephant - the reality of oil companies contributions to the Angolan State income 38
The IMF in Angola 39
7 Campaign progress to date 41
Corporate social responsibility - Genuine sentiment or mere PR? 45
8 Regulating payment disclosure 47
Risks of complicity 48
9 The truth about tax payments to the Angolan Government in 2000 - another case of missing funds? 48
Complicity-O-Meter 49
10 The complicity of oil companies - conclusion 50
Part Three: The Financing
11 Introduction - international lending to Angola 51
12 The credit tap remains wide open... 52
New lending since December 1999 53
The Wolfsberg Principles - Anti-money laundering guidelines for private banking 55
Shutting Down the Dictators' Laundromats 57
13 Conclusion 59
References 61
Acknowledgements 62
1 Recommendations
Oil companies should:
* Adopt a policy of full transparency. This involves:
1. Rendering summary figures of taxes and other payments made to national governments publicly available for all countries of operation. In addition to information already available in the reports of subsidiaries, data should be listed as total net payments to national authorities for each country of operation and should be provided in the parent company's consolidated annual reports and in annual returns to investment authorities.
2. Data should be provided locally in the national language of each country of operation as well as in the home language of the company.
3. Parent companies should publish the names and locations of registration of all subsidiary companies operating in each country.
* Embrace a unified stand on full transparency of payments to national governments amongst all companies in the oil sector for all countries of operation.
* Facilitate the rapid publication of the IMF Oil Diagnostic study for Angola.
* Adopt a policy of independent, transparent auditing of social programmes both for the purpose of the project and for its value for money.
Commercial banks involved in existing loan arrangements to countries with severe corruption problems (such as Angola) should:
* Publish full details of loans provided, including details of the amount lent, recipients, interest rate, expiry date and purpose of the loan.
* Ensure internal systems are in place to prevent loans breaching internationally-agreed lending limits, such as Angola's US$269 million limit on new lending agreed with the IMF for 2001.
* Clarify measures taken to verify that actual expenditure corresponds with that stated on bank documentation and during negotiation and insist that such expenditure is verifiable as a condition of providing the loan.
* Diagnose and implement mechanisms to ensure fiscal transparency in international lending in conjunction with multilateral lending institutions. This includes conditionality in loan attribution: loans should be approved when expenditure of previous loans has been verified and approved by an accredited committee; expenditure should be monitored and irregularities punished by non-attribution of further loans.
* Ensure that any future loans to Angola are payable through one appropriately audited governmental channel, rather than the current situation with a multitude of parallel channels.
* Immediately subscribe to the Wolfsberg anti-money laundering guidelines. Wolfsberg signatories themselves - particularly ABN Amro, Citibank and Société General which already loan money to Angola - should not collaborate with or take part in any loans in which all parties are not fully transparent as to their disbursement and subsequent expenditure.
* Banks such as Lloyds Bank in London, which runs the Cabinda Trust, should publish regular updates detailing the resources held by the Angola oil-back offshore trusts funds and the demands being made upon them.
Bilateral Export-Credit Agencies should:
* Impose full transparency on all participants as a condition for future export-credit agreements.
National governments should:
* Ensure that their national oil companies adopt full transparency criteria on overseas operations. National governments should require them to adopt a forceful common position on this issue. In particular, the French and the American governments should promote transparency in their oil industry: as major oil extractors in the off-shore of Angola, TotalFinaElf, Chevron and Exxon's apathy on this issue is appalling.
* Insist that financial regulators of international stock exchanges should legally oblige companies filing reports with them to disclose payments to all national governments in consolidated and subsidiary accounts.
* Insist that their export financing agencies practice full transparency as a condition for setting up credit agreements, and that full transparency of funding partners and recipients becomes a pre-requisite for funding.
* Fast-track the 'name and shame' process to isolate jurisdictions that are hiding and laundering dirty money and identify and seize assets of corrupt, non-transparent regimes.
The Angolan Government should:
* Immediately implement a policy of transparency for government income and its expenditure. The Government should fully clarify all revenues that are controlled or disbursed extra-territorially, in parallel budgets and/or by the Presidency.
* Attend to civil society's demands for more accountability and increased social spending.
* Publish immediately the oil sector diagnostic results and allow the IMF to publish this data too.
The IMF should:
* Render publicly and widely available the results of the Staff Monitored Programme, in particular the over-due KPMG report on the Oil Sector Diagnostic.
The international community should:
* Institute appropriate national enquiries into influence peddling around access to oil reserves and revenue misappropriation from the Angolan oil industry and facilitate the French investigation into 'Angolagate'. Who knew what and when did they know it?
* Insist that the oil industry and the financial world institute a policy of full transparency on all revenues and loans to Angola and other corrupt, neo-authoritarian regimes.
* Provide a mandate to require the IMF to provide a retrospective analysis of oil revenues from 1993 onwards as part of an international effort to identify and repatriate misappropriated state assets in the wake of the 'Angolagate' scandal and insist that the IMF renders public all information uncovered by the Staff Monitored Programme public.
* Ensure that current UN peace-building efforts, focused on UNITA's war effort, are extended to take into account the lack of transparency over Government oil revenues as part of the peace-building and demobilisation process. In addition, the UN must include civil society in any unfolding peace process.
* Recognise that the definition of acceptable corporate behaviour is bound up with the operation of transparent and accountable business practices and the provision of information on payments to national governments to the citizens of that country. Future regulatory programmes or voluntary codes-of-conduct should recognise that the 'stakeholder' concept includes the general population of a country in whose name the resources of a territory are being exploited. Civil society is entitled to be provided with adequate information to be able to call their governments to account over the management of 'their' resources. It is time to move from debating corporate social responsibility to corporate accountability.
The G8, EU, OECD and the New Partnership for African Development (NEPAD) should:
* End the practice of secret deals between governments and multinational companies by issuing clear contracting guidelines defining and legislating 'good practice' for multinational enterprises in structuring transparent financial arrangements with host governments. Such an initiative requires the G8 and others to make it a priority for national regulatory authorities to legally require full transparency for all companies over payments to national governments.
2 All the presidents' men -
an introduction
All the presidents' men is the product of two years of investigations, and provides an update on the campaign for full transparency in the oil and banking sector. It continues an exposé, which started with December 1999's A Crude Awakening, into the mechanisms of wholesale state robbery in Angola.
Central to the issue of state looting is a glaring discrepancy: the progressive impoverishment of a country during almost four decades of war and civil conflict has gone hand-in-hand with rising oil revenues. Despite earning around US$3-5 billon from oil last year (an estimated 87% of state revenue), social and economic development in Angola has continued to deteriorate. Three-quarters of the population are forced to survive in absolute poverty on less than one dollar a day; one in three Angolan children die before the age of five and one child now dies of preventable diseases and malnutrition every three minutes (480 every day);1 life expectancy is a mere 45 years; and about 3.1 million civilians have had to flee their homes since the war resumed in January 1998.2
Rising oil revenues have been diverted straight into parallel budgets of the shadow state. Information emerging from economists involved in analysis of Angola's oil sector suggests that up to US$1.4 billion in revenues - comprising almost a third of state revenue - is unaccounted for the year 2001. Although the exact amount of missing revenue is debatable - information on loans and payments revealed in this report suggest that this amount may, in fact, be a substantial underestimate - such figures nevertheless stand in stark contrast to the US$200m the UN barely managed to scrape together to feed the one million internally-displaced Angolans dependent on international food aid.
Global Witness' investigations into this missing revenue culminated in uncovering how top government officials now make money out of a highly over-priced military procurement process and benefit financially from almost every item consumed in the pursuit of the war against UNITA. A billion dollar bank account connected to this process in the British Virgin Islands is also exposed, whose signatories include two high-powered Angolans.
Whilst Global Witness does not deny that the majority of the Angolan Government would welcome genuine peace, it clear that the political and economic disorder brought about by the civil war has been deliberately exploited to enrich the ruling elite. Meanwhile, the failure of the Angolan state to provide for its citizens has been blamed on the conflict. The death of sociopathic UNITA leader Jonas Savimbi on 19th February 2002 may herald the end to that excuse; the international community must seize this opportunity to call the Angolan Government to account over its use of oil revenues.
part one - the scandal follows on from the 'Angolagate' arms-to-Angola affair that broke in France at the end of 2000. It reveals how what started as a legitimate exercise in self-defence by an internationally-recognized Government threatened by rebel insurgents in the early 1990s, ended up with full-scale appropriation and laundering of state assets through parallel budgets, over-priced arms deals and deliberate indebtedness through mortgaging of future oil production. Culpability and complicity amongst political and economic actors in France and Angola has reached to the highest level; significant links can also be inferred to the US, Israel, Russia and across Europe, including a direct lobby in the EU Parliament.
The recent spectacular meltdown of Enron provides clear lessons on the dangers of 'influence peddling'. Enron's political donations clearly bought a substantial reformulation of national energy policy and diminished regulatory oversight. It is therefore impossible not to be concerned about the 'assistance' being sought through major donations (subsequently returned) to George W Bush's election campaign by a company connected to a figure central to Angolagate. If the impact of influence peddling can be so severe for US company employees and investors - theoretically, a domestic audience - imagine what its effect might be on the far-removed people of Angola.
part two - the complicity of the oil companies argues that international oil companies operating in Angola are complicit in the economic abuses of the ruling elite because they choose not to publish the revenues that they pay to the Angolan State. These companies claim that they do not get involved in the politics of the countries where they operate, yet the active decision to withhold information about payments to the State, when such information could clearly be provided (and is provided as routine in the developed world) is itself a political statement.
Under the Angolan Law, 'all deposits of liquids and gaseous hydrocarbons ... belongs to the Angolan people'3; thus, it is outrageous that these owners are not allowed to know - and are actively deterred from finding out - what 'their' resources are worth. By not 'publishing what they pay', oil companies endorse a double standard of behaviour that would be unacceptable in the North and make it impossible for ordinary Angolan citizens to call their government to account over the management of revenues earned from resources that are meant to be held in trust for the general population. Instead, oil company revenues are diverted into non-transparent arms and other commodity deals.
Despite the resistance from companies and the Angolan Government in rendering public information on revenue disclosure, Global Witness is pleased to reveal this information for the first time for the year 2000. ChevronTexaco and TotalFinaElf top the list of hidden contributions: these two companies are also notable for refusing to engage in discussions on transparency. Disturbingly, the data show that between the Ministry of Petroleum and the Ministry of Finance, some US$770 million unaccountably disappeared, indicating that the missing money from year 2001 is only part of a prolonged sequence of economic abuse.
part three - the financing looks at how the international banking sector has operated offshore havens for these assets and gleaned lucrative commissions on oil-guaranteed loans with minimal oversight. Oil-backed loans represent a vast additional source of unaccountable income to the State; investigations by Global Witness suggest that the Angolan Government borrowed over US$3.55 billion by mortgaging future oil production at high interest from September 2000 to October 2001 alone. This was provided by various banks with almost no procedures to check that the money was actually spent on that for which it was requested and, if correct, these figures indicate that informal estimates of US$1.4 billion of revenue and loans diverted may be a substantial underestimate. Certainly, international banks have given no regard to the fact that they have vastly exceeded the Government's agreement with the IMF to restrict new lending to US$269 million during 2001. Northern Export Credit Agencies are guilty of a similar lack of care; taxpayers' money in Northern countries is being used to underwrite unaccountable export financing arrangements in highly corrupt countries with no transparency provisions attached.
Despite this pressing need for the natural resource sector to be open and transparent about payments to unaccountable regimes, there is a startling lack of pressure in this direction from the international community. Angola, for example, has seen the full-scale retreat of any objective and principled foreign policy towards the country: recognizing the importance of future oil production, diplomatic efforts have at best refrained from hindering, and, at worst, have actively colluded with, the operations of their industrial interests. Policy engagement with the Angolan Government has resolutely focussed on sanctioning UNITA with the aim of moving the group back into line with its obligations under the 1994 Lusaka Protocol. Whilst this has been an admirable effort - indeed Global Witness made an important contribution to this effort by exposing UNITA's funding through the diamond trade and continues to negotiate and promote the Kimberley Process to address the conflict diamond issue - the international community has failed to examine faults on the side of the Government, including its manifest failure to provide adequately for the population as a consequence of corruption.
Without support from a broad international coalition for change, oil companies operating in the country are in a difficult position - even if they want to do the right thing and publish what they pay to the Angolan Government, they face immediate reprisals from those with a vested interest in the status quo. Indeed, the announcement of a policy of transparency by BP brought a vicious response from the Angolan State oil company, Sonangol, in a confidential letter reproduced in this report, which shows their apparent contempt for the issue. It is clear that a single company cannot make such a move alone, so there is a pressing rationale for coordinated group action by the major oil companies in the country, all of whom, according to their fine-sounding corporate mission statements, are committed partners in equitable development and social justice.
The international community must also act conclusively to level the playing field amongst competitors and introduce mandatory disclosure of revenue payments to governments by transnational resource companies for all their countries of operation. This could be achieved overnight by requiring such summary disclosures in annual reports to major international securities exchanges.
The international community should also identify and freeze, pending repatriation, all overseas assets that have been looted from Angola. This report reveals how the machinery for state robbery and money laundering took on a global dimension. The events of the destruction of the World Trade Centre have created a new sense of urgency to confront money laundering, arms trafficking and internationalised crime. The same resolution to trace and impound the assets of terrorist groups should also be directed against the mechanisms used for state looting in corrupt, neo-authoritarian regimes.
As World Bank President James Wolfensohn wrote after the 11th September 2001 'central to conflict prevention and peace-building must be strategies for promoting social cohesion and inclusion, ensuring that all have opportunities for gainful employment, that societies avoid wide income inequalities that can threaten social stability and that poor people have access to education, health care, and basic services such as clean water, sanitation and power'.4
Full disclosure of payments and royalties to all national governments by natural resource companies is a necessary precondition to deliver just and equitable development and is central to preventing the blatant exploitation of political disorder for private economic gain. This report is a challenge to all involved to move forward creatively to address the real forces underpinning the Angolan civil war and deliver fiscal accountability of Angola's oil wealth such that it might, for once, deliver some benefit to its real owners.
Angolan Social Indicators
Population 12.4 million
Life expectancy 48.9 years
National Budget US$5.1 billion
GNP per capita (Constant 1995 US $) US$233
Children
Population under 15 48%
Infant mortality rate for children under 1 12.4%
Infant mortality rate for children under 5 male 20.9%
female 19.2%
School enrollment rate, Primary 37.5%
Children under 5 years suffering malnutrition 35%
Underweight children 42%
(14% severe)
Poverty Statistics
Population living in absolute and relative poverty 82.5%
Maternal mortality rate during 1996 1.9%
Population without access to drinking water 62%
Population without access to adequate sanitation 56%
Population without access to healthcare 76%
People requiring food aid 3.2 million
Estimated rate of severe malnutrition 13%
Internally displaced persons (an estimate) 3.5 million
Unemployment rate 80%
Adult literacy rate 42%
Land Mines
Disabled land mine victims 86,000
Part One: The Scandal
3 A story of state looting and a privatised war -
a summary
Following the December 1999 report A Crude Awakening, Global Witness continued its investigations into the financing of Angola's war machine. The result is a story of how a legitimate exercise of self defence against UNITA turned into a conspiracy involving highest level politicians and individuals in Angola and beyond to rob the country of its wealth through kick-backs related to over-priced arms deals, financed by oil-backed loans.
Investigations indicated that certain key individuals benefit financially from the military procurement process, from almost every item consumed in the pursuit of the war against the UNITA. This leads to a disturbing conclusion: political and economic disorder and a total absence of financial transparency of the Government's oil revenues are the necessary conditions for this machinery of cash diversion and kickbacks to operate. Recent indications of a will to make peace appear to have received a major boost following the death of UNITA leader Jonas Savimbi, providing an opportunity which should be grasped with both hands by all sides to the conflict. The recent suggestion of a ceasefire is the first indication that peace negotiations are a possibility. However it is still far from clear how a genuine peace will be achieved, and as conflict and instability continues, Angola's wealth will continue to be siphoned off through a myriad of corporate and offshore centres, courtesy of the global banking system, whilst a major proportion of Angola's dispossessed are left to the mercy of donor assistance.
All the Presidents' Men reveals an international scandal that encompasses a global process of control over oil and the predatory nature of the international financial and banking systems. The miasma of dirty dealing discussed in this section demonstrates how members of the international community have sought mutual advantage with Angola's shadow state to ensure future oil supplies. From the perspective of oil interests, this has been largely successful, but it has been a disaster for the ordinary citizens of Angola, who have paid a devastating price for access to resources that are being exploited in their name.
An insight into state looting in Angola?
Angolagate is the name given by French and international media to a scandal that saw, amongst others, the December 2000 arrest of Jean-Christophe Mitterrand, son of former French President François Mitterrand. Fortune Magazine wryly commented that, 'it is de rigeur for French corruption scandals to be very complicated' and, so far, the scandal discussed in the press only concerns allegations of influence peddling, illegal weapons trading and abuses of public trust by a complex web of individuals in the supply of arms to Angola during 1993 and 1994.
Global Witness' investigations have uncovered additional information which, taken together with published material, leaves little doubt that Angolagate and associated events of 1993/4 are but a small proportion of a much wider international scandal involving key international political and business players. In fact, the true story is about the privatisation of Angola's war and the architecture of state looting on a scale to rival Mobutu and Abacha. Just how far this scandal reaches, and which other international political leaders are tainted, is difficult to determine. But as Philippe de Villiers, previously vice-President of former French Interior Minister Charles Pasqua's Rassemblement pour la France (RPF) party explained, 'I can confirm in a very explicit manner that the Mitterrand-Pasqua affair [Angolagate] is a very serious state affair, with inter-continental ramifications...'.
This introductory section provides a summary of, and a background to, the whole affair and explores its wider international implications. The full account begins with the section entitled 'Angolagate - the full story'. Global Witness points out that we are not implying guilt on behalf of any party, and those individuals that are named have yet to be tried or convicted in a court of law. Nevertheless, we invite those named to clarify their actions.
Africa is seen from France as a 'judicial no-man's land which, in the name of mutual political interests, was to stay for eternity a land of unpunished crimes.'
- Reuters, quoting from Le Monde editorial, December 200092
The start of French influence peddling in Angola
By 1993, despite having won the 1992 Angolan elections, President dos Santos' Government was losing the war against UNITA. The latter had reverted to armed conflict following electoral defeat, and at the time controlled around 80% of the country. The Government had neither the arms, nor the financing, to fight back.
The resultant call-for-help from dos Santos was aimed at sympathies within Mitterrand's Presidency in Paris. It also provided a potential solution to France's increasing paranoia about likely United States domination of Angola's oil sector following the Clinton Administration's formal ending of US support for UNITA. However, there was a major barrier to official French help for the Angolan Government due to the fact that President Mitterrand was going through his second period of co-habitation, sharing power with the centre-right Government of Prime Minister Edouard Balladur. Any official military assistance from the French Government to Angola would require the support of the French Minister of Defence, who at that time was one of the strongest supporters of UNITA in Paris. Official channels of support were thus closed.
Jean-Christophe Mitterrand allegedly then introduced businessman Pierre Falcone to engineer a solution. Falcone headed a group of companies under the umbrella, 'Brenco International', whilst simultaneously working as 'key advisor' for Sofremi, a security export company that was controlled by the French Interior Ministry, then headed by Minister Charles Pasqua.
Pasqua's team immediately saw this as an opportunity to head off US oil dominance in Angola. According to the press, though Falcone had been brought into the discussion courtesy of the French Political left, he now received endorsement from Pasqua's team on the right, and was thus tasked to provide a solution to Angola's weapons and finance requirements, on the proviso that supplies did not come directly from France.
According to numerous French press articles, Falcone then formed a partnership with Russian émigré and businessman Arkadi Gaidamak (also spelt 'Gaydamac'). In a telephone conversation with Global Witness, Gaidamak claimed that at that time, both he and Falcone travelled to Angola where they were provided with Angolan diplomatic passports, after which they operated as de facto Angolan officials. During this conversation and in earlier press reports, Gaidamak claimed that the purpose of their cooperation related to the provision of oil-backed loans for Angola, and he denied that they had been involved in the supply of weapons. In a later conversation with Global Witness, Gaidamak subsequently admitted that arms had been supplied, though he denied direct involvement. His justification was that these deals had been arranged with a legitimate government.
The French press describe a series of contracts that both Falcone and Gaidamak reportedly put together to supply arms to Angola during 1993 and 1994, totalling some US$633 million. Documents detailing some aspects of these contracts have been published and although they appear to contain Falcone's signature, Gaidamak is conspicuous by his absence.
L'Express reports that Falcone and Gaidamak were the 'tandem who would deliver arms to the Angolan regime' and to do so, they took 'defacto control of a company, ZTS-Osos, based in the Slovak Republic.'5 The paper refers to arms including 'tanks, rockets, helicopters, combat vehicles and troop transporters, all of which were of Russian manufacture', being delivered in reference to contracts from 1993 and 1994, and that negotiations were 'conducted in Paris and the money transited through a Banque Paribas account in the capital.'5
Banque Paribas, now taken over and subsumed into the group BNP-Paribas, was also one of the key banks involved in the provision of oil-backed loans to Angola. According to Gaidamak, both he and Falcone were effectively given control over the disbursements of funds from such loans exercising, as he put it, their duties as effective representatives of the Angolan Government.21 Were any of the loans provided by Paribas used to fund arms supplies through the arrangements discussed above? Regardless of whether or not this has happened, another major question arises: given the high exposure of banks to risks associated with bad loans, why was Paribas willing to be involved in the provision of substantial loans to a government that was, at that time, by no means sure of its own survival?
Did Angola get value-for-money?
It is not clear if arms supplied from these contracts represented value-for-money for Angola. Weapons clearly were supplied during this period that were of sufficient quality to change the fortunes of the Government, allowing it to fight back to a position of stalemate with UNITA, which in turn led to the Lusaka protocol agreement in 1994. However, the issue of arms supplies to Angola in general throughout the 1990's, together with the supply of other commodities, have been dogged by claims low quality. These claims have ranged from shipments of rotting meat being imported, solely for the commission involved, to the delivery of tanks and other heavy equipment, of such low quality that they had to be removed from their delivery vessels by chains, whereupon they were transported to 'tank graveyards', outside Luanda.
The situation across Africa
This is a pattern that does not affect Angola alone. Investigations conducted by Global Witness into a number of different African conflict hotspots suggest that in many cases, arms deals are often extremely bad value for money. For example, in a number of deals, arms have been supplied worth a fraction of the money ultimately used to pay for them. On one occasion, the government concerned paid their suppliers approximately 35% of contract face value, whereupon the latter delivered weapons worth around 25% of contract face value, generating an immediate 10% profit on the deal. As if this was not bad enough, the suppliers then arranged additional financing from a number of banks, secured by revenue from natural resource extraction, up to the value of the contracts. These additional funds, essentially worth 65% of contract face value, were then added to the 10% profit already generated from the up-front payments. The result - the country concerned obtained weapons worth a quarter of what they paid, generating enormous profits along the way for those involved in the deals.
Beyond Angolagate - arms trafficking following 1993/4
Global Witness' investigations revealed that at least one further arms supply contract was put together by ZTS-Osos in 1995 or 1996. Though the date of the contract is not clear, it is possible that this contract, worth approximately US$44 million, was agreed at roughly the same time that Paribas provided its 19th September 1996 oil-backed loan of US$135 million.
Interestingly, Gaydamac's (sic) signature appears to have been included alongside Falcone's on this 1995/6 ZTS-Osos contract, reproduced on page 16. Well-placed sources have suggested that it was very rare for Gaidamak to sign documents. However, based on available documentary evidence, Falcone's signature appears to be genuine; if it is, then Gaidamak, at the very least, should explain how his name appears on this document.
Investigations also revealed that in addition to arms, a similar method of financing and supply has been used to provide food, medicines and other commodities required by the Angolan Government in its war effort. One of the key vehicles used to supply food and medicines for the Angolan armed forces is a subsidiary of Falcone's company Brenco International, called Companhia Angolana de Distribuição Alimentar (CADA), that reports have suggested gained a monopoly of supply to the Government Forças Armadas de Angola (FAA) for a period of five years.
The scene unfolding before our eyes is overwhelming. At the heart of the State [France], Socialist and neo-Gaullist networks joined hands to enrich themselves by facilitating sales of heavy Russian arms to a country ravaged by war and misery. It is a disgrace for France and Africa.
- Reuters, quoting from Le Monde editorial, December 200092
A lesson in transparency - do you keep accounts like this?
Global Witness' investigations have also identified the existence of a bank account - number 15468991 - held at the so-called 'First Virgin Bank' in the British Virgin Islands (BVI). This account held approximately US$1-1.1 billion during 2001, with two high-powered Angolans acting as signatories. The true identity of the 'First Virgin Bank' remains a mystery. (For further information, see Whose billions are in this bank account? - page 22.)
Angolagate and legal action
Following a complex series of judicial investigations, described later in this report, Pierre Falcone was arrested on 1st December 2000. His arrest, together with interviews and searches at the offices and residences of other individuals allegedly connected to this scandal, precipitated press reports and speculation about Angolagate. Prominent individuals, including Jean-Christophe Mitterrand, Jacques Attali, former advisor to President Mitterrand and first Director of the European Bank for Reconstruction and Development, and some lesser-known individuals were subsequently arrested and charged for a variety of alleged offences. During 2001, both former French Interior Minister Charles Pasqua and his right hand man, Jean-Charles Marchiani, were also formally cautioned and questioned in relation to this issue; the latter two appear not to have not been formally arrested because they enjoy immunity of prosecution as Members of the European Parliament.
An international arrest warrant, number 0019292016, was issued for Arkadi Gaidamak on 11th January 2001. Nevertheless, it appears that Gaidamak currently enjoys the protection of Israel. Well-placed sources have suggested that he continues to travel freely between Israel and Angola, to South America and into the UK.
After numerous legal challenges, Falcone was finally released on 1st December 2001, after spending precisely one year in prison. His release was accepted on a bail posting of 105 million French Francs (US$14,351,000),6 more than ten times France's previous highest bail demand. Nouvelle Observateur reports that the Court of Appeal reduced Falcone's bail demand to €5 million (US$4,309,000)7, which it says is to be paid by Angola's State oil company Sonangol, as a mark of Angola's solidarity with Falcone.8
The Brenco group and links to the United States
Reports in both Arizona Republic and in Newsweek Magazine suggested that Falcone is well established in the United States and that he has strong connections with the US political elite. In late 2000, Falcone purchased an immense mansion in Paradise Valley, Arizona, for a reputed US$10.6 million, the highest value personal property purchase in Arizonan history. Interviews in Arizona Republic with individuals claiming familiarity with Falcone and his Bolivian beauty queen wife Sonia, suggested that they led a dream life, circulating within the party circuit of Arizona's elite, and spending significant funds on a variety of philanthropic ventures.9
Sonia de Falcone runs Essanté, a Utah-registered company specialising in health and beauty products, and of late, a range of products aimed at enhanced sexual pleasure. The company was incorporated in Delaware on 6th April 1994, with Sonia and Pierre Falcone listed as directors.10 Essanté is also connected to the Brenco group in terms of shareholdings and common addresses, both in the UK, and for holding companies in the British Virgin Islands. According to both Newsweek Magazine and Arizona Republic, and supported by US Federal election funding records, Essanté donated US$100,000 to George W. Bush's election campaign. This money was returned in January 2001, with the Arizona Republic quoting Newsweek 'the money was returned to avoid questions about whether an international weapons merchant was trying to buy influence with the new Bush Administration.' The Arizona Republic reported that Falcone family spokesman, Jason Rose, 'scoffed at that insinuation.' Newsweek's January 2001 article referred to both the donation and to Falcone's December 2000 arrest in France.9
The US publication In These Times furthered the discussion about Essanté's donation to Bush's campaign. In an article entitled 'The arms dealer next door', In These Times reports claims by Sonia Falcone that '...her husband had no connections to Essanté and that the company's political contributions came out of corporate profits.'10 The article went on 'more significantly, Essanté, which has been losing money for the past seven years, has no profits from which to make political contributions.' The article then provides comments attributed to the legendary Hollywood PR agent, Lee Solters, which reportedly claimed that 'Essanté spent its first six years, and US$6 million, developing its product line. Sales only began in earnest last September, after Essanté threw a three-day launch party at the Paris Hotel in Las Vegas.10 In These Times concludes by quoting a source which it described as 'familiar with the family' 'the company [Essanté] has come a long way with Pierre's generosity, but after a few years he'd like to see some profit. It rubs him the wrong way, but out of love for his wife he's done it with a smile on his face.'10
Had Newsweek not raised the issue of Falcone's arrest, together with Essanté's donation, would the money have been returned by the Bush campaign? According to In These Times, 'The GOP [Republican Party] returned the contributions following Pierre's detention - "to avoid the appearance of impropriety," in the words of a statement issued by the Republican National Committee.'10
According to Swissinfo, a Swiss-based web site covering Swiss affairs, on the 16th March 2001, 'Justice authorities in the Canton Geneva [...] launched another money laundering investigation involving alleged arms trafficking to Angola.' The article described how this initiative 'follows an earlier money laundering investigation, also involving alleged arms trafficking to Angola, which was launched by Geneva's top prosecutor, Bernard Bertossa, in January [2001].'11 According to Swissinfo, as part of this investigation, '...several Geneva banks have been ordered to reveal whether any of the people or businesses on the list [a list of individuals and companies forwarded to the Geneva prosecutor by the French investigating judges] have ever held accounts with them.' It continued, 'if so, officials are expected to request account statements dating back to 1990, when Swiss money laundering laws came into effect.' According to Swissinfo, 'one of the most prominent names on the list is that of the former French Interior Minister, Charles Pasqua, and his son, Pierre Pasqua. European Deputy Jean-Charles Marchiani, and Sonia Falcone, wife of the alleged arms dealer Pierre Falcone, are also on the list.'11 There are no suggestions of any charges against or wrong-doing by Sonia Falcone - it appears this request relates to the investigation into her husband.
Further US connections - a smoking gun?
Shortly prior to Falcone's arrest in December 2000, judicial investigations in France led to a raid on the apartment of Falcone's secretary. According to French press articles, investigators located some 26 diskettes, containing significant quantities of documents detailing activities, contracts and letters relating to Falcone's activities in Angola. Given that these diskettes provided sufficiently good quality primary information that led to the subsequent questioning, and in some cases arrests of, amongst others, Jean-Christophe Mitterrand, Jacques Attali, Charles Pasqua and Jean-Charles Marchiani, it is logical to assume that the information they contain is considered reliable by the investigating Judges.
Allegedly, amongst these documents, investigators discovered a letter inviting then US Presidential candidate, George W Bush for a meeting with Angolan President dos Santos at Falcone's Arizona ranch. Global Witness understands that this meeting did not actually take place, though the reason why is not clear. However, given the Bush Campaign's acceptance of Essanté's money until it was publicly embarrassed, one might conclude that the meeting may not have taken place due to scheduling reasons, rather than for any specific distrust of Falcone, or his overtures.
In a late December 2000 article, the French publication, La Nouvelle Observateur, implied yet another close link between the Falcone and Bush families. The magazine suggested that, in addition to campaign financing, Laura Bush and Sonia Falcone are friends. Meanwhile the publication, In These Times, suggests any such relationship is due more to connections generated by Arizona State Senator Bundgaard, and because of funds provided to Bush's election campaign, than out of any real friendship. Regardless of the reality of any such relationship between the two families, it is not difficult to imagine that Falcone might have been in a position to arrange meetings with the future President of the United States.
It seems likely, however, that Falcone's potential influence did not end with political donations to the Bush campaign alone. In These Times reports that a meeting took place between Falcone and three un-named high-level Phillips Petroleum Corporation executives in June 2000, some five months prior to Falcone's arrest in Paris.10 Phillips Petroleum Corporation holds a 20% stake in Angola's Block 34, allocated in 2001, but for which negotiations were already well-underway at the time of the company's alleged meeting with Falcone. The article states that Phillips refused to comment on the meeting.
Global Witness sought clarification about what role, if any, Falcone might have played regarding the acquisition of Phillip's stake in Block 34. Bryan Whitworth, Executive Vice President and General Council for Phillips, responded in January 2002, stating that he was unable to identify a meeting in Scottsdale in June 2000, but that there was a meeting in September and a follow-up in Washington in October 2000, '...to determine whether or not Phillips wanted to utilize Mr. Falcone as a consultant [...] it was concluded that Mr. Falcone should not represent Phillips.' Further, the letter stated that 'Mr. Falcone has never been employed by Phillips Petroleum Company nor represented Phillips in any respect on any matters.' This response, of course, raises the question as to why Pierre Falcone should have been considered as a possible consultant in the first place, and on what basis did Phillips come to the conclusion that he was inappropriate for such a job afterwards?
Michael Austin, an Arizona-based friend of the Falcone family and domain name holder of a website in support of Falcone wrote to Global Witness in an e-mail, '...Pierre derives a great deal of income from Exxon Block 33 located within the boundaries of Angola.' Given the apparent meetings between Falcone and Phillips, and given ExxonMobil's operatorship of Angola's Block 33, ExxonMobil should clarify what, if any role is, or has been played by Falcone in Block 33. In particular, ExxonMobil should clarify if it has also held meetings with Falcone, and if the latter played any role in advising, or facilitating the company's acquisition of its operatorship of Block 33. Global Witness sought clarification from ExxonMobil on 23rd January 2002, and has yet to receive a response.
Following Falcone's arrest in December 2000, the Sunday Times hinted at possible links between Vice-President Dick Cheney, in his role as CEO of the oil services company Halliburton, and Angolagate. The paper commented that '...as Defence Secretary, Cheney had been an outspoken supporter of UNITA ... he now finds himself in the intriguing position of having recently headed a company that pursued contracts aggressively with UNITA's sworn "enemy."' According to the Sunday Times, during the American election campaign, Cheney was reportedly 'accused of using his connections as a former Defence Secretary to secure the company [Haliburton] contracts.' 80 Given the suggestion from the Sunday Times that 'French authorities [connected to the Angolagate investigation] are scrutinising the activities of several oil companies that provide Angola with most of its foreign revenues - including Haliburton Co,...', a key question arises: Did Pierre Falcone play any role in securing contracts for Haliburton? Vice-President Cheney should immediately clarify Haliburton's success in Angola.
It is obvious from the Enron scandal that influence peddling is a major problem in the United States. Interestingly, Enron CEO Kenneth Lay's US$100,000 donation to the Bush campaign is strikingly similar to the Falcone's US$100,000. We have seen what Enron managed to achieve through its 'donations' - what was Falcone hoping to achieve, and perhaps more to the point, what would he have achieved, had the embarrassment of his arrest not facilitated the belated return of his money? It is a matter of urgency that a full and thorough investigation into the reaches of Angolagate is conducted in the United States. It is clearly good, for legitimate US domestic concerns, that the current spate of Enron investigations might lead to a clean up and end to efforts by companies to buy influence in Washington. However, given the plight of Angola's population, suffering from nearly 40 years of fighting, and given the strategic value and benefit accrued to the US from the exploitation of Angolans' resources, nothing less than a full investigation will do. What did the key players know, and when did they know it?
Russian debt and guns
Sources suggest a strong Russian involvement in ZTS-Osos, the Slovak-based supplier of arms involved in Angolagate; including significant shareholding in the company by a number of Russian State arms production companies (See Russian State interests in ZTS-Osos - page 17).
According to a number of press reports, both Falcone and Gaidamak were involved in a deal to renegotiate Angola's US$5.5 billion debt to Russia. According to a February 2002 article in the Geneva publication Le Temps, 'in 1996, the pair [Gaidamak and Falcone] negotiated the re-purchase of Angola's debt to Russia: the latter was intended to receive US$1.5 billion instead of the US$5 billion owed by Luanda's Government.' The paper continued, 'the Angolans agreed to reimburse this amount, thanks to the country's oil revenues.' Commenting on those involved in the deal, the paper reported 'swiss-based companies took part in the operation: Glencore, in Zug, traded the oil; Paribas (Switzerland), together with other banks, advanced the money promised by Angola.'12
The role of Falcone and Gaidamak in this operation is not clear. However Le Temps commented that 'Pierre Falcone was in charge of the distribution of revenue from the debt repurchase amongst Angolan dignitaries, while Arkadi Gaidamak did the same thing for the Russian side.'12 Both Falcone and Gaidamak have commented on this deal, with Falcone suggesting he made a modest, 'less than US$15 million,'13 for his services - ironically, roughly the amount required to post his bail demand on the 1st December 2001. Gaidamak has boasted, 'as a matter of fact, I even supervised the relations between Russia and Angola, looking after the interests of both parties.'14
Whatever the truth of this arrangement, it is clear that the IMF is concerned about what really went on. By December 2001, the IMF had been unable to obtain any clarification about these arrangements, either in Luanda, or Moscow. It is time, not only for the Russian and Angolan Governments to be transparent about this arrangement, but also for all the banks that have participated in oil-backed loans to Angola since 1996, to provide details of what they know of this situation.
The French connection
Numerous detailed French press articles leave the reader little alternative but to conclude that at the start of the 1993/4 finance and weapons supply programme described earlier, a number of top level officials, both closely connected to then President Mitterrand and within Prime Minister Balladur's party, were intimately aware of what was going on.
A number of questions have yet to be asked. What happened after the end of the Mitterrand Presidency? What did President Jacques Chirac, Mitterrand's successor, know of these events and when? These questions are especially poignant given that loans continued to be provided, together with the provision of arms and other commodities to Angola, well into the period of Chirac's Presidency.
Falcone wrote personally to President Chirac both in 1997 and in 1998, and these letters provided considerable detail about projects underway. Further, sources suggest that during President Chirac's state visit to Angola in 1998, at least one meeting was held in Luanda between Chirac and dos Santos in which Falcone was present.
Another area of concern relates to the 1995 release of three French pilots, who had been shot down over Bosnia. According to press reports General Gallois, who was the main negotiator, had successfully secured their release but he was formally instructed to terminate discussions prior to bringing them to their conclusion. A few weeks later, Gaidamak reportedly stepped in to secure the hostages' freedom, which resulted in their arrival in Paris, shortly prior to a post-Dayton peace conference on Bosnia, hosted by newly elected President Chirac.
According to Le Monde, the former Prefect of the Var Region, Jean-Charles Marchiani, presented Gaidamak with the 'Order of Merit', in recognition of his services in the release of the hostages. However, a January 2002 article in Le Monde stressed that General Gallois deplored the existence of 'parallel negotiations', and stressed that he did 'not understand why Gaidamak and Marchiani intervened after [him], it did nothing. It only had the effect of slowing down the release of the hostages.'15
In an article about the 22nd May 2001 indictment of Jean-Charles Marchiani, Le Monde reported that, 'the former Prefect of the Var is also suspected of having received a financial compensation for the attribution, in 1996, of the Ordre National du Mérite to Mr Gaidamak, which was agreed by the President of the Republic, Jacques Chirac.'16 Le Monde stressed that Marchiani vigorously denied all allegations that have been laid against him.16
Given recent articles about corruption and the 'Travelgate' affair during Chirac's tenure as Mayor of Paris, any potential involvement of Chirac, or his knowledge about arms trafficking and state looting in Angola, is of major concern. To date, President Chirac has simply side-stepped all questions relating to his tenure as Mayor citing Presidential immunity. This has led, for example, to the bizarre situation with 'travelgate', where other members of Chirac's family have been required to respond to questions from investigating Judges, whilst the President himself is able to maintain his silence.
It is time for all to come clean
The essence of corruption in Angola, is that instead of relatively small sums, or petty personal advantage as epitomised by 'Travelgate', here we are talking about Mobutu- and Abacha-scale state looting. This is a process which has been intimately tied to the conduct of war in Angola and perpetuated by the highest-level elites for personal and political gain. It is the general population of Angola that has had to pay a terrible price - that includes more than 500,000 killed from 1992-1998 alone, approximately 480 children dieing every day of preventable causes, a quarter of the population displaced, and more than a million citizens entirely dependent on emergency food aid; conditions, which despite suggestions of a ceasefire, appear set to get worse before they improve.
It is imperative that decisions should be made on an international basis to ensure that the events and actions discussed in this document can never again be repeated. Part of this process of change could so easily be instituted through the suggested actions and recommendations in this report with little or no pain for any corporate or national interests, excepting those that currently profit from the Angolan shadow state.
[FONT=Arial]In this regard, it is imperative that responsible leaders must come clean about what they know of events relating to the arming and financing of Angola's war machine. For example, President Chirac is facing the electorate during 2002, and the conduct of the democratic process in France cannot tolerate the continued concealment of vital information central to unravelling these events, especially when a lack of information undermines the capacity of Angolans to hold their Government to account for its actions. The cost to An...
"The philosophers have only interpreted the world, in various ways. The point, however, is to change it." Karl Marx
"He would, wouldn't he?" Mandy Rice-Davies. When asked in court whether she knew that Lord Astor had denied having sex with her.
“I think it would be a good idea” Ghandi, when asked about Western Civilisation.
"He would, wouldn't he?" Mandy Rice-Davies. When asked in court whether she knew that Lord Astor had denied having sex with her.
“I think it would be a good idea” Ghandi, when asked about Western Civilisation.