Oligarchy

MEMORY HOLE

In the George Orwell novel 1984, Winston Smith’s job is to rewrite articles from old newspapers to make sure that political predictions came true and inconvenient “unpersons” no longer feature, before destroying the old versions. He starts to doubt the truth of what he’s reading when he sees a forgotten scrap of paper, which clearly proves that three supposed criminals had been innocent.

I occasionally wonder if there isn’t a vague parallel between his job and the work done by defamation lawyers who craft versions of the truth that are acceptable to their rich clients, thereby erasing what was previously considered to be true. It would be fun to demonstrate this by having an entire bookcase of the different editions of Catherine Belton’s Putin’s People, each one subtly different to the last, each one affected by a different wealthy person’s representative.

We now have a new demonstration of the power of the memory hole. You might think you remember a reference to Dmitry Leus in this ground-breaking report from British think tank Chatham House (called the U.K.’s Kleptocracy Problem), which was published in December 2021, but your memory is tricking you. Look for yourself, he’s not mentioned once. Oceania had always been at war with Eastasia.

Leus is a businessman of ex-Soviet origin who came to the U.K. in 2015, and has donated generously to a number of causes, including to the Conservative Party.

• “The reality is that there was no justification for Mr. Leus’ inclusion in the report — he has never been any form of kleptocrat or oligarch and was in no way connected to the Kremlin. In fact quite the opposite. A substantial body of evidence shows that he was the target of a politically motivated conviction, and subsequent wrongful imprisonment, by the Russian authorities. In any event, by the time Mr. Leus came to the U.K., this conviction was expunged,” said a spokesperson for Leus in a statement.

I am making no judgment on what he did or did not do. I do not know Mr. Leus nor have I researched his career. However, I am troubled by the fact that a report written by some of the world’s leading experts on kleptocracy should be retrospectively altered in this way, without any note in the new version of the report to alert readers to the fact it had been changed. Everyone hates publishing corrections (particularly really embarrassing ones) but they’re an important demonstration of journalistic and publishing ethics.

• “I am disappointed by this news. It seems our report – entirely accurate and in the public interest – has been excised of all mentions of Mr. Leus, a person of Russian-Turkmen origin who was mentioned in the report for his activities in the U.K.,” tweeted Professor John Heathershaw, the report’s lead author.

This happened without any court proceedings, simply because to do otherwise would cost Chatham House more money than it can afford to spend on legal fees.

• “After seven months of increasing demands, and due to the costs of defending the case — estimated at some £500,000 before trial — Chatham House has been forced to agree to his meritless claim and excise the report of all mentions of Mr. Leus,” Margaret Hodge, a Labour member of the House of Commons, said in a debate last week.

• “The Leus case… is just the latest example of the threatening abuse of lawfare, this time against Chatham House. It is remarkable that robust, incredibly famous international organizations are filleting reports because of the intimidation paid for by multi-millionaires,” said Bob Seely, a conservative MP, later in the same debate.

As you may have noticed, there is political instability in the United Kingdom at the moment, so who knows what the next week will bring? For all I know, King Charles is plotting to mimic his seventeenth-century namesake and get rid of parliament altogether. However, in the summer, when Britain had the government before the last one, or possibly the one before that, ministers promised to take action to protect academics and journalists from these kind of legal threats, which are often called Strategic Lawsuits Against Public Participation (SLAPPs). It was heartening to see a government minister repeat the promise last week in response to the comments from Hodge and Seely, though since Britain now has an entirely different prime minister, who knows what that is worth?

Incidentally, Heathershaw’s employers at the University of Exeter continue to host the original version of the report on their website. So you can compare and contrast what was written for yourself, perhaps while enjoying the irony inherent in its reference to how he had previously asked for online references to himself to be corrected.

GRENADA

I have a slight obsession with countries that sell passports. Sorry, I mean, I have a slight obsession with countries that award citizenship to foreigners that are prepared to invest generously in their economies. Obviously, most of the attention has gone to Cyprus and Malta, as well as to St Kitts and Nevis, because they’ve been doing the biggest numbers. But I’ve always felt that Grenada didn’t get the attention it deserves.

As a weird kind of apology for having invaded their island in 1983, the United States has long been notably generous in awarding Grenadans the super-useful and super-hard-to-get E-2 visa, which is like a green card but without having to fill in a tax return every year. Ever since Grenada started selling citizenship in 2013, foreigners have had access to that useful E-2 too, and for the very reasonable price of $150,000, which is far cheaper than buying an EB-5 visa direct from the United States.

Grenada stopped Russians from applying for its passports after the war began in February, then quietly lifted the ban five months later, and Russians appear to be lining up, according to this article from Business Insider, which quoted Fadi Minawi, an immigration attorney.

• “The E-2 route, using Grenada as a stepping stone, is a “sort of work-around” for wealthy Russians seeking to save both money and time in getting to the U.S. to avoid being drafted, Minawi said.”

This is good news for Russians, since other popular routes to alternative citizenship have been squeezed in recent years. Cyprus stopped selling passports after a scandal over the fact it wasn’t really checking who was buying them, while Turkey has put the price up as a response to a huge surge in demand.

Meanwhile, the European Commission last month referred Malta to the European Union’s top court in the latest instalment of its attempt to stop it selling EU citizenship.

• “EU values are not for sale,” tweeted Didier Reynders, the EU’s commissioner for justice.

It is worth pointing out, as friendly folks in the citizenship by investment industry invariably do whenever I talk about this, that there is a big issue here that doesn’t get talked about. Far more new passports are granted to people with supposed family ties to Italy, Poland, Romania or other EU countries, than Malta or Cyprus have ever sold. It is a statistical certainty that some of those people are not telling the truth and have instead bribed officials to falsify their ancestry documentation. That is an easy thing to do considering how much Eastern European borders have moved around in the last century or so, and how many people’s ancestors have thus moved countries without ever moving house.

That form of citizenship fraud needs more attention too, not least from the European Commission. So, if anyone reads my newsletter with the power to make that happen, please do so.

WHY FIGHT FINANCIAL CRIME?

In a couple of hours, I’m going to be giving evidence to a committee of the U.K. parliament scrutinizing a new economic crime bill. The bill will, among other things, impose order (or try to) on Britain’s corporate registry, a favorite source of shell companies used to hide criminal wealth. There’s a pretty amazing cast of people speaking before me, so I’m hoping to use my slot to try to persuade the politicians of the need to do more to fight economic crime. Just in case it doesn’t come out right, I’m going to rehearse the argument here.

According to estimates from academics at the university of Portsmouth, who’ve been publishing reports on the question for years, fraud costs the world economy $5.38 trillion every year, which is equal to more than six cents of every dollar earned, which comes to a total that is more than twice Britain’s GDP. In British terms, that is a £137 billion hit on individuals and businesses, which could be invested in the economy.

Britain’s tax take last year was £718 billion so, by tolerating this level of fraud, we are essentially adding a fifth to the tax burden of everyone in the country, raising enough money to quadruple the defense budget, but letting criminals keep the money rather than using it ourselves. The burden on the economy is equal to doubling the level of Value Added Tax, or to tripling all taxes on business.

Right now, fraud makes up 40% of all crime in the U.K., yet only 2% of police budgets go to fighting it. That is particularly frustrating because fighting fraud not only pays for itself, but is a profit center. During the Covid-19 pandemic a small investment in tackling procurement fraud returned ten times as much money as it cost to the treasury. Experience in other countries has yielded similar results.

And this is just the argument as applied to the U.K. Hundreds of billions of pounds of illicit wealth of foreign origin are laundered through the City of London every year, all of it the proceeds of crime, corruption, and tax evasion. If we stopped this from happening and confiscated the money, then the baddies would be poorer, and the goodies would be richer. It’s a no-brainer and would be, as we say in rugby, a fourteen-point swing.

Wish me luck. Although — by the time you’re reading this — the session will be over.

WHAT I’VE BEEN READING

I spoke at three literary festivals over the weekend, which meant I spent about seven hours driving around southwestern England. I took the opportunity to listen to the first half of William Boyd’s James Bond novel Solo, which was strongly reminiscent of one of my favorite thrillers: Frederick Forsyth’s Dogs of War. Boyd’s book is significantly better written but, for the kleptologist, they both have plenty to offer, being set in fictional African countries just after the Nigerian civil war, with insights into various bits of skullduggery take place in the tax havens available at the time: Luxembourg, Liechtenstein, Switzerland, etc. They’re good fun and, in the case of Solo, beautifully read by Dominic West too.

On getting back home, I discovered that my parents had dropped off a Carl Hiassen book I hadn’t read before called Sick Puppy, which was published two decades ago but which has lost none of its charm. Hiassen is probably my favorite novelist writing about corruption although, since he’s writing about Florida, other writers might think he’s rather spoiled for material. If ever I wrote a novel about kleptocracy, I’d tried to do a London-based equivalent: daft and brash and enraging. If you don’t know his stuff, you’re in for a treat.