Corruption continues to be one of the most pervasive and insidious forces in the world today. Usually lurking in the darkest of corners, the term evokes images of shadowy dealings, backroom conspiracies, and individuals abusing their power for personal gain. While the topic is often discussed, there are countless facets to its dark underbelly that remain hidden from view. In this three-part series, “10 Strange Facts About Corruption: Unveiling the Bizarre”, we’ll embark on a journey to shed light on this complex and often hidden world.
From jaw-dropping tales of embezzlement that rival a Hollywood heist, to stories straight out of a spy-thriller, we’ll navigate the murky waters of politics, business, culture and society, to uncover the good, the bad, and the truly bizarre aspects of corruption that continue to shape our world.
Join me as, we start peeling back the layers of secrecy that form the murky world of corruption.
(1) The World’s most Expensive Gas Station
Corruption is often associated with government waste and mismanagement. No program encapsulates this more than the US$145 billion the United States has spent (over a 20 year period) on trying to rebuild Afghanistan, its security forces, civilian government institutions, economy, and civil society
An October 2020 report by the Special Inspector General for Afghanistan Reconstruction (SIGAR), an independent body created by Congress to provide independent and objective oversight of Afghanistan reconstruction projects and activities, presented a damning report. By this stage the United States (since had spent US$134 billion on the reconstruction. Nearly half of this (or US$63 billion) had been reviewed by the SIGAR. The conclusion? Almost a third (or US$19 billion) had been “lost to waste, fraud, and abuse.” Diving into the various reports is sobering, if not eye-opening reading. Some of the tit-bits uncovered include:
- The Task Force for Business and Stability Operations (TFBSO), a temporary organisation created by the US Department of Defence in 2006. In 2018, SIGAR found that the TFBSO had managed to spend more on itself then on Afghanistan. When funds were spent, the decisions were questionable, with $US $35.1 million awarded to firms employing former TFBSO staff as senior executives. In another case TFBSO awarded two sole source contracts (worth US$500,000) to construct and equip a pomegranate cold storage facility. While contract documents confirmed that construction of the “shell building” has been completed, a subsequent visit to the site by the SIGAR found that no such structure existed.
- United States Agency for International development (USAID) funded healthcare facilities. Of the 510 projects funded by USAID, 80% couldn’t be found: Over a third that the SIGAR had been given coordinates for, did not exist in the location provided; 189 showed no physical structure within 400 feet of the reported coordinates; 30 were located in a different province then the one reported by USAID; and 13 were not located in Afghanistan at all, with “one located in the Mediterranean Sea”.
- A multi-billion counter-narcotics programs. Despite spending US$8.6 billion on various counter-narcotic programs, (between 2002 and 2017) – US$1.5 million dollars a day – opium production actually increased fourfold.
While nowhere near the most expensive example of corruption, waste or mismanagement, the one that stands out the most is contained in a 2015 SIGAR finding that that the Department of Defence (through TFSBO) had charged American taxpayers US$43 million for what can only be described as the world’s most expensive gas station.
Located in Sheberghan in Northern Afghanistan, the facility was designed to show that compressed natural gas (CNG) could be used effectively in cars. Opening to grand fanfare in 2012, it closed shortly after. SIGAR’s report found that CNG filling stations operating in neighbouring Pakistan cost no more than US$500,000 to build, making its Afghani cousin 140 times more expensive.
While part of a larger US$800 million program that reported directly to the Office of the Secretary of Defence, the US Department of Defence claimed they no longer had the “personnel expertise” to address any of the questions or concerns raised by SIGAR.
One of the key lessons learnt from the reconstruction efforts was how a lack of awareness and understanding of the specific context by those at the top, enabled corruption to grow and even flourish. In this context, the United States and its allies misunderstood the dynamics of political power in Afghanistan, particularly the role of highly entrenched patronage networks. Efforts to build Western-style governance institutions and populate them with the heads of pre-existing patronage networks were deemed to failure, as it ignored the reality on the ground; resulting in the empowerment of a number of malign actors, none of whom had any interest in “self-correcting”. As summed up by Hamid Karzai, the country’s former President (whose been described as having headed-up a government that “self-organized into a kleptocracy”), pouring hundreds of millions of dollars a year into one of the most corrupt country in the world, with no accountability, simply “fed corruption”.
(2) ‘Neverland’ and the Strange Case of the Phantom Antarctic Nation
Money laundering and corruption have always been common bed-fellows. In what must be one of the most ludicrous – and farfetched – fraud and money laundering schemes ever, took place in Italy at the height of the COVID-19 pandemic. Involving a phantom nation that promised luxuries and privileges in exchange for citizenship concocted and perpetuated by a band of fraudsters, it showcases what happens when greed and con artistry in the digital age meet.
Dubbed “Operation L’isola che non c’è” (or ‘Neverland’) by Italian investigators, the swindle involved the Theocratic Republic of the Sovereign Antarctic State of St George (‘St. George’). Established in 2011, St. George was governed by a head of state, completed with a set of a cabinet of ministers and various other institutional roles including its own Civil Court. It even boasted its own national flag and passport. established in accordance with its Constitutional Charter (made up of 94 Articles), it operated a legal office based in Lugano, Switzerland. Proclamations and other news relevant to its citizens was published in the country’s official government Gazette, copies of which were posted on its official website and Facebook page. It even had its own, newspaper – The Antarctic Tribune – based in the state’s capital, the City Station of St Anne.
Obtaining citizenship of St. George brought with it a plethora of benefits, including a nominal tax rate of just five percent, as well as immunity from Italy’s taxation system as well as asset protection from expropriation by Italian authorities. In addition to this St. George’s citizens were exempted from Italy’s strict COVID-19 vaccination requirements that where in place at the time. On top of this its citizens were eligible to tap into funding for individual research projects, a more streamlined bureaucracy (for business owners), and the use of citizenship documents enabling them to move freely in Italy and abroad.
And it didn’t stop there, in an effort to kick-start the country’s medical system – and better look after its citizens – a decision had even been made to provide medical practitioners who had had their licenses revoked or suspended a promise of redemption: the opportunity to continue their practice under the sovereignty of St. George.
All of these benefits could be tapped into simply by acquiring St. George citizenship, which could be obtained from between €200 and €1,000 depending on the individual.
While initially successful, the scheme started to unravel in April 2021, when agents from Italy’s Divisione Investigazioni Generali e Operazioni Speciali (The General Investigations and Special Operations Division of the country’s State Police), following a tip-off that drug dealing was taking place on the premises, raided a house in Catanzaro (in Calabria, Italy). The house in question turned out to be the supposed diplomatic headquarters of St. George, and instead of finding drugs – to their surprise – they uncovered counterfeit passports and diplomatic identity cards that “perfectly correspond[ed] to international standards”.
The subsequent investigation found that over 700 Italians had acquired St. George citizenship, a number of which had also involved the purchase of land in Antarctica that came complete with titles of nobility. In addition to this, funds had also been obtained from a number of St. George’s citizens as part of a scheme to purchase the Greek island of Kouneli, that would then be annexed by St. George as state territory.
The issue in all of course was that the Theocratic Republic of the Sovereign Antarctic State of St George ended up being nothing but a mirage, with the scheme netting those involved around €400,000. Funds raised had been laundered through bank accounts in Malta where a representative of Antarctic state was based. The investigation finally led to the arrest of 12 people (including a former general of Italy’s Guardia di Finanza tax police, and a former warrant officer in the Carabinieri, the country’s paramilitary police force). Charges included criminal association, fraud, manufacturing and possession of false documents and money laundering. A further 30 people are still under investigation.
While far from being unique in the annals of Italian legal history, the fact that so many people were so easily tricked into believing that such a state existed, maybe warrants a little introspection on how gullible our society has become in this new age of digital connectivity.
(3) From Malaysia to Hollywood: A Modern Day Kleptocracy
No discussion on corruption is complete without mentioning 1Malaysia Development Berhard (1MDb). Established in 2009 by Malaysia’s newly elected Prime Minister, Najib Razak – with help from flamboyant Malaysian financier Jho Low – 1MDb was a sovereign owned development company. In 2016, just seven years after its launch, the fund collapsed under a debt burden of 42 billion Ringgit (US$10.5 billion). Dubbed by the Unites States Department of Justice as the biggest case of kleptocracy it had ever investigated, the 1MDb scandal ended the collapse of a government and the jailing of its Prime Minister, the closure of a 142-year0old Swiss bank, and an out-of-court settlement by one of Wall Street’s most prestigious investment firms. In addition to this were a host of Hollywood A-Listers and socialites all of whom were also drawn into the 1MDb orbit.
Originally established to attract foreign investment into Malaysia, leaked documents showed that 1MDb had used government bonds to borrow vast amounts of money that was then siphoned off into bank accounts in Switzerland, Singapore, and the United States. This method alone, was used to skim-off over US$6 billion of 1MDb funds, some of which was used to purchase: luxury properties across Europe and the United States; valuable artworks, including paintings by Claude Monet. Pablo Picasso and Vincent Van Gough; “flawless” diamonds and other high-end pieces of jewellery, including US$8.1 million in diamonds given to Australian model Miranda Kerr; a US$250 million super-yacht; and a US$35 million private jet. At one stage, 1MDb funds were also used to pay for US$26 million in Las Vegas gambling sprees and dozens of lavish multi-million dollar parties which various Hollywood A-Listers and socialites were paid to attend.
Things however came to a head in 2015, when it was revealed that US$731 million of 1MDb funds had miraculously “appeared” in Prime Minster Najib’s personal bank account (NB Najib was at the time the fund’s Chairman). The funds were alleged to have been used by Najib, for a variety of purposes including attempting to “buy” politicians in the lead-up to the country’s general election, paying off his personal credit card bills, and funding his wife’s lavish shopping habits (said to be reminiscent of Imelda Marcos, the wife of Ferdinand Macros, the former leader of the Philippines and the second most corrupt leader of recent history).
So widespread were 1MDb’s tentacles, that at one stage it was the centre of five separate international investigations, including a probe established by the Malaysian Anti-Corruption Commission (MACC). In July 2015, on learning that the MACC was considering issuing a warrant for his arrest, Najib: dismissed the Attorney General, who was leading the investigation; replaced the county’s deputy Prime Minister, a 1MDb critic; and, reshuffled his cabinet by removing four ministers who has started raising questions about the fund. MACC’s offices were then raided and four of its officials taken in for questioning, effectively shutting down its investigation. His government then refused to cooperate with the 1MDb related investigations initiated by the US and Singapore.
Within months, Malaysia’s newly appointed attorney general (temporarily) cleared Najib of any wrongdoing, claiming that the funds deposited in the Prime Minister’s bank account were in fact a “donation” from a Saudi Prince, and had since been returned. As a result the issue had now “comprehensively been put to rest”.
The issue finally came to a head in 2018 when – partly due to public anger associated with ongoing 1MDb revelations – Najib was defeated in the country’s general election. The following month police raided a number of properties linked to him, seizing US$30 million in cash (in different currencies), 1,400 necklaces, 567 designer handbags, 423 watches, 2,200 rings, 1,600 brooches, and 14 tiaras; all allegedly belonging to his wife Rosman. The total amount seized was estimated to be worth round US$273 million.
Najib, his wife and step-son, along with the flamboyant financier behind it (Jho Low), were finally charged with various offences relating to 1MDb’s collapse. Famous for his lavish parties and mixing with Hollywood A lister’s, Jho Low mysteriously disappeared in 2016, and is thought to be hiding in Macau along with a number of other 1MDb fugitives.
This wasn’t the end of the story however, as the 1MDb continued to reverberate around the world. Charges were laid against 17 current and former directors at Goldman Sachs, for misleading investors over 1MDb bond sales totalling US$6.5 billion (NB the charges were dropped when Goldman Sachs agreed to pay the Malaysian government US$3.9 billion to settle the criminal probe over its role in the scandal), while Swiss authorities fined BSI – one of county’s oldest and most venerable banks – CHF 95 million Swiss francs (US$96 million), for failing to prevent suspected money laundering and bribery in its dealings with 1MDb, leading to its eventual collapse. Even Donald Trump’s name was dragged into the fold, when the United States Department of Justice charged Jho Low with “orchestrating and concealing an unregistered, back-channel campaign” aimed at trying to get the then-Trump administration to drop the 1MDb investigation.
In yet a further twist to the saga, further revelations revealed that US$248 million of 1MDb funds were siphoned off via a film production company run by Najib’s stepson, Riza Aziz, just under half of which was then used to help produce the 2013 Leonardo DiCaprio hit ‘The Wolf of Wall’; an award winning film about the notorious Wall Street trader Jordan Belfort. The centre of an extensive FBI investigation, Belfort was jailed for defrauding investors out of as much as US$200 million in numerous ‘pump-and-dump schemes’ he set-up and operated in the 1990’s.
While still not fully resolved, as at September 2020, the Malaysian government had managed to recover around 13.4 billion Ringgit (or US$3.24 billion) in assets linked to the scandal. Notwithstanding this, 1MDb still had an estimated 32.3 billion Ringgit (around US$7.8 billion) in outstanding debt owed.
Stay Tuned for Part 2 of ’10 Strange Facts about Corruption’
As we wrap up Part One of our exploration into strange, and often bizarre, corruption facts, it’s clear that the topic isn’t just confined to conventional scenarios of bribery or embezzlement. Instead, it weaves itself into the very fabric of society today.
Stay tuned for Part Two, in our three-part series where we delve even deeper into the topic, where we’ll be reminded that corruption is often as creative as it is cunning.
About the author: Jeremy Sandbrook is the Chief Executive of Integritas360, an award winning anti-fraud and corruption consultancy that helps charities and NGOs/NFPs ‘corruption-proof’ themselves. An internationally recognised anti-corruption expert, he has spent the last decade working in the international development sector, predominantly in Africa and the Middle East, Asia, Europe and Australasia. Jeremy also lectures on the topic at the University of Sydney’s Centre for Continuing Education.