Financial Transparency Coalition

Global Witness

LONDON – Global Witness has learned that Teodorin Obiang, the notorious son of Equatorial Guinea’s long-ruling dictator, commissioned plans to build a superyacht worth $380 million – almost three times more than his energy-rich country spends annually on health and education programs combined [1]. This news comes amid an increasingly heated debate about how Middle Eastern dictators and their family members have enjoyed luxury lifestyles, as well as stashing their assets in foreign countries.

Teodorin (full name Teodoro Nguema Obiang Mangue) asked Germany’s Kusch Yachts to draw up a basic design for the secret project, which is codenamed “Zen.” Last year, Global Witness revealed details from a U.S. Justice Department investigation into Teodorin which mentioned plans to build a yacht. After discovering that it was to be built at Kusch’s shipyard in northern Germany, a Global Witness investigator visited the company and obtained key details about the project, confirming the identity of the client, and the yacht’s price tag. The vessel’s basic design was completed by Kusch in December 2009 for €250,000 ($342,000) with an original delivery date set for late 2012. However, construction has not yet started.

The Obiang regime has a long track record of looting money that belongs in Equatorial Guinea’s treasury. Global Witness has previously revealed Teodorin’s profligate lifestyle in the US and elsewhere with a $35 million dollar Malibu mansion, a fleet of luxury cars and a private jet, while earning a ministerial salary of $6,799 per month [2]. It would take him some 4,600 years to pay for Project Zen on his reported official salary.

“Evidence points to corruption by Teodorin on a scale that would not be possible or attractive if countries like Germany and the U.S. were not safe havens, in terms of free passage for him and for his questionable private wealth,” said Gavin Hayman, Director of Campaigns at Global Witness. “$380m is a staggering sum – that a President’s son from such a poor country has ordered this yacht is outrageous extravagance on his part,” added Hayman.

Teodorin’s father, Teodoro Obiang Nguema Mbasogo, took power in 1979 following a bloody coup and presides over a repressive government almost entirely dependent on energy revenues generated by ExxonMobil, Marathon and other multinational giants and has one of the worst human rights reputations in the world [3]. Obiang came eighth on a 2006 list by Forbes of the world’s richest leaders with a fortune estimated at $600 million, whilst the majority of Equatorial Guinea’s people live in poverty [4].

Incredibly, since oil was discovered in the mid-1990s, poverty levels have actually worsened. Equatorial Guinea enjoys a per capita income of about $37,900, one of the highest in the world. Yet 77 percent of the population falls below the poverty line, 35 percent die before the age of 40, and 58 percent lack access to safe water [5].

Forty-one-year old Teodorin is the Minister of Agriculture and Forestry and vice president of the ruling party, and is apparently being groomed to succeed his father. A US embassy cable from March 2009 posted by Wikileaks describes how Teodorin was given a significant tract of pristine jungle to log, leaving him with a “large windfall”. The author of the cable paints a picture of a nepotistic state where choice natural resource concessions are handed out to the President’s family and close associates. Responding to corruption allegations, Teodorin told the US official: “I’ve been very lucky in business […] and I like to live well” [6].

According to the Justice Department investigation Teodorin funneled roughly $75 million into the United States between 2005 and 2007 through three European banks — Banque de France, Natixis and Fortis — and then on to the U.S. through Wachovia (later bought by Wells Fargo), Union Bank of California, and Bank of America [7]. Global Witness questioned what checks these banks had done on Teodorin’s funds; they could not comment on this.

“[I]t is suspected that a large portion of Teodoro Nguema OBIANG’s assets have originated from extortion, theft of public funds, or other corrupt conduct,” says a Justice Department document dated 4 September 2007. The document relates to a preliminary investigation; as yet no charges have been filed [8].

Kusch employees who spoke with Global Witness’ undercover investigator said that Teodorin’s yacht will be 118.5 meters (387 feet), housing a cinema, restaurant, bar, swimming pool and a $1.3 million security system complete with floor motion sensors, photoelectric barriers and fingerprint door openers. Teodorin reportedly met a representative of Kusch at a hotel in Switzerland to discuss the design.

Its total contract price is approximately €288 million, or $380 million at current exchange rates. This would make it the world’s second most expensive yacht, behind Russian oligarch Roman Abramovich’s $1.2billion Eclipse [9]. England’s Tim Heywood, one of the world’s most renowned yacht designers, produced the drawings for Project Zen. Heywood’s previous designs include the 377-foot Pelorus, which served as the blueprint for Project Zen and is also owned by Abramovich.

“Kusch’s motto is, ‘we don’t just build yachts that you use, we create a dream that you live’. But this sounds more like a nightmare for Equatorial Guinea’s oppressed and brutalized citizens, whose money may once again be put to Teodorin’s benefit rather than theirs,” said Hayman. “The yacht company involved should refuse his cash and repudiate any involvement in the project. In addition, this order should raise loud alarm bells for whichever bank handles this transaction.”

Kusch confirmed to Global Witness that Teodorin was a client, but would not give further details “for reasons of confidentiality”. Tim Heywood declined to comment.

The Information and Press Bureau of the Government of Equatorial Guinea confirmed that Teodorin had ordered the design, while adding that he “then dismissed the idea of buying it”. The spokesperson claimed that if the order had gone ahead Teodorin “would have bought it with income from his private business activities and he would not in any case have bought it with funds derived from sources of illegal financing or corruption”. She clarified that in Equatorial Guinea “there are no legal restrictions prohibiting public figures from taking part in private lucrative activities” [10].

Some countries, such as the U.K., require luxury goods dealers including yacht builders to abide by anti-money laundering rules. Like banks, they have to monitor their customers for suspicious activity and report doubts about dirty money to the authorities. Global Witness is calling on Germany to implement similar regulations. In addition, Germany should work with EU member countries to produce mandatory revenue payment disclosure laws for extractive companies, such as those required by the Dodd-Frank Wall Street Finance Reform Act. The Extractive Industries Transparency Initiative (EITI) conference hosted by President Sarkozy in Paris next week would be a good place to start this process.

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Contact:

Robert Palmer
+44 (0)20 7492 5860
+44 (0)7545 645 406
rpalmer@globalwitness.org

Oliver Courtney
+44 (0)7815 731 889
ocourtney@globalwitness.org.

Notes:

[1] Details on the misappropriation of state money by Teodorin can be found in Global Witness, Undue Diligence: How banks do business with corrupt regimes, March 2009 and Global Witness, The Secret Life of a Shopaholic, November 2009. Budget figures: IMF, Republic of Equatorial Guinea: 2008 Article IV Consultation—Staff Report, March 2009, p. 17.

[2] Statement by the Information and Press Bureau of Equatorial Guinea Director, 17 February 2011.

[3] The US State Department’s most recent Equatorial Guinea human rights assessment was damning, describing unlawful killings, torture of prisoners, official impunity, arbitrary arrest and restrictions on free speech: U.S. State Department, ‘2009 Country Reports on Human Rights Practices: Equatorial Guinea’, 11 March 2010. For more on the oil industry see the website of the Ministry of Mines, Industry and Energy, as well as Human Rights Watch, Well Oiled: Oil and Human Rights in Equatorial Guinea, July 2009.

[4] Luisa Kroll, ‘Fortunes Of Kings, Queens And Dictators,’ Forbes, 5 May 2006.

[5] GDP: CIA, The World Factbook, 2010 estimate. Poverty level: IMF, ‘Republic of Equatorial Guinea: 2008 Article IV Consultation—Staff Report’, March 2009. Mortality rate and access to water: UNDP, ‘Human Development Report 2009: Equatorial Guinea’.

[6] US embassy cable 196480 posted on www.elpais.com.

[7] Global Witness, The Secret Life of a Shopaholic, November 2009.

[8] Ibid., p. 2.

[9] www.mostexpensiveyacht.net.

[10] Statement by the Information and Press Bureau of Equatorial Guinea Director, 17 February 2011.

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The Task Force on Financial Integrity and Economic Development addresses inequalities in the global financial system that penalize billions of people, and advocates for improved transparency and accountability.

Global Witness is a coordinating committee and founding member of the Task Force on Financial Integrity & Economic Development.

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