In Libya, companies collide with corruption

[viper37]

Long, but interesting reading, imho.

Shady Dealings Helped Qaddafi Build Fortune and RegimeBy ERIC LICHTBLAU, DAVID ROHDE and JAMES RISEN 

WASHINGTON — In 2009, top aides to Col. Muammar el-Qaddafi  called together 15 executives from global energy companies operating in  Libya's oil fields and issued an extraordinary demand: Shell out the  money for his country's $1.5 billion bill for its role in the downing of  Pan Am Flight 103 and other terrorist attacks.       
If the companies did not comply, the Libyan officials warned, there  would be "serious consequences" for their oil leases, according to a  State Department summary of the meeting.       

Many of those businesses balked, saying that covering Libya's legal  settlement with victims' families for acts of terrorism was unthinkable.  But some companies, including several based in the United States,  appeared willing to give in to Libya's coercion and make what amounted  to payoffs to keep doing business, according to industry executives,  American officials and State Department documents.       

The episode and others like it, the officials said, reflect a Libyan  culture rife with corruption, kickbacks, strong-arm tactics and  political patronage since the United States reopened trade with Colonel  Qaddafi's government in 2004. As American and international oil  companies, telecommunications firms and contractors moved into the  Libyan market, they discovered that Colonel Qaddafi or his loyalists  often sought to extract millions of dollars in "signing bonuses" and  "consultancy contracts" — or insisted that the strongman's sons get a  piece of the action through shotgun partnerships.       

"Libya is a kleptocracy in which the regime — either the al-Qadhafi  family itself or its close political allies — has a direct stake in  anything worth buying, selling or owning," a classified State Department  cable said in 2009, using the department's spelling of Qaddafi.       

The wealth that Colonel Qaddafi's family and his government accumulated  with the help of international corporations in the years since the  lifting of economic sanctions by the West helped fortify his hold on his  country. While the outcome of the military intervention under way by  the United States and allied countries is uncertain, Colonel Qaddafi's  resources — including  a stash of tens of billions of dollars in cash that American officials  believe he is using to pay soldiers, mercenaries and supporters — may help him avert, or at least delay, his removal from power.       

The government not only exploited corporations eager to do business, but  willing governments as well. Libya's banks apparently collected  lucrative fees by helping Iran launder huge sums of money in recent  years in violation of international sanctions on Tehran, according to  another cable from Tripoli included in a batch of classified documents  obtained by WikiLeaks.  In 2009, the cable said, American diplomats warned Libyan officials  that its dealings with Iran were jeopardizing Libya's enhanced world  standing for the sake of "potential short-term business gains."       

In the first few years after trade restrictions were lifted — Colonel  Qaddafi had given up his country's nuclear capabilities and pledged to  renounce terrorism — many American companies were hesitant to do  business with Libya's government, officials said. But with an agreement  on a settlement over Libya's role in the Pan Am bombing over Lockerbie,  Scotland, finally reached in 2008, officials at the United States Commerce Department began to serve as self-described matchmakers for American businesses.       

At least a dozen American corporations, including Boeing, Raytheon,  ConocoPhillips, Occidental, Caterpillar and Halliburton, gained  footholds, or tried to do so. In May, the Obama administration and the  Qaddafi government signed a new trade agreement, designed, according to  Gene Cretz, the American ambassador to Libya, to "broaden and deepen our  bilateral economic relations."       

Libya became so flush with cash that Bernard L. Madoff, the New York financial manager who stole billions of dollars in a long-running Ponzi scheme,  approached officials overseeing the country's $70 billion sovereign  fund a few years ago about an "investment opportunity," according to a  State Department summary of the episode in 2010. "We did not accept," a  Libyan official reported.       

Colonel Qaddafi, the State Department said, was personally involved in  many business decisions. He worked with local "riqaba" councils, an  oversight committee set up by the Libyan government to dole out business  with foreign firms, and insisted on signing off on all contracts worth  more than $200 million. He also learned how to hide money and  investments in case sanctions were ever imposed again, as they recently  have been.       

Colonel Qaddafi and his family set up accounts in banks around the world  that are in the names of members of Libyan tribes that remain loyal to  his government, said Idris Abdulla Abed al-Sonosi, a member of the  exiled Libyan royal family, who is familiar with many of Colonel  Qaddafi's business dealings. (Some accounts may have been frozen by  authorities, who have blocked access to tens of billions of dollars.)  And Qaddafi relatives adopted lavish lifestyles — including posh homes, Hollywood film investments and private parties with American pop stars.       

When Colonel Qaddafi was not making the decisions, one of his sons —  whom he has anointed to run various sectors of the country's economy —  often was.       

Daniel E. Karson, executive managing partner at Kroll, a risk-consulting  firm, recalled in an interview that an international communications  company he represented tried to enter the Libyan cellular phone market  in 2007. From the outset, Libyan officials made it clear that the  foreign company's local business partner would have to be Muhammad  Qaddafi, the eldest son of the Libyan ruler.       
"We advised them they would have to go through Muhammad Qaddafi," said  Mr. Karson, who declined to identify the client. "This was not going to  be done on the basis of, as they say in retail, price, quality and  delivery." Fearful of going into business with the Qaddafis, he said,  the company made no investments in Libya.       

Coca-Cola got caught in the middle of a fierce dispute between Muhammad  Qaddafi and his brother Mutassim over control of a bottling plant the  soda maker had opened in 2005, forcing it to shut down the plant for  months amid armed confrontations, a diplomatic cable noted.       

And Caterpillar, the Illinois machine maker, was about to finalize a  lucrative deal in 2009 to provide equipment for infrastructure projects  when Libya demanded the company become a partner with a state-owned  company controlled by the Qaddafis, according to the State Department  documents. Caterpillar resisted and was blocked by Libya from the work  after intervention by American diplomats failed to break the impasse.         

When Qaddafi aides demanded payment for the Lockerbie settlement from  oil companies operating in Libya, a State Department cable in February  2009 reported, industry executives had indicated "that smaller operators  and service companies might relent and pay." Several industry officials  and someone close to the settlement, all speaking only on condition of  anonymity, said the payments went through but declined to identify the  businesses.       

Other companies also struck costly deals with the government. In 2008,  Occidental Petroleum, based in California, paid a $1 billion "signing  bonus" to the Libyan government as part of 30-year agreement. A company  spokesman said it was not uncommon for firms to pay large bonuses for  long-term contracts.       

The year before, Petro-Canada, a large Canadian oil company, made a  similar $1 billion payment after Libyan officials granted it a 30-year  oil exploration license, according to diplomatic cables and company  officials.       

The company also hired Jack Richards, a business consultant based in the  British Virgin Islands and close friend of the Qaddafis, as their local  agent to cement the deal, according to The Globe and Mail, a Canadian  newspaper. Mr. Richards, who could not be reached for comment,  reportedly used shooting trips to British royal estates to win the  family's support.       

The company also courted a Qaddafi son, Seif al-Islam. Petro-Canada sponsored an exhibit of his paintings — ridiculed by Canadian critics as "lurid" and a "triumph of banality"  — after museums refused. A Montreal business, SNC-Lavalin, which won  more than $1 billion in Libyan contracts, also sponsored the exhibit and  a soccer team that hired another Qaddafi son, Saadi, as a player.         
In Norway, two top officials at the state-run oil company quit in 2007  and came under government investigation after it was revealed the  company had made more than $7 million in apparently illegal "consultancy  agreements" with Libya.       

Looking back on the decision in 2004 to resume business dealings, Juan Zarate, a former top White House and Treasury official in the administration of President George W. Bush,  said that officials had believed then that the benefits of trying to  rehabilitate Colonel Qaddafi outweighed the obvious risks. "It was a  deal with the devil," Mr. Zarate said.       
"The hope was that with normalization, Qaddafi would serve less as the  mad dog of the Middle East and more as a partner," he added. "But I  don't think this is the way anyone would have wanted it to work out."         

[Grey Fox]

Link somewhere?

I aint reading THAT in italics.

[KRonn]

Amazing. Gaddafi actually asked foreign contractors to pay to cover his costs of repayment for his terrorist acts. 

Hopefully this nasty kleptocracy is brought down soon, though who knows if a worse one will take its place.