“Well, let me put it this way … We have to see what we can do … I can’t tell you yet.” These were some of the answers Swiss Prosecutor Michael Lauber gave in an interview during a recent visit to Cairo where he met with his Egyptian counterpart and other officials to discuss the ongoing efforts to recover funds deposited by President Hosni Mubarak and his entourage in Swiss banks.
These ambiguous answers sum up five years of asset recovery efforts that have largely consisted of one stumble after another, transforming what started as a promising case into one that seems all but hopeless.
Hours after Mubarak was deposed on February 11, 2011, Swiss authorities took the initiative to freeze assets belonging to him and figures tied to his regime. After this show of good faith, Egyptian and Swiss authorities embarked on a joint effort to prove that this money is indeed illicit and bring it back to Egypt.
Five years later, little tangible progress has been made. The Egyptian government and public are frustrated by Switzerland’s refusal to return Mubarak’s assets. In return, Swiss authorities complain of insufficient cooperation and political instability from the Egyptian side. Accounts holding 590 million Swiss Francs belonging to 14 people remain frozen in Swiss banks, equally unattainable to both their original owners and the Egyptian government.
So, what went wrong?
In theory, the model for cooperation in asset recovery cases like this is simple: A person makes money illegally and deposits his money in a Swiss bank; the country where he made the money starts a criminal investigation and requests legal assistance from Switzerland; Switzerland provides the country with the necessary information; the country convicts the person in its court then takes the conviction to Switzerland and Switzerland gives the money back. The end.
“Usually, if the two states function well, with two judicial authorities doing their jobs, it works,” says Olivier Longchamp, a financial specialist with the Berne Declaration, a Swiss NGO that advocates for easier paths for asset recovery in cases involving high officials. In Egypt’s case, the process hasn’t been so linear.
After a largely futile attempt at cooperation, the Swiss Federal Court ruled in December 2012 to deny Egyptian prosecutors access to Swiss criminal records, effectively suspending mutual legal assistance. In the wake of upheavals in the Egyptian judicial system —including the removal of the prosecutor general by former president Mohamed Morsi — Swiss authorities said they couldn’t be sure legal information shared with the Egyptian prosecution would remain confidential.
This meant Egypt had no access to any of the Swiss investigations or to bank records the Swiss authorities were able to trace, crucial pieces of the puzzle for Egyptian investigators trying to prove the illicit nature of the money.
Contrary to celebratory statements by Egyptian officials, the final verdict in a corruption case against Mubarak, which came out in January, will have little effect on the recovery process.
“Yes, it has a certain impact. But a direct, concrete impact? I can’t tell you yet,” Lauber, the Swiss prosecutor, explained during his recent visit. “Under Swiss law, assets can only be forfeited if there is a causal connection or nexus to a crime.” It’s not as simple as convicting Mubarak of appropriating a certain sum and then claiming that sum from his Swiss account; a direct connection has to be established between the crime and the money.
In the particular case where Mubarak received a final conviction, he was charged with using state money to maintain his personal residences. Since the final destination of the stolen money is known, prosecutors can’t argue that this is the money in Swiss banks.
“Egyptian authorities are fixated on the idea that getting final verdicts against Mubarak is enough to get the money back, and that’s not true,” says Osama Diab, researcher at the Egyptian Initiative for Personal Rights (EIPR) who has been following the asset recovery process.
The Swiss government’s lack of confidence in Egypt’s judiciary also means that this or any verdict against Mubarak in Egypt will only be a minor development.
Longchamp explains that in each international asset recovery case, the Swiss judicial system determines whether it will take the verdicts from its partner at face value. If the Swiss deem that local trials are conducted at high enough standards for verdicts to apply in Switzerland, then a conviction for misappropriating, say, US$50 million in their home country is enough for the Swiss to hand over the $50 million.
That doesn’t apply in Egypt’s case. “The sense internationally is that everything in Egypt is politicized. People aren’t going take judgments or decisions from the Egyptian judiciary too seriously right now,” says Waleed Nassar, a specialist in international financial disputes at the Lewis Baach law firm. Because of its lack of faith in Egypt’s legal system, Switzerland requires proof of a direct tie between the money stolen and the money in Swiss banks. This is an immensely complicated process. Now that Switzerland has stopped sharing information with Egypt, it’s nearly impossible.
There were, but they all ended up being missed opportunities or failed attempts.
In 2012, Switzerland launched a criminal case against 12 Mubarak-regime figures for money laundering and organized crime offences. At the time, the court raised hopes by stating it “could not rule out the possibility that an organized criminal network was involved.”
In organized crime cases, Swiss law shifts the burden of proof onto the defendant rather than the prosecution. This allows for the return of assets to their country of origin, unless the convicted party can prove they made the money legitimately.
This rule was designed for mafia trials, but a clever lawyer representing Nigeria in 2005 was able to apply it to the case of General Sani Abacha, who is believed to have stolen up to US$5 billion during his five years in power. Ruling that Abacha and his entourage acted as a criminal organization, the Swiss government repatriated $700 million to the Nigerian government in 2013.
In June 2014, the Swiss prosecution dropped the organized crime charges against Mubarak. While the exchanges between the two countries are confidential, Longchamp said he was aware that Swiss officials had requested supporting evidence from Egypt and received little in return. Egyptian officials, including Assem al-Gohary, former head of the Illicit Gains Authority, refused to comment on the matter.
Nassar explains that Egypt has not made use of offers by third parties who could navigate the complicated path of asset recovery. “In the early days, the country was inundated with people flying in at their own expense saying, “we can help,” and giving very technical presentations, “which largely fell on deaf ears,” he says. Offers came from the World Bank’s Stolen Asset Recovery initiation (StAR) and private firms like Nassar’s, which offered their services to aid Egypt through the recovery process. As far as Nassar is aware, none of these firms or individuals were hired.
Last month, Switzerland passed a new law facilitating the freezing and repatriation of assets of “politically exposed people” — individuals who held positions of public trust and their relatives and associates. The law allows for administrative cooperation when repatriation efforts are stymied by a dysfunctional judiciary in the home country. However, Longchamp thinks the chances of this law applying to Egypt are low. Not only would the government need to apply the law retroactively, it would also have to formally concede that its judiciary is malfunctioning.
There seems to be plenty of blame to go around on this issue.
Swiss laws regarding the recovery of stolen assets were tailored for cases against criminal organizations, not fallen dictators. The system doesn’t factor in the exceptional nature of post-revolution times.
“When a dictator falls and the country wants to restore his money after a revolution or a coup, this will be a time of weak institutions and strong political infighting, or sometimes the person in question is still in power and institutions are not independent and have no integrity,” says Diab of the EIPR. “They’re making requirements from a country with no corruption. If this were the case, their help would probably not be needed.”
The Swiss also got the impression the asset recovery process was used amid political infighting, making them reluctant to cooperate and risk getting drawn into factional squabbles, Nassar explains.
Longchamp’s organization has been advocating — so far unsuccessfully — for a new law that shifts the burden of proof onto high officials in cases in which it is difficult to obtain evidence against them in conventional ways, as is currently done for the mafia.
The Egyptian side has had its own problems. Nassar says efforts by all of Egypt’s governments over the last five years have been marked by a lack of political will and a poor understanding of the process has permeated as a result. Longchamp notes that Egypt failed to submit the correct recovery forms.
Another basic problem, Nassar says, is that the entire process is an “unfair fight,” with Egyptian bureaucrats facing off against sophisticated businessmen and their top-notch advisors and lawyers.
According to Lauber, lawyers for Mubarak and his associates are already trying to get their assets unfrozen. The original administrative decision to freeze assets had a three-year limit, but they are currently frozen by judicial order, which does not expire, and Lauber says that all the accounts are still in place and intact.
The process could drag on for decades. Nigeria began recovering some of Abacha’s assets from Swiss banks in 2005, seven years after his death. This is the fastest asset recovery on record. A more typical example is the Philippines. Although it is considered a success, the complicated process still took 18 years.