REPORT INCLUDED FOR REFERENCE ONLY ----------------------------------- The Financial Times Page 2 London Edition ISSUE MONDAY, MAY 12, 1997 COPYRIGHT (C) THE FINANCIAL TIMES LTD. 1982 - 1996 FINANCIAL TIMES ZAIRE: SPECIAL REPORT How Mobutu built up his Dollars 4bn fortune Seen at first as a bastion against communism, Zaire's president proceeded to siphon off vast resources while the west looked the other way. By NEIL BUCKLEY, JIMMY BURNS, WILLIAM HALL, MICHAEL HOLMAN, MARK HUBAND and PETER WISE BRUSSELS A stone pedestal before the private driveway of the Villa del Mar commemorates Sir Winston Churchill as a citoyen d'honneur of Cap Martin. Off Avenue Churchill a shaded cul-de-sac leads to the French Riviera residence of Mr Mobutu Sese Seko, the Zairean president, which serves as a monument of a different sort. Iron gates, and a sign warning unwanted visitors that guard dogs may be snarling on the other side of the wall, hide the villa, which a local estate agent estimated as being worth FFr25m-FFr30m (Dollars 4.3m-Dollars 5.2m). 'It's the children he brings with him that we see the most,' said the owner of the nearby newsagent. 'The seven- and eight-year-olds who come in here with wallets full of FFr500 notes, and buy up everything. Even the children are richer than me. But we know how he got all that money, and we wouldn't like it if he came here to retire. We would object. The people of France would object.' The Mobutu story is about the venality and corruption of one of Africa's most eccentric dictators, and how and why he persuaded others to help him during his 32-year rule. It is about personal enrichment and the plundering of the nation, and the international complicity that made it possible. An FT investigation has found that in spite of clear evidence from early in his regime that Mr Mobutu misappropriated and wasted funds, financial institutions, with the blessing of their governments, continued to give aid, little of which found its way to the ordinary people of Zaire. Property is the most visible part of his overseas asset structure. The Villa del Mar is the largest of a cluster of luxury homes dominating a small hill leading down to the Mediterranean. It is one of 20 identified properties held by Mr Mobutu and his entourage, from Belgium to Ivory Coast, from Switzerland to Morocco, with a minimum estimated value of Pounds 23m (Dollars 37m), according to estate agents' estimates and property records obtained by the FT. His and his family's property portfolio also extends to a hotel and residences in South Africa, as well as a coffee plantation in Brazil. Obscuring the extent of investments financed essentially with funds embezzled from the Zairean state, much of the property is held in the names of front companies, business associates and family members not using the Mobutu name. The FT has established that the largest concentration of properties is in the wealthy suburbs of the Belgian capital, Brussels. The true size of his fortune, amassed during three decades of plunder, is said by US Treasury and IMF officials to have peaked at around Dollars 4bn in the mid 1980s, But his fortune has been trimmed as the cost of staying in power has grown. Mr Mobutu himself was a creature of the cold war. In 1960 Patrice Lumumba became prime minister of what had previously been Belgian Congo and began courting the eastern bloc. The US reacted by considering Lumumba's assassination and sought an alternative leader as a BASTION AGAINST COMMUNISM. It found the 30-year-old army chief Joseph-Desire Mobutu, whose associates arrested and killed Lumumba without CIA assistance later the same year. 'The US stepped in at independence because the place was a plum financially,' said Mr John Stockwell, former CIA chief of base in Zaire. 'At that time people were impressed by Mobutu. In 1960 nobody was prepared for what happened (later).' For more than 20 years western presidents, generals, spies and bankers made no attempt to curb his excesses, but saw him as a necessary ally AGAINST COMMUNISM. Only in the post-cold war years has Mr Mobutu found his fortune insufficient to retain his grip on power. In 1965 Mr Mobutu took over a country rich with enormous reserves of copper, cobalt, diamonds, timber, as well as vast tracts of land suitable for producing coffee and cocoa. Between 1970 and 1994 Zaire received Dollars 8.5bn in grants and loans from western donors. Export earnings for the same period, less a five-year gap for which figures are not available, were Dollars 10.7bn, according to the IMF. 'Given these sorts of numbers it would be hard to argue much was achieved in Zaire, either in economic or social terms, as a result of the aid,' an internal World Bank report stated this week. Throughout his rule Mr Mobutu has used the promise of access to Zaire's wealth as a means by which opponents have been softened, critics silenced and henchmen rewarded. 'Mobutu used a patronage network. He had to put out a lot of money to stay in power. He has a tremendous need for cash,' said a former US assistant secretary of state for African affairs who had daily contact with him. 'He had to pay a 10,000-strong presidential guard. And he seems to have trusted a lot of people who stole from him, including his own children. He would give them Dollars 5m in cash for investment, and it would be stolen.' 'In the first few years Mobutu received millions of dollars from the CIA' both before and after he seized power, said Mr Stockwell. 'Dollars 20m-Dollars 25m of CIA and US government aid money could well have gone through Mobutu's hands.' Following the outbreak of the Angolan civil war in 1975, money intended for the US-backed Unita forces in Angola was delivered to Mr Mobutu, who the CIA hoped would channel it to the rebels in support of their war AGAINST the Moscow-backed MPLA party. 'When Angola was coming under Cuban influence Zaire was considered a fortress that could be trusted. The policy of the west, led by the US, was to help Mobutu as much as possible,' said Mr Leo Tindemans, Belgian prime minister from 1974 to 1978. But Mr Mobutu quickly began to exploit his strategic importance to serve the system of embezzlement he was creating. 'Early on we channelled Dollars 1m via Mobutu intended for the Angolans. But Unita came to us soon after to tell us: we're hungry. We can't do anything. None of the money had gone to the Angolans, and our efforts to get Mobutu to pass the money on were futile,' said Mr Stockwell, who ran the CIA's covert operation supporting Unita forces. 'The CIA knew all along he was pocketing huge amounts of money.' Mr Mobutu had access to far larger sums than those that were provided by the CIA, on one occasion refusing a Dollars 25,000 gift from the CIA station chief in Kinshasa, Mr Lawrence Devlin. Presidential appropriations granted by parliament officially accounted for 30 to 50 per cent of the budget for capital investment from the late 1960s, reaching Dollars 65m a year in 1988. In addition to this presidential appropriation from parliament, which had no influence on how it was spent, Mr Mobutu received further funds for 'political institutions' including the Mama Mobutu Foundation and the ruling Popular Movement for the Revolution party. A World Bank report containing data for the period 1980-87 obtained by two US researchers, Mr Steve Askin and Ms Carole Collins, revealed that in 1986 the presidency received Dollars 15m, though the World Bank document shows that Mr Mobutu spent Dollars 94m and the political institutions Dollars 172m that year, revealing the extent of other sources of funds. A 1989 World Bank study showed Dollars 209m of the year's state expenditure was appropriated for spending on what the Central Bank of Zaire itemised as 'other goods and services'. 'There is no, I repeat no, chance on the horizon for Zaire's numerous creditors to get their money back. .. Mobutu and his government show no concern about the question of paying off loans and the public debt. .. there was, and there still is, one sole obstacle that negates all prospect: the corruption of the team in power,' said Mr Erwin Blumenthal, a senior German banker seconded to the Zaire central bank in 1978, in a secret IMF report circulated in 1982, in the possession of the FT. Three years earlier, in a letter of June 11 1979 to Mr Jacques de Larosiere, then IMF director-general. Mr Blumenthal said: 'Things in Zaire went the way I was afraid they would' and gave the strong impression of a breakdown of trust between the regime and IMF. Mr Blumenthal's damning portrayal of the routine plunder of state finances was ignored by both foreign donors and governments. His report coincided with the build-up of Cuban troops in Angola, whose presence cemented US support for Mr Mobutu and may have been the reason why the banker's recommendations fell on deaf ears. By 1988 there were 50,000 Cuban troops on Angolan soil, fighting alongside the Marxist government AGAINST Unita. IMF figures show the fund offered nine loans worth SDR 231m to Zaire between 1967 and 1982, when the Blumenthal report was completed. But three times this amount was offered by the fund between the year the report was written and 1989. Mr Blumenthal identified special bank accounts held in the name of the Central Bank of Zaire at seven foreign banks in Brussels, Paris, Geneva, London and New York, holding millions in export earnings which had not been remitted. A key example of payments made to the special accounts reveals the amounts involved. In 1978 the state-owned copper and cobalt giant Gecamines was instructed to deposit its entire export earnings - which by 1989 had reached Dollars 1.2bn - into a presidential account. 'At the beginning we thought Mobutu was the only person who could lead Zaire,' said Mr Tindemans. 'We thought he had the talent, capacity, and intelligence. . . then he changed. He just wanted the money from wherever he could get it, private companies, foreign governments. He had no feeling for financial policy but it didn't matter. He knew the money would keep on coming. 'It was not easy to formulate a common attitude towards Mobutu. There were those who invested in Zaire and flattered Mobutu and others who developed a stance AGAINST his government. There was no doubt where the balance lay.' A former Zairean secret service agent, Mr Emmanuel Dungia, recalled: 'The money spent by Mobutu in seducing and corrupting senior politicians around the world gave him great satisfaction.' Mr Mamadou Toure, former head of the IMF's Africa department, who knew the special accounts were being used to divert export earnings by the regime, said: 'In the late 1970s and early 1980s there were some very bizarre things going on in Zaire. For example, we had discovered that some of the country's export earnings were being held in special accounts outside Zaire and not being recorded in the accounts of the central bank. Instead of foreign earnings being reimbursed, they were diverted to special accounts held in commercial banks outside the country. 'Orders would come from Mobutu that he needed money for a foreign trip, and some senior officials would come to Europe to pick up the money from the special account. All the Central Bank of Zaire officials were intimidated. They felt they had to do what Mobutu told them.' However, things did not all go Mr Mobutu's way. 'Two things hurt him,' said a senior US official. 'In 1978 the bottom fell out of the copper market, and people receiving his patronage wanted to be paid in dollars instead of zaires. Then in 1990 he ended the one-party system and started 45 parties with his money, in order to keep his grip. This took a lot of money, which he took from the productive sector - the mines, first the copper mines, then the diamond mines.' More recently he spent millions of dollars financing a disastrous attempt to use Bosnian Serb mercenaries in his campaign to confront the rebel force which is now poised to overthrow him. However much his wealth has shrunk in recent years, Mr Mobutu remains extremely wealthy, with a fortune encompassing shares in big Swiss and German companies, liquid cash and his property portfolio centred in Brussels. His assets in Zaire comprise a vast estate at Gbadolite in northern Zaire which boasts a marble palace, Olympic-size swimming pool, and airport runway able to accommodate Concorde. Outside Kinshasa, the Nsele presidential domain has a large Chinese-style pagoda crowned with a malachite pinnacle. Nearby is moored the Kamanyola, a three-storey river steamer converted to suit Mr Mobutu's love of luxury. Oyster-shaped sofas in pink silk grace the salons, and Mr Mobutu's leopard-head emblem emblazons cutlery, linen and tableware. A total of nine properties in Brussels ranges from office blocks to chateaux and mansions set in their own parklands in the exclusive residential districts of Uccle and Rhode St Genese. One property is close to the Musee de l'Afrique, built to commemorate exploits of the first plunderer of Zaire's immense wealth, Belgium's King Leopold II. In Paris, a few metres from the Arc de Triomphe, a first-floor apartment at No 20 Avenue Foch, in the city's exclusive 17th district, provides Mr Mobutu with an 800 sq m city residence close to the furrier who made his seven leopard-skin hats, and convenient for visits to the succession of French presidents who have been his staunch allies. As one of several alternatives to his Cap Martin holiday home, the 82,186 sq m 12-bedroom Casa Agricola Solear estate at Areias de Porches in the Portuguese Algarve is also the home of Mr Mobutu's 14,000-bottle wine cellar. Most prized, according to a local source, are the many bottles of vintage port, acquired to satisfy the 66-year-old Mr Mobutu's preference for drinking wine of his own age. Bought on behalf of Mr Mobutu in 1985, but registered under the name of a limited company whose president is Mr Jaime de Cunha Viana, it is currently valued at Esc400m (Dollars 2.3m). Mr Viana is an Oporto-based businessman who was the chief representative of the sizeable Portuguese community in Zaire, and is recognised as Mr Mobutu's representative in Portugal. Mr Mobutu's Spanish interests include a luxury villa and hotels in Marbella, and a luxury home in the Madrid suburb of Las Lomas at Boadilla del Monte valued at Pta200m (Dollars 1.38m) when it was bought in 1983 in the name of his sister-in-law. Meanwhile his bank accounts remain hidden from view. The only attempt by western governments to identify these accounts was made in 1991 when the US, France, and Belgium examined holdings in their own countries. France and the US abandoned plans to freeze Mr Mobutu's assets on the grounds they amounted to very little in their countries, while Belgium claimed it would have lacked sufficient legal instruments if it had pursued the seizure of assets. Among the banks identified as having dealt with Mr Mobutu and his financial front-men in the Blumenthal report in 1982 were Banque Bruxelles Lambert, Paribas, Credit Commerciale, , Midland Bank and Union Bank of Switzerland. All banks invoked banking rules of client confidentiality when asked about alleged relationships with Mr Mobutu. Only Midland was prepared to go further: 'We have no record of an account being opened on behalf of Mr Mobutu. We have an account with a correspondent bank in Zaire which has been dormant for over a year.' Mr Mobutu was named last week in an internal Belgian government report, written by Mr Hendrijk van Dijk, deputy head of mission at the Belgian embassy in Luxembourg, citing him among heads of state using accounts in Luxembourg to launder 'fantastic' sums of money. Mr Mobutu is named alongside Libya's Muammer Gadaffi, Iraq's Saddam Hussein and the late Emperor of the the Central African Republic, Jean-Bedel Bokassa, as holding accounts with Luxembourg-based banks. One senior Swiss banker said it would be 'an enormous surprise' if Mr Mobutu was found to have any sizeable sums still invested in Swiss banks. 'If he had any sense he would have shifted the bulk of his money out of Switzerland a long time ago to avoid the fate which befell the heirs of ex-President Ferdinand Marcos of the Philippines, whose Swiss bank accounts have been blocked for more than a decade,' he said. Last month Switzerland's Federal Banking Commission asked 12 leading Swiss banks whether they held accounts in the name of Mr Mobutu. All replied they did not, but close aides of Mr Mobutu have confirmed to the FT that the bulk of his liquid assets remains in Swiss banks. Mr Jean Ziegler, a Swiss Socialist MP and long-time critic of Swiss banking secrecy, does not accept that most of Mr Mobutu's money has already been spirited out of Switzerland. 'We are not talking about Dollars 1m in a Swiss bank account, but a whole overseas financial empire which has been built up over more than 30 years,' said Mr Ziegler, who thinks 'several billion dollars' of Mr Mobutu's money have been invested in Switzerland. Nevertheless, he thinks the longer the Swiss government delays freezing Mr Mobutu's assets, the greater the risk they will disappear. 'If this happens then Switzerland will be guilty of being an accomplice to embezzlement on a grand scale,' said Mr Ziegler. The Swiss government had acted 'very foolishly' and its attitude towards Mobutu mirrored the 'typical Swiss hypocrisy' which has marked Swiss relations with Zaire for years. Last November the Swiss government refused to renew Mr Mobutu's entry visa. It was not always so. The Swiss politican who had the closest ties with Mr Mobutu was Nello Celio, a member of the Radical Democrat party and state president in 1972. As well as being on the board of Credit Suisse, Celio, who died in 1995, was a former chairman of Alusuisse, Switzerland's only aluminium company. He was closely involved in Alusuisse's plans to set up an aluminium smelter in Zaire and was also president of Eurotrust, a big investment fund involved with Zaire. Now, as the cancer-stricken president tries to cling to power for a few more days, uncertainty surrounds who will inherit his fortune. There will be no shortage of family members, aides and allies desperate to grasp a share of what is left. But the people of Zaire his clique are leaving behind will also be seeking to recover what has been stolen from them. The question is whether the countries now harbouring his assets will be prepared to lift the veil of secrecy behind which they and Mr Mobutu have hidden for so many years. Additional reporting: Michael Holman in London, Neil Buckley in Brussels, William Hall in Zurich and Peter Wise in Lisbon Countries: ZR Zaire, Africa. The Financial Times Page 2 London Edition ISSUE MONDAY, MAY 12, 1997 COPYRIGHT (C) THE FINANCIAL TIMES LTD. 1982 - 1996