Citigroup proclaims that its "private bankers act as financial architects, designing and coordinating insightful solutions for individual client needs, with an emphasis on personalized, confidential service." That is so colorless. It might better boast, "We set up shell companies, secret trusts and bank accounts, and we dispatch anonymous wire transfers so you can launder drug money, hide stolen assets, embezzle, defraud, cheat on your taxes, avoid court judgments, pay and receive bribes, and loot your country." It could solicit testimonials from former clients, including sons of late Nigerian dictator Sani Abacha; Asif Ali Zardari, husband of Benazir Bhutto, former prime minister of Pakistan; El Hadj Omar Bongo, the corrupt president of Gabon; deposed Paraguayan dictator Alfredo Stroessner; and Raul Salinas, jailed brother of the ex-president of Mexico. All stole and laundered millions using Citibank (Citigroup's previous incarnation) private accounts.
One lesser-known client, Carlos Hank Rhon of Mexico, has been the object of a suit by the Federal Reserve to ban him from the US banking business. Hank belongs to a powerful Mexican clan whose holdings include banks, investment firms, transportation companies and real estate. Hank bought an interest in Laredo National Bank in Texas in 1990. Six years later, when he wanted to merge Laredo with Brownsville's Mercantile Bank, the Fed found that Citibank had helped him use offshore shell companies in the British Virgin Islands to gain control of his bank by hiding secret partners and engaging in self-dealing, in violation of US law. One of the offshore companies was managed by shell companies that were subsidiaries of Cititrust, owned by Citibank.
The Fed says that in 1993, Hank's father, Carlos Hank González, met with his Citibank private banker, Amy Elliott, and said he wanted to buy a $20 million share of the bank with payment from Citibank accounts of his offshore companies, done in a way that hid his involvement. Citibank granted him $20 million in loans and sent the money to his son Hank Rhon's personal account at Citibank New York and to an investment account in Citibank London in the name of another offshore company.
Citigroup spokesman Richard Howe said, "We always cooperate fully with authorities in investigations, but we do not discuss the details of any individual's account."
At press time, there were reports that Hank had negotiated a settlement with the Fed, which the parties declined to confirm.
Thefts from other countries pale in relation to the looting of Russia, with the indispensable assistance of the "Offshornaya Zona." The 1995 "loans for shares" scheme transferred state ownership of privatized industries worth billions of dollars to companies whose offshore registrations hid true owners. More billions were stolen around the time of the August 1998 crash.
Insider banks knew about the coming devaluation and shipped billions in assets as "loans" to offshore companies. The banks' statements show that their loan portfolios grew after the date when they got loans from the Russian Central Bank, which were supposed to stave off default. After the crash, it was revealed that the top borrowers in all the big bankrupt banks were offshore. For example, the five largest creditors of Rossiisky Credit were shell companies registered in Nauru and in the Caribbean. As the debtors' ownerships were secret, they could easily "disappear." Stuck with "uncollectable" loans and "no assets," the banks announced their own bankruptcies. Swiss officials are investigating leads that some of the $4.8 billion International Monetary Fund tranche to Russia was moved by banks to accounts offshore before the 1998 crash.
The biggest current scam is being effected by a secretly owned Russian company called Itera, which is using offshore shells in Curaçao and elsewhere to gobble up the assets of Gazprom, the national gas company, which is 38 percent owned by the government. Itera's owners are widely believed to be Gazprom managers, their relatives and Viktor Chernomyrdin, former chairman of Gazprom's board of directors and prime minister during much of the privatization. Gazprom, which projected nearly $16 billion in revenues for 2000, uses Itera as its marketing agent and has been selling it gas fields at cut-rate prices. Its 1999 annual report did not account for sales of 13 percent of production. As its taxes supply a quarter of government revenues, this is a devastating loss. Itera has a Florida office, which has been used to register other Florida companies, making it a vehicle for investment in the US economy.