Political Turmoil And Corruption Allegations Cast A Shadow Over Kuwait

Forbes Finance 3 weeks ago

Kuwait finds itself consumed by allegations of corruption and political infighting, following the resignation of the government and amid warnings the country is becoming an "unsafe" environment for international investors.

Prime Minister Sheikh Jaber al-Mubarak al al-Sabah and his cabinet resigned on November 14, two days after public works minister Jenan Mohsin Ramadan Boushehri had stepped down and another colleague – interior minister Sheikh Khaled Al-Jarrah Al-Sabah – was targeted by a no-confidence vote in parliament. Sheikh Jaber subsequently turned down the offer of another term as PM.

While the country waits for a new government to be formed the old cabinet is staying on in a caretaker capacity, but there have already been some changes. Sheikh Khaled had clashed with defence minister (and a son of the emir) Sheikh Nasser Sabah al-Ahmad al-Sabah over the alleged misuse of some KD240 million ($790 million) in military funds. Both have now been removed from their jobs.

There were also large anti-corruption demonstrations outside parliament earlier in the month. Against this background, the emir gave a speech on November 18 in which he vowed to clamp down on graft, saying “no-one, no matter his position, will evade punishment if convicted in public funds crimes.”

One case which appears particularly troubling involves Russian businesswoman Marsha Lazareva and her local business partner Saeed Dashti. The pair are battling multiple charges of fraud and related issues in Kuwait but suffered a setback on November 11 when a court convicted them on two charges of money laundering (they were cleared of eight other charges).

Lazareva’s high-powered legal team described the sentence of 15 years in prison with hard labor as a “sham” and based on evidence from unreliable witnesses.

Cherie Blair QC, a noted human rights lawyer at Omnia Strategy in London, points to the long judgement issued by the court, noting that for eight of the charges “it preferred the evidence of the defence experts, accepted that the books have been meticulously kept, said we can't rely on the only two witnesses the prosecution produced, because both of them are convicted liars… and then almost like somebody else had written an addendum to this judgment, there were a couple of pages in which they dropped a bombshell and decided that in relation to two charges that she had been guilty of money laundering a sum of about $3.5 million.”

KUWAIT-POLITICS-DEMO
Locals take part in a protest against corruption outside parliament in Kuwait City on November 6, ... [+] 2019. (Photo: Yasser Al-Zayyat / AFP) (Photo by YASSER AL-ZAYYAT/AFP via Getty Images)

The case against Lazareva centres around The Port Fund, an investment vehicle that has been mired in claims and counter-claims of money laundering and official corruption for several years. The fund was set up by KGL Investment to invest in logistics projects around the world, including a large scheme in The Philippines, for which it drew investment from the likes of the Kuwait Port Authority (KPA) and the Public Institution for Social Security (PIFSS). As vice chair and managing director of KGL Investment, Lazareva managed the creation of The Port Fund. 

Profits from the fund’s Philippines investment were frozen in Dubai in 2017 while being routed back to the company and its investors, leading to a complex legal wrangle there which only ended in early 2019 when the Dubai authorities agreed to release the funds.

Unsafe space?

Lazareva’s lawyers say they believe she is the innocent victim of a wider dispute between rival local business figures in Kuwait.

“We're not saying that the system is filled with corruption, but we are saying that people can manipulate the system and this is what's happened,” says Blair. She says there are lessons for other investors too. “The world needs to know that Kuwait is not a safe place for investors, particularly those investors who fall foul of well-connected locals. This shows that even relatively wealthy foreigners who are doing legitimate business in Kuwait cannot feel safe in Kuwait.”

Lazareva’s lawyers have yet to say if she will lodge an appeal against the latest verdict, but say she is currently in a “safe place” while she considers her next steps. The legal team have also called on the U.S. government to intervene in the case – an appeal based on the fact that her five-year-old son Yvan is an American citizen.

Neil Bush, a son of former President George H. W. Bush and brother of former President George W. Bush, said in response to the November 11 verdict that “Kuwait has had countless opportunities to root out corruption within its legal system and drop the false charges against Marsha Lazareva. Its failure to do so has resulted in [this] false conviction and may leave the United States government no choice but to intervene and hold those responsible to account.”

Five members of the U.S. Congress have now called for an investigation under the Global Magnitsky Act into officials involved in the Lazareva case. The act authorizes the U.S. to impose sanctions against foreign citizens who have been found to have committed human rights violations and engaged in corruption.

Following an appeal to Treasury Secretary Steve Mnuchin by Senator Roger Wicker (R-Miss.) and Representative Steve Chabot (R-Ohio) in April, there were similar calls from Representative Madeleine Dean (D-Pa) in June, Representative Paul Gosar (R-Az) in August and Representative Gus Bilirakis (R-Fl) in September.

Among the Kuwaiti officials identified as possible targets for Global Magnitsky Act investigation are: general manager of the Kuwait Port Authority Sheikh Youssef al-Sabah; attorney general Dherar al-Asousi; chief of Emir protocol Sheikh Khaled al-Sabah; prosecutor Homood al-Shamy; Judge Metab al-Ardi; State Audit Bureau official Hamad al-Allayan and head of the Kuwait Appeals Court Mohammed Bin Naji.

“I believe there are many people within the Kuwaiti system who are appalled about what has happened and are concerned about the strain this has put on the relationships between Kuwait and many of its traditional supporters including of course the US and indeed Russia,” adds Blair.

Lazareva’s lawyers have also filed a complaint with the UN Working Group on Arbitrary Detention, which is expected to consider the case this week. Diego García-Sayán, the UN Special Rapporteur on the Independence of Judges and Lawyers, has separately expressed concern about Kuwait’s handling of the case.

Lazareva has previously successfully overturned a 10-year term for false invoicing, although she only secured her freedom after spending 474 days in a Kuwaiti prison and paying tens of millions of dollars’ worth of bail. In May, a Kuwaiti appeals court found that the trial court had ignored Lazareva’s rights to present a defence. A retrial has been ordered and that case is ongoing.


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