The President’s Bank: corruption allegations tarnish Somalia’s brave new world – By Jay Bahadur
The election of President Hassan Sheikh Mohamud in September 2012 was heralded internationally as an almost messianic break from the past, an end to Somalia’s never-ending progression of corrupt “transitional” governments and the beginning of a brave new era. Once in office, Hassan Sheikh was feted by Western powers in London and Brussels, where he spoke of rebuilding Somalia and opening up the country to foreign investment. At a Brussels conference in September 2013, enthusiastic European donors delivered the ultimate endorsement – a pledge of $2.4 billion as part of a “New Deal” for Somalia.
But Hassan Sheikh’s tenure as the international community’s chosen one may be coming to an end. On 9 July 2014, the U.N. Monitoring Group on Somalia and Eritrea submitted a 37-page letter – leaked to Reuters news agency and this writer – to the U.N. Security Council accusing the president and a Maryland-based law firm of “a conspiracy to divert the recovery of overseas assets” belonging to the Central Bank of Somalia (CBS). At least one of the president’s close advisors, who was paid by the law firm for services rendered, was implicated in the letter for supplying arms to the al-Qaeda linked Islamist group al-Shabab.
The Somali government’s contract with the Maryland law firm of Shulman, Rogers, Gandal, Pordy & Ecker to help recover assets – squirreled away in vast overseas accounts by members of former dictator Mohamed Siad Barre’s kleptocratic regime – first came under scrutiny following the resignation of Yussur Abrar, Somalia’s first female Central Bank governor, after only seven weeks on the job.
The story of Abrar’s resignation – and of the Somali president’s discrediting – begins with the publication in July 2013 of a highly critical report on the CBS by the U.N. Monitoring Group. The report, which referred to the CBS as a giant “slush fund,” accused the bank’s then-governor, Abdulsalam Omer, of facilitating the misappropriation of millions of dollars of government money and alleged that the bank effectively functioned as a giant ATM for “˜bag-men’ sent by high-ranking politicians.
Omer resigned soon after the bombshell report was released, and on 20 September 2013, Abrar, a Somali-American banker and a former vice-president at Citigroup, took over in his place. But fewer than two months later, she too resigned after abruptly leaving Somalia. In a frank letter addressed to Hassan Sheikh, Abrar claimed that political interference had prevented her from safeguarding the CBS’s autonomy. “The message that I have received from multiple parties is that I have to be flexible, that I don’t understand the Somali way,” she wrote, adding that “my own personal security would be at risk…”
Precipitating Abrar’s resignation was a clash with the Somali president and his allies over an agreement between the CBS and Shulman Rogers for the recovery of frozen assets. Believed to be in excess of $100 million, the missing funds are reportedly held mostly in Citibank, Bank of America, Chase, and UBS accounts in the United States and Switzerland. Shulman Rogers had been originally contracted in 2010 by Somalia’s previous government through the offices of Ali Amalow, the last Central Bank chief under Barre before the Somali state collapsed. But on 15 July of last year, Hassan Sheikh’s administration renewed the firm’s tenure in a new contract signed by Omer – despite the fact that the World Bank’s Stolen Asset Recovery Initiative had offered to do the job for free.
According to the contract, obtained by this author, the Somali government agreed to pay Shulman Rogers $25,000 per month plus expenses. Moreover the firm was to receive a 2 to 5 percent cut of all recovered assets, depending on their value, as well as additional 6 percent set aside for “mutually agreed costs and expenses.”
When Abrar questioned certain clauses in the Shulman Rogers contract, the president asked her why she was standing in the way, as “people needed to get paid,” according to the Monitoring Group’s letter.
The Monitoring Group alleges that Musa Haji Mohamed Ganjab, a Somali-Canadian businessman with close clan ties to the president, and Abdiaziz Hassan Giyaajo Amalo, nephew of former central banker Ali Amalow, acted in the “dual role” as both “Government advisors and facilitators for Shulman Rogers.”
According to the Monitoring Group letter, Haden Global Services LLC – a company registered to Amalo and employing Ganjab – “submit[ed] an invoice to Shulman Rogers for USD 107,730 including timesheets and expenses for Abdiaziz Hassan Giyaajo Amalo and Musa Haji Mohamed Ganjab” on 13 September 2013. On 26 November, according to the allegations, “Amalo forwarded to Musa Haji Mohamed Ganjab a wire transfer from Haden Global Services for USD 40,000.” A February 2014 Memorandum of Understanding between Shulman Rogers – acting on behalf of the Somali government – stated that “Haden Global Services would receive between two and five percent of all overseas assets to be recovered” from 1 January 2014 onwards.
A representative from Shulman Rogers acknowledged that Ganjab and Amalo had provided “logistics, security, translations and other services” to the company. However, in an email to this author, Shulman Rogers stated that Ganjab and Amalo “are not now and never have been government advisors,” and had received “no share of the recovered assets.”
Alarmingly, the Monitoring Group letter also implicates Ganjab in the delivery of weapons to al-Shabab commander Sheikh Yusuf Isse “Kabukatukade” in the port town of Adale, about 100 kilometers northeast of Mogadishu. In an email on 27 October to his brother Abukar Ganjab, Musa Ganjab stated that he had “ordered most of the weapons from Yemen,” and instructed Abukar to oversee their transfer to Kabukatukade.
In a written response to this author, Abdiaziz Amalo denied being a presidential advisor. He acknowledged that his company Haden Global Services had been compensated by Shulman Rogers for travel, translation, and security services, but in relation to the firm’s counter-investigation into the claims against the CBS in the Monitoring Group’s 2013 report, and not the assets recovery scheme. The MOU, Amalo asserted, was his proposal for how he and his team “should be compensated for four and half years of work supporting the asset recovery project.”
Musa Ganjab declined to respond to a request for comment.
The Shulman Rogers contract is also troubling because it allows for recovered assets to be transmitted into the custody of the Somali president and prime minister – a provision that undermines the independence of the central bank. Maneuvering to take full advantage of this clause, in September 2013 Hassan Sheikh had himself designated an official legal representative of the CBS through a U.S. State Department section 25B certification. The document, signed by the Deputy Secretary of State William J. Burns, authorized Hassan Sheikh to “receive, control, and dispose of” any assets recovered on behalf of the Central Bank of Somalia.
“United States acceptance and recognition of the President’s authority over overseas assets was duly exploited to convince other Member States and financial institutions to similarly give exclusive control to the President, along with Shulman Rogers,” the Monitoring Group letter alleges.
A State Department spokesman wrote in an email to this author that U.S. recognition of the Somali government in January 2013 had paved the way for Somali-appointed officials to formally request access to frozen assets. “These are Somali central bank assets and we cannot tell the Somalis how to use these funds,” he wrote, noting that the U.S. had recommended to the government of Somalia that it continue to hold its assets at the Federal Reserve.
Abrar, meanwhile, was pressured by top government officials – including then-Foreign Minister Fawzia Adam and then-Deputy Finance Minister Mohamed Hassan Aden – to open a National Bank of Abu Dhabi account to receive recovered Somali government assets. When Abrar suggested they use a CBS account instead, Aden became insistent.
“They tried to open the account without Abrar. But the compliance department of the National Bank of Abu Dhabi came back to them and said they wanted the sign off of the Central Bank governor,” a regional intelligence source told this author.
When Abrar continued to object, she was visited by Ganjab, who, according to the SEMG letter, said that “it would become dangerous for her” if she did not comply with the president’s wishes. With few options, Abrar seemingly acceded to the government’s demands and flew to Dubai, only to submit her resignation letter to the president once safely out of Somalia.
In an email to this author, a presidential spokesman stated that he could not comment on specific allegations in the Monitoring Group’s letter, as it had not been officially released to the Somali government. However, he added that the government had begun reviews of six major contracts and that it had “solicited advice from the World Bank’s Stolen Asset Recovery Initiative on the Schulman Rogers contract.”
In a separate statement in February 2014, Fawzia Adam stated that neither she nor the president had given orders to Abrar to open a bank account in Dubai.
Despite intense international criticism following Abrar’s resignation, the Somali government has maintained its relationship with Shulman Rogers. A letter from Shulman Rogers to the Monitoring Group on 16 June outlined that “USD 12,326,971.63 worth of assets held in the United States” had been transferred to its custody. Of that sum, “a final amount of USD 9,001,092.25″ was transferred to a CBS account in Turkey on 2 and 5 December 2013, where it currently remains. The status of additional assets Shulman Rogers had been pursuing is unknown.
A 6 November email from Jeremy Shulman to a Somali presidential aide also stated that several million dollars in cash and approximately $37 million in gold on deposit at the Federal Reserve Bank were now “under the President’s control,” according to the Monitoring Group’s letter. A representative from Shulman Rogers refused to comment on the financial specifics of the asset recovery project, citing attorney-client privilege.
The Shulman Rogers deal is only one of a series of murky government agreements over the past year that has cast Hassan Sheikh’s squeaky clean international reputation into doubt. In September 2013, the government unilaterally cancelled its contract with the South African-staffed SKA International Group to manage Mogadishu’s international airport, only three years into what was supposed to be a 10-year agreement. Brought in to replace SKA was Favori LLC, a Turkish company hastily formed only nine months previously.
In a bizarre 25 August letter allegedly written by then-Somali Minister of Information Abdullahi Elmoge Hersi and addressed to U.N. Monitoring Group Coordinator Jarat Chopra, Hersi claimed that he had refused to sign the “sham deal,” despite being “relentlessly bull[ied]” by Hassan Sheikh and other higher-ups. Hersi later denied authorship of the letter, and its authenticity is unverified. However, the Favori contract, which was publicly leaked, supports at least one of the letter’s claims, showing that the company was required to pay a $1.5 million “Initial Premium Fee” to the government. CBS records confirm that this amount was deposited to the bank on 24 January.
Only weeks later, Hassan Sheikh’s administration entered into an agreement with the Turkish firm Albayrak Group to run Mogadishu’s seaport for 20 years, allegedly in exchange for payments of between $6 and $8 million to the government, according to sources with intimate knowledge of the deal.
None of this is outright evidence of anything crooked. But the secretive, non-tendered nature of the contracts is troubling, especially given Hassan Sheikh’s publicly stated goal of making Somalia an attractive environment for foreign business. Rather, his administration seems inclined to perpetuate Somalia’s quasi-warlord economy, where control over state infrastructure provides lucrative opportunities for graft. In each of the past four years, for instance, between 40 and 80 percent of Mogadishu port revenues have gone missing, according to financial auditor Abdirizak Fartaag, whose findings have been used in a World Bank report. In 2012, those missing revenues amounted to over $25 million.
“The current government is not concerned with working out federalism or any of Somalia’s other problems,” Fartaag said. “They want to take over national assets so they have something to sustain themselves when they are kicked out at the next election.”
The recent machinations of Hassan Sheikh’s government have not gone unnoticed by the donor community, and indications are that patience with the president may be running out. In a series of meetings in Mogadishu last November, top-level diplomats from the United States and European Union, as well as representatives from the World Bank and United Nations, demanded that Hassan Sheikh provide an account of Abrar’s resignation, according to the leaked minutes from those meetings. According to the minutes, the president denied threatening Abrar – or pressuring her to sanction the Shulman Rogers deal – and indicated willingness to appoint an official commission of inquiry into her resignation.
But the international community’s faith in the Somali government may already have been shaken irrevocably. At the very least, the $2.4 billion of EU money pledged in Brussels is much less likely to be entrusted to the Somali government in the form of direct treasury assistance.
“The Central Bank governor’s resignation doesn’t necessarily undermine these commitments, but it makes [the donors] more wary. It rattled them,” said a U.N. official speaking on the condition of anonymity. “With the airport thing there was already a bit of a smell.”
On 28 November 2013, the Somali government appointed Bashir Issa Ali, an old financial hand who helped reestablish the Somali Central Bank in 2006 and served as its governor until 2010, as interim CBS governor. Ali has a reputation for honesty and is not a member of Hassan Sheikh’s inner circle, but without an electronic banking system in place, the prospects for changing an endemically corrupt system fueled by cash and patronage are remote.
The naive optimism that welcomed Hassan Sheikh to power over two years ago is now fading. And as evidence mounts that the president and his cronies are profiting from selling off pieces of the state, Somalia’s brave new era is looking a lot like its past.
Jay Bahadur is a Nairobi-based freelance journalist and author of The Pirates of Somalia: Inside Their Hidden World.