U.S. Hunt for Nigeria Fraud Cash May Come Second to a Small Bank

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JULY 20, 2017 – U.S. prosecutors trying to recover proceeds from an alleged $1.5 billion Nigerian fraud may have to wait their turn.

A plum penthouse condominium in one of Manhattan’s most expensive buildings is among the cash, real estate and luxury yacht the U.S. moved last week to seize from Nigerian tycoon Kolawole Akanni Aluko, whom it accuses of laundering money and bribing a foreign official. That’s where it gets complicated.

The apartment in the One57 building was scheduled to be sold at a foreclosure auction on July 19. The sale was delayed at the last minute after a new creditor claimed Aluko owes it about $83 million for gasoline and jet fuel.

Yet as things stand now, the first and likely largest chunk of the proceeds from any condo sale won’t go to the Justice Department’s effort to claw back the allegedly illicit funds. It would be bound instead for Banque Havilland SA, a small Luxembourg bank that wrote a mortgage against the property shortly before public disclosures emerged that international law enforcement agencies were investigating the owner and his associates.

Aluko wired about $49 million for the apartment and registered it in 2014 in the name of a shell company he controlled, according to court documents. If that ownership structure had stayed in place, the U.S. could have sought to claim the property outright. But in September 2015, Aluko’s shell company took out a $35.3 million mortgage from Banque Havilland, guaranteed by the condominium, in exchange for a 25 million euro ($28 million) loan, according to the mortgage document. What Aluko did with the money he borrowed remains unclear.

Tokunbo Jaiye-Agoro, who has represented Aluko in the Nigerian court case, didn’t respond to multiple messages left with his secretary at his office in Lagos.

Spoils of Oil

The U.S. has accused Aluko of laundering the spoils from bribes paid for Nigerian oil contracts, notably by buying assets such as apartments in New York and a superyacht. Aluko hasn’t responded in the U.S. court proceeding.

“It seems likely that the assets won’t be Aluko’s for much longer, what is less clear is who gets what after that,” Daniel Hall, an expert in financial crime investigations and a director at Burford Capital, which provides litigation financing, wrote in an email. Burford isn’t involved in this case. “The U.S. authorities will want to scrutinize the diligence conducted by these creditors before they contracted with Aluko.”

The full payment of the loan was due a year after the mortgage was written, foreclosure filings in New York State Supreme Court show. The payment wasn’t made, according to the documents. Banque Havilland started a foreclosure action in January, which Aluko’s shell company didn’t oppose, and got a New York Supreme Court judgment allowing the action in May. The U.S. is seeking only funds left over after the bank is paid off, along with any taxes or other assessments owed on the condominium, according to the filing in district court in Houston.

The U.S. hasn’t accused Banque Havilland of any wrongdoing. Officials at the bank didn’t respond to emails and phone calls requesting comment.

Shortly after Aluko’s mortgage was filed, the U.K. asked Switzerland, where Aluko had his residence, to help their investigation into the Nigerian. In October 2015, British police arrested and then released on bail Diezani Alison-Madueke, the former Nigerian oil minister Aluko is alleged by the U.S. to have bribed, on suspicion of bribery and money laundering, a spokesman for the Nigerian government said at the time. In April, Alison-Madueke was charged in a separate case in a Nigerian court with violating anti-money laundering laws. She was described in the charge as being “still at large.”

Alison-Madueke’s lawyer, Oscar Onwudiwe, didn’t return calls to his mobile phone seeking comment.

The U.S. may choose to take a closer look at the timing of the mortgage, said Howard Sharp, the former solicitor general of Jersey. “One issue for investigators to carefully consider is whether these events constitute money laundering intended to frustrate an anticipated confiscation order or civil asset recovery proceedings in the USA,” he said, referring to Aluko.

Banque Havilland

Banque Havilland is controlled by the family of U.K. Conservative party donor and businessman David Rowland, its website and annual report show. A fund controlled by Rowland started the bank in 2009, when the governments of Luxembourg and Belgium lent him 320 million euros to keep part of Iceland’s failing Kaupthing Bank going, according to a European Union statement from the time. Rowland’s fund also invested 50 million euros in capital.

The bank has grown under Rowland and it now has offices in Monaco, Liechtenstein, Dubai, Geneva, Zurich, the Bahamas, London and Moscow, according to its website. It shares a name with his mansion in Guernsey. Multiple attempts to reach members of the Rowland family through the bank received no response.

The U.S. prosecutors may yet recover much of the amount they identified. Apart from three Manhattan apartments, including the One57 property, they said they would go after the 65-meter Galactica Star yacht, two properties in Santa Barbara county and all rights held by a another company registered in the British Virgin Islands.

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