Kleptocracy in America: Russian-style corruption, driven by global oligarchs, enabled by US elites

As Naomi Klein documents in her classic and seminal book The Shock Doctrine, disasters and upheavals are the bread-and-butter of global looters, who use the collapse of civil society or the default of debtor states to privatize state assets at pennies on the dollar, then milk them into further crises, which create more chances for looting — but the collapse of the USSR was different, because the spies and strongmen who rode out that collapse ensured that public assets were only given to domestic looters, not off-shore oligarchs.

This created a distinctly Russian form of failed state, in which the wealth that had been stolen from the country's people was still in the country, in the hands of the country's "leaders" — oligarchs — who then began to eagerly offshore that cash, understanding that their wealth was precarious and depended on the ongoing sufferance of the higher-ups in the mafiyeh state (Putin has a habit of murdering his super-wealthy rivals and redistributing their assets as an example to the rest of the oligarch class).

The oligarch money that poured out of Russia to be "invested" in criminal enterprises, laundered through western firms, or parked in huge swathes of real-estate flipped the script on the Shock Doctrine: when the USSR collapsed, it didn't open the doors for foreign looters to drain the nation dry, instead, domestic looters drained the nation and began to project their power overseas, using tremendous wealth to engineer profound shifts in countries like the USA and the UK that made it a juicy target for oligarchs of every nation.

It helped that the 1990s were the period in which Reagonomics was really getting bedded in, with the share of national wealth controlled by the rich climbing to such heights that policy was already routinely being made without regard to the public interest. When Clinton proposed modest curbs on money-laundering for offshore criminals, bank lobbyists — fuelled by the hundreds of millions already pouring through their doors — mobbed the Capitol and killed it.

A decade later, 9/11 opened a tiny policy space to do something about money-laundering, but lobbyists ensured that there would always be loopholes, and that pattern endured through the Obama years and the modest banking reforms that followed the crisis of 2008.

Today, the US remains awash in dirty money, despite systems like FBAR, which require US citizens and foreign banks to report on all offshore assets — because FBAR doesn't stop the "onshore-offshore" money laundries that use easy-to-set-up, anonymous companies in Wyoming, Nevada and Delaware (you can set up a US company with less ID than it takes to get a library card).

These onshore laundries are used to buy truly vast amounts of property in US cities, sometimes to corner the market and jack up the rent, sometimes to create vast, vacant deserts of parked assets that have ceased to function as homes or businesses.

The US's leading law firms, real-estate brokers, and (of course) bankers have come to depend on money-laundering oligarchs, and have become some of the leading lobbyists, cheerleaders and enablers of the practice ("Wouldn't it be great if we could get all the Russian billionaires to move here?" NYC Mayor Michael Bloomberg, 2013).

Trump is, of course, a very visible expression of this phenomenon, but he's hardly unique: indeed, the reason Trump has been so palatable to elites who are otherwise put off by his crassness is that he is foursquare for money-laundering, a friend to oligarchs everywhere. Shady real-estate deals, after all, are a hell of a way to move a lot of cash into the USA with no questions asked.

Global Witness conducted its experiment to point out Big Law's complicity in the spread of kleptocracy. But the footage also provides primary anthropology of an American elite. A profession like law has highly developed ethical codes, yet those codes appear to have receded in recent years. Even the most prestigious firms find themselves fretful about the survival of their high-priced business model, which was profoundly rattled by the 2008 financial crisis and the corporate cost-cutting that followed. Greedy impulses have surely always existed within the white-shoe world, but the sense of Darwinian struggle and the norms of a global elite have eroded boundaries. The same partners who shed underachieving colleagues more ruthlessly than they used to also seem primed to adopt a more permissive attitude toward clients whom they might once have rejected.

This decay has been on full display in Robert Mueller's investigation. We have seen how the firm Skadden, Arps, Slate, Meagher & Flom, a sturdy pillar of the legal profession, placed itself in the service of kleptocracy. One partner at the firm from 2010 to 2018, Gregory Craig, had served as Barack Obama's White House counsel, the man responsible for safeguarding the integrity of the presidency. At Skadden, he oversaw the creation of a report that was used to justify Ukrainian President Viktor Yanukovych's arrest of his primary political opponent on what were widely viewed as highly dubious grounds. (The firm, according to testimony in Mueller's investigation, said privately that evidence to support the arrest was "virtually nonexistent.") Another lawyer who worked for Skadden has pleaded guilty to lying to prosecutors during the Mueller team's probe of the firm's Ukrainian work.

The Ukrainians hired Skadden through a middleman, the now-jailed political consultant Paul Manafort. Once upon a time, it might have been possible to think of Manafort as a grubby outlier in Washington—the lobbyist with the lowest standards, willing to take on the most egregious clients. But Mueller has exposed just how tightly tethered Manafort's work on behalf of Ukrainian kleptocrats was to Washington's permanent elite. Manafort subcontracted some of his lobbying to the firm of Tony Podesta, arguably the most powerful Democratic influence-peddler of his generation. And Manafort employed Mercury Public Affairs, where he dealt with Vin Weber, a former Republican congressman and a former chairman of the National Endowment for Democracy.

Russian-Style Kleptocracy Is Infiltrating America [Franklin Foer/The Atlantic]

(Thanks, Fipi Lele!)

(Image: Steve Jurvetson, CC-BY)