Teodoro Nguema Obiang Mangue serves as Agriculture Minister of Equatorial Guinea, a tiny, impoverished country on the west coast of Africa. But when Teodorin, as friends call him, goes boatshopping, the world takes notice. The son of Equatorial Guinea’s President last year flirted with the idea of buying a $380 million yacht, though his annual salary is just $60,000. Consider, too, that he also owns a $30 million home in the Los Angeles suburb of Malibu and you’ll understand why the U.S. Congress approved a regulation designed to pull back the curtains on the finances of secretive governments.
Tucked into the Dodd-Frank financial reform act is a provision requiring U.S.-listed oil, gas, and mining companies to reveal what they pay governments around the world for permission to tap resources. In Angola, Kazakhstan, Myanmar, Venezuela, and more than a dozen other oil- or mineral-rich countries, those numbers may suggest why there is sometimes a huge disconnect between government paychecks and leaders’ lifestyles, says Senator Patrick Leahy (D-Vt.), a backer of the measure. The money “props up corrupt billionaire dictators or fuels armed conflict,” Leahy says.
In Equatorial Guinea, where oil earns 9 of 10 export dollars, a gusher of cash flows into government coffers. That windfall has helped President Teodoro Obiang Nguema Mbasogo and his inner circle “amass huge personal profits,” the U.S. State Dept. says in its annual human rights report on the country. In an affidavit filed for a lawsuit in South Africa in 2006, the younger Obiang insisted that a government minister has the right to cut deals that put “a sizable part of the contract price in his bank account.” The President, who currently serves as the ceremonial head of the African Union, has called oil revenue a “state secret.”
The legislation won’t end corruption in Equatorial Guinea, but it might make the Obiang family “curtail how much money they are siphoning,” says Tutu Alicante, executive director of human rights group EG Justice in Washington. The government press office didn’t respond to a request for comment, but in January it released a statement saying that while Obiang had asked a German company to design a yacht, he decided against building it. The statement said Obiang had planned to pay for the ship with his legal earnings, not funds derived from corruption.
When Dodd-Frank passed, it spurred front-page headlines in Cambodia, where newspapers told readers that resource companies would finally have to reveal hidden payments to the government. “All of the detail around that is pretty much out of the public eye,” says Brian Lund, who works with anti-poverty group Oxfam in Phnom Penh. In response to a U.S. Securities and Exchange Commission probe last year, Australia’s BHP Billiton (BHP) admitted its employees might have violated “anti-corruption laws involving interactions with government officials.”
Oil companies hate the provision. In a January letter to the SEC, Exxon called it “excessively burdensome.” The American Petroleum Institute, an industry group, says it “has the potential to impose substantial costs and to have significant adverse effects” on energy companies. In an August comment to the agency, the group said the measure offers the “very real potential for tens of billions of dollars of existing, profitable capital investments to be placed at risk” if companies are forced to disclose information that laws in other countries consider private.
The SEC says it plans to publish details of how it will implement the rules in the coming weeks, though it will be at least a year before companies are required to reveal how much cash is changing hands. “We want simple things,” says Alicante, who envisions oil-funded schools and clinics. The law written 6,000 miles away, he says, might force the Obiangs to “straighten out their act.”