A Kuwaiti embezzlement case carries global implications

This past weekend, a Kuwaiti court’s decision to order the release on bail of business executives Marsha Lazareva and Saeed Dashti marked the latest chapter in what may be the Persian Gulf’s most intensely lobbied embezzlement and money laundering case. Lazareva and Dashti, who have been accused of misappropriating nearly $500 million of proceeds from an asset sale in the Philippines, will see proceedings in their case begin again on June 9th. The high-powered advocacy effort organized on their behalf, however, is already well underway.

Thanks in large part to the deep pockets of their Kuwait-based company, Kuwait & Gulf Link (KGL) Investments, Lazareva’s case in particular has taken on international dimensions. As reported by Politico, the firm spent fully $2.5 million in the first quarter of 2019 on high-profile American lobbyists to plead their imprisoned CEO’s case, including both Neil Bush (son and brother of former presidents George H.W. Bush and George W. Bush, respectively) and former director of the FBI Louis Freeh. Bush and Freeh have been joined by Cherie Blair, wife of ex-UK Prime Minister Tony Blair, as well as seemingly the full weight of the Russian government.

This campaign has spent a considerable amount of time – and even more money - arguing Lazareva is the “most successful businesswoman in the Middle East” and a victim of Kuwait’s supposedly corrupt and inadequate judicial system. Ironically, its main outcome may be to draw renewed scrutiny to previous allegations of wrongdoing levelled against KGL by prominent leaders in the US Congress, jeopardizing the company’s ability to do business with one of its most lucrative clients – the US government.

From the Philippines to Washington, via Moscow

Lazareva and Dashti were initially arrested in 2017 on suspicion of embezzling funds from the Kuwait Port Authority (KPA) through their positions as executives at private equity firm KGL Investment (KGLI). The charges center around the sale of Clark Global City in the Philippines, a venture controlled by the Port Fund private equity vehicle directed by Lazareva and sponsored by KGLI, to the Udenna Corporation of Rodrigo Duterte ally Dennis Uy. Lazareva herself claimed it had been for $380 million in 2017, but records in the Philippines indicate an amount as large as $1.1 billion.

Kuwaiti parliamentarians and prosecutors have pointed to these substantial discrepancies between the various sums reported for the sale. They are understandably eager to know where the remainder of the funds have gone, especially as Kuwaiti public entities had invested substantially in the Port Fund. Both Dashti and Lazareva were both found guilty of embezzlement in May of the following year, jointly fined $73 million, and sentenced to fifteen years (in Dashti’s case) and ten years (in Lazareva’s) hard labor, subject to appeal.

While Lazareva fought her case in court, American allies like Freeh have gone after the Kuwaiti judiciary in the media, claiming that she has been deprived of a fair trial and housed in unsanitary conditions. Neil Bush has gone so far as to invoke his father’s memory, reminding readers of the Washington Times that George H.W. Bush “helped liberate” Kuwait and that “to his last day, he was proud that Kuwait remained an honorable and respected member of the international community.”

The Kremlin, for its part, has flexed its diplomatic muscle to try and assist Lazareva. Foreign Minister Sergey Lavrov directly interceded on Lazareva’s behalf during his March visit to Kuwait, while the Russian government is pursuing an extradition agreement with Kuwait that would see citizens of either country, if convicted of a crime in the other, transferred home for either prosecution or to carry out their sentence.

Will the strategy backfire?

The trouble with the Lazareva campaign’s narrative of a sterling reputation is that her company, KGL, has in fact been beset by legal issues and allegations of wrongdoing for years. The company and its subsidiaries (including KGLI and KGL Logistics) were blacklisted in late 2017 by the Kuwait Ports Authority (KPA) for a number of violations, including trespassing on warehouses and offices, failing to pay debts, and producing fraudulent documents.

Just weeks after the KPA decision, Senator Marco Rubio, who sits on the US Senate’s Committee on Foreign Relations and is one of the most influential foreign policy voices in the US Congress, wrote to Department of Defense (DoD) Inspector General Glenn Fine in January 2018 and asked him to open an investigation into the company. Rubio’s letter specifically requested Fine address KGL’s “past and current compliance with Federal Acquisition Regulation (FAR),” referencing allegations that KGL had worked to circumvent American sanctions against the Islamic Republic of Iran by facilitating logistical support, illegal sales of aircraft components, and even money laundering – all while serving as a major contractor to the DoD.

As the work of Lazareva’s backers raises the profile of both her case and her company, is it possible that Rubio’s previous allegations against the company could resurface and create yet another scandal for the Trump administration? After all, KGL’s most recent contract award came just days after Rubio’s 2018 letter. Instead of overturning Lazareva’s conviction, the campaign’s ultimate impact may prove to be forcing the Pentagon to review its previous contracting decisions and reassess its approach going forwards.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.