When Riggs Bank president and chief executive Lawrence I. Hebert learned of State Department reports and newspaper stories 18 months ago describing widespread corruption and human rights abuses by Equatorial Guinea's dictator, Hebert knew he needed "independent verification of what was going on in the country," he said at a Senate hearing last month.
The oil-rich West African country was Riggs's biggest depositor, with $700 million on deposit by 2003, some of it hauled $1 million at a time into Riggs's DuPont Circle branch in shrink-wrapped, 20-pound bundles. The published reports raised troubling claims that Teodoro Obiang Nguema Mbasago and his family might be skimming money illegally from the country's oil-revenue accounts at Riggs.
Federal law and internal bank policy require Riggs to verify that customers' money doesn't come from or pay for illicit activities, such as bribery, drug sales or terrorist acts. So, Hebert told the Senate Permanent Subcommittee on Investigations, he arranged for himself and other top Riggs executives to hear a presentation on Equatorial Guinea by an Alexandria, Va.-based expert, Bruce McColm.
McColm, in a 45-minute talk at Riggs's executive downtown offices in Washington, painted a favorable picture of Obiang and his regime, McColm said in interviews. Riggs executives told Senate staff members during a year-long subcommittee investigation of Riggs that they relied on McColm's portrait to justify doing business with Equatorial Guinea.
But according to the subcommittee report, McColm wasn't independent. His long, close ties to Equatorial Guinea made him knowledgeable, but also created a conflict of interest, the report said. He heads a tax-exempt organization that consults the government on election and human rights issues, and a profit-making operation, housed in the same building, that was a business partner of Obiang's in a project to bring high-speed Internet service to the country.
The McColm connection is one of several relationships between Obiang and U.S. firms, including major oil companies, detailed in the Senate report.
Hebert told the subcommittee he didn't know at the time of the presentation that McColm was a business partner with Obiang, or that Riggs had agreed to set up, for a fee, financing for their project.
McColm disputes that. He said Hebert and the other executives at the meeting knew of his business ties to Obiang because Riggs executive Simon Kareri -- who was in charge of the Equatorial Guinea account -- introduced him as expert who did business with the country, its leader and Riggs. Hebert, through a Riggs spokesman, said he stands by his Senate statement that he didn't know at the time of McColm's business ties to Obiang or Riggs.
"The fact that the bank could even consider any part of that meeting to be part of the bank's due diligence or risk assessment is ridiculous," McColm said.
McColm said that, while it may have been naive, he had no idea at the time why he'd been asked to give the talk about the country, except that he was an expert on it because he spends so much time there on business.
Under pressure from regulators this year, Riggs closed the Equitorial Guinea accounts, along with most of its embassy and related international business. Kareri was fired in January.
McColm consults for Equatorial Guinea and Obiang through the nonprofit Institute for Democratic Strategies. Profit-making International Decision Strategies Inc. is part of a joint venture with Obiang in the Internet firm Nusiteles GE .
McColm and Joseph S. Balcer, his partner, defend having the two operations. They said doing business with Obiang does not compromise their ability to be objective in their role as a nonprofit consultant to that government on such issues as holding fair elections, trying to free the nation's judicial system of corruption, and pardoning prisoners convicted unfairly.
IDS and Obiang set up Nusiteles three years ago but no money changed hands and nothing has come of the project, according to McColm and the Senate report.
The nonprofit arm of IDS received four payments totaling $525,000 "from an Equatorial Guinea oil account at Riggs between March 2000 and October 2002 to monitor the most recent elections in the country," the Senate report says.
McColm said he believes Obiang to be a good man and that the country is making progress.