#868: Moneyland We follow writer Oliver Bullough as he explores how stolen money moves around the world, and what that might mean for democracies.
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#868: Moneyland

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#868: Moneyland

#868: Moneyland

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NOEL KING, HOST:

Oliver Bullough is a journalist who writes a lot about financial crime. For many years, he worked in Eastern Europe. And in 2014, he was in Ukraine, and Ukraine was in bad shape.

OLIVER BULLOUGH: Ukraine was a basket case. You know, it was in a mess. The roads were falling apart. The government was terrible. You had to pay bribes to get anything done. The children couldn't get the medicines they needed. I mean, it was awful.

KING: It was awful. But it was also interesting. Oliver is fascinated by the countries that make up the former Soviet Union, like Ukraine. Since the end of the Cold War, Ukraine has always sort of had one foot in Europe and one foot in Russia. And then in 2013-2014, Ukraine's president, a man named Viktor Yanukovych, decided to move both feet toward Russia. His government suspended a plan to sign this trade deal with the European Union, which would ideally have brought open markets and transparency. He said, no, we want more trade with Russia and its oligarchs and corruption.

BULLOUGH: This sort of small group of intellectuals were furious. You know, and they went and protested.

(SOUNDBITE OF PROTEST)

UNIDENTIFIED PROTESTERS: (Chanting in foreign language).

BULLOUGH: And the protests continued. And then the government responded in a very heavy-handed way.

(SOUNDBITE OF GUNSHOTS)

BULLOUGH: So more people protested. And it just snowballed and snowballed until eventually it became this sort of expression of rage.

(SOUNDBITE OF PROTEST)

UNIDENTIFIED PROTESTERS: (Chanting in foreign language).

BULLOUGH: The president just had to run away. Basically, he more-or-less went away in the clothes he was wearing.

KING: He did bring his hand luggage. But when Yanukovych got on his helicopter and bounced to Russia, everyone, including Oliver, was able to get this rare window into how he'd been living because his houses were just left open - left there for anyone to see. So Oliver goes to Yanukovych's palace on the outskirts of Kiev.

BULLOUGH: I walk up to this fence. It's an ordinary green fence - a very tall green fence but unremarkable. You know, it could be around a municipal dump or something. And then I walked through this gateway, and it was like I'd entered a wonderland. I'd been in this ordinary Ukrainian suburb, where there's potholes in the roads, and the tower blocks are rundown. And, you know, the buses are thirdhand from Hungary. And suddenly through this gate in the fence, I've entered an entirely other universe where everything is brilliant. So there's a golf course. There's a kind of enclosure for shooting animals. You know, wild boars would be brought out and shot there. There was a kind of Spanish galleon built on the side of the river.

KING: Like a pirate ship?

BULLOUGH: Yeah, like a pirate ship - that sort of thing. He didn't have an actual pirate flag, but that's what it looked like.

KING: (Laughter).

BULLOUGH: And then there was this palace - a log cabin but five stories high. The amounts of money that have been spent on this place - it was absolutely extraordinary. Yanukovych had gone away in his helicopter and just headed off and left it behind. And it was magical in a kind of almost hallucinatory way - like being in a dream. And the joy of this kind of post-revolutionary time is there was no one to stop you doing this. If you were curious, then you just carried on. And you just looked and poked around. And once I'd been in his palace, I kind of got the bug. And I'd go and look in other places.

KING: Those other places were also in Ukraine. And so Oliver starts travelling around and looking. And along the way, he goes from marveling at what he's seeing to being really, really angry. Ukrainians are poor. The country is a mess. And that is what's on his mind when Oliver and his friend Anton walk into Yanukovych's hunting lodge.

BULLOUGH: Everything was exactly how he'd left it - you know, the heated massage table. There was a sauna, a plunge pool. Everything - the lawns were perfectly mowed. It was absolutely surreal.

KING: Even the bathrooms were ridiculous.

BULLOUGH: In the bathroom, opposite the toilet at sitting-down height was a really big television. So obviously, you know, if he'd been in bed watching a TV show and then needed to go to the loo, he'd nip across and just be able to continue watching it in the toilet. And never seen anything like this before. That was the moment that made me really realize how appalling this man had been. And I said to Anton, how did you not stop him? And Anton, who is a polite guy but, you know, a passionate person, he said - exploded at me really. And he said, we didn't know. We couldn't have known because - he just said look. If you look it up - look it up. This palace, it isn't even in Ukraine. Look it up. It's in England. And I was like, what on earth do you mean? And he's like, look it up. Look it up. So I went, and I did look it up in the land registry. And, you know, the area of land was owned by a Ukrainian company. And that Ukrainian company was owned by a British company. And British company was owned by another British company. And that British company was owned by a foundation in Liechtenstein.

(SOUNDBITE OF MUSIC)

KING: Hello and welcome to PLANET MONEY. I'm Noel King.

BULLOUGH: I'm Oliver Bullough. I'm the author of "Moneyland: Why Thieves And Crooks Now Rule The World And How To Take It Back."

KING: We see the world in terms of countries. And that makes sense. Trade happens between sovereign countries - so do trade wars. Countries have their own currencies. All of this is obvious. But Oliver argues there's a kind of upside-down, shadow economy just under the surface where money - stolen money, dirty money - is vanishing into darkness. No one taxes that money. No one regulates it. No one can even count it. Sometimes money from that dark world bubbles up into our world - a $90 million penthouse that no one is living in, a stupidly big yacht. And you can make fun of it. But Oliver thinks it's dangerous. As that dark economy gets bigger, it starts to erode countries. It starts to suck the life out of democracy.

(SOUNDBITE OF MUSIC)

KING: So my first question to Oliver - am I not likely to get to Moneyland anytime soon?

BULLOUGH: Well, I don't know how much NPR pays its journalists. But I expect...

KING: (Laughter) Not Yanukovych money.

BULLOUGH: Well, I fear that you are going to have to work on your kleptocracy skills if you want to gain citizenship of Moneyland.

KING: But Oliver decided, standing there in that lodge, that he was going to try to get to Moneyland. And he got a lucky break. In Ukraine, the door into Moneyland accidentally opened up just a crack because on his way out Ukraine's president Viktor Yanukovych made a really stupid move.

BULLOUGH: So Viktor Yanukovych runs away in a hurry. And there is this huge volume of incriminating documentation which show how he structured all his assets and how he's hidden his money in Moneyland. And so they're all in a panic. You know, the revolutionaries are coming. It's going to be awful. So, yeah, they just chuck them all in the lake. And they just chuck them all in there and hope they sink. But - well, some of them did but not enough of them. So when the revolutionaries turn up, there's a sort of slurry of floating bits of paper and bank statements just floating in the water. And so they dived in and fished them all out again and dried them - they dried them in the sauna.

KING: In the sauna (laughter).

BULLOUGH: Yeah, the sauna is because of course he had a sauna - right? - probably had several actually. And that's it. They had this sort of priceless insider documentation to show them how his assets were structured, how the money flows worked, you know, who'd he'd been paying off and all that. You know, it was helping them crack the code of, you know, what he'd been doing in terms of how he looted his country.

KING: Oliver starts looking into how Yanukovych's money is moving around the world. And he keeps remembering what his friend Anton told him. You know, this building is not in Ukraine. He thinks, well, then where is it? So he looks up the company that owns the land that the lodge sits on. And he finds an address. It is not in Ukraine. It's in London - 29 Harley Street. It turns out Yanukovych runs two companies that use that particular building as their address. And Oliver thinks this is it. He has seen Moneyland on paper, and now he's got a physical address that he can visit.

BULLOUGH: It's just in central London. It's very easy to get to - just up from Oxford Street, which is the big shopping center. The houses are kind of - they don't match. They're sort of higgledy-piggledy. They're separately built, but they're all very lovely. Twenty-nine Harley Street, it's got a dark-stained wooden front door. It's got like a kind of balustrade at the first-floor level and then up at the top another one. And I knocked on the door. And a young man opened it and looked to me slightly disapprovingly and ushered me into a conference room - this sort of very boring conference room. And then a young lady came out, and we had a chat. And she said, I'm sorry. You're going to have to email me the questions because, you know, we're a bit distrustful of journalists. And that was, you know, the last I heard of her really. So that was it.

KING: That was it. He was foiled. But anyway, he was able to go online and find out a little bit about this house. It has an official name. It's called Formations House.

BULLOUGH: There were more than 2,000 companies based there in a relatively - one house, a small house.

KING: In that house was a company that creates companies. In the past 10 years, hundreds of thousands of companies have been created out of this one house. It costs little as 20 pounds to get a company started in the U.K. That's about $26. Viktor Yanukovych's two companies were called Astute Partners and Blythe Europe.

Well, let me ask you. What do those companies actually do? Was anybody working for Astute or for Blythe? Did they have employees? Did they have a dicey accountant or a bookkeeper who is, you know, funneling money? Like, what were those companies?

BULLOUGH: Those companies did nothing.

KING: Nothing?

BULLOUGH: Those companies just existed to own property on his behalf.

KING: And it's not just company mills in London. Entire countries are doing this. Remember those documents that were thrown in the lake and then dried out in the sauna? Throughout those documents, there was one place that kept coming up - the island of Nevis. So that was Oliver's next stop.

BULLOUGH: Nevis is an island in the Caribbean, which is a sort of jurisdiction-sized version of "The House On Holly Street." It exists to provide people with anonymity. The laws were written for it by a group of American lawyers who wanted, essentially, to make it easier for people who were being sued or who were divorcing their wives to hide their assets.

KING: Oliver has some specific addresses on Nevis, so he gets on a boat and goes looking.

BULLOUGH: I imagined it might be quite hard to find them, but they're all in an area about the size of a football pitch. I got off the boat, and the first office block is directly opposite me. And then there's another one, you know, a hundred yards that way, another one a hundred yards in the other direction. It's absolutely tiny and really surreal because all of these addresses, in my head, were, like, kind of almost Mafia addresses, you know, like hideouts of the Mafia. And they're not at all. They're just perfectly pleasant office blocks with a couple of receptionists.

I went all the way there. And essentially, after sort of a couple of hours wandering around, I'd done all the - what I came there to do in terms of knocking on doors, and I just ended up sitting in a bar on the beach and, you know, eating fried fish and drinking beer.

KING: When you were in Nevis, did anyone tell you anything worthwhile?

BULLOUGH: I had this extraordinary encounter with the regulator, the person who's essentially in charge of checking the integrity of the financial system there. And it was one of the most extraordinary interviews I've ever done in my life. I mean, I - she just laughed at me...

KING: (Laughter).

BULLOUGH: ...From beginning to end, really. And I couldn't - I mean, the hilarity - I just didn't see the humor of it.

KING: Maybe he didn't see the humor in it, but here's an argument in their favor. Maybe it was funny because he was acting like a detective on the trail of something that is a normal, totally legal way of doing business. It would be like if you went into an Ikea and you said, I've traveled across the world. I took a boat to get here. Are you people really just openly selling furniture? They would laugh in your face.

So from there, he's kind of stuck. No one in any of these places is going to give him any information. But even though the money in Moneyland is hidden, some of it is going to start bubbling up in very specific places.

BULLOUGH: The really extraordinary thing is where the money gets spent; it's where ends up. And where it ends up is overwhelmingly in London and New York.

KING: It's like the Upside Down is oozing into our world.

BULLOUGH: You want to put your money somewhere where there's lovely art galleries and great restaurants and gorgeous parks and all that. And where's better than London or New York? So it's the - sort of the really uncomfortable truth at the heart of this whole episode is the fact that we criticize, you know, the Marshall Islands or Nevis or all these sort of offshore, you know, palm-fringed destinations for enabling fraud and theft - which they are enabling, you know, fraud and theft - but it's where the money ends up that's important. And the money ends up in London, New York, Miami, Los Angeles - places like that.

KING: And this gets at some things that have been really hard to explain, like, how is a former presidential campaign chairman who's done some consulting work in Ukraine able to buy millions of dollars of rugs and suits and a townhouse in Brooklyn? I'm talking, of course, about Paul Manafort.

BULLOUGH: I think the really interesting thing about Paul Manafort is the fact that he did exactly the same tricks as the Ukrainians did. If you look at the indictment - I love the Paul Manafort indictment. I practically have it, you know, stuck on my wall. It's so wonderfully - for a nerd, it's just heaven. The structures that he used to move his money through - he had companies in Cyprus, he had company - a company in the U.K. - not a treasure on Holly Street, but still a company in the U.K. He had companies in the Caribbean and Saint Vincent and the Grenadines. He had, you know, a whole string of LLCs in the U.S. And the tricks he was using were exactly the same tricks as were being used by Ukrainian kleptocrats, Yanukovych and Yanukovych's friends.

And I think what's really interesting about this and what Manafort was doing is it shows that this is not a crime of culture; this is a crime of opportunity. An American who could essentially see his way to dodging scrutiny, dodging taxes, you know, keeping money in the same way that a Ukrainian did was doing it just because he could.

KING: Because he could. And that's just it. It's that easy. And it is also easy to not think too much about this, but Oliver is obsessed because, remember; he spent years working in Eastern Europe, in Russia and Ukraine and Kyrgyzstan and Azerbaijan and Tajikistan. And he's learned that when a country's money is vanishing down the drain and it can't be found or taxed or even counted, there is something very big at stake.

BULLOUGH: We need to deal with this issue if democracy is to have a future. If some people can opt out of that legislative and taxation process, then that is a threat to democracy because otherwise you end up in a situation like you do in Russia, where more than half of all the money in Russia is owned offshore. It's in Moneyland - 52 percent of the household wealth. So if...

KING: Fifty-two percent?

BULLOUGH: Fifty-two percent. That money is, essentially, no longer subject to the decisions of the Russian government. Now you can understand why, if you were a Russian - a wealthy Russian, you might not want your money to be subject to the decisions of the Russian government.

KING: Yeah, yeah.

BULLOUGH: But, I mean, you know, obviously you can, but that's very bad for democracy or any chance of democratic transformation. It's important for democracy that money can be taxed because that's how democracies fund themselves. Taxes are the price we pay for civilization.

KING: That figure, by the way - 52 percent of Russian money is offshore - that's an estimate from the economist Gabriel Zucman, who studies tax havens. So big picture, what are the fixes here?

BULLOUGH: Well, I mean, the really - the obvious thing, the thing that we all need to do is find a way to stop them hiding their assets. We need transparency of ownership so a shell company doesn't work anymore. It's a very important principle because even the FBI finds it very difficult to find out who owns a company in Delaware, you know, let alone the investigative authorities in, say, Afghanistan. And so it makes it very easy. Just hide your identity behind a Delaware company, and you're home free. You know, that should stop.

KING: When Oliver was tracing this money, he talked to FBI agents and to law enforcement officials who were working this beat, and it is maddening to them.

BULLOUGH: Trying to unpick that chain of companies, you have to go to every single one of those countries to find out who owns the company. And then once you've found out that, actually, it's just owned somewhere else, you have to go to another country and find out who owns it. And eventually, you will end up, you know, possibly finding out who owns it, but years will have gone by. And by that stage, I will have, you know, happily moved somewhere else in my super yacht. So it's - you know, it's become incredibly easy to steal money and hide it and then enjoy it - to spend it.

KING: Of course, there is one big problem. A lot of people and a lot of places are making a good living catering to Moneyland, or being part of it.

BULLOUGH: The problem is, how do you persuade Delaware when the Delaware state budget is heavily dependent on incorporation fees? You know, how do you persuade South Dakota that they should stop hiding people's identities behind trusts when the South Dakota trust industry is absolutely booming?

KING: I mean, that's the argument, though, for this, isn't it? I mean, these economies, these countries, these states would say plenty of people who are not shady are starting companies. Plenty of people who have legitimate reasons for wanting to keep their wealth secret are using our services, are setting up companies here. And so what do you do with that?

BULLOUGH: But we need to say, yes, if you have a legitimate reason to own your property anonymously, that should be allowed for everyone.

KING: A legitimate reason like you live in a really unstable country. You don't want people to know how much money you have because somebody might kidnap your kids and hold them for ransom.

BULLOUGH: And the courts could very easily decide - you pass a law that says, you know, these are the people who have the right to anonymity, people who have a legitimate fear for their own security. And there you go. You're done. It would be very straightforward.

But the problem is if you were to pass a law of that nature, you're essentially gutting the state budget of all, you know, jurisdictions in countries all over the world - places like, you know, the British Virgin Islands, places like Delaware. You know, what do they do to make up the shortfall, which is the money they have made from incorporating companies for people who want anonymity? You know, what do you do? It's difficult, but we absolutely have to do this because this money is poisoning the world.

KING: We don't know an economist will cop to this - how much of this money there is. An educated estimate? Around 8 percent of all the money in the world is in that Upside Down - no taxes being paid, no names attached, just waiting to come up to the surface and buy more stuff.

Oliver tells this story about walking around his neighborhood in London. The shop where he buys his coffee every morning - that building is owned in the Bahamas. The building where he gets his hair cut is owned in Gibraltar. There's a building site he passes when he walks to the train. That is owned in the Isle of Man. And he wonders who owns those buildings. And he wonders if the money that bought them should be paying for roads or hospitals in some other country. But the odds are Oliver, like the rest of us, won't ever figure it out.

(SOUNDBITE OF MARC FERRARI AND MICHAEL MCGREGOR SONG, "NOTHING LIKE THAT")

KING: Special thanks to Gabriel Zucman, who wrote the book "The Hidden Wealth Of Nations." Today's episode was produced by Alexi Horowitz-Ghazi. Our editor is Bryant Urstadt, and our supervising producer is Alex Goldmark. I'm Noel King. Thanks for listening.

(SOUNDBITE OF MARC FERRARI AND MICHAEL MCGREGOR SONG, "NOTHING LIKE THAT")

KING: Your book has not been published in the U.S. yet - it will be next spring - but you have been published in the U.K. You have 15 Amazon reviews, and all of them are five stars. And all of them are people who wrote, like, relatively long reviews saying how much they liked this book. Is that your friends and family?

BULLOUGH: Actually, no.

KING: Really?

BULLOUGH: One of them is.

KING: Just one (laughter)?

BULLOUGH: There's a guy who's married to a school friend of my wife. And, no - the others, I've genuinely no idea who they are, I think. You know, I haven't looked at them all, I confess. You know, I'm heavily opposed to anonymity in any financial instruments.

KING: (Laughter).

BULLOUGH: But the people that leave me really positive five-star reviews on Amazon? They can hide their identity as much as they like.

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